Van Nuys Man Leaves Trail of Heartbreak and Lawsuits : Courts: Loan broker faces accusations of fraud but denies wrongdoing.

In his flamboyant career as a loan broker and real estate dealer, Michael D. (Mickey) Henschel has been more than a match for the legal system.

Numerous lawsuits for fraud, and convictions for grand theft and other crimes, have hardly slowed him down.

The 46-year-old Van Nuys businessman also has become persona non grata in the bankruptcy court, thanks to a string of allegedly abusive bankruptcies that have helped Henschel avoid paying creditors and tens of thousands of dollars in rent.

In March, after Henschel had filed four personal bankruptcies in the space of 14 months, Bankruptcy Judge Geraldine Mund did the unheard of: barring Henschel from filing for bankruptcy again until 2001.

His notoriety has rippled as far as Washington, D.C., where an alleged victim testified before Congress in 1992 about Henschel’s business practices.

Yet Henschel’s audacity, quick wits and knowledge of the legal system have always pulled him through.

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At a bankruptcy hearing last fall, a lawyer testified that Henschel had boasted of holding an ownership interest in 47 houses--none in his own name. Yet Henschel has avoided paying more than $3 million in court judgments and settlements on grounds that he has virtually no assets.

And though Henschel currently faces two criminal charges--and pleaded guilty to felonies or misdemeanors at least four times in the past--he has never received a prison term.

Henschel declined interview requests, and would not respond to written questions from The Times. In answers to various lawsuits, he has denied having deceived anyone, and claims that his accusers were informed of the details of the disputed transactions.

Brad Hughes, a business associate and Henschel defender, said, “I’ve seen this guy just killing himself to help people. . . . If he has a bad side, I don’t see it. I see a wonderful guy.”

But according to alleged victims, his career is an indictment of the legal system, reflecting a milquetoast response to white-collar crime. Other critics say that Henschel is but one of many such shady operators who thrive in Southern California, where citizens, police and lawmakers are preoccupied by violent crime.

“In some ways, . . . a lot more . . . aggravation and pain is caused to citizens who are victims of a nonviolent swindle than to those who have the unfortunate experience of being robbed,” said Mitchell Block, a former deputy district attorney who once prosecuted Henschel.

“A white-collar criminal . . . may get away with many, many more times the amount . . . with a smile, a handshake, and a signature.”

Henschel’s adversaries describe him as a man who dupes people for sport as much as money, and who allegedly has posed, at one time or another, as a doctor, real estate broker and practicing lawyer.

“Smarter people than I have been screwed by Mickey,” said James Coblentz, a film editor for TV and movies who said he was swindled when he sought Henschel’s help in getting a loan and has since sued him for fraud in a case that is still pending. “He’s ruined a lot of lives.”

“Where’s our justice system?” asked Morris Swan, a 62-year-old retiree who says Henschel and an associate swindled him and his father-in-law of nearly $60,000--and destroyed Swan’s credit to boot.

“Why can a guy do this for so long and get away with it for so long, and rook so many people out of their homes, their life savings?” asked Swan, who won a default judgment against Henschel but has yet to collect.

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Similarly frustrated is William D. Pangburn, a Ventura lawyer who has represented several purported victims. During the past three years, Pangburn has peppered federal authorities with detailed letters concerning alleged acts of bank and bankruptcy fraud by Henschel, but has yet to see results.

“I don’t know if the system is set up to handle . . . this kind of crime,” Pangburn said.

Although Henschel has spent much of his career in hot water, lately the temperature has gone up. He currently faces a pair of criminal charges and a recently opened federal investigation. In one of the pending cases, the Los Angeles district attorney last year charged Henschel with felony grand theft for allegedly cheating Gerald and Linda Silverman, longtime family friends, of $87,000.

According to court documents, Henschel induced the San Fernando Valley couple to lend money against two properties in Burbank and Encino--promising they would recover the investment plus a 10% profit within a few months.

But the Silvermans lost all but $3,000 of their $90,000 investment. According to court papers, Henschel did not disclose to them his interest in the properties. And in place of the second trust deeds that he allegedly promised to secure the Silvermans’ loans, prosecutors said Henschel gave them a worthless sixth trust deed on one property and a third trust deed on the other.

