Father, daughter plead guilty to bank fraud Dealership didn't report car sales to lender

March 08, 1996|By John Rivera | John Rivera,SUN STAFF

The former owner of a Howard County Buick dealership and his daughter pleaded guilty yesterday in federal court in Baltimore to bank fraud charges arising from the December 1991 collapse of the family business that had operated for more than 50 years.

Rea H. "Mike" Keech Jr., 54, and his daughter, Leslie Keech, 31, who was the general sales manager of the dealership, each face one to three years in federal prison, prosecutors said, with Rea Keech likely to receive a longer sentence than his daughter. They pleaded guilty before U.S. Magistrate Judge Catherine C. Blake.

Rea Keech owned Rea Keech Buick, which was in the 8400 block of Baltimore National Pike in Ellicott City until the business was dissolved after it declared bankruptcy in December 1991. Rea Keech's father founded the dealership in 1933.

The bank fraud charges, which are felonies, stem from a "float" scheme Rea Keech and his daughter engineered as the dealership began losing money in fall 1990, according to a statement of charges filed during yesterday's hearing by Assistant U.S. Attorney Jefferson M. Gray.

The dealership received its inventory of cars by securing a $3 million line of credit with Pittsburgh-based Mellon Bank, which paid for the Buicks and Skylarks that were delivered from a General Motors factory.

According to the financing arrangement, Rea Keech's dealership would pay Mellon for each car once it was sold. But when the dealership started losing money, it stopped forwarding the payments to the bank. Over a year, Rea Keech Buick sold more than 70 cars, worth approximately $1.2 million, without paying Mellon bank for them.

In addition, the court document said, Rea Keech, Leslie Keech and other employees, conspired to conceal the sale of those cars from Mellon officials who periodically inspected the dealership to ensure that it was complying with the financing agreement.

To conceal the sale of cars from bank officials, Keech Buick employees altered invoices, hid the cash receipts journal from inspectors and told them that cars that were not on the lot because they had been sold were actually being test-driven by customers.

Mellon officials became suspicious by fall 1991 and began more frequent, unannounced inspections. Bank officials filed a complaint in Howard County Circuit Court in November 1991, and the dealership declared bankruptcy the next month. The bank recovered about half the money it was owed through the sale of the dealership's assets and real estate, but it is still owed $467,477.

Attorneys for Rea Keech and his daughter maintain that the money was used solely to support the failing family business and not for personal gain. But Mr. Gray said he would argue at sentencing that they received some personal financial benefit.

Because they continued to draw salaries, Mr. Keech had the business pay for personal expenses such as the feeding and upkeep of his horses, and Ms. Keech borrowed cash from the dealership that was never repaid.

"It was a family business that had been in the family for three generations," said David B. Irwin, Ms. Keech's attorney. "There were hard times in the car business and unfortunately, there were just a few corners that were cut trying to keep the business going. They're paying a very heavy price for it."

Pub Date: 3/08/96

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