
DATE: Thursday, October 2, 1997             TAG: 9710020542

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:  118 lines

HOLLANDS PLEAD NOT GUILTY TO BANK FRAUD THE FEDERAL TRIAL IS SCHEDULED FOR APRIL 6.

A U.S. District Court magistrate set a trial for next April after State Sen. Richard J. Holland and his son pleaded not guilty Wednesday to charges involving their lending practices and record-keeping at Farmers Bank in Windsor.

Sen. Holland, chairman of the rural community bank, and Richard J. Holland Jr., the bank's president and chief executive officer, asked for a jury trial during their brief arraignment.

The two were released on their personal recognizance after surrendering their passports.

The Hollands were indicted by a federal grand jury last Friday on charges of conspiring to defraud, misapplying bank funds and making false entries in Farmers Bank's records. They also were charged with perjury.

If convicted, the 72-year-old senior Holland and his 45-year-old son could be sentenced to lengthy prison terms and fined millions of dollars.

U.S. Magistrate Judge Tommy E. Miller set a trial date of April 6 after an attorney for the senior

Holland said he would have to withdraw if the case were tried any earlier.

James C. Roberts of the Richmond law firm Mays & Valentine told the court he had long-standing commitments to clients during the General Assembly session that begins in early January.

Roberts, who represents insurance companies and other businesses in legislative and regulatory matters, said he had been brought into the Hollands' case 12 days ago. He told the court he needed additional time to familiarize himself with the charges and the government's evidence.

In addition to gathering numerous documents, the Justice Department has assembled a list of 100 potential witnesses, Roberts said.

But any delays would hurt the government's case by hampering the availability of potential witnesses, U.S. Attorney James A. Metcalf told the court.

One of these witnesses, he said, was Del. George H. Heilig Jr., the Norfolk attorney who died Tuesday of a heart attack. Heilig was chairman of the House of Delegates' Corporations, Insurance and Banking Committee.

Pushing back the trial to April also would complicate the availability of an FBI agent and a witness from the Federal Deposit Insurance Corp. to testify, Metcalf said.

The FDIC, which insures deposits at the nation's banks, participated in bringing the case against the Hollands.

Under the rules requiring speedy trials in federal court, the Hollands' trial normally would have to begin by Dec. 10, Miller said. However, that was mitigated by the amount of evidence and Roberts' need for additional time to prepare for the case, he said.

In the indictment against the Hollands, the Justice Department alleged that the father and son made surreptitious loans to a Farmers Bank customer, then altered the bank's records to cover up their actions. When questioned about the loans, the Hollands perjured themselves by denying what they had done, the indictment said.

The loans, according to the FDIC and the Justice Department, were made to Dr. Lloyd C. March Jr. to shore up a troubled real estate project and enable March to make interest payments on previous loans from Farmers Bank.

The bank had already surpassed its legal limit on loans to one borrower, so the Hollands disguised the new loans to March by putting them in the names of March's wife and a March friend, the indictment alleges.

To reduce the risk to a bank's safety, state and federal regulations have limited the amount that an institution can lend to any one borrower to 15 percent of its capital. During the 1990-91 period covered by indictment, the lending limit at Farmers Bank ranged from $1.76 million to $1.98 million.

By making a $350,000 loan to March in late 1990, the bank exceeded its limit by at least $91,950, the indictment alleges. If March's partnership obligations were included, the bank surpassed its lending limit by $507,000, according to the charges.

Hunter W. Sims Jr., who is representing the younger Holland in the case, said a key issue in the trial will be the different ways of accounting for loans to a single borrower.

Virginia's banking laws define these limits more broadly than the federal rules do, said Sims, a specialist in business litigation and white-collar criminal defense.

Roberts said he believed that Farmers Bank had not surpassed its legal limits when the Hollands provided additional loans to March between late 1990 and late 1991. The lending scenario described in the indictment was incomplete because it failed to account for the payments that reduced the amount March owed the bank, he said.

By tallying March's new borrowings, the indictment made the total appear greater than it really was, Roberts said.

Federal banking regulators have brought civil charges against bank officers and directors in southeastern Virginia in the past, but the case against the Hollands is unusual in that it alleges criminal actions by bank officers.

``I was surprised that they would bring any charges'' because Farmers ``is a very healthy bank,'' Sims said after the arraignment.

In addition, there was no evidence in the indictment that either Holland benefited personally from their actions, said Sims, who is with the Norfolk law firm Kaufman & Canoles P.C.

The allegations also stand out because of Sen. Holland's stature in Virginia's political and business sectors. The senior Holland, a Democrat, is chairman of the Senate Rules Committee and a member of the Senate Finance Committee.

He also serves on the board of Smithfield Foods Inc., the Norfolk-based meatpacking concern with plants in Smithfield.

The lending activity described in the indictment came at a time when banks throughout the Mid-Atlantic and Northeast were being battered by losses on commercial real estate loans. These losses fueled an epidemic of bank failures and forced mergers, including several in Virginia.

Federal regulators responded by forcing many banks to shed their weaker real estate loans and line up additional collateral for others. MEMO: Staff writer Lynn Waltz contributed to this report. ILLUSTRATION: Color Photos

BILL TIERNAN photos/The Virginian-Pilot

State Sen. Richard J. Holland, right, and his lawyer James C.

Roberts.

Richard J. Holland Jr., left, and his lawyer Hunter W. Sims Jr.

Graphic

LOANS

BY LAW, AN INSTITUTION CAN LEND NO MORE THAN 15% OF ITS CAPITAL TO

ANY ONE BORROWER.

KEYWORDS: BANK FRAUD INDICTMENT