Maryland Bank & Trust Co. agreed yesterday to pay $432,000 to settle a suit by the federal government that claimed the Lexington Park bank lied to obtain a guarantee from the Farmers Home Administration on a $335,000 farm loan, the Justice Department said.
In agreeing to the settlement, the bank did not admit to allegations that the bank said the loan was used to buy farmland and equipment while knowing the money was used "to retire bad debts owed to it and to make cash and other payments" to the Maryland farmer, the Justice Department said.
Bank officials could not be reached late yesterday for comment. The farmer's name was not available from Justice Department officials.
The suit settled yesterday is an offshoot of another lawsuit that is still pending in U.S. District Court in Baltimore by the federal government against the bank over who should pay $460,000 in cleanup costs at a hazardous waste site.
The problem began in 1980, when Maryland Bank & Trust got a guarantee from the FmHA for a loan to a farmer in St. Mary's County.
The farmer defaulted on the loan, and the bank foreclosed on the farmer's land, Justice officials said.
Later, federal officials discovered hazardous waste on the site and paid to clean it up.
But when the government sued the bank -- which it said owned the property -- to get reimbursed for the cleanup bill, Maryland Bank & Trust disclaimed ownership.
Also, the bank countersued the government, saying the FmHA owned the land and that the bank merely had acted as the FmHA's agent both in setting up the loan and in foreclosing on the property, Justice officials said.
In the course of the court paper cross fire, the government discovered that the bank had submitted "false statements to the government in connection with a federally guaranteed farm loan."
Yesterday's agreement settles the lawsuit about the alleged false statements, but the suits over who owns the property and who will reimburse the government continue, Justice officials said.