THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, April 23, 1996 TAG: 9604230343
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 58 lines
Signet Banking Corp., one of seven financial institutions victimized in a $323 million lending scam, sought advice Monday from the federal court in Richmond on how to distribute the funds it expects to recover.
Signet, the Richmond-based parent of Signet Bank and Signet Leasing, and a handful of other institutions lent the money to a man who claimed to be working on behalf of Philip Morris Cos.
Edward J Reiners, 51, of Somers, N.Y., and an alleged accomplice, Judy Rose Bachiman, 38, of Cliffside Park, N.J., were arrested on March 19 by the FBI in Rye Brook, N.Y., and charged with bank fraud.
Reiners, a former employee of the giant tobacco and consumer products manufacturer, told Signet in late 1993 that a Philip Morris subsidiary would be using the money to lease computer equipment for a secret tobacco research program, according to an affidavit that the FBI filed last month in U.S. District Court in Richmond.
The FBI later disclosed that some of the funds that were lent ended up in several bank and brokerage accounts at Bank of New York; Prudential Securities Inc.; Merrill Lynch Pierce Fenner & Smith Inc.; A.G. Edwards & Sons Inc.; ESI Securities Co.; and Smith Barney Inc.
In a statement Monday, Signet Banking Corp. general counsel Sara R. Wilson said that Signet sought advice from the U.S. District Court in Richmond to speed up distribution of those funds to the institutions that lent money in th deal.
``We believe it is in the interest of all parties that the court declares in advance of further collection efforts how the funds will be allocated,'' Wilson said.
Monday's request for advice appeared to be an effort to forestall possible legal wrangling among Signet and the other banks. A declaratory judgment by the court would spell out the rights of the different banks involved in the deal without ordering any action.
In addition to lending $81 million of its own funds, Signet brought together six other institutions for loans in the deal. These included Bank of Montreal, CoreStates Bank, Credit Anstalt, Hitachi Credit America Corp., Long Term Credit Bank of Japan and NationsBank.
Signet has said it expected to recover much of what it lent. However, Signet disclosed earlier this month that it had restated its 1995 net income and had taken a pre-tax charge of $35 million against its 1995 earnings to cover possible losses on the fraudulent loans.
The scam came to light in mid-March after one of the banks participating in the loans - Long Term Credit Bank of Japan - asked Philip Morris for additional details about documents supporting the loans.
A Philip Morris officer, assistant secretary Diane M. McAdams, responded that she had never heard of Reiners and that he was not employed at Philip Morris. McAdams also told the Japanese bank that her signature on a loan document had been forged. by CNB