Md. man charged with collecting $225,000 in fees for bogus loans Loan scams increase as credit tightens

November 10, 1991|By Brian Sullam

For capital-strapped businessmen who could not get financing from a bank, former Frederick resident Stephen E. Witt was a godsend, or so it appeared.

For a fee, he would tell them, he could arrange loans of millions of dollars from European lenders at very favorable terms.

All they had to do was pay him fees -- from $2,000 to more than $5,000 -- in advance to cover his expenses, and Mr. Witt would see that they got their money.

But in the 30 months from January 1988 to May 1990 he operated Stephen E. Witt Co. in Frederick and took in more than $225,000 in fees, Mr. Witt never got a loan for any client.

A Baltimore federal grand jury indicted him Friday on 11 counts of wire and mail fraud charges, alleging that he was defrauding his customers by running a "loan advance" scheme.

The grand jury also indicted Lawrence W. Hill, of Lincoln, England, of eight counts of mail and wire fraud for also running a similar scheme in which he was able to obtain $250,000 in fees from unsuspecting businessmen.

"These advance loan fee schemes are cropping up everywhere," said Assistant U.S. Attorney Joseph L. Evans, who directed the investigation.

He said that the current lending climate, in which banks are making loans only to their most creditworthy customers, has encouraged these schemes.

All of Mr. Witt's clients were legitimate businessmen who were seeking seed money for news businesses or for cash infusions to keep their struggling businesses afloat. They usually were referred to him by other money brokers.

Federal investigators said about half of his 50 clients were from outside Maryland.

Even though the clients were not able to obtain any loans from conventional sources of capital like banks, insurance or investment companies, Mr. Witt would tell his less than creditworthy clients that they could borrow millions from his foreign lenders, according to federal officials.

He would generate reams of loan documents, but not one of his clients ever got the loans they were promised.

In some cases, Mr. Witt would refer his clients to Mr. Hill, in England, who would charge the businessmen additional fees.

Mr. Hill, federal officials said, also has been indicted in Boston by federal officials for defrauding businessmen in Massachusetts.

Federal officials said they will seek to extradite Mr. Hill from England so he can be tried in the United States.

In a separate charge, Mr. Witt is accused of taking $65,000 from an investor who thought he was buying an option on a golf course. Mr. Witt promised the investor that his option was going to be resold for a $1 million profit.

Instead of purchasing the option, the indictment read, Mr. Witt pocketed the money and used it to pay for a house in Miami, where he lives now.

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