Howie Lavin sentenced to 6 1/2 years for check-kiting scheme that cost Myrtle Beach- area banks millions
07/15/2014 7:31 PM
07/15/2014 7:33 PM
Howie Lavin, one of the owners of the former Lavin Cars dealership in Myrtle Beach, was sentenced Tuesday in federal court here to 6 1/2 years in prison for orchestrating a check-kiting scheme that cost financial institutions nearly $8.6 million.
Judge Bryan Harwell called the scheme “not just a significant financial loss but broken trust” in handing down a sentence that includes five years of probation once Lavin is released.
“This is a serious offense, this check kiting,” Harwell said. “Playing this shell game has serious consequences.”
Harwell sentenced the 54-year-old Lavin to the maximum term under the federal sentencing guidelines. Tommy Brittain, Lavin’s lawyer, had argued for the minimum sentence of just more than five years.
Lavin tearfully apologized to the court and his victims.
“I affected a lot of people and I live with that every day,” he said. “I can’t turn back the clock.”
Two of Lavin’s victims, officers with Carolina Trust Federal Credit Union, attended the sentencing hearing but did not address the court. They previously submitted a letter to Harwell outlining the impact Lavin’s crime had on the credit union.
Brittain told Harwell that the check-kiting scheme was an attempt to save a failing Lavin Cars dealership.
Brittain said the scheme began in about 2007 when Lavin was looking for a way to make payroll and pay bills for the dealership. Brittain said Lavin never was able to catch up on the growing deficit and the check-kiting scheme snowballed.
“There is no Swiss bank account or fancy home somewhere,” Brittain said. “This is a situation where a family business was being propped up over the years. They had 40 to 50 employees and they weren’t selling enough cars. The money went into the business.”
Jerry Miller, the credit union’s president and chief financial officer, and Charles Thrash, the credit union’s board chairman, said in their letter to Harwell that they “were shocked and dismayed at the magnitude of this heist.”
Miller and Thrash said Lavin’s actions caused a 25 percent loss in capital at the not-for-profit credit union based in Myrtle Beach. Lavin’s scheme cost the credit union $3.3 million.
“The crimes perpetrated by Mr. Lavin also significantly strained operating expenses, which impacted employee salaries, benefits and insurance premiums,” the letter stated. “The repercussions from this massive theft are far reaching.”
CresCom Bank was the other local financial institution victimized by the scheme. That bank lost almost $4 million, according to Tuesday’s hearing.
CresCom spokesman Scott Brandon said the bank did not want to comment on Lavin’s sentencing. Brandon previously has said CresCom Bank wrote off all losses attributed to Lavin at the time they occurred and has turned in strong financial performances since then.
Another bank and an insurance company lost a combined $1.3 million.
Although the scheme lasted for years, an indictment in Lavin’s case focused on just one month of activity – April 2012 – in Lavin’s checking accounts.
The indictment shows Lavin was making dozens of deposits and withdrawals every day – totaling 1,853 transactions for the month – at CresCom and Carolina Trust to keep the check-kiting scheme afloat. The financial institutions gave immediate credit on 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.
Bill Day, the assistant U.S. attorney who prosecuted the case, said keeping the scheme afloat was “almost a full-time job” for Lavin.
The 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 loans the bank had given the dealership.
In addition to the car dealership, Howie Lavin’s Barefoot Resort Bar & Grill shut down abruptly once the check-kiting scheme was discovered.
Brittain said the check-kiting scheme was not used to support gambling or any other non-business related activities.
“He might have bought some lottery tickets hoping he’d hit it big and solve some of these problems,” Brittain said. “But there was no systemic gambling problem . . . not anything that would amount to the missing money.”
Miller and Thrash said they trusted Lavin and the reputation of his family’s business, which had operated for more than two decades.
“The significant financial loss incurred, broken trust, and five years of deliberate deception and detailed planning to steal money from the membership of Carolina Trust Federal Credit Union is inexcusable,” the men said in their letter to Harwell.
Harwell said he will allow Lavin to self-report to prison, probably within the next 30 to 60 days. Lavin must pay restitution of $500 per month begining 30 days after his release. At that rate, it will take Lavin more than 1,421 years to pay back the money he stole.
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, 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. His sons, Howie and John Lavin, then took over the dealership.
No other family members or bank officials were implicated in the scheme.
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