Four Accused of Defrauding : Failed O.C. Bank

A federal grand jury on Friday charged four San Diego County residents with using a risky automobile-financing scheme to defraud Far Western Bank, a now-defunct Tustin institution, of $10 million during the late 1980s.

The indictment, filed in U.S. District Court in San Diego, alleges that Rancho Santa Fe residents Richard L. Burns, Joyce C. Burns and David W. Watt used the scheme to take illegal insurance commissions from Far Western. The bank, once Orange County’s largest, failed in 1990.

It also charges Del Mar resident Rocco J. Fabiano, a former San Diego thrift executive, with accepting bribes of $50,000 cash and a 1988 BMW automobile from Richard Burns in return for agreeing to funnel business to Far Western.

Joyce Burns owned more than 50% of Far Western, but was not an officer. Banking regulators had prohibited her husband, Richard, from playing a management role at the bank, but they believed he was nonetheless calling the shots.

Richard Burns earlier had served as chief executive officer of Nucorp Energy Inc., a San Diego-based firm that went bankrupt in 1982. He was pushed out of another troubled company, which moved to Indiana and revived under new managers.

Watt, who had been an aide to Burns previously, was Far Western’s chief operating officer.

According to the indictment, the Burnses and Watt created a scheme in which Far Western used unsound practices to finance high-risk auto loans, pumping up insurance commissions that lined their pockets. They are accused of accumulating about $10 million in personal income under the scheme.

The indictment also charges them and Fabiano with bank fraud against now-defunct Imperial Savings Assn. in San Diego by causing the thrift to pay about $11 million in servicing fees to Far Western Bank. Fabiano was an executive at Imperial Savings, which also failed in 1990.

Regulators closed Far Western in December as mounting losses threatened to wipe out the bank’s capital. Regulators discovered that the bank, which had relied almost totally on risky car loans, lost $13.7 million during 1990 and had less than $1 million in capital remaining.