Stiff Sentences Given in Fraud at Ramona S&L; : Courts: The first owners of a failed thrift in Southern California to be convicted of bank fraud get 15 and 12 years in prison for their role in the collapse of the Santa Ana-based institution.

The first owners of a failed thrift in Southern California to be convicted of bank fraud received severe prison sentences Tuesday in an emotional proceeding in federal court and were ordered to pay millions of dollars in restitution to the government.

Donald P. Mangano Sr., 53, of Huntington Beach was sentenced to 15 years in prison and John L. Molinaro, 49, of San Jose was sentenced to 12 years for fraud and conspiracy that led to the 1986 collapse of Ramona Savings & Loan in Santa Ana. They were also ordered to pay $6.8 million in restitution to the Federal Deposit Insurance Corp.

The two men, who acquired the now defunct thrift in 1984, were convicted in October on more than 30 counts of bank fraud and conspiracy.

“There is an element in this whole thing of cynicism and ruthlessness and deceit,” said U.S. District Court Judge David V. Kenyon in announcing the sentences.

The prosecution was pleased with Kenyon’s decision.

“We regard this as a significant victory for the government in its efforts to punish those responsible for the savings and loan crisis,” said Assistant U.S. Atty. Steven E. Zipperstein. “The sentence will send a message to other savings and loan owners that white-collar crime doesn’t pay.”

Neither man showed any reaction as Kenyon read the sentences. Molinaro, dressed in a wrinkled blue work shirt and prison fatigues, leaned back in his chair. Mangano looked down at a note pad. The men will be eligible for parole in four to five years.

“It doesn’t surprise me, “ Mangano said. “The bottom line is that I will be appealing the verdict and I expect to be successful.”

Molinaro, who is currently incarcerated, had no comment as he was led out of the courtroom in handcuffs.

Defense attorneys expressed little surprise at the length of the sentences, claiming Kenyon was under pressure from regulators to set a tough example. They said the prison terms were among the stiffest ever handed out for bank fraud.

Kenyon had received letters from the nation’s top banking regulators including L. William Seidman, FDIC chairman, and M. Danny Wall, former director of the Office of Thrift Supervision, appealing for long prison terms for both men.

The Ramona case has attracted a great deal of attention because Molinaro and Mangano were the first owners of a failed thrift to face criminal charges since the nation’s thrift debacle began to unfold in the late 1980s.

At times, emotions in the courtroom ran high because Mangano is a quadriplegic in poor health, the victim of a bout with polio more than 30 years ago. Mangano’s attorneys pleaded with Kenyon on Tuesday to place him on probation. So did his former partner.

“I feel more for my co-defendant,” Molinaro told Kenyon in a personal statement. “I’ve seen people in prison in wheelchairs. Any sentence he gets will be 10 times as long as mine because of his condition.”

Friends and supporters of the two men--including Jerry Tarkanian, University of Nevada at Las Vegas basketball coach--had deluged the court with hundreds of letters asking for leniency.

But Kenyon sentenced both men to the terms recommended by the state’s office of probation.

Defense attorneys throughout the 11-week trial had tried to place at least some of the blame for Ramona’s collapse on an industrywide deregulation in the early 1980s.

Because the nation’s thrifts were experiencing difficulties writing home loans when interest rates soared in the late ‘70s and early ‘80s, federal and state regulators rewrote investment laws allowing S&Ls; to invest 100% of their assets in real estate ventures.

Kenyon said Tuesday the regulatory environment set up something of a modern-day Garden of Eden, with lots of temptations.

“Smart qualified business people found themselves in a garden full of ripe fruit that was easy to pick,” Kenyon said. “But the fruit didn’t belong to those who did the picking.”

Ramona’s collapse required a $65.5-million bailout. No depositors lost money--their funds were insured by the Federal Savings and Loan Insurance Corp.--but taxpayers have had to foot the bill.

Gerald V. Scotti, Molinaro’s attorney, argued his client should receive a light sentence because he had initially cooperated with the government in its investigation of Ramona’s failure and a questionable real estate deal in Palm Springs, which regulators claim was the cause of the thrift’s demise.

“After he gave them everything they asked for, they turned their back on him,” Scotti said.

Molinaro had originally cooperated because he had decided to plead guilty to four fraud charges. He later revoked that plea.

He spoke before Kenyon on Tuesday in an angry tone, saying he felt betrayed by government officials.

