State Exchange Finance Company (SEFCO) 1983;

1983 - Jan 2 - Culver-Based Loan Agency Files Bankruptcy Petition

SOUTH BEND, Ind. (UPI) — The depressed farm economy has forced the State Exchange Finance Co. into bankruptcy, company officials said Friday.

Representatives of the Culver-based loan agency filed for bankruptcy Thursday in U.S. District Court.

The action was "necessary due to loan losses the company has suffered primarily as a result of the depressed farm economy," board Chairman Fred Adams said.

The agency is located in rural areas, including Culver and Plymouth.

Company officials said they decided to file for bankruptcy to minimize potential losses to holders of the company's investment notes.

Allen Cummins, president of the State Exchange Bank of Culver, said the filing will not affect his bank or the Farmers State Bank in Lapaz.

The State Exchange Bank is affiliated with the bankrupt company, and the Farmers State Bank is a subsidiary of the company.

The same board of directors supervises the finance company and the banks.

William Ray, director of the Indiana Association of Financial Institutions in Indianapolis, emphasized "the money invested in the banks is insured." He said the money in the finance company was not insured.

If bankruptcy is approved, the company would be operated by its top 10 creditors under the supervision of lawyers. Logansport Pharos-Tribune

1893 - Jan 21 - Creditors' meeting Feb. 8

The first meeting of creditors in the bankruptcy reorganization of the State Exchange Finance Co., a Marshall County bank holding company seeking protection under Chapter 11 of the federal bankruptcy code, has been scheduled for 9 a.m. Feb. 8 in U. S. Bankruptcy Court in South Bend

Last week Bankruptcy Judge Robert Rodibaugh approved the appointment of Rex A. Figg as the new chief executive officer to replace Fred E Adams, who died Jan. 10 from a self-inflicted gunshot wound

Because of Adams' death and other factors, company officials were also given an extension of time until Feb. 1 to file detailed schedules of assets and liabilities and a statement of assets.

The creditors committee has been appointed with Joseph L. Currens, president of Thompson-Smith, Inc., Hamlet, as chairman, and William Thorne and J. Richard Ransel as the attorneys for the committee.

The bank holding company is affiliated with the Farmers State Bank of LaPaz, a wholly-owned subsidiary, and the State Exchange Bank of Culver, a separate institution with the same ownership and management However, company officials claim the banks are not affected by the bankruptcy proceedings.

The bankruptcy filing listed unsecured debts of nearly $6 million. The finance company's assets were estimated at $30 million. The South Bend Tribune

1983 - Feb 8 - Troubled finance firm seeks separation

By RAY M. LELIAERT JR. Tribune Business Writer

The State Exchange Finance Co. is taking steps to establish itself as a separate business from the Culver bank with a similar name and hopes to. begin making payments to creditors this summer, Rex A.Figg said this morning in a jam-packed Federal Bankruptcy Court in South Bend.

Figg, who was named Jan. 11 to succeed Frederic Adams as head of the finance company, said share holders will elect a new board of directors on Friday.

However, the finance company and State Exchange Bank of Culver continue to have the same stockholders.

Federal marshals were on duty and dozens of extra chairs were set up as an estimated 250 persons, some who said they had invested in finance company notes, were on hand for the start of the bankruptcy hearing.

Figg testified, At the present lime, we cannot speculate on when the creditors will be paid or how much they will receive."

Figg said that he hopes to submit a reorganization plan to the court in late April and begin payment to creditors in mid or late summer. However he acknowledged that creditors probably will not be paid in full and emphasized the payments will depend on the ability of the finance company to sell real estate assets in a depressed market. Figg also said that the finance company has been having problems establishing itself as a separate entity since the company and the State Exchange Bank shared officers and employees until the finance company filed for court protection under Chapter 11 of the Federal Bankruptcy Law on Dec. 30.

The relationship between the two firms is further complicated because the finance company as a bank holding company owns the State Bank of LaPaz.

