Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, December 17, 1994 TAG: 9412190057
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: MICHAEL STOWE STAFF WRITER
DATELINE: LENGTH: Medium
The federal charges stemmed from a "straw man" loan scheme in the late 1980s that left several banks with thousands of dollars in worthless loans.
It took a jury about 90 minutes to convict Hoffman, 60, of five counts. The former president of Direct Consumer Marketing in Salem and Hill Brothers Shoe Co. in Lynchburg was found innocent of four other fraud counts.
Assistant U.S. Attorney Tom Eckert said he was pleased with the verdict because white-collar crime cases are tough to prosecute.
Hoffman, who now lives in Michigan, is the first borrower to be convicted in federal court in the bank fraud scheme that revolved around Richard Hess, a Salem mortgage broker who died in 1992.
To ease the financial problems of his development companies, Hess devised a scheme in which he recruited third-party borrowers - or straw men - who turned over the loan proceeds to him.
The straw men were paid a fee and Hess agreed to pay off the loans, which totaled nearly $1 million, Eckert said.
Hoffman was charged with helping Hess secure three loans in 1989. However, the jury convicted him on counts relating to a $23,000 loan that Hoffman signed for on July 28, 1989.
Eckert said Hoffman's motive for participating in the scheme was "to cultivate a crooked banker ... who could make loans for his businesses."
That banker was Thomas E. Hartman, a former executive with First Virginia Bank and First Security Bank who pleaded guilty in 1992 to accepting bribes in return for approving illegal loans for Hess. He was sentenced to three years' probation and 100 hours community service after agreeing to help the government with its investigation.
Joseph Marshall, one of Hess' partners, also has pleaded guilty to passing $40,000 in kickbacks to Hartman.
Hartman was the main witness against Hoffman during the three-day trial this week.
Hoffman's attorney, Barry Tatel, tried to convince the jury that his client was simply an innocent participant in a scheme cooked up by Hess and Hartman.
"He was one of the ones who got sucked in," the lawyer said.
Eckert, in closing arguments, urged the jury not to take Hoffman's crimes lightly.
"It's games like this that have destroyed a large part of the American banking system," he said.
Hoffman is facing additional charges of mail fraud stemming from thousands of customer complaints against Hill Brothers before it went out of business in 1992.
by CNB