The former president and owner of Rea Keech Buick Inc. and his 31-year-old daughter pled guilty Thursday in U.S. District Court in Baltimore to bank fraud charges arising from the collapse of the Howard County dealership.
Rea H. “Mike” Keech Jr., 56, and Leslie Keech, the dealership’s former sales manager, had each been charged in January by a federal grand jury with 15 counts of bank fraud.
Their guilty pleas, given to U.S. District Court Judge Catherine C. Blake in Baltimore, could lead to maximum prison sentences of 30 years and fines of $1 million. But they are more likely to receive sentences of between one and three years, said U.S. Attorney Lynne A. Battaglia, whose office prosecuted the case.
David Irwin, attorney for the younger Keech, described the family business as one that had spanned three generations and come upon “hard times.” He added, “They were just trying to keep the business going, and obviously mistakes were made, and they are paying the price for it.”
Battaglia said in a written statement that problems stemmed from a financing agreement that Mellon Bank N.A. had with Keech’s dealership. The agreement established a line of credit with General Motors on the dealership’s behalf.
The agreement allowed the dealership to order new Buicks and Skylarks from GM, with Mellon advancing the invoice price of each car to GM on behalf of the dealership, Battaglia said.
The dealership was then required to repay Mellon within a specified number of days after selling the car or receiving customer payments.
The agreement, common in the automobile business, enabled the dealership to stock its sales floor without having to pay for each new car out of its own capital, Battaglia said.
But when the dealership ran into financial trouble in 1990, the Keeches and their employees began to falsify dates of sales, exchanges and customer payments in their paperwork, Battaglia said.
Mellon inspectors were also misled by the Keeches, who told them that cars were temporarily absent from the sales lot because of test drives or other reasons. In fact, the cars had already been sold, Battaglia said.
Mellon gradually became suspicious and filed a lawsuit in Howard County Circuit Court in November 1991 to gain access to the dealership’s sales journal, Battaglia said.
When Mellon’s representatives reviewed the sales records later that month, they revealed the dealership had sold some 70 cars, worth about $1.2 million, without remitting the proceeds to Mellon as required under the agreement, Battaglia said.
The dealership went bankrupt in December 1991, and Mellon was left with a loss of some $470,000, after the dealership’s remaining assets were sold, Battaglia said.
“The lesson of this case for commercial borrowers who find themselves in financial difficulty is clear,” Battaglia said in a prepared statement. “By choosing to defraud Mellon rather than honestly admitting their financial problems, the Keeches made a bad situation worse – and in the end, they lost most of all.”
Blake will sentence Mr. Keech May 30, and his daughter on June 7, said Irwin, of the law firm Irwin, Kerr, McDonald and Dexter.
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