The Culver bank is continuing to - seek permission from state and federal regulators to acquire the LaPaz bank.

When you have officers who are the same officers of both Institutions, its difficult for me to say what institutions they were making loans for, Figg told William Thome of Elkhart, attorney for the creditors committee.

Under questioning by Thorne, Figg said that efforts are continuing to clarify the separate loan obligations of the bank and finance company.

Salvatore A. Barbatano, the finance company's Chicago attorney, blamed the factors leading to the bankruptcy filing on the general downturn in the agricultural economy in Marshall and surrounding counties and a "series of rumors that began to circulate in Culver".

Barbatano said the rumors concerned embezzlement, pending indictments and a suicide involving finance company officers.

He noted that the rumors preceded the death Jan. 10 of Adams. Adams death was ruled a suicide.

In addition to the pending sale of the Farmers State Bank, the finance company is attempting to sell two multi-million-dollar tracts of real estate acquired last year in lieu of foreclosure on problem loans, Figg said.

The real estate includes the 4,900-acre Overmyer farm in Marshall County which was turned over in connection with the debt of more than $7 million. The finance company also assumed nearly $4.5 million in mortgages.

The other tract is a 2,600-acre vineyard valued at an estimated $2.5 million which was turned over by Syler, Inc.

Figg said that in addition to himself, the finance company now has five officers although four of those employees are agents for the State Exchange Insurance Agency.

He also said that the finance company has invested $1.2 million in a repurchase agreement, a form of government bond secured loan, to the American National Bank of South Bend.

In similar fashion, $350,000 has been invested with 1st Source Bank of South Bend and $375,000 with the State Exchange Bank. South Bend Tribune

1983 - Feb 13 - New Directors Named

The board of directors of the State Exchange Finance Company, Culver , resigned Feb. 3 following the appointment of five new directors.

The new directors are Rex Figg, Sharon Brockus, Donald Slyh, Andrew Vernum and .George Schipper. None of these people have previously been involved in the management of State Exchange Finance Company or The State Exchange Bank other than Figg, who recently became affiliated with the finance company, and Brockus, who has been an employee of the finance firm for 15 years.

Figg, chief executive officer of the State Exchange Finance Co., stated he was confident the new board will devote its time and energy toward implementing a successful plan of reorganization in the pending Chapter 11 proceedings - Logansport Pharos-Tribune Sunday, February 13, 1983

1983 - May - From Sun, May 8, - Fri. May 13 to a series of articles ran in the Indianapolos Star: Bank crisis What happened to finance company in Culver? By RICHARD E. CADY And MYRTA PULLIAM Star Staff Reporters Culver, Ind.

1983 - May 28 - State Exchange Bank offers to buy some of SEFCO assets

1983 - June 2 - Bank Purchase Eyed

Culver (UPI) The State Exchange Bank of Culver is considering, the purchase of its sister company, the State Exchange Finance Co., which has filed for Chapter 11 bankruptcy.

Allen Cummins, chairman of the bank, said the deal would include buying the finance company's subsidiary, the Farmers State Bank in Lapaz.

The proposal would be subject to approval by bankruptcy court, bank shareholders, and governmental regulatory agencies. - Thursday, June 2, 1983 Logansport Pharos-Tribune

1983 - Jun 2 - Exchange Finance Co. Creditors approve offer

By MATT GALBRAITH Tribune Plymouth Bureau

CULVER The court-appointed committee of State Exchange Finance Co.'s largest creditors has approved in principle an offer made for a portion of SEFCCs capital assets, an attorney says.

But William A. Thorne, the committees counsel, said today further negotiations will be necessary on the State Exchange Banks proposal to purchase some assets, assist m liquidating others and acquire the SEFCO-subsidiary Farmers State Bank of LaPaz.

The bank announced last Friday it was seeking to buy a substantial portion of SEFCO assets.

It was not a rejection, Thorne said of the creditor committees reply, which he mailed earlier this week to the banks attorney! We responded with suggestions on how they could change the structure of the proposal

They'll be several more meetings to work out the details, the Elkhart lawyer added.

