Former MN Bank Executives Face New Fraud Charges
Two former officers of a local bank and one of their customers are facing additional charges in an alleged $1.9 million “check-kiting” scheme that led to the closure of St. Paul-based Pinehurst Bank, Minnesota's U.S. attorney's office said Thursday.
John Anthony Markert, a 57-year-old man from Mendota Heights and former president of Pinehurst Bank, and Gregory Paul Pederson, a 43-year-old man from Roseville and the bank's former chief credit officer and senior vice president, were each charged with five counts of misapplication of bank funds in June. George Leslie Wintz, Jr., a 71-year-old customer of the bank, was charged with the same counts at that time.
Minnesota's U.S. attorney's office on Thursday said that each of the three defendants has been charged with additional counts in a superseding indictment. Markert now faces one count of bank fraud and one count of making a false statement. Pederson was charged with one count of bank fraud and two counts of making false statements. And Wintz has now been charged with two counts of bank fraud and one count of theft from an employee benefit plan.
From March 2006 through January 2010, Markert, Pederson, and Wintz misapplied about $1.9 million from Pinehurst Bank in a check-kiting scheme, according to the U.S. Attorney's Office in Minnesota. Check kiting refers to a process of floating checks between accounts in order to create the illusion of having a balance from which money can be withdrawn; an individual writes a check for a value greater than his or her account balance at one bank and then writes another check from a different bank to cover the over-drawn account at the first bank-essentially taking advantage of the time it takes a check to clear.
Wintz is accused of kiting increasingly large sums between Pinehurst Bank and a second bank until late February 2009, when the second bank discovered his insufficient funds and returned more than $1.8 million in bad checks to Pinehurst Bank.
Markert and Pederson then allegedly recruited five straw borrowers to get $1.9 million in loans from Pinehurst for Wintz, and the three defendants each concealed the scheme from the bank's board and regulators. The bank terminated Markert and Pederson in January 2010, and it was required to declare the loans involved in the fraud scheme as losses, which contributed to its closure by regulators in May 2010, the U.S. attorney's office said.
Wintz is also accused of embezzling more than $160,000 from his company's 401(k) plan.
Pederson's attorney, Chris Madel, told the Star Tribune that prosecutors “had nothing with the first indictment, and the second indictment is much worse. They wouldn't need to do a second indictment if they had a case in the first place.”
Each defendant faces up to 30 years in prison for each bank fraud and misapplication count. Markert and Pederson also face a maximum of five years on each false statements count, while Wintz faces up to five years for his count of theft from an employee benefit plan.