U.S. Urges Prison for Ex-Banker : Fraud: A two-year sentence is recommended for the former head of the now defunct Westlake Thrift & Loan.

The U.S. attorney’s office recommended a two-year prison sentence Thursday for the former president of Westlake Thrift & Loan for his admitted role in a massive phony loan scheme that has triggered one of the major fraud investigations in Ventura County history.

Assistant U.S. Atty. David C. Scheper also asked U.S. District Court Judge Richard A. Gadbois Jr. to levy a $30,000 fine against Steven Smith, who pleaded guilty in December to charges of conspiracy, bank fraud and misapplication of bank funds.

Smith, 46, of Thousand Oaks is scheduled to be sentenced by Gadbois Monday in U.S. District Court in Los Angeles.

Under federal sentencing guidelines, Smith could receive a minimum sentence of eight to 14 months in prison, 85% of which he would be forced to serve.

According to a sentencing memorandum filed Thursday by Scheper, Smith “fully confessed his own involvement, and matter-of-factly described the conduct of others” in a scheme to allegedly build the largest video rental store chain in the nation.

As a result of Smith’s cooperation, federal prosecutors are asking for the two-year sentence instead of a longer term, Scheper said.

Nevertheless, Smith’s attorney, I. Mark Bledstein, said he will seek a maximum sentence of one year in prison for the Thousand Oaks banker, a punishment that still “is a lot for someone like Smith” to serve.

According to the sentencing memorandum, Smith’s troubles started in January or February of 1987 when he apparently realized that the now defunct Westlake Thrift had approved more than $2 million in bogus loans to Walter Vladovich, a Riverside businessman who allegedly set up a phony scheme to build a video store empire.

Instead of exposing the scheme--including bogus loans issued to people who never existed--Smith went along with Vladovich and approved $2 million more in phony loans, according to the memorandum.

Vladovich, a Riverside businessman, has pleaded guilty to charges of conspiracy, unlawful payment of bribes and bank fraud. He is scheduled to be sentenced in July.

“Mr. Smith was not aware of what Mr. Vladovich was doing until half the money was taken,” Bledstein said. And when he realized what was happening, he thought that the bank could recover the money by continuing with the plan, he said.

In July, 1988, Westlake Thrift went out of business. Initially, the exact nature of the company’s many problems was not revealed. Then in December, 1989, the troubles became clearer when a 26-count federal bank fraud indictment was returned, naming Smith, Vladovich and three of his salesmen as defendants.

Salesmen George Loayza Sr., 52, and his son, George Loayza Jr., 25, both of Eagle Rock, each were sentenced to 90 days in prison and fined $15,000. Salesman Jerry Tulak received six months in prison, a $30,000 fine and three years’ probation in connection with the case.

Vladovich could face up to 45 years in prison and $2.25 million in fines.

A variety of sources have alleged in interviews with The Times that Vladovich, who also owned a mortgage firm, Pioneer Acceptance Corp. of Riverside, began his fraudulent activities in 1984 with a banker, Henry Schneider, vice president of First United Thrift and Loan of San Francisco.

Vladovich is accused of submitting false loan packages to Schneider for video store franchises that supposedly were going to be operated by some of his own employees and others.

The arrangement between Vladovich and Schneider allegedly lasted about a year. Scheper said Vladovich received about $550,000 in loans and paid $15,000 in bribes to Schneider. He said Schneider has pleaded guilty to three counts of conspiracy and fraud. He is scheduled to be sentenced on May 7.

First United ultimately was absorbed by a larger bank, however, and the loans to Vladovich were stopped in 1985. About that time, sources said, Schneider introduced Vladovich to Westlake Thrift officials.

After meeting with Smith, who then was a vice president of Westlake Thrift, Vladovich allegedly came up with a different scheme that involved obtaining about 800 bogus loan packages through Pioneer Acceptance.

The loan packages were submitted to Westlake Thrift on behalf of individuals who supposedly were going to buy 48 video movies and video equipment with which to launch their own video store businesses. But, sources said, Vladovich allegedly used some of the money to pay himself a $1,800-a-month salary and to cover his business operating expenses.

The Times has learned that an FBI fraud investigation into Westlake Thrift’s demise now focuses partly on Olen B. Phillips, a stockholder in both the United Community Bank of Thousand Oaks and Westlake Thrift. Phillips is also under investigation by state and county officials in connection with allegations of fraudulent real estate transactions.