11 Indicted in Real Estate Loan Fraud Scheme

The three leading partners of the Beverly Hills law firm of Brown, Baron & Madden, and the former vice president of an Alhambra savings and loan have been indicted with seven others in a $15-million loan fraud and kickback scheme, federal prosecutors announced Monday.

Also named in the 10-count indictment is the owner of a Beverly Hills title company and several top-level escrow officers and loan brokers, all accused of participating in a series of about a dozen illegal transactions involving valuable Southern California residential properties.

Among those indicted are Peter Brown, a prominent criminal defense lawyer, and his partners, Robert Baron and Robert Madden, who are accused of acting as “straw buyers” in a series of transactions in which sales prices were artificially inflated.

The properties were allegedly purchased at a real market price and then simultaneously sold again in a sham transaction at a much higher price to another participant in the scheme, Assistant U.S. Atty. Laurie Levenson said. The buyers would then get a mortgage at the inflated value, pocket the difference and allow the loan to go into default.

Progressive Savings and Loan Assn. of Alhambra and at least one other lender were then stuck holding foreclosed property worth only about 40% to 50% of the money loaned on them, Levenson said.

The three lawyers are also accused of submitting grossly inflated tax returns in order to qualify for large loans on the properties, the proceeds of which went to pay off the participants in the scheme, Levenson said.

Norman R. Giddings of San Marino, former senior vice president of Progressive S&L;, allegedly accepted large “finder’s fees”--ranging from $45,000 to $120,000 per property--in exchange for assuring approval of the fraudulent loan applications.

The alleged mastermind, charged in a variety of tax evasion counts, was Peter Sampson of Westlake Village, who structured the transactions through his company, Ashman Burnett Corp., and failed to report the earnings on his tax returns, federal prosecutors said.

In 1982, according to the indictment, Sampson failed to report that he had received about $800,000 in real estate income. The following year, he allegedly failed to report $1.3 million.

Giddings is charged with failing to report the loan fees he secured as part of the scheme totaling about $241,000.

Others named in the indictment for their roles in the scheme are Marc C. Sturm of Westlake Village, owner of Golden Valley Escrow, and his wife, Natalie, who also worked at the escrow company; John M. Melvan, a Vista loan broker; Richard Floberg, a title company owner from Beverly Hills; Dana M. Bersch, a Miami real estate investor, and Kathleen King, a tax preparer from North Hollywood.