ESM Officials Plead Guilty To Theft In Toledo Loss
TOLEDO, Ohio (AP) _ A co-founder and a former vice president of a Florida securities dealer pleaded guilty Tuesday to charges of grand theft in the city of Toledo’s loss of $19.2 million in investments with the firm.
George Mead, 52, co-founder of ESM Government Securities Inc. of Fort Lauderdale, pleaded guilty in Lucas County Common Pleas Court to four counts of grand theft by deception. Tim Murphy, 39, a former vice president of ESM, pleaded guilty to two counts of grand theft by deception.
Mead faces a maximum sentence of eight years in prison, but because of a plea bargain, prosecutors recommended that he serve no more than five years.
Murphy faces a mamximum sentence of four years in prison, but the prosecution recommended that he serve no more than 3 1/2 years, also because of a plea bargain.
The collapse of ESM in March 1985 led to the failure of Home State Savings Bank of Cincinnati and the temporary closing of Ohio’s 69 state-chartere d, privately insured savings and loan institutions.
Home State lost $143.5 million through its investments with ESM.
Special prosecutor Lawrence Kane has been investigating ESM’s dealings with Home State and the city of Toledo.
The sentencing recommendations were contingent on Mead’s and Murphy’s cooperation in the investigation, said Kane’s assistant, Kirk Warner.
Lucas County Common Pleas Court Judge Reno R. Riley Jr. set sentencing for Oct. 3.
Mead was charged with defrauding the city of Toledo of $8.1 million. Murphy was charged with aiding and abetting ESM officials in defrauding Toledo of $3.1 million.
As part of the plea agreement that limits the number of years in prison Mead and Murphy will serve, the two were not charged with the theft of the remaining $8 million.
Prosecutors say ESM misrepresented its financial health in seeking investments from Home State and the city of Toledo. ESM lost about $300 million.
From June 1984 until the company collapsed, Toledo made 111 short-term investments with ESM totaling $219.3 million, according to city financial records.
ESM was so aggressive in getting the city’s business that it called city officials every day, city officials said.
Toledo finance officials dealt in repurchase agreements with ESM, in which the city lent the brokers money in exchange for government securities used as collateral. The securities were to be repurchased by the brokers at a set date and price.
ESM issued false financial statements that disguised losses, prosecutors said.
Jose Gomez, 38, of Miami, a former accountant with Alexander Grant & Co. who audited ESM’s books, pleaded guilty in Toledo and Cincinnati in December to falsifying ESM’s financial statements.
Mead pleaded guilty in state and federal court in Cincinnati Monday to three counts of grand theft and one count of obstruction of justice. Charles Streicher, a former ESM vice president, pleaded guilty in Cincinnati to three counts of grand theft.
Mead and Streicher also pleaded guilty Monday to federal charges of wire fraud.