SERIES CHRONOLOGY; SERIES NJ BANK FINANCE EMPLOYEE CHRONOLOGY

SERIES CHRONOLOGY; SERIES NJ BANK FINANCE EMPLOYEE CHRONOLOGY; THE INTERTWINED INTERESTS OF FIRST PEOPLES' OFFICERS

Author: James Asher and Craig Stock, Inquirer Staff Writers

The men who took First Peoples Bank down a steep slope from spectacular growth to financial crisis routinely used the bank as a reservoir of financing for their personal and business ventures.

Under the direction of William G. Rohrer, the bank's chairman and founder, First Peoples has lent millions of dollars to the bank's officers and directors, their companies and their families. At one point last year, the total amount of outstanding loans to First Peoples executives amounted to more than 40 percent of the bank's capital.

Although such loans are legal and apparently have been repaid on schedule, they typify management practices that have drawn the attention of federal regulators to First Peoples.

The Inquirer reported yesterday that the recent history of First Peoples apparently has been marked by poor lending practices and unsound management decisions. Earlier this year, the Federal Deposit Insurance Corp. instructed First Peoples, one of New Jersey's largest banks with more 200,000 depositors, to declare that $69.1 million of its loans were delinquent and to write off $15.1 million more in loans as uncollectable.

FDIC officials also ordered First Peoples to report an operating loss for 1982 of $18.7 million. They told the bank to revamp its loan practices, increase its capital and replace top management.

In April, Rohrer was replaced as chief executive officer. Though he remains chairman of the board, insiders at First Peoples say he no longer plays a role in the day-to-day operations of the bank.

Deeds, land records and mortgage papers filed in several South Jersey courthouses show that Rohrer borrowed money from the bank in dozens of transactions. Bank records show that the total value of his loans has declined in recent years, from a high of $4.56 million - or 17 percent of the bank's entire equity - at the end of 1976, to $2.89 million at the end of last year.

Despite the legality and financial soundness of such loans, many banking experts say such transactions should be avoided. Many banks, in order to prevent actual or apparent conflicts of interest, prohibit lending to executive officers.

"Generally speaking, except for routine consumer credit such as credit cards and other revolving credit programs, our bank doesn't make any loans to its executive officers, and very few to directors," said Joseph Gordon, chief counsel for Philadelphia National Bank and a member of a panel that wrote ethics codes for the Bank Administration Institute.

"I think among the larger and better banks this record is typical. They just don't borrow from their own banks."

At First Peoples, such loans were a standard practice - and one that its current officers defend.

The total amount of loans outstanding to executive officers and directors of First Peoples has fluctuated from a low of $7.55 million at the end of 1978 to a high last year of $18.62 million, a figure representing 43.3 percent of the bank's capital - the net worth of the bank.

Like all other lending institutions, First Peoples is not required by law to disclose the particulars of its insider loans, even to its shareholders. As required, it has disclosed the aggregrate amount of such lending, declaring that such loans "are made in the ordinary course of business and on substantially the same terms and rates as loans to other persons."

Many of the details not disclosed to First Peoples' shareholders are available amid the mass of public records filed in the courthouses of six South Jersey counties.

An Inquirer review of public and business records relating to First Peoples revealed the following types of insider dealings:

* Over the years, First Peoples lent more than $20 million dollars to its own officers and directors. Included were millions of dollars in loans to at least 39 businesses owned wholly or in part by bank officials or their relatives. In most cases, the terms at which the loans were made is not included in any public records, and bank officials refused to discuss specific loans.

* A number of businesses that bought property from members of the First Peoples board of directors were permitted by the board to finance the transactions with loans from the bank.

* First Peoples purchased millions of dollars in property, goods and services from enterprises operated by its own directors and officers. In one instance, First Peoples sold five pieces of property to Rohrer and other bank officials for $4.5 million, then agreed to lease back the property for 25 years for payments totaling $14.4 million. The bank also agreed to pay all taxes and upkeep on the property during the life of the lease.

* First Peoples financed several real estate deals for two members of Rohrer's family. In one case, the bank transferred property in Haddon Township at attractive terms to Rohrer's wife, Mimi, as trustee for his daughter. It also made at least $755,000 in loans to Rohrer's son-in-law, Kenneth A. Moss.

A loan of $2.5 million by First Peoples to Society Hill Associates illustrates the intertwined interests of the bank's board.

Society Hill Associates is a partnership that is completing a luxury condominium project in Cherry Hill, making money and repaying its loan to the bank on schedule. A limited partner in the venture is Jerome S. Goodman.

