Jury Is Out on Owners of Orange-Based Thrift : Ramona S&L; Chiefs Face 30 Charges
The first criminal trial involving owners of a failed Southern California thrift went to the jury Thursday after 11 weeks of testimony in U.S. District Court that encompassed 35 witnesses and 350 exhibits.
John L. Molinaro, 48, and Donald P. Mangano Sr., 52, former owners of Ramona Savings & Loan in Orange, each face more than 30 charges, including bank fraud and conspiracy, in the real estate transactions that led to the thrift’s collapse in September, 1986. The S&L; subsequently needed a $65.5-million bailout.
The jury received instructions late Thursday from District Judge David V. Kenyon and was scheduled to begin deliberations today.
Prosecution and defense attorneys spent much of the 11 weeks leading jurors through the complicated transaction surrounding the sale of the Cherokee Village condominium project in Palm Springs.
Mangano and Molinaro bought Ramona in April, 1984, and spent about $25 million, or a quarter of the thrift’s assets, building Cherokee Village. Neither man had much banking experience--Mangano was a real estate salesman and Molinaro was a former carpet salesman.
Cherokee Village was a flop--just seven of the building’s 180 units had been sold by the summer of 1985.
The prosecution alleged that the two devised a clever scam to sell Ramona before the thrift and Cherokee Village went belly up.
They set up several dummy corporations with the help of three outside investors, prosecutors said, then sold Cherokee Village to companies set up by those investors to get the condominium project off Ramona’s books.
Ramona booked a $4-million profit on the deal, and Mangano then bought the stock in the corporations, becoming the new owner of Cherokee Village. Molinaro took a $2-million dividend about this time, which the prosecution alleged was based on the profit it said was phony.
Appealing to Buyer
The federal government alleged that the sale took place to make Ramona look appealing to a potential buyer and ward off regulators from taking over the ailing thrift.
“The prosecution said the purpose of the three borrowers was to deceive the regulators of the true owner,” said Gerald V. Scotti, Molinaro’s attorney. “But the records are so clear that even a Boy Scout could figure it out.”
But Assistant U.S. Atty. Steven E. Zipperstein strongly disagreed in his rebuttal, saying even some of the defense’s witnesses did not understand the transaction.
During his closing arguments Thursday, Scotti placed some of the blame for Ramona’s collapse on federal regulators. During the mid-1980s many thrifts were in bad shape, so government officials encouraged them to invest much of their assets in real estate to generate more money.
“It’s a war between the regulators and the owners,” Scotti said. “Now they’re denying they (the regulators) had anything to do with it (the S&L; crisis). Everybody just became a crook at the same time.”
The defense has said the three corporations were set up to protect Mangano’s credit-worthiness in the event of Cherokee Village’s failure and to fulfill tax regulations.
But the prosecution said outside investors were used to mislead regulators into believing that Ramona had made a legitimate sale.
“There is no reason at all to use these three people except to perpetrate the fraud,” Zipperstein said.
After the trial closed, Mangano said the three corporations are a routine business practice and that he is innocent of wrongdoing.
“It’s solely in the hands of the jury,” he said. “I do not believe at this moment that I am guilty of any crime, nor did I when I entered into any transaction.”
But Zipperstein told jurors that Molinaro and Mangano set out on purpose to loot the thrift.
“Ramona was a small, mom-and-pop savings and loan in Fillmore, Calif.,” he told jurors. “Two branches. It had been in business for 57 years. Then came the defendants. Molinaro and Mangano. In just over two years, they drove Ramona to ruins. They pilfered its assets.”
If convicted, Molinaro faces up to 165 years in prison and $8.3 million in fines; Mangano could receive a 155-year sentence and $7.8 million in fines.