The committee has a key vote on whether the assets-purchase offer materializes, because it is the first of the parties involved in SEFCO's Chapter 11 proceedings to consider the offer. Later approval of the bank plan must come from the rest of the creditors, bank shareholders and regulatory agencies.

Some 900 creditors claim they are owed about $26 million by SEFCO, which filed for Chapter 11 bankruptcy protection on Dec. 31, 1982. They are seeking a 100 percent return of the funds.

Allen H. Cummins, bank president and chairman of the board, said he has not seen the committees reply, but feels confident a deal agreeable to all parties can be worked out Without it, he said, there is no deal.

That's the first people that we have to get approval from, said Cummins. If they don't go along with the proposal we can get all the regulators and shareholders to approve it, but it wont make a difference.

I would think it would be basically acceptable to most of the creditors, but there may be some who don't like it, he added.

Cummins declined to say how much money, in cash and securities, is involved in the offer. All parties have agreed not to' comment on a dollar amount until an agreement is reached and approved by the bankruptcy court, be explained.

He did say the offer Includes bankable assets" that the bank would be authorized to buy troth federal and state banking agencies. Other assets not available to the bank would be placed in i trust for liquidation.

SEFCO has a repealed $33 million in total assets.

As it stands, SEFCO has until July 30 to submit a reorganization plan to the court Then, the creditors have another 90 days to approve it or submit one of their own. - South Bend Tribune

Directors employed the legal firm of Krieg DeVault Alexander and Capehart as Special Counsel to make an independent study of the relationship between the State Exchange Bank and State Exchange finance Company.

1983 - Aug 18 - Ex-member of board hits deal method

By MATT GALBRAITH Tribune Plymouth Bureau

CULVER The State Exchange Finance Co.s directors were skirted when the deal allowing the State Exchange Bank to help reorganize SEFCO was made, says a former board member who resigned to protest the action.

I feel 1 have been used only for my name," Donald Slyh stated in a letter of resignation. Slyh resigned a week ago today, two days after the agreement was announced.

The entire board has not been permitted to assist in any way to resolve the problems (of SEFCO)," said Slyh, who was one of four new directors named on Feb. 3.

Rex Figg, SEFCOs chief executive and also a director, said Slyh's departure will not hamper talks. A replacement should be named at the boards next meeting, Figg added.

But Figg declined to respond to Slyhs charges, saying, Im not going to comment on anything that was said in the letter.

Slyh, in a separate interview, said bank attorneys had proposed two bank assistance plans on prior occasions. But both, he said, were rejected as inequitable" by SEFCO directors and also by the bankruptcy court-appointed creditors committee.

SEFCO filed for Chapter 11 protection last Dec. 31 and since has been working to raise cash to pay back nearly 800 creditors.

A third proposal the one apparently accepted was presented early last week. It was followed by a public statement announcing that an agreement had been struck. Neither Slyh nor the other directors knew about the details until a board meeting was called for last Thursday.

Slyh said he was quite upset to first hear about the agreement" through media reports.

There's no way that I would approve this plan, said Slyh, who says his opposition extends beyond the lack of input the SEFCO board had in formulating the proposal.

In my opinion, the plan still is inequitable, he added. They (SEFCO officials) are not paying the creditors back 100 cents on the dollar, for one thing, which is what they Ye supposed to try to do.

As set forth in the proposal, the bank would purchase a substantial amount of SEFCO assets for cash and stock and merge with the SEFCO-owned Farmers State Bank of LaPaz.

Slyh would not say how much of SEFCO would be purchased, only saying SEFCO and its State Exchange Insurance Agency would be liquidated as a result of the agreement.

The Aug. 9 announcement said SEFCO and the bank had agreed in principle on the plan. We were completely bypassed, Slyh contends.

But another director, George Schipper, said the announcement was misworded and the proposal is tentative, subject to approval by all parties involved in the reorganization.

I have no qualms with it, he said Wednesday.

