Appraiser responds in altered valuation

The former appraiser caught up in a lawsuit involving ousted Steuben County banker Earl McNaughton admitted to making appraisals for him.

But Margaret Luann Putnam, who now lives in Florida, said the appraisal was altered to state that it was for David G. Schimmele and Farmers and Merchants Bank, according to recently filed court documents.

Late last month, attorneys for the bank sued Putnam, alleging she inflated the value of a 77-acre piece of land to benefit McNaughton by more than 245 percent. The lawsuit has since been moved from Allen Circuit Court to U.S. District Court for the Northern District of Indiana.

The Steuben County property, known as Duguidville Heights, was once owned by Batten Kill Inc., a corporation controlled by McNaughton, the former CEO, president and chairman of First National Bank of Fremont.

Since he was ousted by bank officials in 2004, a number of lawsuits filed by various parties allege McNaughton used millions of dollars in bank funds for personal gain through faulty loans, access to cash and loans through other people’s names. Recently, the federal Office of the Comptroller of the Currency, which oversees many of the nation’s banks, fined McNaughton $250,000 and prohibited him from working in banking.

Farmers & Merchants Bank of LaOtto became an owner of McNaughton’s holding company after he defaulted on loans using his company’s stock as collateral.

But in their June lawsuit against Putnam, bank officials allege they lost money earlier when the bank floated a loan to Schimmele, a former executive at First National Bank of Fremont, for purchase of the Duguidville Heights property, according to court documents.

The lawsuit alleged Putnam inflated the value of the property – later determined to be largely swampland with a railroad running through it – and her appraisal was used to help Schimmele obtain permanent financing for the land.

In her response, Putnam said she made the appraisal for McNaughton and the bank, but said the paperwork was altered to state that it was for Schimmele and Farmers and Merchants Bank.

Putnam admitted her appraisal “opined” the value of the real estate at $616,000, and admits that the copy of the bank’s loan paperwork is true, which shows the $200,000 loan relying on Putnam’s appraisal, according to court documents.

Putnam admitted that a later appraisal, conducted by the Indiana Department of Natural Resources which was looking at buying the property, valued the ground at $250,000, according to court documents.

She denied inflating the value of the property by 245 percent, according to court documents.

McNaughton is believed to be living on a ranch in New Mexico.

He has not appeared at court hearings since late 2005.

If he were to return to Indiana, he could be arrested on a warrant compelling him to appear for the civil proceedings.

rgreen@jg.net

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Appraiser responds in altered valuation