McKinzie Found Guilty in North America S&L; Case

Janet Faye McKinzie was convicted Thursday of looting the now-defunct North America Savings & Loan, forever ending what had once been a fairy tale existence of Rolls Royces, $1,000 cocktail dresses and lavish parties with the likes of Sammy Davis Jr. as entertainment.

A jury of six men and six women deliberated eight days in U.S. District Court before finding McKinzie guilty of 22 of 26 counts including racketeering, conspiracy, bank fraud, wire fraud and interstate transportation of stolen property. She faces up to 175 years in prison.

McKinzie, 40, wept as the verdict was read.

During the eight-week trial, defense attorney Richard (Racehorse) Haynes portrayed McKinzie as a helpless victim duped into carrying out the fraud because she was being pumped full of prescription drugs by the thrift’s chairman, Duayne Christensen.

Christensen mysteriously died in a car accident only nine hours before federal regulators took over the thrift in 1987. The former dentist was named an unindicted co-conspirator in McKinzie’s case.

Federal prosecutors had portrayed the couple as a modern day Bonnie and Clyde, stealing millions of dollars from North America to enrich themselves.

They each had a Rolls Royce. And McKinzie spent hundreds of thousands of dollars at Neiman Marcus, much of it after regular store hours. The FBI at one point found that the pair had spent $125,000 on a gold eagle statue, $18,500 on a letter opener and $500 on a gold paper clip.

McKinzie’s 37th birthday in 1986 was celebrated with a full-course meal for hundreds of guests at the Newport Beach Marriott. Sammy Davis Jr. was on hand to sing a mix of tunes, including “Happy Birthday.”

North America’s collapse eventually cost taxpayers more than $120 million. Thursday’s verdict was hailed by regulators.

“The North America case was probably one of the top three investigations in the last five years in terms of how egregious the fraud was,” said William Davis, chief deputy of the California Department of Savings and Loan. “Justice finally prevailed. I’m delighted.”

McKinzie is the first person to be convicted under the RICO statute--the Racketeer Influenced and Corrupt Organizations Act--in connection with a savings and loan failure on the West Coast.

Federal prosecutors employed the RICO statute so the government could try to claim the proceeds from Christensen’s $10-million life insurance policy, which named McKinzie as sole beneficiary.

The jury in the McKinzie case is scheduled to reconvene next month to decide if she must forfeit that money to the Treasury Department. The money is being held in a government-controlled escrow account.

Michael M. Essmyer--Haynes’ co-counsel--expressed disappointment. “Ms. McKinzie’s judgment was impaired by the prescription drugs to the extent that under the law she should have been found not guilty,” he said.

McKinzie had pleaded not guilty by reason of insanity, a highly unusual plea in a white-collar crime case.

Haynes, one of the nation’s leading defense attorneys, repeatedly told jurors that McKinzie was “a washed out zombie” simply following Christensen’s orders. Hundreds of prescriptions were introduced as evidence, indicating McKinzie was taking massive doses of drugs including anti-anxiety medications such as Xanax.

The defense even showed jurors pictures of McKinzie before and after her relationship with Christensen. The first photo shows her svelte and healthy. The second makes McKinzie look emaciated and pale.

“The smiling, charming blond had become an 89- to 93-pound, prescription-drug-addicted, mentally diminished person who almost died in February, 1987,” Essmyer told jurors.

Jurors sided with the government, which said McKinzie was fully aware of what she was doing.

Christensen died in 1987 when his Jaguar crashed into an overpass piling on the Corona del Mar Freeway. He was 57. The Orange County coroner classified the cause of his death as undetermined, failing to rule on whether it was an accident or suicide.

Federal prosecutors focused exclusively during the trial on two schemes that they claimed McKinzie directed personally.

“These schemes are not complicated,” Assistant U.S. Atty. Paul L. Seave told jurors. “They just required a lot of hard work, and Janet McKinzie was a very hard worker.”

McKinzie--along with several other officers and directors at North America--still faces a civil lawsuit brought by the Federal Savings and Loan Insurance Corp. FSLIC attorney Eric Isken said the agency has no plans right now to drop its action.

THE SAGA OF NORTH AMERICA S&L; September, 1983: Duayne D. Christensen, a Westminster dentist, invests $6.4 million to open North America Savings & Loan in Huntington Beach. November, 1986: North America, now based in Santa Ana, loses $8.9 million for the first 11 months of 1986 and has a negative net worth of $1.5 million by the end of November. January, 1987: Christensen is killed when his car crashes into a bridge support on the Corona del Mar Freeway. Nine and a half hours later, North America is declared insolvent by state regulators. When evidence of widespread fraud is detected, the state turns the institution over to the Federal Savings and Loan Insurance Corp., and the FBI and the state Attorney General’s Office begin criminal investigations. Charles Bottomley is hired by the FSLIC to manage the thrift. February, 1987: Federal regulators sue Janet Faye McKinzie, Christensen’s business manager and executive consultant, charging that she and Christensen defrauded the institution of more than $20 million and caused its collapse. March, 1987: Lawyers for federal regulators operating the thrift revise the amount missing to $40 million. December, 1987: After moving to new offices in Costa Mesa, North America puts its art and collectibles up for auction. Regulators estimate the thrift paid more than $250,000 for the office decorations. June, 1988: Federal regulators announce that they will close and liquidate North America. The failure is estimated to cost taxpayers $120 million. April, 1989: A federal grand jury in Los Angeles returns a 40-count racketeering indictment against McKinzie and five other former principals of the savings and loan, alleging that they looted the institution of more than $16 million. November, 1989-January, 1990: Three of McKinzie’s associates plead guilty to criminal charges in connection with alleged fraud at North America. January 9, 1990: Federal racketeering and bank fraud trial of McKinzie begins in Santa Ana. March 29, 1990: McKinzie is found guilty of 22 counts of racketeering, conspiracy, wire and bank fraud and interstate transportation of stolen property. She could be sentenced to up to 175 years in prison. Source: Los Angeles Times files.