MADISON - Two brothers who owned a Ford dealership in Tomah have agreed to plead guilty in federal court to loan fraud that authorities say cost two Tomah banks more than $2 million.

Timothy E. Vernier, 57 and Stephen N. Vernier, 63, were accused of obtaining financing from Farmers and Merchants Bank and First Bank from January 2004 to August 2008 by falsely claiming to purchase certain vehicles for resale.

Some of the loans were for vehicles the brothers never had at their Norris-Vernier Motors Sales Inc., according to documents filed in U.S. District Court in Madison. In other instances, they failed to report to the lenders that vehicles had been sold.

The fraud resulted in a $1,767,353 loss for Farmers and Merchants Bank and a $296,861 loss for First Bank, according to a statement Monday by the U.S. attorney in Madison.

The banks reported the matter to federal authorities in August 2008, which charged each of the brothers with one count of loan fraud. The dealership since has been sold to Brenengen Motors of Tomah.

Timothy Vernier, former president of Norris-Vernier, and Stephen Vernier, who was vice president, are scheduled to plead guilty Dec. 15. Each face a maximum penalty of 30 years in prison plus restitution.

Timothy Vernier took responsibility in a statement issued Monday.

"Our inventories were not correct and included vehicles we had sold, vehicles in transit and not belonging to us," he said. "... I am making every effort to remain in the community, working and paying restitution."

Assistant U.S. Attorney Grant Johnson said the Verniers repaid some funds by selling personal property.

Farmers and Merchants CEO Tom Wierschem said the Vernier loans "embarrassed" the bank in 2008, but it has fully recovered.

"These were long-term customers of the bank and it's a very unfortunate circumstance for them ... There were some rumors that swirled around the community, but this should clear them up," said Wierschem.

Wierschem didn't anticipate any additional significant restitution to be made by the Verniers.

"No, we wrote it off last year. This year, the bank has made a profit, so we're putting this behind us," he said.

Like Wierschem, Cynthia Erdmann of First Bank declined comment on details of the matter but said the bank has received some restitution.