Countering Slyhs claim that the plan underpays creditors, Schipper said SEFCO officials are very dedicated to get every dime that we can get for the creditor payback.

Joseph Currens, who heads the creditors committee, said the banks proposal is not 100 percent finalized, although committee members are looking over some of the details, which until now were kept confidential

A Sept 30 deadline has been set for submitting the reorganization plan in federal court But the deadline twice has been extended 90 days, and sources say another extension would not be a total surprise.

1983- Jul 10 - Publisher is linked to Culver bank - Forlow owed the bank or its sister company, State Exchange Finance (SEFCO), $1,865,000 on 10 promissory notes

1983 - Sep 11 - Loan transactions 'larceny by trick,' Culver bank claims

By RICHARD E. CADY Star Staff Reporter



Culver, Ind. Attorneys for a troubled Marshall County bank believe a former bank officer and a bank lawyer committed fraud in the issuance of a $150,000 loan.

A spokesman for the FBI said an investigation of the Culver-based State Exchange Bank and State Exchange Finance Co. (SEFCO) is continuing.

SEFCO, the subject of a series of stories in The Indianapolis Star in May, has been under bankruptcy reorganization since last December.

Fred E. Adams, chairman of the board of the bank and finance company, committed suicide in January.

SINCE SEFCO'S petition for Chapter 11 bankruptcy protection was filed in South Bend at the end of the year, numerous lawsuits have piled up over loans the bank and finance company made from 1980 to 1982.

State Exchange Bank is seeking recovery of various loans from Lafayette attorney Alfred E.McClure, a former bank lawyer. A key complaint the bank filed against McClure alleges McClure abused his role as an attorney for the bank while receiving close to $1 million in loans.

The bank filed the complaint in July after McClure himself sought Chapter 11 protection in Federal Bankruptcy Court at Lafayette.

MCCLURE SOUGHT bankruptcy shelter for himself, his law firm, shopping centers in Portage, Ind., and Mount Juliet, Tenn., and an Indianapolis apartment project.

The bank complaint accuses McClure of receiving money through fraud, false pretenses, false representations and "larceny by trick." Those charges center in part on a series of transactions MeClure had with John J. Deery, former senior vice president of the bank, on Dec. 31. 1981.

According io the complaint, Deery approved a $150,000 loan for McClure in the account of a McClure real estate project, the Meadows Shopping Center at Portage. The loan was at the prime rate, the lowest interest rate offered commercial customers.

THE FUNDS went into Mc-Clure's Meadows account, and McClure then drew a $150,000 check from that account and had it deposited in his law firm account at the Lafayette Bank and Trust -

McClure then drew a $150,000 check from the Lafayette bank account, made payable to Harbour Development Co., and had this deposited in a Harbour Development account at State Exchange Bank.

The lawyer then drew a $150,000 check from the Harbour account, payable to Deery who deposited it in his own account. All of this happened on Dec.31, according to the complaint That was the same day McClure filed with the Indiana secretary of state articles of incorporation for Harbour Development with himself and Deery as officers.

HARBOUR DEVELOPMENT is building luxury condominiums on Lake Maxinkuckee here.

Although Deery is not a defendant in the complaint, bank attorneys said Deery had prepared and filed an account status sheet "wrongfully showing" the purpose of the $150,000 loan as operating capital for the Meadows Shopping Center.

McClure through his attorney, denied any wrongdoing. Deery has refused to talk to reporters.

The bank's complaint also attacks McClure on other transactions, including his representation of State Exchange in the acquisition in early 1982 of Washington State land known as the Cold Creek Ranch.

AS PART of the acquisition. State Exchange Bank pledged $200,000 in U.S. Treasury notes at American Fletcher National Bank (AFNB), in Indianapolis. This has been described as a misapplication of bank assets in violation of banking regulations.

According to the complaint McClure "wrongfully" encouraged and participated in the pledge.

Deery, a former AFNB employee, received a $350,000 AFNB loan for the Harbour Development project in. October 1981.

