Feds: $38 Million in Deposits Diverted
MIAMI (AP) _ The first major Florida indictments growing out of the savings and loan crisis charged Wednesday that bank officers funded illegal campaign contributions and diverted $38 million in deposits to cover losses on speculative investments.
″Had there been a mask and gun involved, we almost could have called this bank robbery,″ said FBI agent William Gavin.
Three ex-officers of the failed Fort Lauderdale-based Commonwealth Savings and Loan and an investment broker were named in two indictments carrying potential prison sentences of 15 to 256 years.
Prosecutors charge the former executives’ acts were a significant reason for Commonwealth’s failure in July 1989 after the thrift absorbed a $33 million loss. The S&L remains under the control of the Resolution Trust Corp.
Depositors were largely protected against losses by federal regulations, but taxpayers will be stuck with Commonwealth debts.
″These individuals defraud the American public, these individuals defraud the investors and the bank, these individuals defraud the taxpayers in this kind of behavior,″ U.S. Attorney Dexter Lehtinen said in announcing the indictments. ″The taxpaying public is having to cover a horrendous loss.″
The indictments charge that money set aside by a Catholic charity, a construction union and other institutional investors was diverted from the purchase of certificates of deposit to secret accounts used to conceal losses on trades controlled by ex-Treasurer Jason Chapnick.
The accounts were credited with fake interest payments to lull depositors into the belief that their investments were prospering, prosecutors said.
Bogus monthly brokerage-house statements, $11 million in unrecorded Treasury bill sales, fake letters of credit and false reports to independent auditors were part of the scheme to keep anyone from discovering the diversions, the indictment charged.
The criminal investigation was prompted by reports from Commonwealth and regulators before the thrift failed, said Lehtinen, who called S&L fraud ″the largest crisis that the country faces.″
Chapnick, brother of Commonwealth Chairman Barry Chapnick, also was accused of converting $1.5 million to his personal use, including $700,000 to repay personal debts. A tax-perjury charge covers his federal income tax returns.
Barry Chapnick is mentioned in the indictment as the one who selected the candidates for political contributions, but he was not charged in the indictment itself. Lehtinen cautioned against making much of the omission because the investigation is continuing.
The probe was led by two prosecutors hired specifically to root out S&L fraud under federal bailout legislation, Lehtinen said.
The additional staff is concentrating primarily on Commonwealth and on Miami’s failed CenTrust Savings, which has not yet been charged.
″The scope of savings and loan fraud in South Florida in general and the inability to staff the investigations here and nationwide properly does impede some of the investigations,″ Lehtinen said.
The expanded staff has been assigned to ″CenTrust, Commonwealth and a few other known investigations, leaving many other investigations in the district extremely short of either FBI or U.S. attorney manpower, but not CenTrust or Commonwealth.″
The fraud conspiracy indictment named: Jason Chapnick, 42, of Fort Lauderdale, former vice president and treasurer; Kenneth Fletcher, 41, of Davie, ex-president of Commonwealth’s securities trading subsidiary Commvest; and investment broker Herbert Leslie Kalbach, 46, of Fort Lauderdale.
Felix Adams, 41, of Bushnell, former executive vice president and assistant secretary, was accused in a separate indictment of misapplying Commonwealth funds on the political donations. Employee contributions allegedly were reimbursed by Commonwealth.
Charges and potential sentences are: Chapnick, 52 counts, 256 years in prison, $12.5 million fine; Fletcher, 32 counts, 160 years, $8 million fine; Kalbach, three counts, 15 years, $750,000 fine; and Adams, six counts, 30 years, $1.5 million fine.
All four appeared Wednesday afternoon before U.S. Magistrate Lurana Snow in Fort Lauderdale, where the grand jury issued the indictments. Adams pleaded innocent, and arraignments were delayed until Thursday for Chapnick and Friday for Fletcher and Kalbach.