THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, March 24, 1996 TAG: 9603240101
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY ROBERT LITTLE, STAFF WRITER
DATELINE: WHITE PLAINS, N.Y. LENGTH: Long : 198 lines
The woman arrested last week for allegedly posing as a Philip Morris Cos. official to bilk eight banks out of more than $320 million thought she was working undercover to protect a sensitive project authorized by the federal government, according to her attorney.
She and a former Philip Morris employee - he with his old identification card and she with a fake - entered the Philip Morris complex in suburban New York last week to meet with bank officials who thought the two were corporate executives seeking financing for a secret research project. Both were arrested in a conference room inside the sprawling facility by FBI agents who monitored the meeting.
Agents say the man, Edward J. Reiners, spent three years weaving together the $323.5 million scheme that collapsed Tuesday, possibly affecting the financial standing of Richmond-based Signet Bank, which coordinated the loans.
The bank said Friday it could be forced to delay its April 23 stockholders meeting and a bond-rating agency also advised last week it could lower Signet's rating to junk-bond status.
After his arrest, Reiners, who worked in Philip Morris' information systems division for 20 years, led investigators to accounts worth at least $215 million. But U.S. District Court Judge Mark Fox refused to consider bail until more of the $323.5 million proceeds of the scam are located. Reiners' attorney, Frank Bress, would not say whether more money has been recovered, but confirmed that he is ``engaged in discussions'' to renegotiate bail.
Conversely, Reiners' alleged female accomplice, Judy Rose Bachiman, is described by her attorney as someone whose only participation in the scheme was to pose as a particular Philip Morris official the day the two were arrested. She knew Reiners through the Manhattan computer leasing firm where she works as a secretary, a company that has legitimate dealings with Philip Morris.
Both Reiners and Bachiman were charged with bank fraud and could face up to 30 years in prison without parole. They are expected to face trial in federal court in Richmond, where several of the alleged victims are located. Prosecutors could not say when the trial might be scheduled.
Bachiman was released Wednesday after signing a $40,000 bond; Reiners offered to post a $5 million bond.
Other differences between the two suspects seemed just as stark:
Reiners, 51, lives in a modern $500,000 house in northern Westchester County, an affluent suburb of New York City. It has four garage doors, a sculpted lawn, 2.5 acres of wooded land and a crystal window in the front door. Bachiman, 38, lives in a small duplex in Cliffside Park, N.J., a congested, urban high-rise community across the Hudson River from Manhattan.
Reiners owns a video rental store, two condominiums in the city, drove a red Jaguar and is described by FBI agents as the key player in the scheme. Bachiman, single, with one school-age son, earns $30,000 a year as a secretary. The 15-page FBI affidavit detailing the alleged scam never mentions her by name. The arrest warrant issued for her in Richmond last week simply calls her Jane Doe 1.
One glaring similarity: Neighbors seemed perplexed by the arrests, and the details covered heavily by the local media.
``Don't even come around here asking about that, because there's no way any of it's true,'' said a woman who lives near Bachiman but would not give her name. ``The police and the newspapers are the only ones who believe it.''
In Reiners' home in the horse-country town of Somers, otherwise remarkable only as the birthplace of the American circus, residents seemed equally puzzled.
``People don't move out here to pull a heist,'' said Jack Greene, outside Froggy's deli near the center of town.
Reiners, a New York University graduate, moved from Long Island to Somers in 1991 with his wife, Gail, and their two daughters.
Said Reiners' next door neighbor, who would not give her name: ``It's not the kind of neighborhood where you know everything about everyone, but you feel like you know who's bad. I doubt anyone sensed anything bad about him.''
Bachiman would not talk about the alleged scam, and Reiners could not be reached. Reiners' attorney would discuss only procedural aspects of the case. Those interviews and others with bank and FBI officials produced the following scenario:
Bachiman had occasional contact with Reiners during her nine years with CCS Leasing because he did business there when he worked for Philip Morris. Bachiman did not know Reiners left Philip Morris in 1992, shortly before the alleged scheme is said to have started, said her attorney, Susanne Brody. And she believed Reiners' story that he was involved in a sensitive project with the federal government - one that would unravel under publicity surrounding alleged nicotine manipulation by the cigarette manufacturer unless she agreed to help him, Brody said.
``She was completely and totally duped,'' said Brody, a court-appointed attorney. ``She's a simple single mother who thought she was doing the right thing and had no idea this had anything to do with bank loans or millions of dollars.''
If Bachiman was a victim who succumbed to Reiners' elaborate tale of covert research and secret government involvement, she was not the only one, according to FBI reports. The affidavit suggests that several bank executives and other high-level businesspeople unwittingly sustained the ruse simply by believing Reiners' stories and agreeing to follow his rules.
