CRM

FOR IMMEDIATE RELEASE 202-514-2007

TUESDAY, SEPTEMBER 12, 1995 TDD 202-514-1888

THREE CHARGED IN SCHEME TO DEFRAUD FIRST FEDERAL

SAVINGS AND LOAN OF TOLEDO

TOLEDO, Ohio -- The Department of Justice announced today

that a grand jury returned a 12-count indictment against Donald A.
Baker, Fred E. Henning and William G. Baker. The indictment
charges a conspiracy, three counts of bank fraud, five counts of
misapplication and three counts of false statements.
According to the indictment, the defendants defrauded First
Federal Savings and Loan of Toledo, Ohio, by selling real estate
owned (REO) properties at inflated sales prices in order to create
the artificial appearance of avoiding losses on REO at First
Federal. Henning was the former general counsel and executive vice
president of First Federal, Donald Baker was the former chairman
and chief executive officer and William G. Baker was a borrower who
purchased REO at the inflated sales prices. Specifically, the
indictment charges that the defendants made loans to William G.
Baker and other selected borrowers for amounts far in excess of the
true value of the properties in order to cover losses associated
with those properties on the books and records of First Federal.
In order to accomplish these inflated sales transactions, the
defendants allegedly used unrealistic and overvalued appraisals to
support the fraudulent loans thus placing a significant amount of
the institution's funds at risk. Moreover, the indictment alleges
that federal bank regulators and members of the Board of Directors
were deceived by the defendants as to the true value of REO
properties and the soundness of the lending practices at First
Federal.
The indictment also alleges that the defendants manipulated
other appraisals involving trade-in properties in order to
overvalue those properties and give William G. Baker an inflated
equity credit to use as a downpayment of the purchase of certain
REO. It is further alleged that the defendants furthered the
scheme by using letter appraisals instead of full appraisals as
required by the regulators to approve the loans to William G. Baker
and then concealing the use of those letter appraisals in the loan
approval process. Additionally, counts 10-12 of the indictment
charge Donald A. Baker and William G. Baker with submitting false
financial information to First Federal in order to influence First
Federal on the loan transactions.
This case is being prosecuted by Fraud Section Trial Attorneys
Nicole Cubbage and Jack B. Patrick of the Department's Criminal
Division.
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