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Jury Clears Sturgis, Deadlocked On Others In Continental Trial

May 3, 1988

CHICAGO (AP) _ A federal jury acquitted an Oklahoma oil contractor Tuesday on charges of scheming to defraud Continental Illinois National Bank & Trust Co., but failed to reach a verdict on two bank executives charged in the case.

U.S. District Judge Milton Shadur declared a mistrial after jurors said they were ″hopelessly deadlocked.″

The government maintained during the 6 1/2 -week trial that former banker William Patterson manipulated his two debt-plagued co-defendants, John Lytle and Jere Sturgis, in a scheme involving high-risk energy loans to save his own failing bank by defrauding Continental.

But the panel found Sturgis, an independent oil contractor from Tulsa, Okla., innocent of wire-fraud charges. Patterson and Lytle were charged with wire fraud and misapplication of funds.

Continental came to the brink of collapse in 1984 in part because of troubled energy loans, but the Chicago bank survived with help from a $4.5 billion federal rescue plan.

″What can I say? The dream came true,″ Sturgis said after the innocent verdict was read. ″I’m getting on the first plane″ back to Oklahoma.

Lytle, a former Continental vice president who headed the Chicago bank’s energy-lending division, said, ″I am very disappointed (about the mistrial). I had hoped for a resolution.″

Outside the courtroom neither Patterson, a vice president at Penn Square bank in Oklahoma City until its collapse in 1982, nor his lawyer, Warren Bickford, had anything to say to reporters.

But in Oklahoma City, another Patterson attorney, Burck Bailey, said he also was disappointed. ″We were hopeful that the jury would return a verdict of not guilty, but of course, we’re pleased on the other hand that there was no guilty verdict returned,″ Bailey said.

U.S. Attorney Anton Valukas said he would huddle for a few days with assistant prosecutors Joseph Duffy and Mark Rotert before deciding whether to seek another trial.

″When the jury speaks, we respect the verdict,″ Valukas said. ″We sent up the best trial lawyers to try an extraordinarily complex case. They did a good job. ″

James Streiker, Lytle’s attorney, said, ″There’s a good possibility there will be a retrial.″

The case went to the jury April 26 and jurors began their fifth day of deliberations shortly after 9 a.m. EDT Tuesday.

Federal prosecutors had contended Patterson was the central figure in the alleged fraud scheme and controlled Lytle and Sturgis, who were financially dependent on him and Penn Square for loans.

The government charged that Lytle, caught in spiraling personal debt to finance a luxurious lifestyle, accepted kickbacks from Patterson in exchange for funding or attempting to fund high-risk energy loans from Continental for Penn Square customers between July 1981 and July 1982.

The indictment cited Lytle’s involvement in $44 million in loans made by Continental to 12 Penn Square customers, many without any documentation. It did not say how much eventually was recovered by the Chicago bank.

Attorneys for Lytle and Patterson had argued that Continental was saddled with the troublesome energy loans because of an aggressive lending policy, not because of a fraud scheme.

Lytle and Sturgis were accused of engaging in a related ″buyback″ investment scheme that began with Lytle buying into Sturgis’ operations in May 1981.

Sturgis bought Lytle out less than a year later at triple the original investment to improve his chances of getting a Continental loan through the Chicago banker, prosecutors said.

Patterson arranged for a $3 million loan to Sturgis from Penn Square that enabled him to buy out Lytle’s $150,000 investment for $475,000, the government said.

The ″buy-back″ scheme was devised as a way for Lytle to clear much of his personal debt and for Sturgis, who was then being pursued by creditors over $100 million in business loans, to find a new lending source, prosecutors said in closing arguments.

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