Federal Probe Focuses On Spokane Man Criminal Charges Loom In $10.5 Million Montana Bank Fraud Scheme

Federal investigators moved closer Tuesday to bringing criminal charges against a Spokane businessman linked to a $10.5 million Montana bank fraud scheme.

Three officers of the Mountain Bank of Whitefish, Mont., including its former senior vice president, pleaded guilty in Missoula to federal bank fraud charges.

In plea bargains, the three bank officials agreed to help federal investigators and testify against John Earl Petersen, owner of JC Investments Group in Spokane.

In exchange, bank officials Marlene I. Havens, Lynn D. Foster and Kathleen McGrath Rommereim are expected to get probation instead of prison time.

Assistant U.S. Attorney Carl Rostad said the three women’s guilty pleas will substantially assist a task force that includes the Internal Revenue Service, FBI and customs agents.

Petersen, who maintains his innocence, is the primary target of the federal investigation examining how the Montana bank was swindled out of $10.5 million, Justice Dpartment sources say.

The 45-year-old Spokane businessman was not charged in the initial indictment, filed last summer in Montana.

It accused four bank officials of participating in the fraud over a six-year period by doctoring the bank’s books and deceiving federal bank examiners.

Bank President Werner Schreiber was charged with complicity in the bank fraud scheme, but he hasn’t entered a plea.

His attorney reportedly is attempting to reach a plea bargain with federal prosecutors. His trial set for next month is expected to be postponed.

Court records filed Tuesday say the bank fraud included a handful of precious gems which exchanged hands in Sandpoint.

The documents also reveal how the bank fraud supposedly began in early 1989 when a customer went to the Whitefish bank, seeking a loan.

Schreiber authorized the loan and agreed to keep the gems as collateral. The customer who got the loan said the gems were to be sold to an Asian concern, at a substantial profit, in a $27 million transaction involving Petersen, the documents say.

Later, the customer told the Whitefish bank president that the gems being held as collateral were to be delivered at a meeting in Sandpoint. The bank loan was to be repaid immediately thereafter.

“Contrary to bank policy and regulations, Schreiber allowed the collateral (gems) to be removed,” court documents say. “The gems were delivered, but no payment was made.”

Petersen later told Schreiber that the $27 million had been seized by Canadian authorities. But he assured the bank president that the money was soon to be released and the loan paid off.

Evidence recovered with federal search warrants served in Spokane proves that there was never any $27 million, nor was there a deal to purchase the gems, the documents say.

The bank president “became embroiled in Petersen’s promises that he was soon to receive millions of dollars from a foreign source and would pay off the loan,” according to the documents.

As time passed, the bank felt pressure to account for the missing gems and the unpaid loan. That’s when Schreiber and Havens hid the loss in an account that lists funds owed to Mountain Bank by other banks, the documents say.

“Thereafter, Petersen and Schreiber began a scheme in which bank funds would be withdrawn for their benefit and the losses hidden in the bank’s transit account,” the documents say.

Transit accounts can fluctuate by millions of dollars each day. They are used by banks to list checks which have not cleared, but have been credited to a customer’s account.

As the bank fraud scheme evolved, Petersen deposited Mountain Bank checks into other financial institutions, including Spokane banks.

When Petersen’s insufficient funds checks were returned to Mountain Bank, Schreiber, Havens, Foster and Rommereim would remove them from daily correspondence, the documents say.

As a result, the bank’s transit account would not show the dishonored Petersen check, and he would “retain the proceeds of the scheme,” the documents say.

When the scheme threatened the bank’s liquidity, the bank officials began accepting pre-signed Petersen checks.

“By depositing checks which they knew to be worthless, they could temporarily enhance the bank’s deposits,” court documents say.

Later, to conceal the embezzlement, the bank officials made bookkeeping entries showing the purchase of non-existent securities.

Knowing that the Petersen transactions were entirely bogus, Havens, Foster and Rommereim continued making wire transfers and issuing cashier’s checks.

“They also concealed the fraudulent nature of the transactions from other bank employees, bank auditors and bank examiners for the state of Montana and Federal Deposit Insurance Corporation,” the documents say.

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