U.S. Goes After ‘Low-Level’ Insider Bank Fraud

A branch sales manager for Crocker National Bank, an employee for more than three years, is accused of drawing a check for $640.81 from the account of a customer and using the money to pay off her monthly credit card bill at Nordstrom department stores.

A loan officer at Union Bank allegedly collected $36,860 worth of manufacturer’s rebate checks bound for automobile buyers at the bank, endorsed them to himself and took the proceeds to Las Vegas.

In Southern California, where typical bank fraud cases run into the tens of millions of dollars, they are the kinds of cases that might normally go unprosecuted.

But both former bank employees, along with six others, were accused Monday as part of a new federal crackdown on low-level bank fraud, basic, often blatant, insider swindles that industry officials say are slipping millions of dollars into the pockets and checking accounts of their own employees.

Under the Fast Track program, which took effect last year, overburdened FBI bank fraud investigators are training bank auditors to spot fraud themselves and accumulate the kind of evidence necessary to take cases to trial.

Quick Guilty Pleas

Already, the program has resulted in 10 criminal convictions in addition to the eight new indictments and complaints returned Monday. Because the evidence compiled by bank officials is so compelling--and prepared without the need for time-consuming record gathering, grand jury hearings and federal subpoenas--most have resulted in quick guilty pleas and restitution orders.

“The Fast Track program is in response to the banking community’s need to have some of these smaller cases prosecuted,” explained Terree Bowers, head of the U.S. attorney’s office’s major frauds section.

With bank fraud reaching virtually epidemic proportions in Southern California, the FBI has been overwhelmed with cases. Lawrence G. Lawler, special agent in charge, said agents in Los Angeles are now investigating 164 “major” cases--involving bank frauds of $250,000 or more--with estimated losses totaling $1.5 billion. Five cases total losses of more than $20 million each.

Inevitably, smaller cases have fallen through the cracks. With Fast Track, however, investigators hope bank officials can learn to bring in cases that can be immediately prosecuted with minimal help from federal law enforcement.

In the past two years alone, Lawler said, bank officials have referred 11,500 smaller fraud cases to the Los Angeles office that might qualify for Fast Track prosecution. The U.S. attorney’s office has opened 50 investigations.

Sent Packing to New Jobs

Bill Bogaard, executive vice president and general counsel at First Interstate Bank Corp., said the lack of law enforcement resources in the past, combined with employers’ potential legal liability for giving an employee a bad reference, has meant that employees guilty of embezzlement or misappropriation of funds have, as a practical matter, simply been sent packing to new jobs.

“The reality is that these characters who commit crimes of this kind end up being able to go off to employment in another financial institution without having the information about their practices come to light,” he said. In San Francisco, where the Fast Track program has been in operation for the past several years, FBI spokesman Chuck Latting said bank employees had believed they could “get by with” embezzling dollar amounts below law enforcement’s prosecution threshold.

But with their own employers doing the investigating, he said, the Fast Track cases have resulted in speedy prosecutions of even small dollar amounts. “What it boils down to is it’s almost a plea bargain thing,” he said. “The people are called in and they say, ‘This is what you did, and this is how you did it, and how much time do you think you ought to get?’ ”

Defendants Named

Named in the indictments returned Monday were Mary Arlene Penta, of Burbank, charged with making unauthorized customer withdrawals at Crocker National Bank totaling $3,640; Myung Kang Lee, 47, of Arcadia, former branch manager at First Interstate Bank, charged with making a $36,000 loan to herself in the name of a bank customer and an unauthorized withdrawal of $9,600 from a customer’s account; Reynaldo Danganan, 35, of West Covina, former senior financial services specialist at Security National Bank, charged with diverting $48,036 from the bank’s federal reserve account to his own account.

Also named were Julian Alonzo Temple, 44, of Midway City, former loan officer at Union Bank, charged with diverting the auto rebate checks; Armando Noriega, 29, of Los Angeles, a former cashier at First Interstate, accused of withdrawing $10,281 in cash from customers’ accounts; Neil Bagnall Richards, 35, of Walnut, a former commercial lending officer at Mitsui Manufacturer’s Bank, charged with creating $85,000 in unauthorized loans in the names of bank customers which were then paid to himself; Donnie Ray Rambo, 33, of Inglewood, former loan officer at Security Pacific National Bank, charged with creating an unauthorized $5,000 loan to himself in the name of a bank customer and advancing himself $6,599 from unauthorized credit lines established in customers’ names.

Also charged, though not named in an indictment, was David Obata, 29, of Lakewood, former financial services officer for Sumitomo Bank of California, accused of unauthorized diversion of $25,000 from the account of a religious organization, Siecho-No-Ie, to his own account.