$5.1-Million Judgment Is Issued Against Financier in Fraud Case : Courts: Award comes nearly five years after massive inquiry involving Olen Phillips began. Some doubt he can repay the investors.
A Ventura County judge has issued a $5.1-million judgment against financier Olen B. Phillips in connection with a failed real estate investment in Thousand Oaks.
The award, issued Wednesday by Superior Court Judge Edwin Osborne, comes nearly five years after authorities launched a massive fraud investigation into real estate investments managed by Phillips’ company.
Although Phillips was subsequently convicted on only one count of grand theft, investigators maintain that hundreds of people have lost as much as $30 million in complicated land deals.
Attorneys for the investors named in the suit say they don’t know if Phillips will ever be able to pay the judgment.
The $5-million judgment stems from lawsuits filed against Phillips in 1992 by investors and partners in a plan to buy 2.5 acres in Thousand Oaks and build a 172-unit residential-care facility for senior citizens.
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In 1988, Phillips raised about $1.5 million from 56 investors to buy the property on Thousand Oaks Boulevard near the Civic Arts Plaza.
But without the knowledge of the investors, Phillips diverted more than $700,000 from that project’s account and then secretly borrowed $300,000 from an individual investor, according to Roger Stanard, a Woodland Hills attorney representing the limited partnership.
“We assume that he used it to keep his other partnerships afloat,” Stanard said.
In return for the $300,000 loan, Phillips issued a deed of trust for the land to Alfred Van Leuven, who worked as a commercial pilot for United Airlines along with Phillips.
Investors and partners in the venture did not know about Van Leuven or his claim on the property, said Wayne Baldwin, Van Leuven’s attorney.
“He didn’t have enough money to close escrow, so he needed to scramble,” Baldwin said, referring to Phillips’ cash loan from Van Leuven’s retirement account.
The senior center project eventually stalled when Phillips failed to obtain a construction loan, possibly because it would have led to the discovery of the second deed on the property, Baldwin said.
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The $5-million award, including compensatory and punitive damages, was split among limited partners--who invested from $10,000 to $300,000--Van Leuven, architect Charles Scribner and the widow of Joseph Danford, who acquired the right to the property.
Specifically, Osborne awarded $2.5 million to the limited partners, $1.24 million to Danford and Scribner, $1.16 million to Van Leuven and an additional $250,000 to Scribner for his architectural services.
Malibu resident Jackie Fry, whose family lost about $400,000 in the limited partnership, said many investors trusted Phillips because of his involvement in the Thousand Oaks and Westlake Village communities.
Phillips’ company was shut down after investigators raided his offices in December, 1989, and seized thousands of documents as part of a fraud investigation by state and local officials. The company’s assets were frozen, and an attorney was appointed to sort out its affairs.
Fifteen months after the raid, Phillips and a pair of his top company managers were indicted on 81 counts of grand theft and securities fraud, described at the time as the largest fraud scheme in the county’s history.
But after a four-month trial, Phillips was convicted of only one count of grand theft and sentenced to probation and 60 days in jail. His right-hand man, Charles J. Francoeur, received 7 2/3 years in prison in the same case.
Phillips, believed to be living in Texas, now faces federal sentencing in a separate bank-fraud case. After an earlier mistrial, he pleaded guilty last month to two counts of making false statements in loan applications and bank statements. He is scheduled to be sentenced June 13 and faces up to 24 months in prison, authorities said.
On Thursday, attorneys involved in the civil suit said they did not know when, if ever, their clients would see any cash.
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Christopher Patterson, who represents Neal Scribner, said he did not know if Phillips had any money left after his legal troubles.
“I don’t know one way or the other,” he said. “There’s nothing to be said . . . because you’re treading off into the dark.”
Attorneys involved with the case said they believe the award is the first successful civil suit against Phillips by investors.
And Baldwin predicted that the $5-million judgment issued Wednesday may set a precedent for future awards.
Stanard, however, said other investors have been blocked thus far from trying to recover their losses because Phillips’ company was seized by investigators. The suit over the senior center was allowed to move forward to free the 2.5-acre property for development.
“The sad thing is, O. B. Phillips will never in a million lifetimes make enough money to pay off all the judgments that are probably going to be (issued) against him,” Baldwin said.
“It’s sad for him and his family. It’s sad for the investors,” Baldwin added. “I think Phillips got in over his head and was trying to keep things afloat, and that’s when he got into trouble.”
