Frank L. Cowles Jr. is known in the Northern Virginia business community as the owner of car dealerships and a founding director of Virginia Commerce Bank in Arlington. Now, at age 76, he is facing allegations of a criminal conspiracy to defraud an Illinois hedge fund out of $25 million.

Cowles was arrested at his Scottsville horse farm last week and released on $1 million bail, said Randall Samborn, a spokesman for Patrick J. Fitzgerald, the U.S. attorney in Chicago. Cowles made his first appearance in U.S. District Court in Chicago on Thursday.

In a criminal complaint filed by Fitzgerald on Tuesday, Cowles was accused of lying to a hedge fund manager, who was not identified, about the nature of a $25 million investment. According to the complaint, Cowles and two associates induced the hedge fund manager to make the investment, promising 10 percent profit per week in a deal that they claimed was being overseen by a Federal Reserve administrator.

Samborn said the full $25 million from the hedge fund has been recovered.

Cowles could not be reached for a comment. A person who answered his home phone Friday said he was traveling.

In a statement, Virginia Commerce said Cowles, a former chairman of the board, had resigned from the bank Wednesday. "The bank has found no indication of any involvement in this matter by the bank or any of its employees or other directors." The bank said Cowles denied the allegations against him.

Cowles was a founding director of Virginia Commerce in 1988 and owns about 4 percent of the bank's stock. He owns Nissan and Chrysler dealerships in Woodbridge, as well as a large Arabian horse farm in central Virginia.

According to the criminal complaint, Cowles is the secretary of American Trade Industries Inc. Richard E. Warren, 63, of Fredericksburg, identified as the president of American Trade, and "associate" David L. Myatt, 41, of Los Banos, Calif., were implicated with Cowles in the alleged conspiracy. The government alleged that beginning in March, Myatt and Warren pitched the Illinois hedge fund manager on an investment program in which American Trade Industries would use the money to trade bonds, promising a 10 percent profit each week. While Myatt and Warren returned $3.4 million to the hedge fund, the hedge fund manager could not get the two men to provide a written accounting of where the $25 million investment was being held, the complaint said.

The complaint alleges that the hedge fund manager flew to Washington to meet with Warren and Cowles on Oct. 21. In later phone conversations that the hedge fund manager tape-recorded for the Secret Service, Cowles allegedly described how the hedge fund manager's money was tied up in foreign bank accounts and said that the "Fed administrator" was tying up the funds. The hedge fund manager's last phone conversation with Cowles was on Nov. 10, the complaint said, when Cowles said the fund manager would have to pay Myatt an additional $500,000 for the "Fed administrator" to return the funds.

Warren was arrested Nov. 12 at Dulles International Airport, holding a ticket for a flight to London, Samborn said. He was scheduled to appear at a detention hearing Friday. Myatt was arrested at his California home Nov. 12 and was released on $300,000 bond, Samborn said.