MYRTLE BEACH — Former used-car salesman Harry Lavin on Wednesday agreed to plead guilty to one felony charge of bank fraud in a case where he orchestrated a long-running check-kiting scheme that cost local financial institutions millions of dollars.
Lavin, who is free on an unsecured $20,000 bond, will formalize his plea agreement during a court hearing Tuesday in federal court in Florence.
The bank fraud charge carries a maximum sentence of 30 years in prison and a $1 million fine. The plea agreement indicates prosecutors will seek a prison term of between 70 months and 87 months for the 53-year-old Lavin, although a pre-sentence report to be completed in the next couple of months could alter that recommendation, particularly if Lavin is shown to have been cooperative with investigators.
The plea agreement also calls for Lavin to pay restitution of more than $7 million. That amount also could change depending on Lavin’s pre-sentence report. The financial institutions previously reported they lost up to $8.6 million.
Tommy Brittain, a lawyer representing Lavin, said his client wanted to move forward quickly with his guilty plea.
“From the first time he came to see me, he has wanted to cooperate with the authorities and admit what he did,” Brittain said.
Lavin was indicted on the bank fraud charge in September. A sentencing hearing has not been scheduled.
The guilty plea apparently clears the way for resumption of a separate civil lawsuit in which CresCom Bank accuses Lavin Cars and its owners – Howie Lavin and his brother, John Lavin – of defaulting on more than $1.9 million in loans. Brittain had asked a state judge to halt proceedings in that case because Lavin had not yet pleaded guilty to the criminal charge.
“Once his sentencing is completed, that right to remain silent will be extinguished,” Brittain said. “You want to make sure that everything is over [with the criminal case].”
CresCom Bank and Carolina Trust Federal Credit Union were the two financial institutions that lost money in the check-kiting scheme.
The indictment in Harry Lavin’s criminal case focused on one month of activity – April 2012 – in three of Lavin’s checking accounts, although prosecutors say the alleged scheme lasted for five years.
The indictment shows Howie 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 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 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.
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.