MYRTLE BEACH — Howie Lavin, co-owner of the now-closed Lavin Cars dealership here, entered a not guilty plea during his arraignment Wednesday in federal court on charges that he orchestrated a long-running check-kiting scheme that cost two area financial institutions more than $8.6 million.
Lavin is facing a felony bank fraud charge that carries a maximum sentence of 30 years in prison and a $1 million fine. Magistrate Judge Thomas Rogers said during Wednesday’s hearing in Florence that Lavin can remain free on a $20,000 unsecured bond pending his trial, which has not been scheduled. Lavin also was required to surrender his passport and cannot travel outside of South Carolina without prior approval from the U.S. Probation Office.
Meanwhile, Tommy Brittain – a Myrtle Beach lawyer who represents Lavin – has asked a state judge to halt proceedings in a separate civil lawsuit in which CresCom Bank accuses Lavin Cars and its owners – including Howie Lavin and his brother, John Lavin – of defaulting on more than $1.9 million in loans. Brittain said Howie Lavin cannot answer the bank’s allegations while the criminal case is active because he intends to invoke his Fifth Amendment right not to testify.
CresCom Bank and Carolina Trust Federal Credit Union were the two financial institutions that lost money in the alleged check-kiting scheme.
CresCom Bank has asked a judge for summary judgment in the civil lawsuit, saying there is no dispute over the facts in the case and the bank should prevail based on evidence already submitted. Henrietta Golding, a Myrtle Beach lawyer who represents CresCom Bank, said the bank intends to pursue a summary judgment for the unpaid loans.
Brittain’s motion appears to hint that more than one person was involved in the alleged check-kiting scheme, stating that Howie Lavin “is one of the subjects” of the criminal investigation. Brittain could not be reached for comment on Wednesday. Golding said she is not aware of anyone other than Howie Lavin being investigated in the criminal case.
A criminal indictment issued in September focuses on one month of activity – April 2012 – in three of Howie Lavin’s checking accounts, although prosecutors say the alleged scheme lasted for five years.
According to the indictment, Howie Lavin made 1,853 deposits and withdrawals that April at CresCom Bank and Carolina Trust Federal Credit Union. The financial institutions gave immediate credit on Howie Lavin’s deposits, allowing him to artificially inflate his account balances and write new checks against those that hadn’t yet cleared, according to the indictment.
Court documents show Howie Lavin was depositing and withdrawing checks totaling $4.5 million per day at each bank during April 2012, with more than $94 million worth of checks flowing into and out of his accounts at the two financial institutions.
The alleged scheme fell apart on May 1, 2012, when Lavin deposited six checks totaling $4.4 million drawn on the Carolina Trust account into his CresCom account, according to court documents. There was not enough money in the credit union account to cover the checks, causing an overdraft of more than $4.2 million. The checks were returned to CresCom Bank the next day, causing an overdraft of more than $4 million in that account.
Within a week, the Lavin Cars dealership on Jason Boulevard was shut down and CresCom Bank started hauling automobiles away from the site in an effort to recoup money from the check-kiting scheme and a $1.1 million loan the bank gave the dealership in 2006.
In addition to the car dealership, Howie Lavin’s Barefoot Resort Bar & Grill shut down abruptly once the check-kiting scheme was discovered.
Check kiting is an illegal scheme in which a person tries to take advantage of the lag time between when a check is deposited and when it clears. That lag time allows the person to create a false line of credit that is based on non-existent money. Check kiting schemes require at least two bank accounts and two or more banks, with worthless checks circulating back and forth between the accounts. Most banks now have computer software that can quickly detect potential check kiting.
Lavin Sales, which was located on Jason Boulevard in Myrtle Beach, was an independent dealership that sold only used vehicles. Dealership founder Harry Lavin, who had sold automobiles for others for more than 25 years before opening his own dealership in 1987, died in 2010. Harry Lavin was the father of Howie and John Lavin.
Contact DAVID WREN at 626-0281.