Federal Fraud Trial to Begin for 2 Officers of Defunct Bank : Crime: Phillip L. Chase and Olen B. Phillips are accused of lying to the FDIC, misusing funds and making false entries on records.

A federal trial is scheduled to start Friday for two officers of a defunct Thousand Oaks bank who are accused of lying to the Federal Deposit Insurance Corp. to keep their failing bank open and their millions in investments intact.

Phillip L. Chase, 51, of the Westlake area of Thousand Oaks and Olen B. Phillips, 53, of Oak View have pleaded not guilty to charges that they made false statements to the FDIC, misused bank funds and made false entries on bank records.

A federal grand jury indicted the pair in May, charging that they tried to keep regulators from seizing the United Community Bank of Thousand Oaks by loaning $300,000 to themselves through “straw borrowers,” then buying more stock with the loans.

This move let Chase and Phillips keep control of the bank while appearing to be supporting it with new investments, a move that kept the bank open for an extra year, prosecutors have said.

Since the bank was shut down for lack of funds in 1989, U.S. taxpayers have paid $9.5 million to cover its federally insured accounts, prosecutors have said.

The 11-count indictment also charges that Chase and Phillips committed fraud by understating their liabilities by $1 million apiece when applying for personal loans at a Pasadena bank, the indictment says.

It also accuses Chase, who was the bank’s chairman and largest stockholder, and Phillips, a board member and the second-largest investor, with conspiring to defraud the government, misuse of bank funds and making false statements in loan applications and bank records.

Chase and Phillips and their attorneys could not be reached Monday afternoon for comment.

This will be Phillips’ second fraud trial in two years.

But this federal case, said Assistant U.S. Atty. Brent Whittlesey, bears no resemblance to 1992’s four-month state court trial of what once was billed as the biggest fraud case in Ventura County history.

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In February, 1991, a Ventura County grand jury indicted Phillips and Charles J. Francoeur on charges of fraud, conspiracy and grand theft, alleging that they had bilked 21 investors in complicated land deals out of more than $3 million.

But a jury ruled that Phillips was guilty only of one count of grand theft. Jurors also found that Francoeur, 35, vice president of Phillips’ real estate investment empire, was guilty of four counts of grand theft and one count of conspiracy.

If convicted of all charges, the two could have received maximum sentences of 10 years in state prison.

But Phillips received probation and 60 days in jail, while Francoeur was sentenced to 7 2/3 years in prison.

The federal case, to be tried in U.S. District Court in Los Angeles, alleges that Phillips and colleague Chase defrauded the FDIC, a nationwide insurance and regulation organization for banks, while operating United Community Bank. State and federal regulators seized the 8-year-old bank in 1989, one year after its subsidiary, Westlake Thrift & Loan of Westlake Village, closed its doors.

The president of the Westlake thrift, Steven Smith, later admitted his role in a phony-loan scheme that drained the institution of $4 million and ultimately forced it to close, costing taxpayers $2 million, Whittlesey has said.

In addition to the $9 million in FDIC tax funds lost at United Community Bank, more than a dozen investors in the closely held company also lost many millions of dollars, Whittlesey has said.

Both men face up to 30 years in prison and a $1-million fine for each count if convicted.