Weyerhaeuser Wins $31-Million Fraud Case Against Cal Fed

California Federal Bank and its defunct Orange County home-building arm were hit with a $31-million fraud judgment Monday by jurors in a civil suit filed by Weyerhaeuser Mortgage Co.

The jury also found two former Cal Fed presidents, William Callender and David J. Reed, and George R. Meeker, former president of its California Communities Inc. subsidiary, liable for civil racketeering.

Woodland Hills-based Weyerhaeuser Mortgage charged in its 1992 suit, filed in Orange County Superior Court, that Cal Fed had promised to stand behind its subsidiary, which was seeking $24 million in loans from Weyerhaeuser.

But when Cal Fed made that promise in 1989, the Southern California real estate development market was already beginning to collapse and Irvine-based California Communities was in financial trouble, Weyerhaeuser attorney Mark Asdourian said Monday.

Officials at Los Angeles-based Cal Fed could not be reached for comment.

Weyerhaeuser loaned $17 million to California Communities in October, 1989, to purchase and develop a tract of land in Riverside County and made a separate loan of $7 million in June, 1990, for construction of homes on the land, Asdourian said.

“But when Cal Fed wrote the letter of commitment” before the loans were made “they already knew California Communities was all but insolvent,” the Santa Ana attorney said.

At the end of 1989, the subsidiary folded and many of its assets were taken over by its then-president, Meeker. He later was retained by Cal Fed to complete the California Communities projects.

Meeker, who runs Meeker Construction in Costa Mesa, said in a brief telephone interview Monday that he was unaware that the case had gone to the jury. He called the verdict “too bad” and then hung up.

In the fraud verdict, Asdourian said, jurors awarded Weyerhaeuser $6.5 million for fraud and an additional $20 million in punitive damages from Cal Fed and $5 million in punitive damages from California Communities.

In the racketeering decision against the three former executives, the jury awarded $6.5 million in damages, which are tripled to $19.5 million under racketeering statutes.

Asdourian said that because Weyerhaeuser can only accept one judgment, it likely will take the fraud award over the racketeering judgment.