Phillips Says He Warned Investors of Problems : Trials: The real estate speculator is accused of fraud. He admits he can’t prove he disclosed risks and cash-flow difficulties.

Under cross-examination at his fraud trial Tuesday, Olen B. Phillips insisted that he told investors all about the cash-flow problems that eventually sank his financial empire--including his failure to pay taxes on some properties and the risk of foreclosure on others.

Phillips admitted, however, that he can’t prove it.

Phillips, 52, and an associate are accused of duping 21 investors out of nearly $3 million. Hundreds of others lost as much as $30 million, investigators have said, in what is described as the largest fraud case in county history.

Most of the victims’ investments were supposed to go toward purchasing trust deeds for specific properties, according to an 81-count fraud and grand theft indictment in Ventura County Superior Court.

Instead, Phillips put the money in a general bank account that he used to pay banks, other investors and himself, the indictment says.

In three hours of cross-examination Tuesday, Deputy Dist. Atty. Rebecca S. Riley repeatedly challenged Phillips to back up his contention that the investors knew of the problems facing his Phillips Financial Group and took their chances.

“Do you have any brochure, any piece of paper, that discloses to those being brought into the trust deed program that their money was being used to pay other trust deed holders, or interest charges, or to fund your negative cash flow?” Riley asked.

“I don’t think we prepared such a document,” Phillips replied.

At another point, Riley asked whether he told investors that he had decided not to pay taxes on some properties because of cash flow problems.

“I would tell the trust deed holders all about the properties,” Phillips said.

“But you can’t show us anything, can you?” Riley asked.

“That’s true,” Phillips said.

He maintained that all investors were told “what the situation was, what the hurdles were.”

“I did not try to hide one item from any investor who came in,” Phillips said. “People were aware that it was a speculative real estate investment.”

Several investors have testified that they had no idea of the company’s problems, which eventually resulted in its closure by the state Department of Corporations. Some investors said they were told that they held first or second trust deeds and later learned that their deeds were never recorded and were essentially worthless.

Phillips also acknowledged taking money from the company account for his personal expenses, but said he had it coming because he had invested between $800,000 and $1 million of his own money in the company’s properties.

But he admitted that the company’s books were so haphazardly maintained that he did not know exactly how much he had invested.

Investors said they were told that their money was being used for a specific piece of property. However, Riley asked Phillips, “when money came in from trust deed investors, wherever it was needed is where it went, right?”

Phillips said he didn’t get involved in the accounting details, but said he “had an idea” that strict accounting principles were not being followed and agreed that he was responsible.

Phillips was polite in his confrontation with the prosecutor, who has been investigating him for 2 1/2 years, answering “yes, ma’am” and “no, ma’am” to Riley’s questions. Neither he nor Riley employed the sarcasm sometimes seen in the cross-examination of defendants.

But when Phillips tried to elaborate on several yes-or-no questions, Riley interrupted and said her query had been answered.

“Yes, but I have to explain,” Phillips said repeatedly. Riley did not give him the opportunity.

The jury in Judge Frederick A. Jones’ courtroom began hearing the case April 22. Attorneys expect testimony to continue for two more weeks. After Phillips’ attorney, Steven D. Powell, finishes presenting his evidence, co-defendant Charles Francoeur’s attorney, Robert Blinn Maxwell, will present his case.

Francoeur, who was general manager of the company, and Phillips, who was its president, remain free on $150,000 bail. Each faces up to 10 years in prison if convicted.