A former chairman and president of a failed upstate New York bank has been indicted on charges of conspiracy, bank fraud, and bank bribery. He was accused of accepting kickbacks from a local law firm and approving improper loans.

Also indicted was a bank director who was a partner in the firm. The two men pleaded not guilty.

Harry S. Pack, who led Watertown-based Jefferson National Bank after it was created in the early 1970s from a merger of three area banks, was charged with directing Jefferson's legal work to the law firm of H. Thomas Swartz, a bank director, in exchange for more than $300,000 in payments from the firm.

The indictment also alleges that Mr. Pack approved improper loans totaling $1.8 million to Mr. Swartz and his businesses, even allowing Mr. Swartz's firm to represent the bank on loans to his own businesses. As a result, the loans weren't properly secured or repaid, said Elizabeth S. Riker, assistant U.S. Attorney in Syracuse.

Mr. Swartz is also named in the four-count indictment, handed down by a federal grand jury in Syracuse. The two men were arraigned Jan. 12 and are expected to go to trial March 12.

If convicted, the two men face a maximum penalty of five years in prison and a $250,000 fine on the conspiracy count, and up to 30 years and $1 million in fines on the fraud and bribery charges.

Mr. Pack, 52, of Pompano Beach, Fla., and Mr. Swartz, 53, of Watertown, were not available for comment.

According to the indictment, Mr. Pack received about $332,900 in illegal payments from Mr. Swartz's firm from 1984 to 1992, when Mr. Pack resigned in August under regulatory pressure because of the bank's deteriorating condition.

Jefferson was seized by federal regulators in February 1993 after its leverage capital ratio dropped below the minimum required 2% level, sparking a run on its deposits and triggering government action. Fleet Financial Group Inc., Providence, assumed $219 million in insured deposits and kept open seven of the bank's 15 branches.

The failure marked the end of a bank that had expanded dramatically into five counties under Mr. Pack's leadership and was the top small-business lender in central New York in 1992, with 32 loans for about $8.9 million.

The alleged kickbacks stemmed from an agreement between the two men prior to April 1984. Mr. Swartz would pay Mr. Pack one-sixth of all legal fees that the law firm obtained in connection with the bank's work, according to the indictment.

To avoid regulatory scrutiny of the payments, Mr. Swartz allegedly made Mr. Pack an affiliate of the firm, "of counsel," and did not disclose to the firm that the payments were for referrals, not legal work. Mr. Pack also allegedly concealed the payments from Jefferson's board.

When the bank went public in 1986, the indictment claims, Mr. Pack failed to disclose in the bank's offering circular that he was receiving payments other than his salary.

This is the second indictment resulting from a federal investigation into the affairs of Jefferson that began in 1992, as the bank was reporting losses of more than $13 million from bad loans.

In September 1994, a 34-count federal indictment charged fraud, loan scams, and kickbacks involving Stephen E. Hayes, the bank's former executive vice president; his wife, a former employee, and Francis Constanzo, a former Watertown businessman.

Mr. Hayes pleaded guilty in June 1995 to defrauding the bank of $500,000 in loan scams and admitted that part of a $1.7 million loan to Mr. Constanzo was diverted to another business in which Mr. Hayes was a partner. The loan was never repaid.

The Hayeses are cooperating with authorities on the case. Mr. Constanzo is scheduled to go on trial March 4.

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