The two, plus a third man, are accused in what authorities say was a $1.9 million check-kiting scheme.
A federal grand jury on Wednesday indicted two officers of a failed St. Paul bank for covering up a $1.9 million check-kiting scheme.
John A. Markert, 57, of Mendota Heights; Gregory P. Pederson, 43, of Roseville; and George L. Wintz Jr., 71, of Minneapolis, were each charged with five counts of misapplication of bank funds. If convicted, they face a maximum of 30 years in prison on each count.
Markert was the former president and Pederson the chief credit officer of Pinehurst Bank, a small bank founded in 2004 whose sole branch was in St. Paul's Highland Park.
According to the indictment, Wintz, described as the young bank's "newest and largest customer," wrote batches of checks between various business accounts at Pinehurst and another unidentified bank, inflating the accounts. Wintz owns or controls three Minneapolis trucking and warehouse companies: McCallum Transfer Inc., Triangle Warehouse Inc. and Cue Properties LLC.
A Pinehurst Bank employee told Markert in 2008 but he approved the overdrafts and allowed Wintz, a long-time customer of his from the unidentified bank, to continue.
Eventually, the other bank noticed a problem with Wintz checks and returned more than $1.8 million in checks that Wintz had written from Bank A to one of his companies with an account at Pinehurst.
To cover up the problem, Markert and Pederson allegedly recruited five straw borrowers -- including Wintz's girlfriend and his daughter -- to get $1.9 million in loans from Pinehurst for Wintz, concealing the loans from the bank's board and regulators. An independent audit of the bank last year uncovered the five loans.
Pinehurst took a $2.2 million charge from the alleged scheme, contribing to the bank's demise. Regulators closed the bank last year and sold it to La Crosse, Wis.-based Coulee Bank, which moved the branch to another St. Paul spot.
Tom Lohmann, Pinehurst's original founder and chairman, said Pinehurst was suffering loan issues like many other community banks at the time, but that the check-kiting scheme was "too much to overcome." He said he was shocked by the magnitude of the deception.
"It wasn't one lie. It wasn't one incident. It was a whole series of incidents," Lohmann said. He believes "the investigation is ongoing."
Markert and Pederson did not return calls.
Doug Kelley, Wintz's lawyer, said Wintz will plead guilty in the near future to one count of aiding and abetting the misapplication of bank funds. Wintz has either repaid all overdrafts and loans or secured them with new collateral, Kelley said.
Wintz's companies, which employ more than 100 people, will keep operating even if his leadership is interrupted, Kelley said. He added Wintz didn't use the money for personal gain, but to "keep the corporations afloat during this rough recession."
Public records show Wintz has been involved with various legal scrapes over the years. In the mid-1990s, a Roseville trucking company was fined $1.2 million for not paying workers compensation premiums, a fine a judge eventually reduced. Another company was forced into bankruptcy by Teamsters funds.
Jennifer Bjorhus • 612-673-4683