Montes pleads guilty to defrauding bank to pay back loans by Carmona Ferrand.

ATLANTA - Recently released court papers reveal that Hector Juan Montes, a municipal investment banker fired in February by Howard Gary & Co., was convicted in April of a federal felony charge of bank fraud.

As spelled out in the plea bargain arrangement before the United States District Court for the Southern District of New York, Montes agreed that he had defrauded Bronx-based Capital National Bank in early 1990 in obtaining a loan to pay off debts owed Carmona Ferrand Montes Securities Corp.

Montes, who founded New York City-based Carmona with a partner in 1988, left there in March 1990 to become a managing director of Miami-based Howard Gary.

Montes and his wife, Daisy Rosario, had originally been charged with the bank fraud and two other counts in an indictment handed down in May 1993. The two other counts were of conspiracy and misapplication of property belonging to an organization that had received federal funding.

As part of the April 15 plea arrangement, the charges were dismissed against Rosario. In return Rosario, who had allegedly misused her position in a city-funded organization to obtain collateral for the bank loan, agreed not to seek employment with New York City.

A spokesman for Judge Dominick L. DeCarlo, who presided over the case, said yesterday that Montes' sentencing has been set for July 28. Assistant U.S. attorney Marian W. Payson, the prosecutor, said yesterday she knew of no other criminal charges pending against Montes, but declined comment on the plea arrangement.

Montes' conviction carries a maximum sentence of 20 years imprisonment, a maximum fine of $1,000,000, and a maximum term of five years of supervised release. The court may also impose an order of restitution of $150,000 plus interest and order notice of victims. Under the plea bargain, Montes has agreed not to appeal a sentence of 18 months or less.

Reached by telephone in Miami yesterday, Rosario declined comment. Montes did not return phone calls.

Rafael Carmona, co-founder and managing director of Carmona Ferrand in 1990, and a principal in a successor firm now named Carmona, Motley & Co., was not available for comment yesterday. But a source close to the firm said that Carmona is aware of the plea bargain arrangement. He said the firm was able to recover the funds owed it by Montes.

A spokesman for Howard Gary said he was aware of Montes' conviction, but declined comment. Officials at Capital National Bank, which defaulted in July 1990, could not be reached for comment. The bank was acquired in August 1991 by Banco Popular de Puerto Rico.

According to the government's indictment, Montes was confronted by Rafael Carmona in February 1990 and accused of having "misappropriated certain funds belonging to CFM Holdings," sole shareholder of Carmona Ferrand Montes Securities Corp.

"Among other things," the indictment said, "Montes had liquidated a certificate of deposit in the amount of $50,000 belonging to the firm and used the proceeds to repay a personal loan."

In response to the confrontation, Montes agreed to repay the firm "approximately $150,000 by on or about March 21, 1990," the indictment continued. He was fired in early March.

On March 20, Montes applied to Capital National Bank for a secured $150,000 loan, naming as the loan applicant Carmona Ferrand Montes Securities Corp., but listing the address of Howard Gary's New York City office. The application was approved on March 21, and Montes used the proceeds to pay off his obligation to Carmona Ferrand, according to the indictment.

The indictment also noted that the loan was secured by a $347,596.91 certificate of deposit owned by the Puerto Rican Home Attendants Service and pledged by Rosario, Montes' wife.

At the time, Rosario was executive director of the organization, a private nonprofit social services provider then under contract with New York City to provide home care for ill or disabled persons in the South Bronx, according to court records.

Before co-funding Carmona Montes in 1988, Montes was an assistant vice president in municipal finance at Daniels & Bell Inc. in New York City.

He began his investment banking career at Bear Stearns & Co., where he was an assistant vice president between February 1984 and February 1986. Between May 1982 and February 1984, he was with the New York Department of Commerce. Previously, Montes was with Seaman's Bank for Savings and Chemical Bank, both in New York City.

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