Before becoming First Peoples' president earlier this year, Goodman had been a member of its board of directors for nine of the last dozen years. He joined the board in 1972 and quit in January 1979, when he left to run Mainland Bank, a small bank in Atlantic County. He returned to First Peoples' board early last year.

In a recent interview, Goodman said that he and Rohrer, his partner in other ventures, "own the ground that the (Society Hill) homes are being built on. We receive from the sale of each unit a certain amount of money. We receive no money until a sale is made."

According to his partnership agreement with Society Hill, which is due to expire in 1996, Goodman limited his financial obligation to a maximum of $100,000. In addition, during the period between 1979 and 1981, Goodman personally lent hundreds of thousands of dollars to Society Hill Associates.

Then in 1982, while Goodman was a member of the First Peoples board, Society Hill applied to the bank for a $2.5 million loan. Before First Peoples made the loan on June 30, 1982, Goodman agreed to give the bank first right to the collateral that Society Hill had put up for an earlier loan from Goodman of $386,306.

Other financing for the project came from Interboro Savings & Loan Association and Commerce Bank.

In addition to the Society Hill mortgage, Goodman has received other loans
from First Peoples.

He and Moss, Rohrer's son-in-law, borrowed $110,000 from First Peoples in September 1977 through their company, Goodmoss Corp.

Mortgage papers filed in Camden County also show that Goodman and his wife, using two parcels of real estate as collateral, borrowed $600,000 from First Peoples on July 24, 1979, six months after Goodman had resigned from the First Peoples' board.

Goodman said he was not receiving a salary for serving as president. Instead, he said, he has asked to be paid in a "Lee Iacocca deal," in which he would receive the right to buy First Peoples stock, which he could sell at a profit if it increased in value.

Goodman was not the only First Peoples official to receive loans from the bank. Records show that:

* In 1979, a partnership between Mario Natale Jr., then the president of First Peoples and now chairman of the bank's executive committee, and Haddonfield attorney Edwin T. Ferren III, then a First Peoples director, borrowed $500,000 from the bank. As collateral, the men used real estate that was subject to a first mortgage held by another bank.

* In 1981, MGF Associates, a partnership involving Ferren and former bank director Robert M. Gillin, borrowed $300,000 from First Peoples. Natale later joined MGF Associates.

* In February and March 1980, Ferren and his wife, Suzanne, borrowed at least $898,000 in three loans from the bank, using property in Avalon as collateral.

* In 1978, another partnership involving Ferren received a $750,000 loan
from First Peoples. The partnership, Upper Fidelity Associates, also included bank director David James Kerr and Henry J. Tyler, Ferren's law partner, whom the bank has retained for legal work.

* In 1981, bank director John M. Kennedy, chief executive of Pepco Manufacturing Co. in Somerdale, N.J., borrowed $850,000 through a partnership for a condominium project in Ocean City.

* In 1980, Gilbert Ramagosa, a former board member of the Stone Harbor National Bank who had joined a First Peoples' advisory board after the 1977 acquisition of the Stone Harbor bank, received three mortgage loans from First Peoples totaling $9.25 million.

In August 1982, First Peoples filed a foreclosure action against Ramagosa, claiming he owed the bank $1.7 million in principal on one loan, plus an undisclosed amount of interest. The bank contends that Ramagosa failed to make payments on the loan from June 1, 1981, through Aug. 17, 1982. The case is pending in the Chancery Division of Superior Court.

There are no laws against such insider loans. But many bankers and authorities on business ethics contend they are wrong.

In a 1977 speech to Pennsylvania bankers, Charles B. Jarrett Jr., then a senior vice president and counsel for Mellon Bank of Pittsburgh, the state's largest, said a bank's "reputation for integrity is its most valued asset and is largely determined by the conduct of its employees."

So, Jarrett said, "each employee must manage his or her own affairs and those of the institution to avoid any situation that might lead to even a suspicion of a conflict of interest."

The insider loan, according to Roger S. Hillas, president of Provident National Bank of Philadelphia, creates two problems.

"It puts pressure on bank employees to overrule their normal credit judgments (and) creates at least the appearance of a conflict of interest," he said.

Though it was Rohrer and his board of directors who approved many such deals, the men who have replaced Rohrer as chief executive and chief operating officer defend the practice.

"A man does not get a loan because he is a director," said John J. Feldman, the bank's new chief operating officer.

