Financial Scams Are on Rise in Region : Fraud: The Lincoln Savings & Loan saga and other cases have made Orange County the center of financial crimes in the Southland.

Southern California’s position as the financial fraud capital of the nation appears to be more entrenched than ever, but the nature of the white-collar crimes is changing, law enforcement officials said Tuesday.

Failures in the fraud-ridden savings and loan industry are declining, but law enforcement officials say there has been an upswing in crimes relating to small-business and real estate lending.

The Los Angeles office of the FBI had 1,003 criminal cases pending on March 31, involving frauds with potential losses of more than $5.6 billion, according to Joseph T. Woodall, a supervisory agent in the Los Angeles office.

At a gathering of 400 financial security officers at a Santa Monica hotel, Woodall said the FBI’s Los Angeles office handles far more financial crime cases than any other office in the nation, including twice as many as New York.

Moreover, Woodall said 79% of the cases in the bureau’s seven-county jurisdiction, stretching from Riverside to San Luis Obispo, involved losses of more than $100,000. Those counties have 6% of the nation’s population, but received 27% of the white-collar crime referrals from Oct. 1, 1992, to March 31, 1993.

Representatives of banks, savings and loans and other financial institutions heard the assessment at a daylong seminar sponsored by the FBI, the U.S. attorney’s office and eight other federal and state regulatory bodies, including the Internal Revenue Service, the Office of Thrift Supervision, the Resolution Trust Corp. and the California Banking Department.

Many in the audience took notes and said they found the program useful. “There’s been a lot of changes in the regulations” about what we need to report, said Patt Niedner Foughty, vice president of operations for Pacific Inland Bank in Anaheim, who added that the seminar provided some valuable guidance. She also said the meeting was a good way for her to “network” with other bankers and share information about common problems they’re experiencing and get ideas about preventive measures that can be taken.

Charlie J. Parsons, who heads the FBI’s Los Angeles office, described the gravity of the problem by drawing a comparison with bank robberies.

“All the loot taken in all the bank robberies in the United States in 1992 amounts to only 3%” of the $2.6-billion loss in the failure of Lincoln Savings & Loan, he said.

Although Lincoln’s notorious owner, Charles H. Keating Jr., called Arizona home, the thrift was headquartered in Irvine. The Lincoln saga ranks as the biggest of a host of financial frauds that have made Orange County the center of the capital of financial fraud.

Other notable Orange County fraud cases in recent years include:

* Newport Beach businessman Michael Parker’s conviction in May for defrauding a Los Angeles savings and loan of $165 million in a scam that involved collecting payments for leases on equipment, such as automated teller machines, that was overvalued or never delivered.

* Newport Beach financial manager Steven D. Wymer’s $105-million scheme, in which he took funds from municipal governments across the nation and spent them on himself instead of investing them as promised. Wymer is serving a four-year prison term after pleading guilty to embezzlement charges in 1992.

* Mission Viejo socialite Daniel Hernandez’s April guilty plea to stealing $7.8 million from a precious metals firm where he worked as a sales executive. Hernandez used the money to support a flamboyant lifestyle as a leading member of Orange County’s social set.

* The felony conviction in April of a Torrance man, Thomas Charles Carter, who operated a string of Orange County-based automobile subleasing firms that took money from potential car buyers with poor credit. He arranged for them to sublease and then buy cars from people who couldn’t sell the vehicles for enough to pay off their loans. State investigators showed that Carter kept much of the money and never processed many of the sales, leaving the original owners on the hook for payments on cars others were driving.

* Former Corona del Mar investment counselor Thomas D. Carter’s 1990 conviction for the unauthorized use of more than $50 million of his clients’ money in the early 1980s to plan a Las Vegas theme park that was never built.

* Newport Beach banking consultant Janet Faye McKinzie’s 1990 conviction and 20-year prison sentence on federal racketeering charges for embezzling $16 million from North America Savings of Santa Ana, allegedly in partnership with the thrift’s owner, Westminster dentist Duayne D. Christiansen, who died in a one-car crash on an empty freeway the same morning federal regulators seized his thrift in 1987.

To combat such frauds, Parsons said, he now has 27% of his 614 agents working on these crimes--more than twice as many as a few years ago.

Since federal regulators began cracking down on banks and thrifts in 1981, a total of 46 financial institutions in Orange County have been seized for insolvency or alleged mismanagement--more than in any other county in the state.

Law enforcement officials said the meeting was designed to bring them into direct contact with possible fraud victims and to foster cooperation in an attempt to combat the scams. “We’re facing a 9% cutback in our staff,” said U.S. Atty. Terree A. Bowers. “It’s even more important that you work with us.”

Woodall said 110 financial institutions--banks, savings and loans and credit unions--have failed in the seven-county area in the last decade. Serious crime played a key role in about a quarter of the failures and led to the conviction of 80 people.

According to John F. Walsh III, who heads the major frauds unit of the U.S. attorney’s office in Los Angeles, the number of failures is abating. However, he said, there has been an upsurge in mortgage fraud and advance-fee loan scams.

In these frauds, Walsh said, con men induce small-business people who cannot obtain conventional financing to pay large “up-front” fees, with promises that banks in Switzerland, Belgium or Luxembourg will issue “standby letters of credit” on their behalf. In reality, neither the banks nor the letters of credit exist, he said.

Speakers from several agencies explained to the bankers how their offices handle criminal referrals.

The general theme was “if in doubt, send it to us.” The regulators also took pains to tell the audience that the referrals are handled confidentially.

Times staff writer John O’Dell contributed to this report.

Southland’s the Place...for Financial Fraud

Southern California is the financial fraud capital of the nation, judging by the total number of such cases under criminal investigation by the Los Angeles office of the FBI, which covers Los Angeles, Orange, Ventura, San Luis Obispo, Santa Barbara, Riverside and San Bernardino counties.

Office Cases pending Los Angeles 1,003 New York 520 Dallas 434 Chicago 363 Boston 348 San Francisco 345 Philadelphia 321 Newark, N.J. 293 Tampa 272 Detroit 243

Source: FBI