A former Augusta Federal Savings Bank vice president and 11 other people were indicted or charged in criminal information documents today and yesterday with running a loan-kiting scheme that allegedly cost the bank $1 million.
Robert Schmuff, 52, of Sparks, Augusta's former vice president for consumer loans, was charged in a criminal information with embezzlement in an elaborate scheme that involved his alleged collaboration with Baltimore-Washington area car dealers to approve loans to fictitious borrowers.
Prosecutor Geoffrey R. Garinther and U.S. Attorney Richard D. Bennett described the scheme as a massive fraud that contributed to the takeover of Augusta last April by Resolution Trust Corp., the federal agency charged with selling or closing troubled thrifts.
They said Schmuff began the scheme by approving a $58,000 loan to a fictitious borrower only a month after he took over the bank's consumer loan portfolio in 1987, and used his loan approval authority to pay off the first loan with a second one.
From then on, Schmuff engaged in "a pattern" of approving bogus loans to benefit his friends and car dealerships in which he had financial interests, and used proceeds from subsequent loans to cover losses on the original ones, prosecutors said.
Schmuff, they said, used the scheme to cover losses on loans for cars and boats that "often did not exist or were never purchased by the purported borrowers."
Prosecutors also charged Donald Cohen, 46, with bank fraud in another criminal information. He is the former owner of Don Cohen and Associates, a Timonium insurance and warranty company and was part-owner of Marble Arch, a Timonium car dealership in which Schmuff also had a financial interest.
Cohen allegedly received more than $121,000 in loans from Augusta for forklifts and a boat that were never purchased.
The filing of a criminal information often means a defendant has waived indictment and has agreed to plead guilty to the charges it contains.
Daniel Silverman, 34, Marble Arch's president, and Evelyn A. Duggins, 59, its bookkeeper, were charged with bank fraud and Carlo Sagastume, 32, a part-time salesman, was charged with misdemeanor aiding and abetting.
Roger Adamson, 46, owner of London Motor Cars, a Washington, D.C.-based dealership, was charged with aiding and abetting up to $110,000 worth of embezzlements by exchanging checks he wrote to Schmuff for Augusta checks that were written out of the dealership's reserve account.
Prosecutors charged Frank Simoni, 55, of Baltimore, with bank fraud for allegedly obtaining more than $150,000 in Augusta loans for two boats, which he allegedly purchased for "significantly less" than the loan amounts. He later sold the boats and defaulted on the loans.
A federal grand jury yesterday indicted Randy M. Hoffman, 31, Marble Arch's accountant, on charges of making false statements to Augusta in a $25,000 loan application and submitting a phony list of computer equipment he never purchased as loan collateral.
Four other defendants were charged yesterday in criminal complaints that were sealed pending their arrests, prosecutors said.