4 Indicted by U.S. in Embezzlement of Sterling Savings : Bank fraud: The accused, one a former controller of a subsidiary of the Irvine-based S&L;, allegedly stole $1.2 million.
A federal grand jury in Los Angeles on Friday indicted four men on bank fraud and related charges for allegedly embezzling $1.2 million from Irvine-based Sterling Savings & Loan through a variety of schemes including the theft of 23 blank checks.
Darrell Dean Knox, a former controller of a Sterling subsidiary, was indicted on 16 counts of bank fraud, conspiracy, money laundering and interstate transportation of stolen property. The U.S. attorney’s office alleges that Knox was the scheme’s ringleader.
Richard Russell Holtby, 44, of Murietta, Calif., and Allen Zane Frazier, 38, of Midland, Tex., were each indicted on nine charges of conspiracy, bank fraud, interstate transportation of stolen property and money laundering. Daniel Day O’Brien, 39, of Fontana, was indicted on five counts of allegedly helping to launder some of the money stolen from Sterling through the use of a bank account he controlled.
Knox, 46, of Fallbrook is being held at Metropolitan Detention Center in Los Angeles after his arrest recently outside Denver carrying a loaded .357-caliber revolver. The FBI claims he was working there under the alias Darrell McCormick.
Federal prosecutors claim Knox--controller of Sterling Builders Inc. for most of 1988--issued nearly 200 Sterling checks that were laundered through several bank accounts controlled by himself and the remaining defendants.
Some checks were made out to legitimate suppliers to SBI--such as Fullerton Roofing and Irvine West Heating and Air Conditioning--but they were never given to those companies because Knox and his associates had forged signatures and then deposited the checks in accounts they controlled, according to the indictment.
Some checks were simply issued to fictitious entities, the indictment charged.
Holtby was arrested outside Denver around the same time Knox was taken into custody. The FBI said in an affidavit that its agents found a .45-caliber semiautomatic pistol, ammunition clips and a 16-inch machete in Holtby’s car. He is free on $25,000 bail.
“Their attorneys in Colorado claimed it wasn’t unusual for people in that state to drive around with loaded weapons in their cars,” said Assistant U.S. Atty. Steven E. Zipperstein. “Obviously, we take a different view of the situation. The FBI considered Knox and Holtby to be fugitives and the fact they were so heavily armed shows they potentially could have posed a life-threatening risk to law enforcement agents.”
Besides the checks he issued in 1988 as controller of Sterling, Knox continued the embezzlement scheme well into 1989 because he had taken 23 blank checks from the thrift’s subsidiary and was cashing them, according to the indictment. Zipperstein said the stolen checks accounted for about $200,000 of the $1.2-million loss.
Knox was hired by SBI in 1986 as a computer consultant and promoted to controller in January, 1988. He was fired by the end of the year because he “had fallen behind in his work and was not cooperating with SBI’s outside auditors,” according to the FBI affidavit.
If convicted, Knox could be sentenced to as many as 150 years in prison and be fined up to $5 million. Holtby and Frazier each face up to 100 years in prison and $3 million in fines. O’Brien could receive 40 years in prison and fined up to $1.5 million. All three men could be ordered to pay even more money in restitution.
Zipperstein said the trial will be held in U.S. District Court in Santa Ana.