Central to the scheme was an international, multi-million-dollar Philip Morris operation called Project Star that FBI agents say was merely a fabrication by Reiners. According to FBI reports, Reiners told lenders he was the Chief Executive Officer for Project Star, a secretive study of tobacco alternatives that Philip Morris was conducting overseas and under separate corporate cover to avoid publicity.
The FBI reports say Reiners strung together a series of loans for computer leases and had the lenders and suppliers involved sign confidentiality agreements not to talk to one another. Most stayed silent for almost three years. Then, March 15, a bank in New York asked Philip Morris to confirm Reiners' authority, and the scam was revealed when company officials called him a fake, according to FBI reports.
But first, hoping to convince lenders that Philip Morris' denial was part of Project Star's shroud of secrecy, Reiners arranged a meeting at the company facility in Rye Brook, New York, a half-hour's drive from Manhattan. He promised to bring Diane McAdams, the assistant secretary at Philip Morris whose signature appeared on documents Reiners used to prove he was working for the company.
New York financiers would later say in published reports that the whole deal made little sense, particularly for a comparatively modest bank like Signet, which would rarely extend so much credit to anyone. Signet's share of the project was $81 million - a larger percentage of total bank assets than many lenders carry. The New York Times suggested that a company as large as Philip Morris rarely needs to borrow money from anyone, especially from a lender as small as Signet.
Still, Philip Morris' stature as a $54 billion Fortune 500 company made the loans reasonable to Signet, and payments were always current - a ploy to keep the scam looking legitimate, the FBI maintains.
And however implausible his story, Reiners apparently took great strides to make it appear real, FBI reports show. The meeting planned at the Rye Brook facility the day of his arrest was another example.
Philip Morris corporate headquarters are on Park Avenue in Manhattan. The meeting was planned to take place in a large suburban building that houses some subsidiary operations, including Philip Morris Capital Corp., which handles financing and investment activities.
The towering metal and glass complex is surrounded by neatly manicured lawns and a pond touching one side. All entrances are blocked by white gates. Cars that enter the complex drive directly into the building, white metal doors creaking shut behind them. As such, the space-age-looking building appears almost abandoned from the outside, with no cars around it or guardposts outside the walls.
The building itself covers several acres, the grounds several more - in the center of a small New York township near the Connecticut border. And nowhere - not on the building, on road signs or at any of the entrances - is anything indicating the complex is owned by Philip Morris.
Reiners' plan called for officials from Signet and Nationsbank to fly into the Westchester County Airport a few miles away and meet inside the facility. Whether the bank officials ever arrived is unclear from FBI reports, but a conversation they had with Reiners was monitored just before the arrests. And an FBI spokesman in New York confirmed that Reiners and Bachiman were arrested in a conference room inside.
Once Reiners and Bachiman - allegedly posing as McAdams - got inside, it is unclear how they gained access to the conference room and hoped to convince the bank officials and real Philip Morris employees they had permission to be there. The FBI, prosecutors, Philip Morris representatives, and both defense attorneys would not discuss it.
Another hearing is scheduled for Tuesday in federal court in White Plains. Officials for the FBI, who earlier said there might be more arrests in the case, had no more details Saturday. MEMO: Staff writers Warren Fiske, Tom Shean and Lise Olsen contributed to this
story.
ILLUSTRATION: Graphic
CHRONOLOGY
Documents supplied by the FBI and interviews with people involved
tell this story of the alleged bank fraud:
Beginning in 1993 - Edward J. Reiners, posing as a Philip Morris
executive, secures an $81 million loan from Richmond-based Signet
Bank for a supposed top-secret research project by the cigarette
manufacturer. Reiners insists that the financing be separate from
other Philip Morris accounts and that all contacts about the loan go
through him. From then until early this year, Signet and other banks
would lend more than $323 million.
March 15 - A representative of Long Term Credit Bank of Japan in
New York contacts Philip Morris to verify Reiners' authority and is
told Reiners' documentation giving him power to negotiate for the
company is phony.
March 16 - A NationsBank official makes a conference call to
Reiners, who says he has a Philip Morris attorney with him. Later,
the real Philip Morris attorney says he was not on the call.
March 19 - Reiners and Judy Rose Bachiman are arrested inside a
Philip Morris facility in Rye Brook, N.Y., where they allegedly
posed as corporate employees to meet with bank officials. They are
charged with bank fraud, facing up to 30 years in prison without
parole.
March 20 - Reiners leads police to $215 million of the money,
but a federal judge denies his request for $5 million bail until
more is recovered. Bachiman is released on a $40,000 bond.
March 21 - The rating agency Standard & Poor's announces it is
considering lowering Signet's bond rating to junk bond status
because of the bank's potential losses.
March 22 - A brief court hearing planned for Reiners is postponed
until Tuesday while his lawyer renegotiates bail. He and Bachiman
are expected to be tried together in Richmond.
KEYWORDS: BANK FRAUD BACKGROUND PHILIP MORRIS COS.
ARREST by CNB