The chairman and president of Farmers Bank, Windsor, Va., have been charged with making illegal loans and then lying to protect themselves.
Richard J. Holland, chairman of the $79 million-asset bank, and his son, bank president Richard Jr., pleaded not guilty Monday at the start of their trial in U.S. District Court in Norfolk, Va.
The elder Mr. Holland is also a Virginia state senator.
In a September indictment, the government accused the Hollands of jeopardizing the bank's finances and misleading regulators. If convicted, the Hollands could be sentenced to prison.
The charges stem from about $500,000 of loans the bank allegedly made to real estate developer Lloyd C. March Jr. in 1991 and 1992. At the time the loans were made, it is alleged, Mr. March's development company was facing foreclosure by the bank on $1.6 million of loans outstanding.
Banks are limited by regulators in the amount of credit they can extend to a single lender. The Federal Deposit Insurance Corp. issued a cease-and- desist order against Farmers Bank in 1993 regarding its lending practices. That order was terminated in 1994.
The indictment alleges that the Hollands back-dated loans and "answered questions falsely" during an FDIC investigation.
Neither defendant could be reached for comment. But in separate statements released at the time of the indictments, both asserted their innocence.
"I want to make it clear that I have done nothing wrong and that the charges against me ... are not true," the younger Mr. Holland said.
Farmers' board continues to support the Hollands, according to Thomas L. Woodward Jr., a director who is acting as a spokesman for the bank.
"There is no allegation that either Holland profited in any way at the expense of the bank," Mr. Woodward said. "We believe that a full presentation of the facts will result in the full exoneration of both of them."
Mr. Woodward declined to say what facts would surface during the trial.
Farmers Bank has always been run by a member of the Holland family, since it was formed in 1919. Despite the bad publicity, the bank retains its customers' confidence, Mr. Woodward said. "We have not lost one dime attributed to the indictment."