Signet restates earnings for 1995 Bank says loan scam will lower figure to $111 million

April 10, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Signet Banking Corp. restated 1995 earnings to reflect a pre-tax $35 million charge related to an alleged loan scam that bilked Signet and six other banks out of $323.5 million, the company said yesterday.

The Richmond, Va.-based bank said the write-off decreased its earnings for 1995 by 17 percent to $111 million, or $1.86 per share. The bank had reported earnings of $133.8 million, or $2.24 a share, in January.

Signet is owed $81 million as a result of the alleged scam, and it said the charge to earnings is an estimate based on reports from federal fraud investigators.

The bank, which has $11 billion in assets and operations in Richmond, Baltimore and the District of Columbia, said more money could be recovered as the bank stakes claims to funds that are frozen in a handful of trading accounts.

Signet officials could not be reached for comment yesterday.

Federal authorities said earlier that they have frozen about $210 million of the total $323.5 million lent by Signet and NationsBank Corp.

Assistant U.S. Attorney Gordon Kromberg said at a hearing in U.S. District Court in Alexandria, Va., last week that nearly $180 million of the money is frozen in about six trading accounts. A portion of the money frozen by the government may be in "speculative stocks," he said.

"Some of them were in technology stocks," Mr. Kromberg told Judge T.S. Ellis III.

Signet said March 19 that it was one of several major financial institutions that had fallen victim to fraudulent commercial loan transactions.

According to an FBI affidavit filed in the federal court, Signet and NationsBank lent the money to a former Philip Morris Co. employee, who allegedly tricked the bankers into believing that he was working on a top secret project for the giant cigarette maker.

The former employee, Edward J. Reiners, convinced the bankers that he was leading an effort code-named Project Star designed to research "cigarette alternatives," the affidavit said.

Mr. Reiners and an alleged accomplice, Jody Bachiman, were arrested March 19 at a Philip Morris office in Rye Brook, N.Y. Mr. Reiners had scheduled a meeting there with bankers from Signet and NationsBank who had become suspicious of his plan.

Mr. Reiners is being held without bail and has agreed to be extradited to Virginia to face bank fraud charges.

Signet lent more than $240 million to a Philip Morris "project" over two years and sold portions of those loans to the other banks, among them NationsBank, Bank of Montreal and CoreStates Financial Corp. It kept $81 million of the loans on its books.

Pub Date: 4/10/96

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