Moreover, prosecutors said that to frustrate foreclosure attempts, Henschel arranged the transfer of one of the properties to a fictitious person, David White--and filed “two false bankruptcies under the name David White.” Trial is scheduled for July.

Henschel is innocent, said his lawyer Donald Re. “This is a very frustrating case for me, because I don’t believe he did anything wrong.”

In the other case, filed in March, the Los Angeles city attorney has charged Henschel with grand theft for allegedly conning a woman out of money for legal services.

Prosecutors said Henschel passed himself off as a representative of a law firm, and deposited the woman’s check in one of his business accounts.

Since the alleged loss was only $1,920, the case was filed as a misdemeanor. Authorities say, however, that it is but one of several incidents in which Henschel falsely presented himself as a practicing attorney or representative of a law firm.

Federal authorities will not discuss their investigation of Henschel. But the probe was revealed in court orders placed in the files of Henschel’s various bankruptcy cases.

The orders, signed by bankruptcy judges last October, authorize the U.S. attorney and FBI to take temporary custody of the bankruptcy files to check for “fingerprints, handwriting or alterations which, when analyzed, may provide significant evidence of relevance to the criminal investigation.”

The orders do not describe the nature of the investigation. However, bankruptcy officials and others have complained to federal prosecutors about alleged inaccuracies in Henschel’s bankruptcy papers. Under federal law, it is a crime to lie in bankruptcy petitions, which are signed under penalty of perjury.

In the four bankruptcy petitions Henschel filed between September, 1993, and November, 1994, he used two different Social Security numbers, according to a review of the files by The Times. In each case, he failed to list creditors and claimants as required.

In one of the bankruptcies, he checked “none” when asked to list prior bankruptcies--although he had filed another bankruptcy petition just two months before.

In another, he checked “none” when asked about his involvement in lawsuits--although court records show he faced fraud claims at the time.

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The son of a real estate broker, Henschel grew up in the San Fernando Valley. He was president of the chess club and a 1966 graduate of Grant High School in Van Nuys. Stocky, bespectacled and balding, Henschel is married, and despite his several bankruptcies sends his daughter to private school.

Considering how many people are after him, Henschel is blessed with remarkable composure, a quality that has impressed friends and foes alike. “Nothing worries him,” marveled a former Henschel employee who would not speak if identified. “A bomb could go off in front of his face, and it wouldn’t faze him in the least.”

Said his business associate Hughes: “If he [Henschel] saw you on his way into the gas chamber, he’d say, ‘Hey, what’s the good word? How are the kids?’ ”

He has had a lot of practice taking trouble in stride.

In 1970, a few years out of high school, Henschel was arrested on a burglary charge. He was convicted and placed on probation, although it appears from court records the conviction may have been on a lesser charge. After completing his probation, records show, Henschel successfully applied to have his conviction expunged.

Henschel re-emerged as a one-man petty crime wave in 1972-73, according to records of three cases from that time.

He was charged with grand theft and receiving stolen property in the theft of a Mercedes-Benz.

And he was charged with forging medical prescriptions in the wake of complaints that he was impersonating a doctor.

Henschel, who had been briefly enrolled in UCLA’s dental school, was often seen on campus wearing a white lab coat and stethoscope and carrying a doctor’s bag, according to an account in the Daily Bruin, the campus newspaper. The state medical board investigated after reports of Henschel’s acting as volunteer physician for a team of female athletes, recalled Robert Keszler, supervising investigator for the Medical Board of California.

The third case triggered a campuswide scandal in 1973, when Henschel was arrested and charged with forgery and grand theft for allegedly diverting more than $20,000 from the communications board of Associated Students UCLA, which oversees student publications. According to investigators, Henschel had funneled the money to a nonexistent publishing company, purportedly for two book projects.

Appointed to the communications board by the university chancellor’s office, Henschel had risen to chairman and for a time was the panel’s only “student” member--although it turned out he was not a student most of the time.

“It couldn’t have been for money,” Henschel’s father told the Daily Bruin. “He got all he needed from his mother and myself.”

