Monday, September 27, 1999
Bank fraud case risks dismissal
Recovered records may cast new light
BY BEN L. KAUFMAN
The Cincinnati Enquirer
Newly recovered computer files raise doubts about the fraud prosecution of an assistant manager at Star Bank's branch in Springdale.
Depending on what her probe reveals, U.S. District Judge Susan J. Dlott might dismiss the indictment against John F. Yeager.
Failing that, Mr. Yeager might withdraw his guilty plea, his attorney, Martin Pinales, said last week.
Meanwhile, Judge Dlott has postponed sentencing for Mr. Yeager, 31, of Anderson Township.
Instead, she is scheduling a hearing on “whether everything was tainted” by bank record handling, Mr. Pinales said.
No hearing date has been set but Mr. Pinales, Prosecutor John DiPuccio and bank attorney Thomas R. Schuck are discussing witnesses.
Grand jurors last year accused Mr. Yeager of illegally approving nine loans involving more than $200,000 to unquali fied applicants, many of them tenants of or buying property from Mr. Yeager.
Mr. DiPuccio said Mr. Yeager used the loans, either directly or indirectly, for his own benefit; and the case turns in part on whether Mr. Yeager created the paper trail required for loans.
Star Bank has become Firstar, but court documents refer only to Star.
In May, Mr. Yeager admitted two bank fraud counts involving $4,500. Now, that plea agreement is in jeopardy even though Mr. Pinales said the two admitted charges did not involve missing or nonexistent records.
The brouhaha arises from Mr. Pinales' objection to the pre-sentence report submitted to Judge Dlott. Preparing his response, Mr. DiPuccio was directed to bank official Melissa Miles on Aug. 26.
What happened next is drawn from court documents.
Ms. Miles volunteered to pull up relevant records from computerized bank archives and he asked her, “While you're at it, retrieve information on these other loans also since ... I wanted to know if there were credit reports on those also.”
The next day, he said, Ms. Miles called and said copies were ready. After the weekend, on Aug. 30, Mr. DiPuccio told Mr. Pinales and the judge that he had “just come into possession of credit reports and loan documents” for some challenged loans.
Mr. Pinales said that was troubling because the law re quires those records to be preserved for seven years and Star Bank insisted they didn't exist.
Judge Dlott convened a hearing Sept. 1 to probe the unexpected appearance of long-sought documents.
The transcript reveals that Judge Dlott assumed the records would help Mr. Yeager and should have been given to Mr. Pinales.
Mr. DiPuccio disagreed. He told the judge that the records further proved the loans should not have been made. Even if they didn't help his case, he said, other evidence justified the charges and guilty plea.
“Mr. DiPuccio,” the judge said, “let me interrupt you. This is information that the defense counsel had asked for repeatedly.”
He, too, had asked repeatedly for it, adding, “I'm not an employee of the bank. I don't know what their system is. We went and asked and that's all we could do.”
Mr. DiPuccio said Ms. Miles works in the loan department but “nobody had talked to this woman” and she was not among witnesses he planned to call had the case gone to trial. “She had nothing to do with producing records” subpoenaed by the prosecution and the defense.
Mr. DiPuccio said he relied on Star Bank's “centralized operation for producing records” and Ms. Miles “has nothing to do with producing records.”
Judge Dlott had Mr. DiPuccio sworn in and he denied ever saying Mr. Yeager made loans without applications. “I indicated that we had been told that there were no credit reports in the file. ... Based on what the bank told us, what the bank told the FBI, there were no credit reports. So the assumption was John Yeager didn't pull a credit report or it would have been in the file.”
Richard Coy, an FBI supervisor who worked on the case, told the judge that his initial, December 1996 subpoena asked Star Bank for “copies of any and all loan files” on suspect loans. It was served on Nancy Stew art, the bank custodian of records, and on March 4, 1997, the FBI received “what she represented to be the records” requested.
Subsequent subpoenas and requests elicited more records but not those found by Ms. Miles last month, Agent Coy said, and Star Bank and Mr. Schuck “represented to me that we had everything that the bank had pursuant to the subpoenas.”
Agent Coy said the statement of facts he read at Mr. Yeager's guilty plea reflected those assurances that loan applications, required credit reports and other documentation “did not exist.”
Mr. Pinales asked, “now you know that was not a correct statement?”
“As we sit here today, yes, sir,” Agent Coy responded.
Even when he interviewed Star Bank's security chief, Agent Coy said, there was no mention of a second source of records.
Bank attorney Mr. Schuck told Judge Dlott that archival information provided by Ms. Miles represented current loan files that are purged after 90 days.
“As it happens, Mr. DiPuccio found the only person who knew how to get into the backup archive and retrieve this stuff that you couldn't get regularly from the computer,” Mr. Schuck said. “I'm told it's not in the loan files. ... I'm told that the reason that this person (Ms. Miles) knows that there is information in the electronic archive is because her job is to review loans in connection with branch reviews.”
No loan department officials “knew that this existed,” Mr. Schuck said. “I cannot explain why no one thought to check with loan review to see if there might be some historical maintained data, but that appears to be the case.”
Mr. Schuck said Star Bank went to extraordinary efforts to fulfill his requests and court requests for records “but obviously no one except Miss Miles knew anything about the historical archival material; and until she was contacted, I gather no one knew that that resource was available.”
Mr. Schuck denied any “deliberate intent” to withhold records. “As it happens, Miss Miles has knowledge superior to people who normally work with loans.”
Judge Dlott said she would review the grand jury transcript and consider releasing it to Mr. Pinales to determine if the indictment was handed up without adequate evidence.
Judge Dlott also warned Mr. Schuck that this is “an extremely serious matter” and potential penalties can range from sanctions to dismissal of the indictment.
Schools brace for teacher exodus
Tristate heavyweights at odds
Butler Regional Highway nears end of long road
Study: Lack of Z's slows reactions
Slaves' trail brings pilgrims to Ripley
Returning favorites sport new looks, new casts
Free smoke detectors douse risks
Health insurer liable in death
Shortages persist at Hoxworth
The no-diet diet
Wine fest ends without mishap
Bank fraud case risks dismissal
Environmental center opens Tuesday
Felines show off coats and purrs
Oxford city logo close to adoption
SharonFest promises new family fun
Symphony's first auction called a rousing success
Afghan Whigs rock hometown proud
Baptists at home with Catholics
Duo delivers taste of homespun country music
Hank Williams Jr. senior crowd pleaser
GET TO IT
TRISTATE DIGEST
