The FBI confirmed yesterday that it has set in motion a "preliminary inquiry" into an alleged check-kiting scheme involving more than $1 million at Farm Fresh Supermarkets of Maryland Inc.
But in a new development, sources said, a third Farm Fresh
employee left the company as the alleged check-kiting scheme played out.
The events unraveling at Farm Fresh have left its principal investor, B. Green, puzzled.
"We've been isolated and blocked from all the activities at Farm Fresh for a lot of years," said Benjamin Green, executive vice president of B. Green. "So we wouldn't have any knowledge of any goings-on at Farm Fresh that the FBI would be interested in."
The case could fall under FBI jurisdiction if it involved bank fraud, according to Kevin L. Perkins, the FBI's white-collar crime supervisory special agent in Baltimore. Under that scenario, anyone convicted could face as much as 30 years in prison and up to $1 million in fines, Mr. Perkins said.
Other felonies could be involved, he said, including interstate transportation of stolen property, wire fraud or mail fraud.
How the FBI proceeds will depend in part on the findings produced by Terry L. Musika, the court-appointed trustee now in charge of the 10-store chain based in Baltimore. "We'll evaluate what falls out of it," Mr. Perkins said. Mr. Musika could not be reached for comment yesterday.
Already, by examining accounts, Signet has established that it has not lost money on the alleged check-kiting scheme, according to attorney Michael D. Colglazier, representing the bank.
After the alleged scheme was uncovered, Farm Fresh ordered a stop-payment on outstanding checks, and it deposited funds, by wire from NationsBank and other means, "sufficient to cure any overdrafts created by the kite," Mr. Colglazier said.
Even without Farm Fresh's rush to cover bad checks, he said, Signet would have been spared from any loss because the retailer's obligations to the bank were secured by enough collateral.
But, Mr. Colglazier said, "That doesn't mean technically a crime hasn't been committed."
Other issues may be involved, he said, including the distinction between the acts of an individual who may have been involved in a check-kiting scheme and the subsequent acts of a company to fix the problem.