U.S. attorneys closed the book on Montana’s largest bank fraud case last week when a jury in Federal Court in Missoula convicted two men from Columbia Falls of conspiring to embezzle a Whitefish bank.
John A. Lence and Michael A. Allen were acquitted of several individual charges of bank fraud but were found guilty for their participation in a $10-million scam that sent the former president of Mountain State Bank to prison.
“It was like the world’s biggest check-kiting scheme,” said Great Falls-based Assistant U.S. Attorney Carl Rostad, who prosecuted the first round of insiders four years ago. Lawyers from Washington, D.C. handled the remainder of the case.
Allen and Lence are scheduled to be sentenced in October. Attorneys would not say if the investigation was concluded but did say that the major convictions have been obtained.
Allen’s problems began in 1989 when con artist John Peterson from Spokane suckered Allen into a bogus investment, which soon had him borrowing money he couldn’t pay back. The conspiracy itself began when Peterson helped Allen, a dentist, make loan payments with a series of worthless checks routed from bank to bank.
Soon Lence, an attorney and accountant holding common business interests with Allen, got involved. Bank President Buster Schreiber joined the circle when he let Allen withdraw gems being held as collateral, effectively allowing him to default on his loans without penalty.
“That was the beginning of the corruption of Buster [Schreiber],” Rostad said. “Once you corrupt a banker a little bit you control him because he needs to keep it hidden and then he’s vulnerable to bigger corruption.”
Schreiber continued to overlook neglected loans and accept bad checks, which were used to buy a ranch for Allen in Whitefish, among other things, and to cover a $723,924 judgment against a corporation controlled by Allen and Lence.
Later, Schreiber even issued a loan in the name of an unwitting relative of Allen because bank examiners were questioning pre-existing loans. The game ended six years later after a bank employee quit aiding the scheme and Schreiber agreed to testify against the other conspirators.
Prosecutors indicted a range of suspects. According to U.S. Attorney Bill Mercer of Billings it didn’t matter whether Lence, Allen and Schreiber were victims of Peterson, knowing co-conspirators, or something in between.
“If you try to try to create economic gain through deception, chances are you’ve committed fraud,” Mercer said.
Federal prosecutors maintain an aggressive strategy against embezzlement and fraud, Mercer said, because white collar criminals are cognizant of the costs and benefits of their actions.
“These are not crimes of passion,” Mercer said. “These are crimes of forethought and calculated risk.”