Bankruptcy Judge Orders Expanded Probe of Parker

A federal bankruptcy judge Thursday ordered an expanded investigation into an alleged multimillion-dollar equipment leasing fraud by Parker North American Corp., a defunct Costa Mesa company.

At a hearing before Judge John Ryan, bankruptcy examiner Robert Poyourow described how at least $12 million that Columbia Savings & Loan of Beverly Hills invested in equipment leases with Parker North American ended up instead as cashier’s checks made out to former Chairman Michael E. Parker, his family and business associates.

Parker, 42, is a prominent Newport Beach businessman and was chairman of Parker North American until the day before the firm filed for bankruptcy in March, 1989. Parker is now chairman of Parker Automotive Corp., a Costa Mesa manufacturer of engine-cleaning products.

Parker North American leased equipment such as automated teller machines to banks and savings and loans.

Under Parker North American’s business deals with Columbia, Poyourow said, Columbia would pay 20% in cash to Parker North American to buy equipment on Columbia’s behalf. Columbia financed the rest of the equipment cost through a third-party lender.

Parker North American would lease the equipment to various firms, and the leasing fees were used to pay off the loans. As the owner of the equipment, Columbia stood to garner significant tax benefits from the deals.

Parker and some of his associates have become the subjects of several lawsuits alleging fraud in connection with leasing deals. Parker North American also is under investigation by the FBI and Internal Revenue Service.

Columbia Savings and Loan in August filed a racketeering lawsuit in federal court against Parker and three other men, including one of its own former vice presidents, for allegedly carrying out “an illegal scheme to defraud Columbia of millions of dollars.” Parker denies any wrongdoing.

“I think it is obvious to the court that a fraud has occurred,” John Graham, an attorney representing the unsecured creditors of bankrupt Parker North American, said after hearing Poyourow’s report Thursday.

Ryan praised Poyourow’s work in tracing 17 of 102 lease transactions involving Columbia Savings and Parker North American. He instructed him to investigate the remaining transactions and to find out exactly what happened to the checks made out to Parker and other “third parties” who were not part of the business arrangement.

Poyourow said he discovered that of the 17 lease transactions that he studied, five were for “fictitious” leases of equipment that was never purchased. In 11 other instances, he said, the price of the equipment in which Columbia Savings & Loan invested was inflated beyond its cost.

“On Columbia’s books, the numbers were uniformly inflated,” Poyourow said. By contrast, he said, the financial records of Parker North American and of the banks that leased the equipment reflected the accurate costs.

In all, Columbia invested about $31.1 million in Parker North American leases. But only about $19.3 million is recorded on Parker North American’s books, Poyourow said.

Poyourow told the judge he will need four to five months to complete his investigation. In addition, he said he needs to obtain additional Parker North American financial records, many of which have been seized by federal investigating agencies.