“I gave substantial consideration and substantial cooperation,” Molinaro said. “I felt I was really misled.”

He expressed little remorse to the court.

“I really don’t know what got into me,” Molinaro said.

For his part, Mangano said his life would never be the same. “There is no doubt I will regret it until the day I die,” he said.

Both men’s attorneys claimed the government had turned Molinaro and Mangano into scapegoats for the nation’s S&L; catastrophe, which is expected to cost taxpayers more than $200 billion.

“There has been a strange eeriness about the zeal in which this case has been pursued,” Scotti said.

Zipperstein rebutted the charges in court.

“This is not a witch hunt,” he said. “This case was indicted well before the savings and loan crisis made headlines.”

Ramona was founded in 1927 in Ventura County and carried on a 57-year tradition of writing single-family mortgages until Molinaro and Mangano purchased it in April, 1984, for $4 million. The thrift soon was in trouble.

“Ramona survived the Great Depression in the ‘30s, World War II in the ‘40s and economic downturns in the ‘50s and ‘70s. The only thing that Ramona couldn’t survive was the greed of Donald Mangano and John Molinaro,” Zipperstein said in court Tuesday.

Molinaro has spent most of the last three years in jail--some of which will be credited to his current sentence--most of it for passport fraud. He was arrested in a San Francisco passport office in 1987 after trying to obtain a passport using the birth certificate of a dead man. The FBI searched a bag he was carrying and found numerous business cards from the Cayman Islands, bank records and travel brochures on Eastern Europe and China.

Federal regulators charge in a $30-million civil lawsuit that Molinaro was stashing millions of dollars of depositors’ money in offshore bank accounts. The civil action is scheduled to begin in U.S. District Court in Santa Ana on May 1.

THE RAMONA SAVINGS CASE

April, 1984: John L. Molinaro and Donald P. Mangano Sr. purchase Ramona Savings & Loan for $4 million.

May,1985: Mangano sells his 50% share in Ramona to Molinaro but allegedly continues to exert some influence over the thrift.

May 1986: Molinaro--now sole owner, chairman and chief executive of Ramona--takes a $2 million dividend out of retained earnings. The State Department of Savings & Loans orders him to pay it back.

Aug., 1986: Molinaro is sued by the state for refusing to pay back the $2 million dividend.

Sept., 1986: State and federal regulators seize Ramona and transfer $108.1 million in assets and liabilities to a newly chartered association, Ramona Federal S&L.; The Federal Savings and Loan Insurance Corp. files a civil lawsuit in U.S. District Court against Molinaro and Mangano for allegedly accepting illegal dividends, breaching their fiduciary duties and submitting false financial statements to the government.

July, 1987: Molinaro is arrested in San Francisco and charged with applying for a passport in a dead man’s name. He allegedly planned to travel to Great Britain and then to the Caribbean where regulators said he had stashed millions of dollars from Ramona.

Sept., 1987: A federal judge orders Molinaro to repay the $2-million dividend.

Nov., 1987: In a partial settlement of the civil suit brought by FSLIC, Molinaro is ordered to repay Ramona $6.4 million. Molinaro is indicted for fraud. He pleads guilty but later withdraws the plea.

Feb., 1988: Molinaro found guilty by a federal judge of 12 counts of contempt for violating court orders by concealing about $4 million in assets, including $3 million in cash shipped to accounts in offshore banks.

Feb., 1988: Federal regulators close Ramona Federal.

May, 1988: Molinaro and Mangano are indicted on more than 30 counts each of bank fraud and conspiracy relating to the failure of Ramona.

Sept., 1988: Molinaro and Mangano unsuccessfully try to obtain dismissal of the charges against them on the grounds that evidence gathered in connection with Ramona’s failure hasbeen improperly used against them in the criminal case.

July, 1989: The bank fraud and conspiracy trial begins.

Oct. 1989: Mangano is found guilty on all 31 counts of bank fraud and conspiracy and is allowed to remain free on bail. Molinaro is found guilty on all 33 counts of bank fraud and conspiracy and is sent to prison because prosecutors fear he might try to leave the country.

Feb. 1990: Donald P. Mangano Sr. was sentenced to 15 years in prison and John L. Molinaro to 12 years for fraud and conspiracy. They were also ordered to pay $6.8 million in restitution to the Federal Deposit Insurance Corp.

Researched by Dallas M. Jackson. Source: Los Angeles Times files