"A man gets a loan because after we go through the credit checks we determine it is a good and valid business decision and the place to invest our money," Feldman said. "We are under absolutely no moral or other obligation to reduce or increase (loans to directors). It is a business decision from day to day."

The 223 acres near Blue Bell Road and Coles Mills Road in Franklin Township, Gloucester County, were not among the choicest development sites in South Jersey. The tract had a high water table and was swampy in spots.

Yet Kenneth A. Moss and his four partners had a vision. They saw houses and roads and, in the end, profit. To that end, they formed MRDG Partnership.

For Moss, it was natural to look for financing at First Peoples Bank. Rohrer was his father-in-law, and the two men had been involved together in real estate transactions in Camden County. Moss later would join Goodman, who at the time was a bank director, in forming a real estate holding company called Goodmoss Corp.

On Feb. 19, 1975, MRDG received a loan for $175,000 from First Peoples. The loan was payable one year later.

But two years passed before MRDG applied for subdivision approval from Franklin Township. And, township officials said recently, the partnership submitted only preliminary plans and never completed the application process.

Then in 1978, the MRDG plan was endangered by the enactment of the Pinelands Preservation Act. The new law required all developers planning to build in that area of Franklin Township to change the minimum size of their lots from 1 acre to 3.4 acres.

MRDG's project languished. According to court papers filed by the bank, the partnership stopped making its mortgage payments. Just when the payments stopped is not clear. Documents filed by the bank said no payments were received after Feb. 19, 1979. The bank also stated it paid real estate taxes on the wooded property for 1978, 1979, 1980 and 1981.

First Peoples took no foreclosure action until May 4, 1981. On Sept. 17, 1982, the bank took title to the land for $100 in a sheriff's sale ordered by Superior Court. Bank records show that the partnership owed the bank $341,700 in principal and interest. The property remains in the bank's inventory of foreclosed real estate. It is appraised at $172,300, an internal memorandum shows.

Rohrer, asked about the loan during a recent interview, said he had not taken part in approving it. When the deal soured, he said, he told Moss:

" 'You was left holding the bag . . . where was your brains?' "

"I didn't get no answer from him," Rohrer recalled.

Before and after the MRDG deal, Moss and a company in which he was involved received other loans amounting to hundreds of thousands of dollars from First Peoples.

In 1977, Moss and Goodman, through Goodmoss Corp., borrowed $110,000 from First Peoples, using as collateral property that they had acquired from an estate held in trust by the bank.

In September 1981, four months after the bank started foreclosure action against MRDG, Moss and his wife, Carol Rohrer Moss, got $100,600 from the bank in two loans.

Moss refused to talk about his dealings with the bank.

Borrowing was not the only way in which officers and directors dealt with First Peoples. The bank also paid hundreds of thousands of dollars every year for property, goods and services provided by enterprises that were owned or operated by its own officials.

In 1976, for example, a partnership in which Rohrer held the largest interest bought five buildings from First Peoples for $4.48 million. In turn, the bank agreed to pay $14.43 million over a period of 25 years, or $577,300 a year, to lease back the buildings from the partnership, Peoples Income Properties Ltd.

In addition, the bank agreed to pay for maintenance, taxes and insurance on the buildings. And, Rohrer and former president Natale, another general partner in the deal, are paid annual management fees by the partnership of $1,000 each.

This deal was reported to the bank's shareholders, and they were invited to buy into the partnership. Rohrer put up $145,000 for 8.8 percent of the partnership units. Other bank officials also became partners, including directors Fred Siris and Edward P. Henry II.

In an interview, Rohrer defended the deal, saying that the terms were favorable to First Peoples.

He said he found no conflict of interest in being involved on both ends of the transaction. Rohrer said he could adequately represent the bank's interest in receiving the highest possible price for the property and paying the lowest rent possible, while directing the partnership whose interests were the opposite.

Executives at other large local banks said their banks would not have engaged in such a transaction because of the potential conflict of interest.

First Peoples disclosed in reports to stockholders and banking regulators most of the following transactions in which it bought goods and services from its own officials:

* The bank paid more than $214,000 for cars and trucks from Rohrer Chevrolet, the chairman's automobile dealership, from 1977 to 1981.

* The bank bought $39,100 worth of cars and trucks from bank director Richard N. Kull, who is an officer of Burns Pontiac-Honda and RK Chevrolet. The bank said all its vehicles were bought at prices comparable to those available from other dealers.

* The bank rents warehouse space from Rohrer's real estate companies at payments ranging from $500 to $1,250 a month.

