D.A. Weighs Mortgage Firm Probe : Investments: Office will decide whether criminal investigation of Newport Beach’s Lincoln is warranted. Owner’s lawyer charges ‘witch hunt.’

The Orange County district attorney’s office says it is considering an investigation that might lead to criminal charges against Newport Beach’s Lincoln Mortgage & Loan Co.

The state Department of Corporations has already filed a civil lawsuit accusing Lincoln’s owner, Kenneth E. Sarvak, of fraud. Assistant Dist. Atty. Joe D’Agostino of the major fraud section said Wednesday that lawyers for the Corporations Department on Tuesday informally sent over the results of their own investigation, which led to the civil lawsuit.

The D.A.’s office will decide whether a criminal investigation is warranted. The Corporations Department, which regulates the sale of securities in California, cannot bring criminal charges on its own.

“They’re asking us to look at their investigation and see if the district attorney’s office wants to do a full-blown criminal investigation,” D’Agostino said.

Lincoln Mortgage solicited millions of dollars from investors--many of them elderly--and ostensibly used much of the money to make second mortgages to homeowners.

Many of the investors say they assumed their money was safe because they thought they were getting part of a deed to the home they were loaning money on. But in its lawsuit, the Corporations Department says Sarvak took in more money than he had deeds. By last year, he owed investors $30 million but held deeds to only about $9 million worth of property, the state contends.

Not so, says Sarvak, 68. He says he didn’t defraud anyone; he merely made some poor investments that went sour with the slump in Southern California real estate. His lawyer accuses the Corporations Department of having a vendetta against Sarvak.

The allegations in the civil lawsuit were enough to persuade a judge to put a receiver in charge of another of Sarvak’s companies in December. But Sarvak managed to have the receiver removed by putting the company into bankruptcy, and another judge refused to reinstate her.

Now that Sarvak himself has filed for bankruptcy too, some investors--there are several hundred--may wind up with nothing.

Sarvak’s lawyer said Wednesday that the Corporations Department is on “a witch hunt.”

“They’ve had very little success on their own through the courts, so they’re giving it to the district attorney to let him have a run at it,” said John B. Casoria, the lawyer. “They’re acting as prosecutor, judge and executioner.

“But in the end, Ken Sarvak will come up clean as a whistle.”