Henschel escaped this legal thicket with barely a scratch.

It turned out the charges of forging medical prescriptions were improperly filed, since Henschel allegedly signed the prescriptions in his name, not someone else’s. As a result, the charges were dismissed.

The auto theft charge was dismissed, too, when Henschel agreed to plead guilty in the UCLA caper.

In that case, Henschel pleaded to a single grand theft charge, agreed to make restitution, and was placed on five years probation. As with Henschel’s prior conviction, his attorney obtained a court order in 1976 expunging this conviction as well.

Henschel by then was once more knee-deep in the law--this time as a student at an obscure, now-defunct North Hollywood law school known as Valley University College of Law. Teachers were impressed not only by his formidable intelligence but with the medical knowledge Henschel indicated he had acquired as a medical student.

At the time, James A. Goldstein, a lawyer and lecturer at the law school, had some personal injury cases, “and I asked him [Henschel] if he wanted to review some medical reports that I had,” Goldstein recalled.

Henschel did a good job, and soon was doing research on a piecework basis for Goldstein and other solo practitioners at Goldstein’s law office in Van Nuys.

It was there that Henschel--while still a law student, and unknown to his employers--allegedly claimed to be a lawyer and duped a man into retaining him to bring a personal injury case.

More than a year passed before the client learned that his “lawyer” was merely a law student, according to a lawsuit later filed against Henschel. By that time, key evidence the client had allegedly given to Henschel had been lost.

Some lawyers in the office also were sued for negligence for failing to supervise Henschel. They or their malpractice insurance carriers wound up paying settlements, and Henschel paid a small settlement, too.

Although he would claim years later to be nearly penniless, in a 1980 deposition in this case Henschel testified that he owned all or part of at least 10 properties, and had a net worth of about $700,000.

He was only 31 and “independently wealthy,” recalled John T. Heaney, the attorney who filed the suit against Henschel and the lawyers. The duping of the client “was totally for sport, because he didn’t need the money.”

Even so, Henschel was so personable “it was hard not to like the guy,” Heaney said.

“He knew I had the goods on him, he knew I hated his guts, and he would sit there charming the pants off me.”

Heaney filed a complaint with officials of the State Bar, who also subpoenaed records of Henschel’s past legal problems. Although he graduated from law school and passed the bar exam in 1979, he was never admitted to the Bar.

So Henschel stuck to real estate, sometimes working with his father Ralph, a licensed broker.

According to authorities and alleged victims, Henschel established a trademark: working deals through straw men or stooges, so that their names--and not his--would appear on deeds and loan applications.

“You haven’t got a dumb guy there,” said Deputy Dist. Atty. Richard A. Lowenstein. “He insulates himself extremely well.”

A prime example was a string of about a dozen closely linked real estate deals in the mid-1980s that triggered a firestorm of fraud claims and criminal charges against Henschel and others.

The scam targeted sellers of homes and apartment buildings on which little or no debt was owed. As a result, victims tended to be elderly people whose paid-off homes represented most of their life savings. The scheme, according to court documents, worked like this:

Sellers were approached by straw buyers with offers to purchase their properties, if the sellers would assist in the financing by accepting a small down payment and taking back a note.

The sellers agreed, after being told they would get first trust deeds to secure the notes. This would enable them to take back their property should the buyers default on the payments.

Key to the scam was the use of an escrow agent who was part of the fraud ring. Before the straw buyer deposited the down payment and deed of trust in escrow, the escrow agent released the seller’s grant deed, which was immediately recorded.

Appearing then as owner of debt-free property, the straw buyer quickly obtained the biggest loan possible from a bank or other lender, using the property as security. With the loan proceeds in hand, Henschel and his minions allegedly funded the down payment, pocketed the rest and walked away.

With the loan immediately in default, the lender, armed with a first trust deed, began foreclosure proceedings. At this point, sellers discovered to their horror that, deep in the fine print of their deeds of trust, the scammers had inserted language making the sellers’ trust deeds junior to those held by the other lenders. This rendered the trust deeds worthless.

