A longtime board member of Nathan A. Chapman Jr.'s companies vouched for his character and integrity yesterday as he testified in the Baltimore businessman's trial on federal fraud charges.
The U.S. District Court jury also heard from a second woman who said she had a sexual relationship with the married Chapman and received payments from him.
Chapman is accused of defrauding the Maryland state pension system, but yesterday's testimony focused on charges that he looted his companies by taking improper payments from corporate coffers.
Donald B. Watkins, a retired lawyer from Alabama and member of Chapman's board since 1986, said directors ratified a series of corporate loans to Chapman totaling more than $1 million. "The act of ratification is blanket approval," Watkins said.
In most of those cases, the board's approval came months after Chapman had made the loans to himself, Watkins said. He said directors "spanked" Chapman for coming to them for retroactive approval of the loans, but defended their decision to approve them.
During about four hours of testimony, Watkins veered between strong support of Chapman and misgivings about the executive's failure to provide the board with critical information.
The director said he would have recused himself from a 1999 vote to retroactively approve a $285,000 loan to Chapman if he had known the businessman used the money the previous year to repay a debt to Watkins.
While Watkins was called by the prosecution, he spoke highly of Chapman during cross-examination. "I think he is an honest man," Watkins said. "If I didn't believe that, I would have left the board a long time ago."
Former Chapman employee Tracey Rancifer Henderson testified yesterday that she had sex with Chapman in 1999 and lied about that fact in a 2002 grand jury appearance.
Henderson, who testified under a grant of immunity, said she had "sexual contact" with Chapman on two or three occasions while the two were traveling together on business. She said the contacts did not amount to a "relationship" and that she remained at the company after ending them.
Henderson acknowledged she received thousands of dollars from Chapman in the form of "business development" checks that prosecutors contend were fraudulent. She denied the payments were related to sex, calling them bonuses for bringing business to the company.
Yelinde Emily Tyler testified Wednesday that she was Chapman's longtime mistress and received more than $200,000 in cash from him.