Financiers of Slums Probed by U.S., State

A variety of federal and state officials are reviewing the activities of a network of Los Angeles slum financiers to determine whether any of them has engaged in criminal conduct or violated civil law, officials said Wednesday.

The U.S. trustees office, which administers federal Bankruptcy Court, plans to subpoena Grover Black, identified in bankruptcy documents and state corporation records as a registered officer of two slum companies but alleged by associates of Los Angeles real estate agent William Leyton to be Leyton’s dog. The Times reported this week that Black is an apparent front for two of Leyton’s slum financing companies.

“If Grover’s a dog, we’re going to find out,” declared Davis H. von Wittenberg, U.S. trustee for the Central District of California, in an interview. “If we think there is provable criminality or fraud perpetrated on this court, we will refer this case to the U.S. attorney’s office.”

Represents Firm

Leyton has refused to be interviewed on the identity of Black or any other aspects of his business. Attorney Milton Simon, who has represented a Leyton company that listed Black as its president, also has declined comment.

In a related development, an official of the California secretary of state’s office said his office is launching an investigation to determine whether Ben Karmelich, president of Highland Federal Savings & Loan Assn., violated any laws when he notarized two reportedly forged deeds in connection with a real estate deal from which he stood to profit.

Karmelich and Leyton are among 142 defendants in a civil suit brought by the Los Angeles city attorney’s office March 28, which alleges civil racketeering and fraud in connection with their roles in Los Angeles slum properties. The lawsuit contends that certain lenders and financiers secretly controlled at least 11 slum buildings during the 1980s. The suit is pending in Superior Court.

The newly announced inquiries raise the prospects of possible criminal charges and additional potential civil violations beyond those alleged in the city lawsuit.

The investigation into Karmelich’s actions stems from a 1983 incident reported by The Times in which Karmelich notarized two deeds as part of a single transaction involving the sale of two old, downtown Los Angeles apartment buildings.

The man who allegedly signed the deeds, Syed Mouzzam Ali, told The Times in an interview that his name had been forged on the document. Ali, a native of India, has a distinctive signature that is half-Arabic and appears on many recorded documents here. The signatures notarized by Karmelich appear different.

The deeds were part of a transaction in which Karmelich and his wife appeared as beneficiaries on a $550,000 mortgage taken out by the buyer, slum investor Joe Fitzpatrick, who is also a defendant in the city lawsuit.

Action Denied

Karmelich denied ever notarizing a forged document. He said he knew Ali personally and would not have notarized the documents unless Ali had signed them.

“If these allegations are true, we at least have a misdemeanor and possibly a felony,” said Jim Randall, chief of the notary division of the secretary of state’s office.

“It’s a violation of both civil and criminal law to act as a notary in any transaction in which the notary has a direct financial or beneficial interest. It’s also grounds for the revocation of commissions, as well as carrying criminal penalties.”

Asked for comment, attorney Michael Berk, who is representing Karmelich and Highland Federal Savings in the city lawsuit, said Karmelich could not comment on the specifics of the state’s probe because he knew nothing about it.

“I would expect that the secretary of state, in conformance with his duties, would investigate any matters that were brought to his attention,” he added.

On Tuesday, the Los Angeles County Board of Supervisors voted unanimously to ask the district attorney to look into possible criminal violations by slum financiers. In asking for the investigation, Supervisor Mike Antonovich cited a recent four-part series in The Times on slum financing.

“If these reports are accurate,” Antonovich said, “poor people are suffering because of the greed of the few who are exploiting those who have no means of defending themselves.”

Conduct Review

Sandi Gibbons, a district attorney spokeswoman, said Wednesday, “We are awaiting the motion from the Board of Supervisors and when we get it, we will respond appropriately. We will conduct our own review to determine if a criminal investigation is warranted.”

The name of “Grover Black” was signed on documents identifying him as president and secretary of PHC Finance Inc., a California corporation that petitioned for bankruptcy in 1985. At the time, the corporation owned an aging apartment building. According to the bankruptcy petition, the corporation “duly” held a board meeting and elected Black to file the petition in court.

Von Wittenberg said the U.S. trustees office will seek to depose Black or others involved in the petition to determine whether the bankruptcy petition should be set aside, which could potentially reopen the case. In that case, Black listed two major creditors, neither of whom could be located by The Times. The nature of the settlement was not clear from the records.

“Unfortunately, dogs tell no tales,” Von Wittenberg said. “In the manual, we’re called the watchdog of the federal Bankruptcy Court. Now, we’ve got a dog to watch.”