CLEVELAND (AP) – A former KeyBank vice president accused of embezzling $29 million bought a multimillion dollar home on Long Island and spent $1.1 million on his fiancee’s engagement ring, investigators say.

David F. Verhotz, 56, also lived a double life, according to pretrial statements made by U.S. Attorney Justin Roberts. He said Verhotz had recently divorced his wife in Ohio but told his fiancee, who lived with him in New York, that the marriage had ended 10 years ago.

“Mr. Verhotz can’t even be honest with his family and his fiancee,” Roberts said at a hearing earlier this month. He said Verhotz also told his fiancee, Kim Chen, that he had two children instead of four.

Verhotz, who has been fired as the head of the bank’s international loans unit, carried out his financial scheme for 10 years, according to the FBI. He had worked at the bank for 11 years.

According to prosecutors, Verhotz used fake names to steal the money and support a lavish lifestyle that included the purchase of a $5.7 million home on Long Island. He also had $2.2 million in an escrow account to buy a town house on New York City’s Park Avenue.

Investigators said he poured money into his New York home, including spending $30,000 for a chandelier and $50,000 for landscaping.

The money authorities say he embezzled also went toward his children’s college tuition, which, along with some of the other funds, can’t be recovered. About $10 million of the $29 million he is accused of stealing over the last three years has been repaid, and investigators say they have accounted for another $11 million in property, bank accounts, jewelry and other purchases.

Investigators believe the rest of the money may be in accounts under fake names, Roberts said.

Verhotz’s attorney, Carlos Warner, a federal public defender in Akron, did not immediately return a call Sunday.

The alleged scheme began when Verhotz, who made $110,000 a year working at the bank, apparently got a fraudulent loan to pay the $30,000 to $40,000 he owed in back taxes, FBI supervisor Scott Gilbert said. Over the years, Verhotz would take out more loans to make payments on previous loans to avoid suspicion, according to the FBI.

That pattern continued without detection until this month, according to prosecutors, although it’s unclear how it was uncovered. Bank officials are auditing seven more years of his activities to determine how much they believe he stole.

“I’m not going to speculate what the number might be,” KeyBank spokesman Mike Monroe said. “Our investigation is now working backward to those earlier years.”

Verhotz committed at least some of the fraud using the made-up identity of a European bank executive named Thomas Henderson, who supposedly borrowed millions from KeyBank, Roberts said.

Verhotz was arrested Nov. 11 at Cleveland Hopkins International Airport after getting off a flight from Dallas.

He could face six to eight years in prison if convicted on charges of bank fraud and embezzlement from a federally insured bank. A federal magistrate has denied bail while Verhotz awaits trial.

KeyBank is owned by KeyCorp., which has more than 900 branches in Alaska, Colorado, Idaho, Indiana, Kentucky, Maine, Michigan, New York, Ohio, Oregon, Utah, Vermont and Washington.

AP-ES-11-26-06 1429EST

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