The brothers who owned and operated D&R Auto Sales and associated businesses in Hermiston and Enterprise are facing federal charges of conspiracy to commit bank fraud.

A federal grand jury on Jan. 4 indicted Roger Spangenberg, 49, of Post Falls, Idaho, his brother, David Spangenberg, 52, of Spokane, Wash., and Steven Johnson, 63, of Aberdeen, Wash., with conspiracy to defraud KeyBank of more than $6 million, according to the indictment. The trio pleaded not guilty this week in U.S. District Court, Portland.

The Spangenberg brothers owned the now closed D&R Auto Sales, D&R Motors and D&R Ford/Mercury dealerships in Hermiston and Enterprise, and Steven Johnson served as a manager. The charges stem from an investigation by the IRS Criminal Investigation Division and the FBI. 

The five-page indictment alleges that from January 2007 through August 2008, the Spangenbergs and Johnson conspired to defraud KeyBank in connection with a flooring loan a line of credit and security agreement that allowed the businesses to acquire vehicle inventory.

KeyBank extended a line of credit to the D&R dealerships to purchase new inventory, but the Spangenbergs and Johnson failed to repay KeyBank after they sold the inventory, according to a statement from the IRS Criminal Investigation Division.

The indictment alleges the Spangenbergs and Johnson deceived KeyBank officials into believing the dealerships had not sold vehicles, including asking customers to return recently purchased automobiles to the dealerships to receive a free service on the day of a bank audit, and misrepresenting that vehicles not on the lot were being used as rental cars.

The indictment also alleges the defendants submitted false vehicle identification numbers to KeyBank to receive funding for inventory the dealerships never purchased, and that the Spangenberg and Johnson double floored vehicles with more than one financial institution.  

KeyBank suffered a loss of more than $6 million as a result of the alleged fraud, according to the IRS statement. 

Conspiracy to commit bank fraud carries a maximum sentence of 30 years in prison and a $1,000,000 fine.   

Trial is set for March 27 before U.S. District Judge Michael H. Simon in Portland. Assistant U.S. Attorney Stacie Beckerman is prosecuting the case.