Despite continuing protestations that the Kings were sheltered from Bruce McNall's deteriorating financial condition, federal prosecutors charged Wednesday that as much as $7 million was diverted from the elite Senate Seat program at the Forum in 1993 to support McNall's collapsing business empire.
The revelation marks the first time the government has detailed an incident in which money from the team was improperly used to ease McNall's severe cash-flow problems. It was made in court papers filed in U.S. District Court by prosecutors, who charged two more former business associates of the King president as part of an investigation into McNall's banking practices.
Charged were Bruce Bargmann and Patricia Linden, whose lawyers said their clients plan to plead guilty and are cooperating with authorities.
The revelation about the Senate Seat funds contradicts previous assertions by McNall officials that the Kings were shielded from McNall's financial problems and that the business of hockey continued as usual. In the Senate program, fans pay thousands of dollars for season tickets to King and Laker games, other Forum events and such perks as preferred parking and waitress service.
Bargmann, 37, executive vice president of McNall Sports & Entertainment, Inc., and a former King executive, was charged with two criminal counts in U.S. District Court in Los Angeles.
Bargmann specifically is charged with defrauding two financial institutions--Bank of America and First Los Angeles Bank--regarding $39 million worth of loans.
Said Bargmann's lawyer, Mark E. Beck: "When the entire story is told, he will be found to be a less significant player than many of the others."
Linden, 39, former vice president and controller of McNall's World Numismatics coin business, was charged with one count of conspiracy for helping divert about $13 million from a coin fund McNall had organized with securities giant Merrill Lynch to a shell company to help ease McNall's ongoing cash crunch.
"She made errors of judgment," said Linden's lawyer, Harriet Beegun Leva, adding that Linden had not benefited personally from the transactions.
The charges bring to five the number of former McNall officials who have been formally charged--all have pleaded guilty or plan to--stemming from the investigation.
The investigation has uncovered a systematic practice in McNall's operations of obtaining loans from banks and thrifts by deliberately overstating McNall's personal and business assets while understating or concealing debts. Sources have previously confirmed that McNall has agreed to plead guilty to four criminal counts, with charges likely to be filed this month.
According to the court papers, Bargmann and others requested a $20-million increase in an $80-million loan from Bank of America, $10 million of which was eventually approved. Papers allege that Bargmann helped prepare fraudulent cash flow figures to get the loan, hiding the fact that Bank of America loan money was used to improperly pay interest on other McNall loans as well as to cover McNall's personal expenses.
One of the charges against Bargmann is that he helped divert the Senate Seat money on two occasions--once while the team was advancing for the first time to the Stanley Cup finals--when the money belonged to Bank of America under a cash management agreement the bank had with McNall.
According to the charges, Bargmann and other McNall officials agreed with Bank of America to deposit all cash receipts from the Kings in an account at Union Bank and to use the money only to service the $90-million loan as well as pay the team's expenses and payroll. Instead, Bargmann and others diverted $7 million to McNall Sports and Entertainment, covering up the transaction with phony team cash-flow reports that understated Senate seat revenue by $7 million.