Bank Swindler Named in S&L;, HUD Fraud

A convicted bank swindler and target of investigations into influence-peddling at the Department of Housing and Urban Development was charged Monday with fraud against HUD and two since-failed Orange County savings and loans.

Federal prosecutors filed charges in Los Angeles and Oklahoma City against Charles J. Bazarian Jr. and apparently struck a deal by which he will testify against his former partners.

Monday’s charges against Bazarian, an Oklahoma City loan broker who is serving a two-year term for a 1987 bank fraud conviction, appear to represent a link between two of the year’s biggest scandals--problems with HUD and a series of failed saving and loans.

Prosecutors in Los Angeles and Oklahoma charged Bazarian in “informations,” which are often filed instead of grand jury indictments when targets of investigations have agreed to plead guilty and cooperate with prosecutors.

“All I can say is that the investigation is continuing,” said Assistant U.S. Atty. Leon Weidman of Los Angeles.

Oklahoma City U.S. Atty. Robert Mydans said he expects Bazarian to plead guilty when he appears in court in Oklahoma on Wednesday.

According to charges filed in Los Angeles, Bazarian took part in complex schemes that involved an affiliate of Associated Financial Corp., which is a Santa Monica-based HUD syndicator, and two Orange County thrifts in an attempt defraud federal savings and loan regulators.

Federal regulators later seized the thrifts--Consolidated Savings Bank of Irvine and American Diversified Savings Bank of Costa Mesa--on grounds of purported insolvency. Authorities did not accuse the thrifts or the HUD syndicator of wrongdoing.

In the information filed in Los Angeles, authorities allege that Bazarian worked with Wilshire Investments Corp., the affiliate of Associated Financial Corp., to obtain upward of $9.5 million in loans from Consolidated.

Bazarian’s collateral consisted of “fraudulent” promissory notes supplied by Wilshire, according to the documents. The five-page information says that Wilshire obtained the notes through investments in real estate, the value of which was “highly inflated.”

Bazarian, in turn, used the notes as collateral to obtain loans to carry out “fraudulent” deals at savings and loans in California, Oklahoma and Texas, the information says.

“Where the U.S. attorney got this information I don’t know,” said Donald A. Spiegelman, special counsel to Associated Financial Corp., adding that the owners of the Santa Monica firm “categorically deny the stuff in here with respect to Wilshire.”

“The notes were not fraudulent,” Spiegelman said. “They were not worthless investment notes, and as far as I know, the ultimate collection on those investment notes was between 99% and 100%. . . . The deals were entirely regular.”

In one 1985 deal, Bazarian borrowed upward of $9.5 million from Consolidated. Bazarian placed $4.9 million of the proceeds into a partnership, knowing that the owner of Consolidated, Robert Ferrante, had an interest in it, according to the charges.

Brian C. Lysaght, lawyer for Ferrante, maintained that his client did nothing wrong and that the thrift lost little or no money, even though federal regulators claimed when they closed it in 1986 that it had $52 million in bad debts.

Federal regulators shut American Diversified on June 6, 1988. A suit by the Federal Savings and Loan Insurance Corp. cited $120 million in losses.

“Sounds like if the federal authorities had any evidence that Mr. Ferrante was a participant (in Bazarian’s wrongdoing) that he would have been named a co-defendant--and he wasn’t,” Lysaght said.

Also in 1985, Bazarian allegedly worked out a deal by which American Diversified bought $15 million in Wilshire’s “worthless” investor notes. In exchange, Bazarian bought $3.85 million in promissory notes from the thrift and two pieces of property from American Diversified.

In the separate Oklahoma City case, Bazarian is accused of skimming $97,637 from two HUD housing projects that he owned in the early 1980s. HUD allowed him to buy the projects in 1980, even though he had been convicted of mail fraud three years earlier in Oklahoma City.

Bazarian, a former nightclub owner with an eighth-grade education, became a loan broker in 1980s, handling transactions at many high-flying savings and loans that ultimately failed in California, Texas and his home state of Oklahoma.

He became a target of a major investigation involving influence peddling at HUD in 1981 and 1982.

The HUD inspector general’s investigation of Bazarian did not result in any charges. But it was among the first nationwide investigations of the housing agency launched during the Reagan Administration.

Through much of the 1980s, Bazarian dealt with Associated Financial, which owns or controls more than 44,000 units of HUD housing nationwide, making it among the largest private for-profit syndicators of HUD projects.

Last year, as Bazarian appealed his 1987 criminal conviction and before he entered prison, Associated Financial Corp. paid Bazarian $15,000 a month, Bazarian’s wife has testified in a bankruptcy proceeding.

Times staff writer Gregory Crouch contributed to this story.