Guilty plea in bank fraud: Signet lost $81 million mastermind could besentenced to 50 years.

June 06, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

RICHMOND - The mastermind behind a scheme that defrauded Signet Banking Corp. and several other large banks around the world out of $350 million pleaded guilty yesterday to federal bank fraud and money laundering charges.

Edward J. Reiners, 51, waived indictment and entered the plea to a two-count criminal information before U.S. District Judge Robert R. Merhige Jr.

Reiners, who was brought to court in leg shackles and handcuffs, faces a maximum of 50 years in prison on the two counts and up to $296 million in fines.

Reiners' attorney, Domenick J. Porco, said his client could receive a reduced sentence ranging from 14 to 19 years because he has been cooperating with the U.S. Justice Department in locating the millions that he stole.

"There was never an intent here to keep the money and use the money and not pay it back," Porco said after the hearing.

"If they [the banks and federal officials] would have left him alone, everybody would have made out."

Prosecutors said in a statement of facts presented to the court yesterday that Reiners, a former employee of Philip Morris Cos. Inc., convinced seven banks around the world that he was still with the cigarette maker and that he needed millions to finance a top-secret tobacco research venture called "Project Star," which he said involved alternative products, including smokeless cigarettes.

He told the bankers that the money would be used to buy computer equipment for the overseas research, and Signet agreed to finance $287 million of the project beginning in December 1993.

It syndicated a portion of the loans to NationsBank, Hitachi Credit America Corp., CoreStates Bank and the Bank of Montreal.

Reiners also obtained $64 million from NationsBank, Creditanstalt Corporate Finance Inc., and Long Term Credit Bank of Japan, prosecutors said.

The money, however, was never used to buy computers.

Reiners invested much of it in stocks and real estate. He spent more than $9 million to purchase a penthouse apartment at the Trump Palace Condominium in New York, prosecutors said.

The scheme fell apart March 19, when Reiners was arrested at the Philip Morris offices in Rye Brook, N.Y., with alleged accomplice Jody Bachiman.

Helen F. Fahey, the U.S. attorney for the Eastern District of Virginia, said yesterday that more than $200 million in assets have been seized from Reiners, including stocks, securities, bank accounts, interests in several businesses and the Trump Palace penthouse.

The assets will "substantially reduce the losses to the individual banks," she said.

"We are very happy about this."

Porco said all of Reiners' assets have been seized, including his house in New Jersey.

The banks with the largest exposure to Reiners include Bank of Montreal with $87.3 million in loans; Signet, $81 million; and NationsBank, $61 million, according to the plea agreement.

Signet has written off about $35 million of the loan. It also has been sued by CoreStates and Bank of Montreal, which allege that officers at the Richmond-based bank misled them about the deal and should reimburse them for the money they have lost.

Several Signet officials attended Reiners' plea hearing, including Wallace B. Millner 3d, Signet's vice chairman, and Robert Merrick, the bank's chief credit officer.

"We are grateful all of the parties participating in the fraud are virtually going to pay the price," said Signet spokeswoman Teri Schrettenbrunner.

Reiners stood stone-faced as Judge Merhige read the charges filed against him.

"You have plead guilty because you are in fact guilty?" Merhige said.

"Yes, Your Honor," said Reiners, who was flanked by his attorneys.

Reiners is being held in the Richmond City Jail without bond pending sentencing Oct. 21.

Porco asked the judge to delay sentencing until fall to allow more time for the government to recover millions of dollars in missing assets.

Porco said later that he hopes Reiners' sentence will be reduced if more money is recovered.

Pub Date: 6/06/96

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