Five Charged With Bilking Loan Seekers Out of $1.5 Million : Indictment: Dozens of victims paid advance fees but never received loans, prosecutors assert.

A Beverly Hills man with a long criminal record, a World War II hero and three other men were indicted Thursday on charges that they defrauded dozens of people out of at least $1.5 million in advance fees that were paid to obtain $250 million in loans that were never delivered.

The lead defendant, Milton Zucker Mende, was indicted on 38 counts of conspiracy, mail fraud, wire fraud, attempting to pass forged securities of the United States and engaging in monetary transactions with proceeds of a criminal activity.

Mende, 77, has seven prior felony convictions, according to documents filed by Asst. U.S. Atty. Mark Holscher, lead prosecutor on the case.

Court documents state that Mende was on probation from a 1982 federal conviction for mail fraud while committing the crimes alleged in Thursday’s indictment.

Mende and the other defendants were arrested Wednesday. Holscher asked Federal Magistrate-Judge George King to hold Mende without bail because of his prior criminal record and threats he has made against various individuals.

Holscher also filed a letter from Bob Morehouse, supervisor of the state attorney general’s organized crime unit, which has identified Mende and co-defendant Rocco Passanante, 66, of Agoura Hills as “being associated with organized crime figures in California.”

Morehouse’s letter to King states that the California attorney general’s office has been monitoring both men since the mid-1970s and that “our information and intelligence indicates that both subjects have continued their association with these organized crime figures.”

Mende and Passanante appeared in court Thursday but neither entered a plea. Mende, holding on to a crutch, told a reporter, “I’ll have plenty to say later.”

Passanante’s lawyer, Richard Caballero of Beverly Hills, said he could not comment on the charges because he had not had time to review them.

Caballero said his client operated a successful jewelry business out of his home. Asked about the charges that Passanante had mob ties, he responded, “What else is new?”

Also indicted in the scheme Thursday were Samuel D. Longo, 55 of Los Angeles, who also has a lengthy arrest record, Robert S. Turman, 36, of Miami and Carroll W. McColpin, 77, of Marin County, who is a highly decorated World War II fighter pilot. The indictment alleges that he used his reputation to attract victims to the scheme.

The indictment states that the defendants established at least five sham corporations that purported to have hundreds of millions of dollars available to finance business loans.

The documents also state that Mende ignored orders from the State Banking Board to cease all loan guarantee operations.

When Mende’s residence was searched on Oct. 18, hundreds of millions of dollars in Japanese yen notes were found, according to court records. Mende had been ordered to return them to a Japanese businessman by a federal judge in Houston during a civil case last year.

Moreover, the indictment charges that Mende attempted to pass $89 million in forged government securities to Dean Witter’s offices in Beverly Hills. The indictment states that the forged securities were seized from Mende’s home on Oct. 18.

Prosecutor Holscher said in court documents that in order to keep the case “somewhat manageable, the government did not charge defendant Mende with defrauding several dozen other victims with additional losses in the millions of dollars.”

Thursday’s indictment was the product of a lengthy investigation conducted by the Los Angeles Police Department’s organized crime unit and U.S. Postal Service inspectors. Los Angeles police sources said that there were many more victims than were named in the indictment.

If convicted, the maximum penalty under federal law for the defendants ranges from 10 years in prison and a $250,000 fine to 30 years and a $2 million fine.

Mende was held without bail pending a further hearing on Tuesday. King set $300,000 bail for Passanante. A federal magistrate in San Francisco released McColpin on $10,000 bond. Bail was set at $250,000 for Longo in Salt Lake City and Turman’s bail hearing is pending.