The Washington State land was acquired in behalf of a SEFCO customer, Syler Inc., a Plymouth seed dealer.

HOWEVER, SHORTLY after the acquisition the bank foreclosed on Syler Inc. and its assets were transferred to a new company operated by a former bank consultant

Last month, Tom Ross Syler, former owner of the seed company, filed suit in Marshall Superior Court asking for an accounting of Syler assets repossessed by the bank.

Syler's suit is against State Exchange Bank; Pilgrim Seeds Inc., the successor to Syler Inc., and John Thieling, president of Pilgrim Seeds.

Although the bank and finance company were regarded as separate organizations, they had the same directors and shareholders and many of the same officers.

THE FINANCE company is expected to be dissolved under a bankruptcy reorganization plan, but committees preparing the reorganization have not finished their work.

In August, a tentative plan was announced under which State Exchange Bank would merge with a subsidiary of SEFCO, the Farmers State Bank of LaPaz, and buy some of the assets of the finance company.

Donald L. Slyh resigned as a SEFCO director the next day. Slyh complained that the SEFCO board had been bypassed in reorganization negotiations.

Joseph Currens, chairman of the creditors' committee, said negotiations are continuing. "We're working very, very hard to finalize the details," Currens said. - Indianapolis Star

On September 30, 1983, a definitive agreement was signed by the Bank and SEFCO, which would form the basis of SEFCO's Plan of Reorganization. The plan basically provided that as much of their principal and interest as possible be returned to the note holders and creditors of SEFCO (later, after lawyer fees, those note holders and creditors would be paid over 50% of the debt owed.) The plan further resolved to eliminate the years of litigation that could occur without a settlement, and to merge the Farmers State Bank with The State Exchange Bank.

1983 - Nov 29 - No objections filed to SEFCOs plan \ Payback

By MATT GALBRAITH Tribune Plymouth Bureau

CULVER The State Exchange Finance Co. Is a step closer to making its first payment to creditors, nearly 11 months after SEFCO filed for Chapter 11 bankruptcy protection.

Monday was the last day for objections to the $4 million payoff, which SEFCO requested Sept 15 and none was on file in the U.S. Bankruptcy Court In South Bend.

Now the matter rests with the bankruptcy court

There should be an order from the court In the near future, I would think, said William A Thorne, attorney for creditors. Thorne said on Oct 4 the court-appointed creditors committee was essentially in favor of the initial payback plan.

The distribution formula, according to the court petition, will be figured from the amount of principal of note or unsecured claim plus interest to Dec. 30 1982, "plus alleged preference (multiplied by) 10 percent minus the preference."

SEFCO claimed in the court document that noteholders who received a preference were those who received interest or principal payments between Oct. 1 and Dec. 30, 1982.

In the formula, creditors will get payments equal to 10 percent of their Investments.

SEFCO filed for Chapter 11 protection Dec. 30, 1982.

Thorne said negotiations between SEFCO and the creditors have focused on nonsecured creditors getting a payback of between 50 and 70 percent, while other creditors would recover about 75 to 90 percent

Creditors had called for 100 percent recovery.

Another matter for the court to decide is whether the State Exchange Bank, the former sister institution of SEFCO, can bail out SEFCO by purchasing the remaining SEFCO stock for $2.2 million, the SEFCO-owned Fanners State Bank for $5 million and SEFCO-owned State Exchange Insurance Agency for a reported $900,000.

An estimated three years are needed for the SEFCO liquidation, Thorne has said.

SEFCO has some 800 creditors, court records show.

SEFCO filed for reorganization after a rash oi rumors of financial troubles caused Investors to draw out large sums of money.

The FBI investigated several deals arranged hy SEFCO and the State Exchange Bank in the after-math of the Chapter 11 filing and the suicide of Frederic Adams, who had headed both financial institutions.

