ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, March 21, 1996 TAG: 9603210026
SECTION: BUSINESS PAGE: B8 EDITION: METRO
DATELINE: RICHMOND
SOURCE: ASSOCIATED PRESS
Posing as a Philip Morris Cos. executive, a former employee of the tobacco giant spun a fantastic tale of a top-secret, offshore cigarette research project to secure $323 million in loans from at least six banks, the FBI says.
Edward J. Reiners, 51, of Somers, N.Y., and his alleged accomplice, Judy Rose Bachiman, a 38-year-old secretary from Cliffside Park, N.J., were arrested Tuesday on bank fraud charges.
The FBI said Reiners and Bachiman used Philip Morris stationery and posed as executives of the food, tobacco and real estate company when applying for the loans, succeeding in part because of Philip Morris' healthy credit rating.
It was not immediately known how much they actually borrowed - two banks alone estimated their losses at up to $141 million - or where the money is.
Reiners, claiming to be Philip Morris' chief operating officer, said the money would be used to lease computers for research into ``future cigarette alternatives'' - a venture he said was called ``Project Star'' and would have to be conducted offshore for privacy reasons, according to the FBI.
Before leaving Philip Morris in 1992, Reiners had done business with one of the bank officials scammed.
Banking experts said the case suggests that banks may be lax in security when dealing with what they believe are Fortune 500 companies, the nation's biggest corporations.
``When you have an established reputation like Philip Morris, they know Philip Morris,'' said Charles Meiburg, who teaches commercial lending management at the University of Virginia's graduate business school. ``They probably aren't as careful in checking those things.''
According to the FBI, institutions including Richmond-based Signet Bank; NationsBank of Charlotte, N.C.; Corestates Financial Corp. of Philadelphia; Bank of Montreal; Hitachi American Credit of New York; Credit Andstaldt of New York, and Long Term Credit Bank of Japan approved loans totaling $323.5 million.
Last week, the Japanese bank questioned a loan document, and the other banks became suspicious. When bankers called Reiners, the FBI alleged, he had Bachiman pose as a Philip Morris official on the phone.
NationsBank, which agreed to extend $64.5 million in credit last year, said it had discovered apparently fraudulent documents on Friday, investigated and referred the case to the FBI on Sunday.
Signet said it had lost $81 million, and NationsBank spokeswoman Lynn Drury said it could lose up to $60 million. But both banks said the FBI should be able to recover much of the money and that neither shareholders nor customers should be affected.
In trading Wednesday on the New York Stock Exchange, Signet fell 75 cents to close at $24.50 a share, and NationsBank was unchanged at $75.121/2.
``This is a highly sophisticated, highly complex potential fraud,'' Signet spokeswoman Teri Schrettenbrunner said. ``There are enormous amounts of documentation that goes with it. It's not easy.''
Reiners and Bachiman could get up to 30 years in prison and a $1 million fine.
Bachiman's lawyer, Suzanne Brody, said her client is innocent and was duped by Reiner. It was not known how Bachiman and Reiners knew each other.
Reiners' attorney, Dominick Porco, did not respond to calls for comment.
LENGTH: Medium: 67 linesby CNB