The former owner of a Santa Barbara auto dealership testified Wednesday that Thomas Spiegel, the once-high-flying chief of Columbia Savings & Loan, personally tried to buy a half interest in his luxury-car business, but used more than $10 million of Columbia's money to complete the purchase.
Howard Schneider--who admitted to jurors that he had falsified his own application in order to get his original stake in Gregg Motors in 1983--said Spiegel approached him in 1987 and that the two hatched a plan to buy out Schneider's existing partners and give Spiegel a 50% stake in the company.
However, Schneider said, Spiegel subsequently ran into "a liquidity problem" and instead told Schneider that Columbia would have to loan the auto dealer the money he needed to buy out his partners. The complicated agreement essentially gave Columbia, not Spiegel, the 50% stake.
Federal prosecutors have maintained from the outset of Spiegel's trial that Spiegel intended to illegally use Columbia's cash to get a piece of the auto business for himself. But Schneider's testimony did not directly affirm the government's theory.
Spiegel is in federal court in Los Angeles on 45 felony counts, ranging from bribery to fraud, stemming from his reign as chief executive of the Beverly Hills thrift, which was seized by regulators in 1991.
Perhaps the most damaging testimony Wednesday for Spiegel involved the financial statements and related documents Schneider said he was asked to provide when he applied for various loans from Columbia.
Spiegel encouraged Schneider to provide grossly inflated estimates of the auto dealer's net worth to ensure approval of several loans, Schneider said.
"Tom had asked me to 'puff it up,' " Schneider said.
The government maintains that Gregg Motors' eventual failure cost Columbia more than $10 million. The cost to taxpayers of bailing out Columbia has been pegged at about $1.2 billion.
But defense lawyers painted Schneider as a habitual liar. Under cross-examination, Schneider was made to recite several of his own illegal acts.
They included fraudulent loan applications he made on his own and lying to a grand jury that investigated the Gregg Motors deal after Columbia declared its insolvency in 1989.
Schneider later pleaded guilty to two counts of loan fraud and agreed to cooperate with the government in its prosecution of Spiegel.