Bank's dealings raise questions Man guilty of fraud had ties to officials

THE BALTIMORE SUN

In late fall 1994, five men huddled behind closed doors to plot the ouster of Jan W. Clark as president of the Bank of Glen Burnie.

Four of them were officials or major stockholders of the bank, but the fifth was an outsider whose presence at the meeting raises troubling questions about the management of the bank.

He was Brian H. Davis, president of a Baltimore trucking company, a high-rolling political money man -- and a man who later pleaded guilty to obtaining millions of dollars in illegal loans from the bank.

Davis and the bankers forged a winning strategy that replaced Clark with a management more friendly to the trucking executive's interests. Two of Davis' allies, F. William Kuethe Jr. and John E. Demyan, were installed as president and chairman.

Since Davis' company collapsed in late 1995, bank officials have sought to play down their ties with him, joining dozens of other creditors in portraying themselves as victims of his schemes.

But court documents in lawsuits generated by the collapse of Davis' Oceanic Ltd. portray a relationship between the trucking TTC executive and the bank so tainted that one of its creditors has accused the bank and Davis of being involved in a "pattern of racketeering activity."

Among other things, the documents say that:

At the time Davis joined the bankers in plotting their coup, Clark had been investigating Executive Vice President Stephen Boyd, the loan officer who authorized the loans to Davis. Clark fired Boyd in February 1995. But the new bank management rehired him just weeks after it ousted Clark in March of that year. The loan officer went on to approve hundreds of thousands of dollars in additional loans to Davis.

At its meetings, the group devised a strategy that included hiring a private investigator to trail Clark in search of damaging information. Kuethe said yesterday that the detective was paid by the insurgents' law firm, which was compensated by the bank after Clark was ousted.

Internal bank documents were provided to the lawyers of a doctor who had brought a racial discrimination lawsuit against the bank. The lawsuit was successfully used by the insurgents as a reason to oust Clark.

Even after other creditors informed the bank's management of Davis' fraudulent activities in October 1995, bank officials tentatively agreed to bail him out by lending his mother $3.5 million. The idea was dropped only after the collateral Davis had proposed using, a supposed 90,000-acre ranch in Montana, was found to be much smaller than Davis claimed.

By Kuethe's admission, he and other bank officials accepted gifts from Davis, including wine, food, baseball and concert tickets, sports memorabilia and frequent flier mileage. Kuethe said the bank permitted the acceptance of such gifts as long as each was not worth more than $100.

Oceanic collapsed in late 1995 after Davis' scheme to obtain multiple loans using phony truck titles as collateral came to light. The estimated $6 million lost by the bank on the Davis loans contributed to the bank's total loss of $2.7 million for 1995 and last year.

Bank's capital declines

The bank is still well-capitalized, with $18.1 million, and its deposits are insured up to $100,000 per account by the Federal Deposit Insurance Corp. But the bank's capital, which cushions it against possible future losses, has fallen 11.7 percent since Dec. 31, 1995.

Two of the five people who gathered to plan Clark's ouster have fallen on hard times.

Davis faces sentencing June 10 after pleading guilty to bank fraud and tax evasion March 17. He is believed to be cooperating in a continuing investigation of his banking activities.

Boyd resigned from the bank under pressure early last year. Neither he nor any other bank official has been charged with a crime as a result of a relationship with Davis.

Kuethe and Demyan remain on the job, along with the bank's chief auditor, Paul Trice, who was the fifth man in the 1994 strategy session.

The men who seized control of the bank said in depositions that Davis was a participant in the strategy session, during which sensitive internal bank matters were discussed.

Kuethe said in a deposition that he did not invite Davis to the meeting but had no objection to his being there.

"At the time, we didn't see anything wrong with it. In retrospect, it would have been better if it didn't happen," Kuethe said in an interview yesterday.

Conflicting accounts

Kuethe and Demyan testified that Davis recommended John E. Pugh, the detective who spied on Clark. But in their depositions, the two men have given conflicting accounts of who hired him.

In one deposition, Demyan said he thought Davis had hired Pugh. Kuethe said on one occasion that he thought it might have been Demyan. But yesterday, Kuethe recalled that the bank's lawyers employed the detective.

The ouster of Clark proved to be a significant -- although temporary -- victory for Davis and a disaster for the bank. Within weeks after Clark was deposed, Kuethe rehired Boyd even though he was aware of allegations that the former loan officer had accepted kickbacks.

With Boyd back on the job, Davis was able to resume a relationship with the bank that was so cozy that at one point he was given the personal identification number needed to gain after-hours access to the bank's offices.

The close ties between Davis and the bank apparently began in the early 1990s, when Davis and Boyd became friends while working together on one of former Rep. Helen Delich Bentley's political campaigns.

Through Boyd, Davis established a banking relationship that generated millions of dollars in loans for Oceanic, Davis and his associates, and McCafferty's, a Mount Washington restaurant in which Davis held a one-third share in his mother's name.

Restaurant files suit

It is not clear when Davis' relationship with the bank crossed the line into fraud. But McCafferty's restaurant, which ousted Davis as a partner in late 1995, has charged in a $50 million lawsuit against the bank that Davis provided forged documents granting him unfettered access to the restaurant's checking accounts as early as February 1993.

McCafferty's alleges that he did so with the "knowledge, aid and complicity" of the bank as part of a "corrupt relationship" with Boyd.

"Davis paid hundreds of thousands of dollars in bribe and kickbacks to or on behalf of Boyd in exchange for Boyd's cooperation and favorable handling of loan applications, diversion of funds and participation in fraudulent dealings and transactions," the McCafferty's suit alleges.

Asked for comment yesterday, Boyd termed the allegations "ridiculous" and denied any wrongdoing. "It's just not true," he said.

Kuethe said, "If I had 20/20 hindsight, I would have done things a lot differently." But he, too, denied doing anything improper in his relationship with Davis.

Pub Date: 5/09/97

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