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Sparks S&L; official pleads guilty to loan fraud scheme


An article in The Sun Saturday about a savings and loan official who pleaded guilty to fraud may have conveyed a misimpression. While Robert Schmuff, the official involved, is a resident of Sparks, he is not affiliated with the Sparks State Bank.

The Sun regrets the errors.

A Sparks savings and loan official pleaded guilty yesterday in U.S. District Court in Baltimore to a charge of scheming to defraud the Augusta Federal Savings Bank of almost $1 million.

Robert Schmuff, 52, pleaded guilty before U.S. District Court Senior Judge Herbert N. Maletz. He faces a maximum penalty of five years in prison and a $250,000 fine when he is sentenced May 22. He was the vice president of consumer loans for the bank from 1986 until his termination in March 1990.

The bank had suffered large losses in its consumer-lending portfolio when it was taken over by the Resolution Trust Corp. in April 1991. Schmuff's activities were investigated by the FBI.

U.S. Attorney Richard D. Bennett called Schmuff's activities a "loan-kiting scheme," in which he approved fraudulent loans and then covered the losses from the loans by using proceeds of other fraudulent loans secured by goods that did not exist.

Assistant U.S. Attorney Geoffrey R. Garinther said Schmuff had authority to approve any consumer loan, and was able to grant loans for cars, boats, computers, forklifts and other collateral that either did not exist or had never been bought.

Mr. Garinther said many of the fraudulent loans involved car dealerships in which he had financial interest. In December 1987, he gave a partner $10,000 to open Laurel Junction Auto Sales and then received a salary from the dealership while approving Augusta loans to the company's customers.When that company's business slowed down in 1989, the prosecutor said, Schmuff arranged for another dealership in which he had interest, Marble Arch Motors, to buy out his partner's interest and take over the Laurel Junction lot in Laurel.

Schmuff also received a salary from Marble while approving Augusta's loans to high-risk borrowers who were customers of that dealership, prosecutors said.

Prosecutors said that Schmuff tried to cover massive loan defaults to customers of the two dealerships by approving loans to ficticious borrowers, friends and Marble employees and using the proceeds to make the payments.

Donald Cohen of Brindle, England, Schmuff's partner at Marble, pleaded guilty Feb. 7 to bank fraud charges. He faces a maximum penalty of 20 years in prison and a $1 million fine. Richard MacCorkindale, 38, of Metairie, La., was charged Wednesday with bank fraud and faces a similar sentence. Also charged in the fraud is Michael Glover, 44, a Florida resident.

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