A Mendota Heights resident is one of three men accused of operating a check-kiting scheme out of a St. Paul bank, according to a federal court indictment released Wednesday morning.
The men face five charges of misapplication of bank funds.
John Anthony Markert, 57, of Mendota Heights, was president of Pinehurst Bank from 2007 until he was terminated in January of 2010.
The chief credit officer and vice president, Gregory Paul Pederson, 43, of Roseville and bank customer George Leslie Wintz Jr., 61, of Minneapolis are also facing charges.
An indictment is a determination by a grand jury that there is enough evidence to establish probable cause.
The indictment alleges that Wintz, the owner of trucking and warehouse businesses, was kiting bad checks, while the bank officers aided by approving $1.9 million in loans to fake, or "straw" borrowers that were then actually used to cover the bad checks.
Check kiting is a process whereby an individual writes a check greater than the balance of an bank account, then writes a second check from another account at a different institution, again greater than the balance, to artificially replenish the first account for a period of time. The money received from the inflated account can then be used by the recipient to cover debts or purchases.
The other bank, which is not named, discovered the activity in February of 2009 and returned $1.8 million worth of bad checks to Pinehurst.
Markert and Pederson are accused of recruiting the straw borrowers to cover up the scheme, and knowingly approving the loans.
The loss of the loans contributed to the undercapitalization of the bank, which was closed by regulators in May 2010, according to a statement by the U.S. Attorney’s Office.
If convicted in federal district court, the men face a maximum of 30 years in prison per count.
