Ex-Bank Officer Helped in Scheme, Moriarty Testifies

Orange County businessman W. Patrick Moriarty, testifying for the first time as a government witness against one of his former business associates, told a Los Angeles federal jury Tuesday of laundering $317,600 through the Bank of Irvine with the help of a former bank vice president.

Moriarty took the witness stand on the first day of the trial of Nelson Hallidy, 61, a former Bank of Irvine vice president who is charged with helping Moriarty launder his personal funds through the bank to avoid Internal Revenue Service reporting requirements.

The pool of cash accumulated by Moriarty was used to pay kickbacks and interest payments on cash loans.

Calmly responding to questions from Chief Assistant U.S. Atty. Richard E. Drooyan, Moriarty described how he had funneled money from his personal banking accounts and from various companies through the Bank of Irvine with Hallidy’s assistance.

Moriarty, who agreed to cooperate with the government in a wide-ranging investigation of public corruption in March, said he laundered the funds through the Orange County bank from Oct. 8, 1980, to July 1, 1982.

Moriarty was a founding director of the bank in 1974 and a member of its board of directors until June, 1983, when it was closed by state banking authorities because of bad loans that had threatened its solvency. The bank was taken over by Security Pacific State Bank.

Both as a bank official and as a “large customer,” Moriarty testified, he had known Hallidy for about 10 years. He said the former bank vice president gave him specific instructions on how to launder his funds from another bank account and from several companies controlled by Moriarty.

Moriarty said that at one point he tried to cash checks made out for $10,000 each but was advised by Hallidy to write checks for smaller amounts so that the bank transactions would not have to be reported to the IRS.

“Mr. Hallidy said to me that the checks were made out incorrectly,” Moriarty testified. “In order to skip the reporting requirements, the checks would have to be made out for less than $10,000.”

Moriarty pleaded guilty on March 12 to seven counts of mail fraud in a plea-bargain arrangement negotiated by his attorney, Jan Lawrence Handzlik, with federal prosecutors. As part of the agreement, he promised to cooperate with officials in a continuing probe of illegal bank activities and political corruption.

Aided by Associates

Moriarty, whose business interests included the Red Devil Fireworks Co., testified Tuesday that he laundered his funds through the Bank of Irvine primarily with the help of two former business associates, John E. (Pete) Murphy and Tony Martello, often sending them to the bank with checks to exchange for cash.

Moriarty said the “principal use” of the cash was to make interest payments on other loans, including some payments to Floyd A. Walden, a former official of the California Canadian Bank who was sentenced last month to four years in prison for failure to pay federal income tax on $230,000 in kickbacks he allegedly received from Moriarty.

Hallidy’s trial is to resume today before U.S. District Judge Edward Rafeedie with Moriarty facing expected cross-examination from the former banker’s lawyer, Byron McMillan. Also scheduled to testify as government witnesses are Moriarty’s former colleagues, Murphy and Martello.