FOR IMMEDIATE RELEASE TUESDAY, SEPTEMBER 12, 1995

TDD

CRM 202-514-2007 202-514-1888

THREE CHARGED IN SCHEME TO DEFRAUD FIRST FEDERAL SAVINGS AND LOAN OF TOLEDO TOLEDO, Ohio -- The Department of Justice announced today that a grand jury returned a 12-count indictment against Donald A. Baker, Fred E. Henning and William G. Baker. The indictment charges a conspiracy, three counts of bank fraud, five counts of misapplication and three counts of false statements. According to the indictment, the defendants defrauded First Federal Savings and Loan of Toledo, Ohio, by selling real estate owned (REO) properties at inflated sales prices in order to create the artificial appearance of avoiding losses on REO at First Federal. Henning was the former general counsel and executive vice president of First Federal, Donald Baker was the former chairman and chief executive officer and William G. Baker was a borrower who purchased REO at the inflated sales prices. Specifically, the indictment charges that the defendants made loans to William G. Baker and other selected borrowers for amounts far in excess of the true value of the properties in order to cover losses associated with those properties on the books and records of First Federal. In order to accomplish these inflated sales transactions, the defendants allegedly used unrealistic and overvalued appraisals to support the fraudulent loans thus placing a significant amount of the institution's funds at risk. Moreover, the indictment alleges that federal bank regulators and members of the Board of Directors were deceived by the defendants as to the true value of REO properties and the soundness of the lending practices at First Federal. The indictment also alleges that the defendants manipulated other appraisals involving trade-in properties in order to overvalue those properties and give William G. Baker an inflated equity credit to use as a downpayment of the purchase of certain REO. It is further alleged that the defendants furthered the scheme by using letter appraisals instead of full appraisals as required by the regulators to approve the loans to William G. Baker and then concealing the use of those letter appraisals in the loan approval process. Additionally, counts 10-12 of the indictment charge Donald A. Baker and William G. Baker with submitting false financial information to First Federal in order to influence First Federal on the loan transactions. This case is being prosecuted by Fraud Section Trial Attorneys Nicole Cubbage and Jack B. Patrick of the Department's Criminal Division. ### 89-478