Studio City Man Held in $12-Million Fraud

A Studio City man indicted in Colorado on charges that he bilked a savings and loan of millions of dollars, contributing to the bank’s collapse, was arrested early Friday by federal agents, authorities said.

James Leroy Smith, 43, was arrested at his apartment without incident by FBI agents from Los Angeles and Denver, capping a yearlong investigation into an alleged $12-million fraud scheme that helped lead to the failure of Capital Federal Savings & Loan in Aurora, Colo., FBI spokeswoman Karen Gardner said.

Smith and four others were indicted Thursday in Denver on charges of conspiracy to commit bank and bankruptcy fraud, Gardner said. A warrant for Smith’s arrest was later issued by the U.S. District Court in Colorado.

The four others were arrested in Denver, she said.

As a physical trainer for M & L Business Machines, Smith and his business partners allegedly received more than $6 million in loans from Capital Federal Savings & Loan by claiming false inventory, Gardner said. Boxes purporting to contain computers later were found to be filled with dirt and packing foam.

Smith also allegedly participated in the confirmation of accounts receivable that later turned out to be fictitious, she said.

He was brought before a U.S. magistrate for a bail hearing Friday in Los Angeles. Gardner said Smith will probably be ordered to return to Colorado for formal proceedings.