Acknowledging that he was breaking new ground, a federal judge in Los Angeles on Monday threw out a 12-count indictment of former Orange County banker and real estate developer Craig E. Collett, ruling that delays by federal prosecutors in the case were "unreasonable."
The decision by U.S. District Judge James M. Ideman left Caldwell, former chairman of the now-defunct Western National Bank in Santa Ana, free of criminal charges.
The U.S. attorney's office will appeal the unprecedented decision, said Patricia L. Collins, the assistant U.S. attorney handling the case.
Caldwell, who said he is now in the real estate business in Long Beach, said he was pleased with the decision but declined further comment.
"It's up to courts and prosecutors to see that cases are expeditiously handled and tried," said Thomas E. Holliday, Caldwell's lawyer.
Voided Waiver Agreement
Ideman's ruling marked the first time a federal judge has voided an agreement between prosecution and defense to waive the statute of limitations, which in this case required that criminal charges be filed within five years of the date of the alleged crime.
The September, 1987, indictment had alleged that felonies had occurred from May, 1981, to March, 1982.
Caldwell, 37, of Rolling Hills, had faced multiple felony counts of making false entries in bank records, making false statements on bank loan applications and misapplying bank funds.
The indictment accused him of setting up straw borrowers on loans he arranged and of personally receiving at least $225,000 in loan proceeds. The indictment also charged that he violated federal banking regulations by personally borrowing $200,000 from Western National, an amount that exceeds what bank directors can borrow from their own institutions.
The loan irregularities cost the bank about $600,000, the indictment said.
Bank Seized in 1982
Western National, which was founded in 1980, was declared insolvent and seized by regulators in August, 1982. It had been Orange County's fastest-growing bank, accumulating $21 million of its peak $30 million in assets during the first six months of operations.
In November, 1986, a federal judge sentenced Western National's former president, John G. Willett, to four years' probation on similar charges. Willett also was fined $15,000 and ordered to perform 1,500 hours of community service work.
Willett, a former examiner for the U.S. Office of the Comptroller, had been fired by Caldwell in January, 1982, a day after Willett called in comptroller's examiners to review what he considered loan irregularities. The bank claimed in court papers then that Willett was fired for his role in those same problems.
In May, 1986, the government told Caldwell that it was prepared to seek an indictment against him. At the request of Jan Lawrence Handzlik, Caldwell's lawyer at the time, federal prosecutors agreed in a written waiver signed by Caldwell to waive the statute of limitations for four months to give the defense time to present evidence clearing Caldwell.
During that time, prosecutors and Caldwell signed two more waivers. The final one in September was an open-ended waiver with no time limit.
"The defense asked for the delay. They initiated the waivers," Collins said. "The government basically accommodated the defense request for a delay."
Handzlik, who testified during Monday's hearing, said Judge Ideman questioned the open-ended nature of the waiver, though he did not invalidate all open-ended waivers.
Attorneys said only one appellate court decision--from the U.S. Circuit Court of Appeals in the District of Columbia--exists on the issue. That decision approved the waiver.
Collins said the appellate court decision turned on whether the defendant was indicted within a reasonable time and whether the indictment prejudiced the defendant. Ideman decided, however, that the test should be on whether the open-ended waiver was reasonable at the time it was signed.
Holliday said that the transactions involved in the indictment were legitimate loans and that Caldwell was innocent of any wrongdoing.
"The key to all of this is we're not attacking anybody," Holliday said. "We think as a matter of policy an open-ended waiver (of the statute of limitations) is no good. Courts and prosecutors have an obligation to see that old cases don't go on."
Times staff writer James S. Granelli contributed to this story.