* Fred Siris, a director of First Peoples since its beginning about 30 years ago, leased the bank its Collingswood, N.J., branch office for 10 years at $20,000 a year until the bank bought the property for $200,000 in January 1981.

* The bank paid the law firm headed by bank director Lewis Katz direct legal fees of $50,400 last year and $9,408 in 1981. The law firm headed by the late bank director Joseph Tuso received $156,000 in legal fees for the years 1979, 1980 and 1981. The payments to Katz's and Tuso's firms did not include fees paid by borrowers who used the firms in mortgage transactions with the bank.

* The law firm of Pat Charles, son of director Leo T. Italiano, received nearly $150,000 in fees from the bank from 1979 through 1982. In 1979, while Edwin T. Ferren III was a First Peoples director, his Haddonfield law firm received $90,816 in legal fees from the bank.

* An internal document listing the bank's foreclosed properties showed that 19 of the 27 properties assigned to real estate agents for sale earlier this year were assigned to bank directors Fred Siris, David James Kerr, George W.
Powell and Moss, all of whom were also real estate salesmen.

For about 10 years, Cuthbert Colonial Builders Inc. made the payments on a $100,000 mortgage loan it had received from First Peoples in 1966. Cuthbert had paid off more than half the principal on the loan, which was secured by a gasoline station located on a 22,500-square-foot lot across the street from First Peoples' headquarters in Haddon Township.

But things went sour for Cuthbert Colonial and its president, Abraham Besser. The company went bankrupt in 1977, and a bankruptcy court trustee gave the service station property to First Peoples, which had $49,044 due it on the loan.

One year later, the bank found a buyer, A&E Development Co. Inc. The head of A&E was Abraham Besser.

Camden County records show that on Aug. 31, 1979, First Peoples transferred the property to A&E for $69,044. The bank agreed to let A&E assume the mortgage with the remaining principal of $49,044 at 6 percent interest, the same rate that had applied in the deal with Cuthbert Colonial 13 years before. That decision was made despite the fact that prevailing interest rates in 1979 were six to seven percentage points higher than in 1966.

But A&E did not hold the property long.

Records show that four days later, on Sept. 4, 1979, A&E Development sold the property to Mimi Rohrer, Rohrer's wife, who was acting as trustee for the couple's daughter, Laura Rohrer. Mimi Rohrer paid $69,044 for the property, exactly the amount that A&E had agreed to pay the bank for the parcel.

First Peoples also extended to Mimi Rohrer the same mortgage deal it gave A&E - at the same old interest rate of 6 percent.

William Rohrer said in a recent interview that he advised his wife to buy the property for their daughter's trust. But he said he could not understand why the property passed through A&E. John A. Mathis, the bank lending officer in charge of the property, said he also could not recall why A&E was involved in the deal.

"I could see no reason they'd transfer it to A&E," Rohrer said. "I don't know why they didn't transfer it to Laura."

Asked why he bought the property and sold it four days later, Besser said he had done it for profit. The records show he sold the property for the same amount he paid for it. Rohrer said he recalled that the price was the same. Besser said he got some additional "consideration" from the Rohrer trust, but he could not remember what it was.

Mathis and Rohrer both said the Besser property was worth $100,000 when the original loan was made in 1966. They said it was sold for less than $70,000 in 1979 because its value had fallen. The value was lower, they said, because the long-term lease to the gasoline station was not as attractive in 1979 as it had been before.

"The problem was the terms of the lease for the gas station," Mathis said. "What kind of an investor are you going to get for it?"

Asked why, if the property were so undesirable, Rohrer would buy it, Mathis responded: "He was an astute buyer. There weren't many of those around."

Although the top managers at First Peoples have been changed under pressure
from banking regulators, the attitude toward insider business dealings appears to be unchanged.

Goodman, who became president in February, said that he would have no reservations about voting on loans brought to the bank's board by his business associates, so long as he was not involved in the specific deal before the board.

Feldman, who became chief operating officer in March, said that banks that have adopted strict policies against lending to officers or directors have ''overreacted to Bert Lance," a reference to federal indictments alleging that Lance, a Georgia banker who was President Jimmy Carter's budget director, had misused funds from banks he ran to make loans to relatives and friends. Lance was acquitted of those charges.

Feldman said he sees no need to tighten banking-disclosure requirements.

"If it ain't broke, don't fix it," he said. "There is not a problem in that area. It is not a problem, has not been a problem and it is not anticipated that there would ever be a problem. . . .

"We do not have a policy, nor do we think it is prudent to have a policy, that says an officer cannot borrow from this bank."

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