Judge Acquits Developer in Surprise Move

A former Irvine developer who wound up bankrupt and mired in more than a hundred civil lawsuits has won an abrupt, court-ordered acquittal on all 28 criminal counts of grand theft and fraud.

Superior Court Judge James J. Alfano left prosecutors stunned when he issued the acquittal in his Fullerton courtroom Monday after jurors had heard more than two months of prosecution testimony.

“I’m really, really surprised the judge did not allow the decision in this case to go to the jury,” said Deputy Dist. Atty. Mark A. Sevigny, who has been the prosecutor on Gerald F. Goeden’s case for more than three years.

Orange County judges rarely step in and take a case away from a jury once trial testimony has begun. But Alfano’s ruling came after three days of arguments on a defense motion for a court-ordered acquittal. Such motions in criminal cases seldom take more than a few minutes.

Goeden, 48, was accused of defrauding Bank of America and United Bank of California (now First Interstate Bank), misusing hundreds of thousands of dollars in bank loans, and nine other counts of misusing mortgage payments made to him by homeowners in his Crown Royale development in Laguna Niguel.

Goeden was investigated by the Sheriff’s Department and the district attorney’s office in 1983 after numerous homeowners, bankers and subcontractors filed lawsuits against his company, including a string of allegations about misuse of money or nonpayments.

Goeden had started out in business as a subcontractor doing framework for other developers in the 1960s. But over the next 15 years, he built up his company, developing three major tracts of homes in the $350,000-and-up range by 1979.

Goeden claims that he was a victim of the economic slump which hit the country in the early 1980s, leading his company into disarray and forcing him into bankruptcy.

While Goeden and his lawyers have refused to talk to The Times, the Los Angeles-based law firm which represented him issued a statement after the judge’s decision, which read in part:

“These charges were brought in an atmosphere of emotion and adverse economic times. They should never have been filed in the first place.”

Judge Alfano has refused to comment on his reasons for ordering the acquittal, and no news reporters were present at the time. But Sevigny said the judge essentially explained that he did not believe that prosecutors had proven that Goeden had intentionally misused any loans or homeowner payments. Also, the prosecutor said, the judge told the lawyers that in some of the counts, prosecutors had not proved that any break in agreements between Goeden and the banks reached the level of legal violations.

While Sevigny would not criticize the judge for his decision, he did not hide his disappointment.

“We felt like we had proven our case,” he said. “You never know what would have happened because the defense had not put on its side yet, but after talking to many of the jurors, I’m convinced (that Goeden) would have been convicted on most of the counts.”

Sevigny said he had expected that the judge might drop three of the counts involving construction loans from the Bank of America, but he had not expected to lose the entire case before the defense had put on its first witness.

The prosecutor said he was especially surprised at the judge’s decision on the nine counts involving homeowners.

“Some of these homeowners lost a lot of money after dealing with Mr. Goeden,” he said. “This trial was pretty much the last forum in which their interests could receive a hearing.”

When the economy turned sour in 1981, the Goeden Co. had set up a unique financing plan to help sell homes in its developments. The company would subsidize the new homeowners for the first two years to help them qualify for loans. But the plan fell through in 1982 when nine of the homeowners ended up facing foreclosure: They discovered that payments they had been making to Goeden had not been forwarded on to the bank, which Goeden had agreed to do.

Goeden’s lawyers argued that the company had insurance to cover such financial problems. In court papers, the defense even argued that some of the homeowners wound up ahead because they stopped making payments to Goeden even after the foreclosure notices were rescinded and ended up living in the homes virtually rent-free for months.

But Sevigny claims that some of the homeowners ended up taking big losses because they essentially lost all the equity in the homes they sold in order to buy the Goeden-developed homes. Then after the financial-subsidy plan fell through, they no longer qualified for the more expensive homes they were buying.

Some subcontractors who testified against Goeden told jurors that they also suffered losses because of nonpayments by the Goeden Co.

Goeden is reportedly now involved in two other companies and still has some civil litigation pending, including final action in his bankruptcy.

One strong Goeden supporter, his ex-wife, Betty Jo Goeden, claims that he has been a victim more than anyone. She had helped him start the company during the early years of their marriage. She also faced criminal charges at one time, but the case against her was dismissed four years ago.

She claimed during the early stages of the trial that she was certain her ex-husband would be vindicated. She has declined comment since the judge’s ruling, except to say that she was in the courtroom when Goeden was acquitted.

“It was one of the happier moments of my life,” she said Tuesday.