Virginian-Pilot


DATE: Saturday, September 27, 1997          TAG: 9709270410

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY LYNN WALTZ, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:  163 lines




STATE SENATOR INDICTED IN WINDSOR BANK FRAUD HOLLAND, SON MADE AND HID ILLEGAL LOANS, FEDS SAY

State Sen. Richard J. Holland was indicted Friday for allegedly making illegal loans to prop up a huge Suffolk development that included the ill-fated Atlantic Film Studio and then lying to federal agents to thwart their investigation.

Holland and his son, Richard J. Holland Jr., who also was indicted, each face 31 counts and lengthy prison terms if found guilty for breaching their duties from 1990 to 1992 as officials of the Farmers Bank of Windsor.

The federal indictment alleges the Hollands backdated illegal loans, asked bank employees to draw up fraudulent loan papers to mislead federal regulators and put the bank's financial health in jeopardy by loaning a single borrower nearly $2 million in unsecured debt.

``The Hollands answered questions falsely and misleadingly under oath in an FDIC investigative enforcement proceeding'' the indictment said, ``to prevent the FDIC from developing evidence of the Hollands' unsafe and unsound banking practices that would have been grounds for enforcement actions against them as well as the bank.''

Holland, 72, has served as state senator for more than 17 years in the district which includes parts of Franklin, Suffolk and Isle of Wight County. He is chairman of the Senate Rules Committee, a member of the powerful Senate Finance Committee, and chairman of its public safety subcommittee. As such, he has sponsored a number of finance and banking-related bills, as well as several get-tough bills aimed at punishing those who break the law.

``I want to make it clear that I have done nothing wrong,'' the senator said in a statement, ``and that the charges against me which arose from events which occurred five years ago are not true.'' Richard J. Holland Jr., 45, issued a similar statement.

Farmers Bank's board of directors issued a statement Friday saying ``a full presentation of all the facts will result in the exoneration'' of both bank officers.

The board said the bank's performance and ``excellent'' financial condition will not be affected by the charges. The bank's deposits are insured by the FDIC up to $100,000 per account.

Farmers Bank, with assets of $75 million, moved into a new building in 1989 and expanded with a branch in Smithfield in 1994. Farmers Bank was named Isle of Wight County's Business of the Year in July.

At the time of the alleged illegal loans, Holland was chairman of the board of directors and chief executive officer. His son was president of the bank and a member of the board of directors.

According to the indictment, the Hollands illegally lent hundreds of thousands of dollars to investor Dr. Lloyd March, part-owner of Oceans Holdings Inc. The company was developing Hillpoint Farms, touted as a state-of-the art community to include the film studio, an 18-hole golf course and residential and commercial properties.

At the time Oceans Holdings was facing foreclosure by the bank for $1.6 million debt.

The federal indictment says the loans were illegal because March already owed the bank millions of dollars and the additional loans violated federal laws prohibiting a bank from overextending itself with a single lender.

The Hollands, the federal indictment alleges, concealed the loans to March by pretending to loan the money to March's wife and another friend. The money really went to March, who in turn paid overdue loan interest owed Farmers Bank by Oceans Holdings.

In return for Dr. March paying the back interest, Farmers Bank halted its foreclosure proceedings.

The alleged scheme came to light when Farmers Bank sued March's wife, June March, on Sept. 12, 1991, for payment of the $799,000 in loans that had been illegally put in her name.

After filing in December for bankruptcy, June March defended herself in court by saying the loans never went to her, but were illegally made to her husband. She said in legal papers that the loans were, ``with the knowledge of the Bank, put in her name in order to mislead bank regulators.''

The Hollands denied the charges at the time, telling federal investigators under oath that the loans were really made to June March, the indictment says.

It is those denials that perjury charges are based on.

Despite knowing her statement was true, Holland Jr. and other bank officials ``met with Dr. March to get him to convince his wife to recant her statements,'' the indictment said.

