Normandy CEO Indicted on Fraud, Conspiracy Charges
A 31-year-old Southern California financier whose style was compared to that of Warren Buffett was indicted here Thursday on federal conspiracy and fraud charges stemming from last year’s aborted $200-million public stock offering in a Nebraska-based reinsurance company he founded.
Christopher K. Bagdasarian of Montecito, chairman and chief executive of Normandy America Inc., was arraigned in U.S. District Court in Manhattan, where he was charged with conspiracy, securities fraud, perjury and five counts of bank fraud.
Also indicted and arraigned on similar charges was Bagdasarian’s alleged accomplice, Samuel L. White, 35, of La Canada Flintridge, a former tax partner in the Los Angeles office of accounting firm Deloitte & Touche.
Bagdasarian was released on $5 million bail and White on $1 million bail, according to a spokesman for the U.S. a ttorney for the Southern District of New York. Neither Bagdasarian nor White could be reached for comment Thursday.
Prosecutors say Bagdasarian lied about his background, representing himself as a highly successful money manager in order to gull New York’s Chemical Bank into lending him more than $24 million between June 1992 and October 1994.
Authorities said White supported the story by sending Chemical an initial letter, on Deloitte stationery, affirming that Deloitte had valued Bagdasarian’s investment portfolio at more than $179 million, authorities said. Bagdasarian headed Criterion Holdings Inc., a Los Angeles money management firm.
White upped the ante in 13 subsequent reports--also on Deloitte letterhead--that “vastly overstated the value of Bagdasarian’s securities portfolio, claiming at one point that it reached more than $521 million,” prosecutors said.
Bagdasarian used the loan proceeds to buy a luxury aircraft and a multimillion-dollar home and to make some “short-term equity investments,” prosecutors said.
The scheme allegedly snowballed, authorities said, with Bagdasarian forming Normandy America in April 1994 as a start-up firm specializing in investment management and reinsurance (providing insurance to insurance companies).
The apparent whiz kid began attracting favorable attention from Wall Street. An executive at Standard & Poor’s insurance ratings group was quoted by Bloomberg Business News as comparing Bagdasarian’s purported investment approach--buying large stakes in a limited number of companies--to that of Buffett, the Berkshire Hathaway Inc. chairman long regarded as one of America’s savviest investors.
Bagdasarian may have encouraged the comparison by locating Normandy America in Buffett’s home town of Omaha.
Shortly after founding the firm, Bagdasarian approached the Wall Street investment firm of Salomon Bros. for help in raising capital. Salomon acted as lead underwriter in a $196-million initial public offering of stock, plus a $20.6-million private placement.
Bagdasarian recruited a Normandy employee to pose as an investor in a phone conversation with the investment bank, asserting that he had achieved 20% returns, prosecutors said. Salomon declined to comment Thursday.
The initial offering was priced at $25 a share on Aug. 14, 1995. Normandy, citing “adverse conditions in the public market,” withdrew it the next day.