Several lawsuits also are pending against SEFCO. - South Bend Tribune

1983 - Dec 16 - Interim distribution Judge considers SEFCO payment

By MATT GALBRAITH Tribune Plymouth Bureau

A unique plan to make a partial payment to unsecured creditors of State Exchange Finance Co. of Culver, was taken under advisment today by a federal bankruptcy judge in South Bend.

A decision on the interim distribution, which is unusual because most creditor payments in bankruptcy cases are made after the end of litigation, is expected early next week from Judge Robert K. Rodibaugh.

The proposal was presented by SEFCO Attorney Thomas Lewis of South Bend.

The payment, if approved, would equal roughly 10 percent of what SflFCO owes to unsecured creditors. It would be the first renumeration since the finance company filed for Chapter 11 protection and reorganization Dec. 30, 1982.

I'll try to make a quick ruling on this, said Rodibaugh, who said a decision could come as early as Monday on the distribution plan, which he called a wholesome idea.

William Thorpe, the attorney for tfie court-appointed creditors committee, said his committee endorses the repayment method. "Nobody is really harmed in this process", said Thorne. "Obviously some are annoyed, but that's (to be expected) in a Chapter 11 case".

Rodibaugh, however, had to divert questions about preference penalties brought up by about 20 creditors who attended the hour-long session this morning in U.S. Bankruptcy Court in the federal building, South Bend.

Those who hold a preference - meaning they received a payment from SEFCO during the 90 days prior to the Chapter 11 filing - would be assessed an "offset cost", as proposed bv SEFCO attorneys, to recover the amount gained by the creditors

The amount recovered would go into the total dollar distribution SEFCO will repay. Lewis said SEFCO may have to file lawsuits to collect the money but stated that officials are discussing alternatives to legal action, which he did not disclose.

Several of the creditors who attended the session told the court that in their opinions the interim distribution formula is unfair, but Rodibaugh responded by saying todays session was to present arguments for the partial payment and that preferences will be decided by the court at a later date.

"I don't have to allow this", the judge said; "Most payments arent, made until all the (legal) battles are over". Lewis agreed with that opinion, saying, "I don't like preferences. I think they stink. But the law says we have to do it this way.

"The debtor wants, to make a preliminary' distribution of some $2.3 million before these questions are decided."

Lewis said he will file an order for the distribution in court on Monday.

Attorneys for SEFCO, creditors and the State Exchange Bank which has proposed a bail-out plan for SEFCO, have indicated in letters sent to all parties that the payback goal for all non-secured creditors is somewhere between 75 and 90 percent of their investments. SOuth Bend Tribune

1983 - Dec 20 - Judge approves SEFCO payment

CULVER - The State Exchange Finance Co. can make an interim distribution of $2.3 million to most unsecured creditors, a federal bankruptcy judge ruled on Monday.

The partial payment, which equals about 10 percent of what SEFCO owes creditors, was ordered by Judge Robert K. Rodibaugh, who heard oral arguments last Friday in South Bend.

Rodibaugh said in his order that the issue of preferences how much SEFCO can regain from investors who withdrew money in the 90 days before SEFCO filed for Chapter 11 protection "shall be decided in the future pursuant to appropriate proceedings".

The Judge explained, Neither this order nor the interim distribution shall be construed to be an adjudication of alleged preferences. - SOuth Bend Tribune

1983 - Dec 21 Caught in bankruptcy bind Others claim farmers life savings

By MATT GALBRAITH Tribune Plymouth Bureau

CULVER - The case of Howard Fouts is typical of the legal dilemma now facing the bankrupt State Exchange Finance Co. (SEFCO) as litigation inches ahead in SEFCOs reorganization.

At present, SEFCO is working out a formula to pay back creditors. SEFCO would like to regain funds withdrawn in the 90 days before the Chapter 11 filing on Dec. 30, 1982, to add to the remuneration kitty, as provided in the bankruptcy code.

And that's where Fouts comes into the picture.

Fouts is a retired farmer living near Walkerton. The 74-year-old man had, as he prefers it to be described, a substantial amount of money deposited in SEFCO in 1982, amounting to a lifetime of savings.

