Hearing Begins Into Former Anaheim Banker’s Dealings : Inquiry: Gerald J. Garner is accused of misappropriating funds and lying about American Commerce National’s financial condition.

Former banker Gerald J. Garner, who once was building a public reputation as a charitable and civic-minded citizen of Orange County, will start defending himself today against federal accusations that he lied about his bank’s financial condition and misappropriated bank funds.

Banking authorities are seeking to ban Garner from the financial industry for life and to fine him $1 million in a hearing starting today into the way he ran American Commerce National Bank. Federal regulators seized the apparently healthy Anaheim institution two years ago in an unprecedented action.

Authorities also are asking an administrative law judge to ban Garner’s wife, Joan, and his brother Daniel from the industry for life. They are seeking a $1-million fine against Joan Garner and a $500,000 fine against Daniel Garner.

Gerald Garner was chairman of the Anaheim bank. His wife was a director, and his brother was an executive vice president.

An FBI investigation into possible bank fraud and embezzlement also is pending.

The case has drawn attention mainly because regulators for the first time used a 1991 law allowing them to seize financially healthy banks. In addition, regulators used unusually strong language in describing allegations of self-dealing and lying.

The Office of the Comptroller of the Currency (OCC), which regulates national banks, had charged in seizing American Commerce that it never really knew the condition of the bank because Garner lied to them, concealed records and wasted the bank’s assets. Insider abuses were so pervasive, the agency said then, that it no longer could trust Garner or his “weak, abusive and self-serving” officers and directors.

Now, regulators say, the bank’s failure will cost the nation’s deposit insurance fund $24 million, and Garner is the primary reason.

“Gerald Garner willfully involved himself with one falsehood after another,” the OCC alleges in its legal papers. “He used the bank as his own personal piggy bank, paying . . . his personal expenses from the bank’s coffers.”

The OCC accuses him of receiving financial gains from “illegal loans, illegal reimbursements from the bank and excessive compensation,” and asserts that his conduct “evinces personal dishonesty” because he allegedly manufactured minutes of board meetings, misled authorities and lied about his background and concealed his interests in businesses that received bank loans.

Garner, 58, has avoided media attention since the bank failed in April, 1993, and did not return telephone calls last week seeking comment about the OCC’s administrative hearing, at which he is acting as his own attorney. Neither his wife nor his brother could be reached for comment.

In his legal papers filed in the case, though, Garner denies that he ever intentionally violated any laws and terms any violations as “technical” ones. He also denies that he received financial gain from the proceeds of loans or reimbursements from the bank.

Indeed, he charges, it was the OCC that altered documents, removed records, distorted data, reneged on promises and misled bank directors. He accuses the OCC’s lead lawyer, Richard Blake, of causing examiners and others to commit perjury.

In addition, Garner contends, the agency “discriminated against bank’s management as a result of certain religious affiliations.” As early as 1986, two years after the bank opened its doors, federal bank examiners questioned the “ethnic balance” of the bank, saying it had “too many Jews,” he alleges.

Blake called Garner’s contentions about him and the agency “unfounded and untrue.”

American Commerce and Garner were under the gun almost from the day the bank opened on Feb. 29, 1984. Regulators examined it seven times in its first 40 months of operation, nearly twice the audits new banks were subjected to at the time.

Garner, for instance, had failed to tell regulators that his license to practice law had been suspended by the State Bar of New York. He was later disbarred. He also had concealed that he controlled 11.6% of the bank’s initial stock--more than twice the 5% per investor allowed under terms of the initial offering.

Gerald Garner also has been portrayed in a series of separate lawsuits and by former associates and employees as a ruthless operator.

He has been named as a defendant in several dozen lawsuits stemming from his position at the bank, as well as his actions as a pension manager, private business operator and chairman of Coast Plaza Doctors Hospital in Norwalk.

Dr. Ronald Lapin--the hospital’s noted “bloodless” surgeon, whose techniques have helped Jehovah’s Witnesses avoid blood transfusions in operations--had been a fellow bank shareholder and staunch Garner supporter.

Lapin, who died last month, filed three suits in February accusing Garner and others of racketeering, fraud and a host of other misdeeds for allegedly taking more than $20 million from Lapin’s pension funds, which Garner controlled, and from Lapin’s business deals involving the hospital, Garner’s former law firm and the bank.

Garner also had stakes in restaurants and other business ventures, often with partners he allegedly forced out. Court records in a lawsuit provide a glimpse at one incident:

In December, 1986, adult members of a flag football team Garner sponsored ate and drank their way through a boisterous meal at the old Dal Rae restaurant in Fullerton. They intimidated customers, confronted armed guards and kicked in an office door as a hulking 6-foot-3, 230-pound Garner directed some of the action. As a director of the company that owned the restaurant, Garner had been trying all that month to seize physical control from a partner. Police were called to quell the disturbance.

Garner’s management of retirement funds also led to a number of lawsuits by former friends. One, Dr. Donald J. Daniel, who also was a director of the bank, accused Garner of mismanaging his pension fund. After making the allegation, Daniel was dropped from the slate of directors for reelection.

Daniel later settled his lawsuit against Garner for $450,000. Regulators charge that Garner used the bank to pay the debt as well as attorney fees of $200,000. It is one example of how Garner used the bank to pay personal debts, regulators charge.

Many people know Garner only as a fellow fund-raiser for charitable causes. His bank was a major sponsor of the post-season Liberty Bowl college football game. Much of his charitable work went to Jewish organizations, from Israeli universities to his then local Temple Beth Tikvah in Fullerton.

He now lives in the affluent Big Canyon community of Newport Beach.

All other former directors of American Commerce have settled with the comptroller’s office, though one, Dr. Galal Gough, has yet to pay $13,000 he had agreed to turn over, the agency said. The others have paid a total of $22,000 in penalties.

The administrative hearing in rented facilities at South Coast Legal and Business Center in Anaheim is expected to last several months.

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Key Dates in the Garner Case

* April 30, 1993: Federal regulators, exercising for the first time new powers to seize financially healthy banks, seize American Commerce National Bank, accusing operators of concealing records, lying and wasting the bank’s finances. Garner, along with other directors and officers, is ousted.

* May 2: American Commerce is sold by regulators to Southern California Bank.

* Sept. 3: FBI reveals that it has launched its own bank-fraud and embezzlement investigation of American Commerce.

* Nov. 18: Garner files a lawsuit against regulators seeking $75 million in damages.

* Sept. 22, 1994: Regulators file a civil suit seeking $1 million from Garner and his wife, Joan, who served as a director. The suit alleges the Garners used the bank to obtain loans and other unwarranted benefits and favorable treatment for companies in which they had interests.

* June 19, 1995: Administrative hearing on Garner case opens in Anaheim.

Source: Times reports; Researched by JANICE L. JONES / Los Angeles Times