Full-Court Press
The Bank of Coronado has had its share of what public relations folks call “bad press” this year--a branch manager accused of money laundering, a president’s resignation, board in-fighting--so bank officials are fighting back by making their own news. And there’s not an ounce of bad press in it.
“The Interest Journal” is the bank’s first newsletter and will be published six times a year, according to Tom Morrow, whose firm, Cotton-Morrow Communications, handles public relations for the bank and its parent company, Crown Bancorp.
“We’re strong believers in newsletters as a way to convey the (firm’s) message to customers and shareholders,” Morrow said. “It’s a positive tool to tell your story.”
Conspicuously missing from the four-page publication, however, is any mention of last month’s resignation of President James G. Klingensmith after the board refused to sell its Capital Bank of Carlsbad to an unidentified group of investors. Only Klingensmith and director Frederick M. Swenson, who works at former Chairman Richard Maitland’s Coronado Shores Co., voted in favor of the sale.
Also missing is any mention of Capital Bank’s merging with the Bank of Coronado.
Klingensmith’s resignation was not mentioned because it had been “beaten to death in the press,” Morrow said. “We wanted news that hadn’t previously been put out. We didn’t want to regurgitate news everyone had seen in the media. Almost everything in the newsletter was new and hadn’t been published somewhere else.”
Indeed, one of those items was an announcement that the bank had hired its first full-time internal auditor responsible for financial and operational audits as well as for “reviewing and recommending policies pertaining to daily operational procedures.”
The bank’s growth rate justifies the need for a full-time auditor, the newsletter said.
Not mentioned, but perhaps just as important a reason for hiring a full-time auditor, is last spring’s arrest and indictment of the bank’s San Ysidro branch manager on charges of participating in a money-laundering operation.
If an auditor had been in place, banking industry sources say, the laundering operation in San Ysidro may have been detected by the bank instead of by law enforcement agents. Data Deposits
Sure, bank robberies are costly to banks and to savings and loans. But holdups aren’t the real problems for financial institutions--frauds are.
Financial institutions lost more than $400 million to fraud in 1982 (the most recent year for which there are statistics)--that’s eight times greater than the amount lost that year in bank robberies, according to Darwin Wisdom, a special agent with the FBI’s white collar fraud division in San Diego.
Wisdom and William Grauer, a former white-collar crime prosecutor in the U.S. Attorney’s office here, imparted that and other information during a recent two-hour banking forum sponsored by Gray, Cary, Ames & Frye.
For example, 61% of the bank failures between 1980 and mid-1983 involved some type of criminal misconduct by a company insider. More than 40% of that conduct was a major factor in the bank’s demise, Wisdom said.
Another eye-opener: Only about 1% of computer fraud is detected. Only 14% of that 1% is reported, and only 3% of those involved in that 14% actually go to jail.
Venturing for Capital
How cold is it out there for seekers of high-tech venture capital? Freezing, according to Bill Wilhelm, president of Cordic Inc., makers of computerized central navigation systems for sea-going vessels.
Wilhelm has been looking for investment capital since early 1984. He raised some research and development funds from San Jose ($220,000 in cash and $80,000 in a deferred note) but nothing locally.
He calls it the “Dominelli Effect.”
“San Diego venture capitalists are getting away from all the electronics firms. You can’t get any venture capital except for biomedical” ventures, he said.
Wilhelm has had some nibbles from venture capitalists in Canada, the Far East and the East Coast.
But those have had their own downsides.
“They all want us to move back where they are; they want to keep an eye on their investments,” he said. “I don’t want to move to Canada. It’s cold there.”
Mixed Opinions
State prosecutors had a chance to tackle the complicated issues surrounding the civil suit against former San Diego Charger Ronald Mix, the local attorney who last week was ordered to pay $1.4 million in punitive damages, attorneys fees and restitution to an investor of the defunct McKee Construction Co.
But when a criminal complaint was issued against McKee in late 1983, prosecutors concluded that there wasn’t enough evidence of wrongdoing by Mix to warrant charges.
Superior Court Judge Alpha Montgomery apparently didn’t agree--although he acknowledged in his ruling that it “wrenches the depths of my being” in ruling against Mix and co-defendant Ramona Suter--and last week he found Mix guilty of securities violations, negligence and conspiracy in connection with luring investors for McKee Construction in 1979 and 1980. Attorneys for Mix say they will appeal the ruling, perhaps as early as this week.
The prosecutor who passed on the case is right now pushing another complicated--and better publicized--case: He is Charles Wickersham, who is heading the prosecution against San Diego Mayor Roger Hedgecock for alleged illegal campaign financing activities.
Wickersham was called as a witness for the plaintiff in the Mix case.
