A second former official of a tiny Mississippi bank pleaded guilty last week to bank fraud for approving nearly $1 million in sham loans.

The charges carry a maximum penalty of five years in prison and a fine of $250,000. Mr. McNair is scheduled to be sentenced Dec. 15.

Henry L. McNair 3d, who had been president and a director of the former Bank of Edwards until it was acquired last spring, approved $941,000 in loans to people who were scheming with him to defraud the bank. The loans were made over a four-year period beginning in January 1991.

The scandal has rocked the normally tranquil, one-bank town of 1,279 citizens. Mr. McNair has lived in the area for more than 20 years and is married to a daughter of the former chairman of the bank. The $16 million- asset institution was sold last March to Merchants National Bank in Vicksburg.

The case followed a similar episode last year, in which a bank official stole $79,000 from the bank and fled to Europe. The official, a vice president, later turned himself in, was convicted, and served six months in prison.

Mr. McNair approved at least 47 loans, ranging from $6,556 to $63,661, to his co-conspirators, according to the Justice Department.

The co-conspirators forged signatures to obtain some of the loans, and Mr. McNair altered documents to create the appearance that the loans were being repaid, according to the charges. Some minimal payments were made on the initial loans with money from subsequent loans.

The average loan was about $20,000, which was within Mr. McNair's lending authority and did not require approval from other bank officials.

Special agents from the Jackson office of the Federal Bureau of Investigation are still investigating the case.

Bank officials would not comment on the case. Mr. McNair could not be reached for comment.

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