Apparently, March had promised the younger Holland that he would repay the loans quickly, which did not happen. In a letter written about July 22, 1991, Holland Jr. wrote March that he was ``extremely disappointed'' with him.

``Every time you needed something , we accommodated,'' the younger Holland wrote. ``Usually on a few minutes notice. I have literally fought with bank examiners concerning questionably regulatory practices regarding your loans so that we could accommodate you . . . Farmers Bank now has great exposure with your unsecured loans and great exposure with federal bank examiners because of our desire to accommodate you.''

Both Hollands said they will appear in U.S. District Court in Norfolk on Wednesday to plead innocent and request jury trials. They said they would have no other public statements on the charges.

``I do not intend to try this case in the press,'' both men said in their statements.

The indictment does not make clear why the Hollands would extend themselves and make themselves legally vulnerable.

During the early 1990s, banks throughout Virginia and the Northeast were battered by heavy losses on real estate loans made during the 1980s. Some were forced to merge with healthier banks, and several failed.

Because of a downturn in the real estate markets, developers often had difficulty making interest payments to banks. But many banks were already burdened by sour loans and often tried to stretch out payments to keep their larger borrowers afloat.

There was a lot at stake for the bank - a family-run institution - if Oceans Holdings loans went belly up.

The Farmers Bank of Windsor was founded by Shirley T. Holland in 1919. His son Richard, who was educated at the Virginia Military Institute and the University of Virginia, joined The Farmers Bank of Windsor in 1951. His son, Richard Holland Jr., moved in as bank president when his father took over as chairman of the 10-member board.

Holland was first elected to the Virginia Senate in 1979 as a representative from the state's 15th District.

In addition to the Finance and Rules committees, Holland sits on the Agriculture, Conservation and Natural Resources Committee, the Commerce and Labor Committee and the Privileges and Elections Committee.

Richard Holland grew up among three brothers in the tight, well-known Windsor family, in their house next to a church in the center of town. His father served 20 years in the House of Delegates as chairman of the Insurance and Banking Committee. Part of the Harry Flood Byrd machine, the elder Holland won 10 elections in a row.

Richard served 24 years on the Windsor Town Council before his election to the state Senate. His brother Clarence A. Holland, a physician, served 12 years on the Virginia Beach City Council - two as mayor - and joined the Virginia Senate in 1984. The brothers served in sync until Clancy's defeat in the 1995 election cycle.

In that 1995 race - in which Republicans hung tightly to the coattails of popular Gov. George F. Allen to seize control of the legislature - Richard Holland was opposed for the first time in his General Assembly career.

While he didn't really know how to go about raising big money, he managed to bring in $167,000 to save his seat. Among his donors was Smithfield Foods. He sits on the Smithfield board and accepted $5,000 in campaign contributions.

Nearly 14 percent of all the money Holland has taken into his campaign coffers from 1994 to 1997 comes from banking, finance, insurance and real estate sources.

Holland's wife, Jean Culpeper Holland, died Aug. 21. MEMO: Staff writers Tom Shean, Linda McNatt and Louis Hansen contributed

to this report. ILLUSTRATION: Color photo

Richard J. Holland

WHO HE IS: Holland, 72, has been a state senator for more than 17

years. He is chairman of the Senate Rules Committee and a member of

the Senate Finance Committee. At the time of the alleged illegal

loans, Holland was an official with the bank, the Farmers Bank of

Windsor.

THE INDICTMENT: The indictment alleges that Holland and his son,

Richard J. Holland Jr., backdated illegal loans, asked bank

employees to draw up fraudulent loan papers and put the bank's

financial health in jeopardy.

THE RESPONSE: Holland and his son say they have done nothing wrong

and that the charges are not true.

Graphic by VP

The Movement of Money

For complete copy, see microfilm

Graphic

Area shown: Windsor

Graphic

The Future KEYWORDS: INDICTMENT BANK FRAUD



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