Former ESM Chairman Says Company Hid Millions In Losses
FORT LAUDERDALE, Fla. (AP) _ A fraudulent audit covered up millions of dollars of losses by ESM Government Securities Inc., a witness testified in the fraud trial of executives of the company whose collapse triggered a banking crisis in Ohio.
Former chairman Ronnie R. Ewton said the company tried to hide heavy losses incurred by ESM co-founder Robert Seneca when the losses were in danger of being disclosed during Seneca’s divorce trial in 1980.
″The truth was, we weren’t hiding Bobby’s (Seneca’s) millions, we were hiding his millions of losses,″ Ewton said. Seneca left the company in 1979 and was not implicated in the fraud case.
Ewton was testifying in the trial of former ESM President Nicholas B. Wallace and Stanley Wolfe, who was in charge of clearing operations with banks that held ESM securities.
The collapse of the Fort Lauderdale-based firm in March 1985 triggered a banking crisis in Ohio and left the company owing more than $315 million to at least 69 investors, including several municipalities.
Wallace, charged with one count of conspiracy and 40 counts of mail and wire fraud, and Wolfe, who faces one conspiracy count and 25 fraud counts, earlier this year pleaded innocent. Seven others named in the indictment, including auditor Jose L. Gomez, entered guilty pleas.
Ewton, who is facing four related felony charges in Florida and four more in Ohio, testified that in exchange for the fraudulent audit, hundreds of thousands of dollars were loaned to Gomez through transactions from various accounts.
In earlier testimony, former employee Timothy R. Murphy told the court that Wolfe and Alan Novick, an ESM official who died in 1984, knew they were using the same or non-existent collateral for different financial transactions.
Murphy also was named in the federal indictment but entered a plea bargain with the government in which he would face lesser charges in exchange for his testimony.
If found guilty on all counts, Wallace could get up to 205 years in prison and $50,000 in fines. Wolfe could receive up to 130 years in prison and $35,000 in fines.