Updated at 5:37 p.m.

The former top two executives of the Bank of Oswego were convicted Tuesday of orchestrating a years-long conspiracy to conceal the bank's shaky financial condition, capping one of the longest and most expensive federal trials in Oregon history.

The jury also found Dan Heine, the bank's co-founder and former chief executive, and Diana Yates, the chief financial officer, guilty of 12 counts of making false entries in the bank's books to hide bad loans.

Heine, 70, once named Lake Oswego's citizen of the year, could spend much of the rest of his life in prison. Each count is punishable by 30 years imprisonment.

Both defendants seemed stunned after the verdict was read in U.S. District Court in Portland, remaining in the courtroom with their legal teams long after the judge, jury and observers had departed.

In June 2015 – two months after a report in The Oregonian/OregonLive raised questions about the bank's business practices and the accuracy of its financial reports -- Heine and Yates were indicted on accusations they conspired to commit bank fraud over a five-year span. The case is believed to be the first criminal prosecution of senior bank management in state history.

The case was complex, teeming with the arcane financial minutia of bank accounting and reporting rules. U.S. District Judge Michael Simon thanked jurors for their perseverance during the six-week trial. In the end, the jury believed the prosecution's argument that Heine and Yates falsified bank records to hide bad loans from regulators and the bank's own board.

Each charge carries a maximum sentence of 30 years. Michelle Kerin, who prosecuted the case along with Quinn Harrington, said the government will request jail time for both defendants. "Lying to bank regulators is a serious offense," she said.

Simon set sentencing for March 5. Heine and Yates will remain free until then.

The court battle is not over. Lawyers for both defendants vowed to fight on. "We believe deeply in Ms. Yates innocence of all crimes charged and plan to appeal the verdict," said Janet Lee Hoffman, her attorney.

"Dan is very disappointed with the jury's verdict, which is not supported by the evidence presented to the jury at trial," said Jeffrey Alberts, Heine's lawyer. "He intends to move for the judge to set aside the jury's verdict and enter a judgment of acquittal as to all counts."

Each defendant had been charged with one count of conspiracy to commit bank fraud and 18 counts of making false bank entries. It's a federal crime for bank officers to mislead bank regulators.

When the bank began to falter in the recession-wracked economy in 2010, Heine and Yates took extraordinary and illegal steps to keep it afloat, prosecutors said. The tiny bank struggled unsuccessfully to survive the scandal, but its remaining assets and lone branch were acquired by another financial institution.

The testimony of Geoff Walsh, a former bank employee and admitted felon, was central to the government's case. Heine hired Walsh – a Lake Oswego native with countless connections -- as a loan officer in 2009, hoping to grow the sleepy institution. The strategy worked: The bank's total loans tripled to more than $180 million during Walsh's tenure.

But Walsh's whirlwind deal making proved impossible to manage. It was made more difficult by Walsh's practice of keeping many customer files with him in his car.

Walsh extended a number of loans to his local buddies. "These are a group of wealthy playboys, the kind of people that party together, traveled together, they do handshake deals for hundreds of thousands of dollars," Alberts said during the trial.

At least one of the locals Walsh brought into the bank hailed the guilty verdict. Marty Kehoe, a Portland developer who borrowed nearly $2 million from the bank, said that when the FBI began asking tough questions about the bank, Heine "threw everyone under the bus," including Kehoe.

"Dan Heine's nefarious activities finally caught up with him," Kehoe said. "I'm sure it's a relief to many of the people whose names he dragged through the mud to hide his own criminal activity."

David Angeli, Walsh's attorney, said the verdict was vindication for Walsh. "We're very glad that Geoff finally had an opportunity — during six days on the witness stand — to tell the full story of what happened at the Bank of Oswego," he said. "And we're tremendously gratified that the jury believed him, and saw through Dan Heine's and Diana Yates's strategy of trying to deflect blame for their own actions onto Geoff.

"Geoff had the character to step up and admit early on his role in this saga, while they chose to try to tear him down personally and professionally to avoid bearing the consequences of their own conduct. It didn't work."

Walsh has pleaded guilty to other financial crimes unrelated to the bank. He is scheduled to be sentenced on Jan. 9. His sentencing guidelines could range from 21 to 33 months.

The defendants spent millions on the case, quickly exhausting the approximately $3 million provided by the bank's insurance. The bank objected to the fees charged by Heine's New York law firm, which were as high as $900 an hour, according to court documents.

The defense paid $750,000 just on expert witnesses.

-- Jeff Manning

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