Investigators Trace Developer’s Alleged Illegal Loan Funds

Federal investigators have traced $1 million in loan proceeds allegedly obtained through fraud by Newport Beach developer Robert Buceta to three banks in Canada.

The disclosure came Friday during a court hearing in which Buceta won approval of his request to be allowed to travel within the United States to prepare for his defense of several civil lawsuits nearing trial.

Buceta and his wife, Patricia, each could face 142 years in prison if convicted of fraudulently inducing financial institutions to loan them more than $70 million. Federal authorities called it one of the largest and most far-reaching swindles ever perpetrated in Southern California. Both have pleaded not guilty.

On Friday, at a hearing in federal court in Los Angeles, Assistant U.S. Atty. Patricia L. Collins revealed that the government had traced some of Buceta’s assets. Representatives for several creditors of Buceta this week said they held out little hope of collecting the tens of millions of dollars they have claimed.

Collins opposed any relaxation in restrictions on Buceta’s movements contained in his release on bond last week. She said the temptation to flee would increase as the strength of the government’s case becomes more apparent.

Restriction Lifted

Buceta, 39, and his wife had been released on $170,000 bond on condition they not leave the Los Angeles area.

But on Friday, U.S. Magistrate Volney V. Brown Jr. lifted that restriction after asking the couple for their word of honor that they would not flee.

“Are you a man of honor?” Brown asked Buceta in soliciting his pledge to abide by the terms of the release.

“Yes, I am, your honor,” Buceta responded.

Buceta had sought the freedom to travel to attend depositions in a lawsuit filed by the Federal Savings & Loan Insurance Corp. alleging he had defrauded a now-defunct Utah firm of millions of dollars in several of the transactions that form the basis for the criminal indictment.

Buceta is charged--both civilly and criminally--with engineering double escrows to purchase apartment properties for conversion to condominiums. He allegedly obtained commitments from a mortgage broker to purchase the property at market value, complete the purchase through a straw party and simultaneously sell the property to himself at a much higher price. Unsuspecting financial institutions financed the second purchase, unaware that the double sale had artificially, and according to the allegations fraudulently, inflated the price.

According to the indictment returned by a federal grand jury in Los Angeles last week, both Buceta and his wife allegedly submitted fake financial statements and tax returns to justify the larger prices.

The scheme allowed Buceta to purchase 10 apartment properties across the country without down payments. The second loans granted by the financial institutions provided enough extra cash to cover all closing costs and to cover loan payments for 12 to 18 months, according to lawyers familiar with the allegations against Buceta.

Source of Funds

Buceta, who was forced to surrender his passport when he was arrested last week, agreed to inform federal officials of the whereabouts of his 5-year-old daughter during his out-of-state trips. He also promised never to take her with him.

Prosecutor Collins had suggested that Buceta be forced to reveal the source of the funds used to pay for the travel. Brown ordered Buceta to reveal the source but said that the information, potentially incriminating, would not be turned over to prosecutors.

Collins argued vigorously that Buceta has hidden assets gained from criminal enterprise. In addition to the funds in Canada, Collins said Buceta has in depositions acknowledged having 50 bank accounts. She said he has yet to reveal the name of a single bank in which he keeps funds.

The Bucetas again declined comment. Their lawyer, David R. Nissen of Orange, again proclaimed their innocence.

The Bucetas are now free to travel anywhere in the United States, provided they first notify court officials and submit itineraries.