Fouts was pondering a land purchase deal and removed most of the savings on Oct. 2, 1982. Ninety days later, SEFCO filed the Chapter 11 petition in U.S. Bankruptcy Court.

Fouts claims he knew nothing of SEFCOs financial troubles and should not be penalized for withdrawing the funds, which SEFCO calls having preferential treatment.

SEFCO now wants that money to be returned so a fair distribution is made to all creditors.

"I can't hardly sleep nights because that's all the money we had, Fouts said Tuesday. That's all the income I'd have except for $230 a month Social Security. I'd have to sell of part of my place to live".

The Walkerton man said the money has been removed from the state, and he'll fight any move on SEFCOs part to get it back, even if it results in his going to jail

"I had that money saved so I wouldn't have to go to a nursing home", added Fouts.

SEFCO attorney Thomas Lewis said at a court hearing last week that between 1,000 to 1,500 investors withdrew either principal payments or interest in the 90 days before the filing. Lewis said SEFCP officials are discussing methods to get. the money back.

Some $4 million was withdrawn from SEFCO in the two weeks before the Chapter 11 filing alone, bank officials have said in the past.

The hearing was in connection with SEFCOs plan to make a $2.3 million interim distribution to most unsecured creditors.

Bankruptcy Judge Robert K. Rodibaugh on Monday ordered the partial payment to proceed, based on a formula which recognizes preferences and reduces reimbursement accordingly.

Rodibaugh said creditors who can later prove they had no preferences will be paid back the amount of their preference reduction.

But Fouts and several other creditors claim the formula is unfair because it requires them to come up with a lump sum for SEFCO, based on the amount they had withdrawn.

In Fouts case, it involves thousands of dollars.

Lewis said one method of regaining the withdrawn funds is to sue those with alleged preferences. That would give the court the opportunity to settle each dispute as it comes.

Three or four other alternatives are being discussed, he added, but disclosed no further details on these other possibilities.

1983 - Dec 22 - Adams loan to Hannah

Adams-Hannah dealings probed by federal jury / SEFCO loan to Indy banker

By MATT GALBRAITH Tribune Plymouth Bureau

CULVER The name of the late Culver banker Frederic E. Adams was on a list of witnesses compiled by a federal grand jury which investigated a former Indianapolis bank official, according to a source close to the inquest

Jurors wanted more information about Adams role in granting a $200,000 loan to Larry J. Hannah, former American Fletcher National Bank (AFNB) vice chairman, the source said.

Adams, who was president and chairman of the board of State Exchange Bank and State Exchange Finance Co., committed suicide last Jaa 10.

Hannah, fired from AFNB in January, was indicted on charges of conspiracy, misapplication of bank funds, making false statements in bank records and receiving money in exchange for procuring loans.

Thomas M. Tuttle, a former AFNB employee, was named as an unindicted co-conspirator.

The 17-count indictment was released last Friday.

The source, who spoke on the condition that he would not be named, said part of the Hannah investigation focused on Adams because of the way Adams handled the $200,000 loan, which was arranged in December 1980.

The source, an employee of the U.S. District Attorneys Office, said Adams was not being investigated, but added, He certainly would have been called as a witness.

Hannah allegedly invested a portion of the loan in a Florida land development project In the indictment Hannah is accused of making loans to a Florida development company in which he held interest and misusing AFNB funds for another Florida company in which he also held interest

Adams, the source said, arranged the loan for Hannah through the finance company rather than the bank. Investigators believe Adams wanted to conceal the loan from various state and federal banking authorities.

Our theory is that he put the loan in there (SEFCO) so he wouldn't have to report it. No one knew that loan existed, the source said.

Jurors wanted to know why Adams hid the transaction.

The loan was moved to the First National Bank of Elkhart in August 1982, four months before SEFCO filed for Chapter 11 protection under the federal bankruptcy code.- South Bend Tribune

SEFCO ~~ 1983 ~~ 1984~~ 1985 ~ ~ 1986