9 Associates of Bank Fraud Figure Are Sentenced

Nine associates of Douglas P. Blankenship, a Capistrano Beach man who has pleaded guilty to defrauding scores of banks and savings and loans of $25 million, were sentenced over the last few days to prison terms ranging from six months to four years.

In what federal prosecutors called one of the largest white-collar crime cases ever in western Washington state, Blankenship and the others had pleaded guilty in federal court in Seattle to defrauding Puget Sound National Bank of $4.5 million and stealing millions of dollars more from other financial institutions in 17 states.

Sentencing for Blankenship is scheduled for Sept. 27.

The nine were sentenced on Friday and Monday for helping Blankenship claim a net worth of $100 million in order to obtain loans during the 1980s. The loans were never repayed and the conspirators pocketed much of the proceeds, prosecutors said.

Blankenship, 48, asked for a delay in sentencing in order to study the government’s sentencing memorandum to the judge, prosecutors said.

He faces a maximum of nine years and could be ordered to pay restitution of up to $14.5 million.

Blankenship’s common-law wife, Stephanie A. Blankenship, 38--accused of helping obtain $5 million in loans with fraudulent financial documents--was sentenced to 18 months in prison.

Larry G. Frankhouser, 31, a San Juan Capistrano resident described by prosecutors as Blankenship’s “chief of staff,” was sentenced to a 27-month prison term and ordered to pay $10 million in restitution.

Several accountants from around the country who helped Blankenship prepare false financial statements and tax returns were also sentenced: E. Frank Neisch, 55, of Long Beach received 36 months in prison; Clifford W. Hudson, 42, Rockford, Ill., 15 months in prison and $2.6 million in restitution, and Joseph P. Babinsky, 44, of San Antonio, Tex., 11 months in prison and $650,000 in restitution.

Other defendants sentenced recently were:

Richard M. Cauble, 59, of San Juan Capistrano, described by prosecutors as a “confidence man,” four years in prison and $6.9 million in restitution.

Frank A. Pugliese, 62, a Beverly Hills real estate agent who was a “front man” for Blankenship, according to prosecutors, 42 months in prison and restitution of $3.7 million.

Clayton D. Sketoe Jr., 48, of Honolulu, an accountant who provided false documents for Cauble, 37 months in prison and restitution of $2.8 million.

Marvin M. Gibbons, 37, of Meridien, Ida., another “front man” for Blankenship, six months and a fine of $1,000.