Court May Release Funds to Fraud Suspect : Inquiry: Olen B. Phillips seeks access to about $1,500 in seized funds to make his house payment and to pay other bills.

A small portion of funds frozen last month when the state took over the assets of Olen B. Phillips is expected to be released this week so that the embattled Thousand Oaks real estate financier can pay the mortgage on his home and other personal expenses.

According to his attorneys, Phillips, a suspect in the largest alleged fraud scheme in Ventura County history, barely has enough money to buy groceries.

Richard Weissman, a court-appointed attorney who has been placed in charge of Phillips’ holdings, said he will give the businessman access to a bank account containing about $1,500 in personal funds.

Weissman said he will also meet with Phillips’ attorneys to discuss the release of other assets--including $20,000 in United Airlines stock--which attorneys say belongs to Phillips and not investors, as claimed by the state.

A tentative date to discuss the issue has been set Thursday in Los Angeles County Superior Court, but the dispute could be resolved out of court today, Weissman said.

Before Weissman releases the stocks, he said attorneys must prove that the stocks were purchased with money from Phillips’ salary as a pilot for United Airlines, and not with investors’ money.

Attorney Richard Hoefflin, representing Phillips, said the state was overzealous when it seized the holdings--estimated in the millions--and now the businessman is struggling. He said the state lacks the evidence necessary to take over the funds and has violated his client’s constitutional rights.

“He has the absolute right to get whatever we’re going to get him,” Hoefflin said. “It’s absurd that we have to be put through this exercise to release funds.”

On March 28, Los Angeles Superior Court Judge John Zebrowski granted a temporary restraining order allowing Phillips’ assets--including 11 businesses and 48 limited partnerships and investment groups--to be seized and placed under the scrutiny of Weissman. Hoefflin said he will request in court April 27 that the restraining order be removed.

“The state went in and threw a pile of documents at the judge, and he issued the court order based on invalid information,” Hoefflin said.

Attorneys for the state Department of Corporations requested the restraining order because they said innocent investors were in danger of losing money that they had entrusted to Phillips, who had built a multimillion-dollar real estate empire in Ventura County.

Phillips has not been charged with any crime; investigations are continuing at the state, county and federal levels.

According to Alan Weinger, an attorney with the Department of Corporations, investigators are trying to find what happened to $40 million in missing funds from 2,000 investors.

He said Phillips is suspected of defrauding investors in real estate holdings he controlled, particularly those who purchased trust deeds or gave the 50-year-old pilot cash loans in exchange for claims on property.

Phillips is also under investigation by the FBI in connection with a massive phony loan scheme at Westlake Thrift & Loan, which went out of business in 1988. Phillips was a stockholder and a director of the now-defunct United Community Bank of Thousand Oaks, the parent company of Westlake Thrift.

The thrift’s former president, Steven Smith of Thousand Oaks, pleaded guilty in federal court in Los Angeles to charges of conspiracy, fraud and misapplication of bank funds in connection with the case. According to investigators, the thrift was apparently making millions of dollars in bogus loans--some of them written to people who never existed--as part of a scheme to build the largest video store chain in the nation. Smith is expected to be sentenced in U.S. District Court in Los Angeles on Monday.