Joyce L. Vachon, the escrow agent used in these transactions, later identified Henschel in sworn testimony as the brains behind the scheme.

He “was the ringleader, . . . the kingpin of the operation,” agreed Mitchell Block, a former deputy district attorney who prosecuted Henschel over one of the fraudulent transactions.

“He was as ruthless as any street criminal who’s robbing people at gunpoint,” Block said. “He was just doing it with a different method.”

However, victims had not dealt with Henschel, nor did his name appear on deeds, loan applications or other incriminating documents. According to authorities and victims’ lawyers, Henschel had so thoroughly covered his tracks that victims who filed lawsuits often named a dozen or more defendants--but did not add Henschel until much later when his involvement was revealed.

Most of the lawsuits were settled with Henschel paying little or nothing. Victims typically regained title to their property--but whereas they once had owned it free and clear, now it was encumbered by loans. Some victims also obtained settlements from the legitimate real estate brokers who had represented them in the sale. They had sued these brokers for negligence for failing to spot the fine print Henschel allegedly had inserted in the deceptive deeds of trust.

One of these lawsuits, however, was not settled and produced a memorable trial.

Hulon and Robert A. Simpson--brothers who lived with their wives within a few blocks of each other in Sylmar--were swindled in 1984 after offering their homes for sale.

Trial of their fraud case against Henschel began in May, 1990. Due to interruptions, the trial dragged on for 14 months. By the end, the pool of alternate jurors was dry. The case survived only because two jurors who had relocated to other states agreed to return for the remaining days of the trial.

In July, 1991, after both sides rested, word came that Henschel had suddenly filed a bankruptcy petition--gaining an automatic stay from all proceedings against him and putting the trial on hold.

However, the Simpsons’ attorney got a bankruptcy judge to lift the stay. The jury went out to deliberate--and returned with a judgment against Henschel of $2.48 million in actual and punitive damages. The Simpsons are still trying to collect, but have been stymied by Henschel’s claim of having virtually no assets.

The trust deed frauds also triggered criminal complaints against Henschel and some of his associates.

Henschel was charged with grand theft and conspiracy in the swindle of elderly apartment building owner Sol Merker. In May, 1990, Henschel pleaded guilty to a single grand theft charge with enhancement--meaning that he acknowledged that the theft involved more than $100,000.

Nonetheless, he avoided a prison term and even a fine. Court records show he was sentenced to 200 hours of community service and 10 days in County Jail--wiped out by his seven days in jail at the time of arrest and three days of good time credit.

Henschel’s attorney Donald Re said Henschel pleaded guilty only to “resolve a nagging problem.”

Re added: “Maybe it was a mistake for him to plead in that case, because he did not do anything wrong.”

Henschel also has denied any wrongdoing in the case of Robert Cooper, a retired Los Angeles firefighter who lost a piece of valuable Van Nuys real estate he had intended for his grandchildren.

Cooper had formed a partnership with Henschel and one of his associates to develop an office building on the Victory Boulevard site. Under an agreement, Cooper transferred ownership of his property to the partnership. His share in the venture was 50%, while Henschel and his associate were to get 25% each, in consideration of their legal and financial expertise.

But according to a lawsuit Cooper filed in 1989, his partners transferred the property to Henschel’s parents without Cooper’s knowledge or consent, and then encumbered it with big loans.

Cooper’s signature “was forged on the document authorizing that transfer,” said Eliseo Gauna, Cooper’s attorney.

The office building was built, but Cooper alleges he never got a penny of rent or other income--nor any accounting for what happened to the money. The property eventually was lost to foreclosure due to default on the loans.

Cooper’s lawsuit is pending, but his expectations are low.

“It’s hard to believe that this guy could get away with this much stuff, and nobody [seems] to do anything about it,” he said.

Henschel’s career illustrates that punishment of fraud rarely fits the crime, said Mitchell Block, the former prosecutor who is now a Van Nuys municipal court commissioner.

And even those who have won judgments and settlements against Henschel have had little luck in collecting.

“He is just hiding, showing . . . that he’s very poor, but I don’t believe him and I don’t think anybody else does,” Gauna said. “We just have to find out where he hid the money.”