Newport Couple Sentenced in Lease Scam

An Orange County couple whose leasing scam led to the collapse of the Bank of Newport were sent to federal prison Friday and ordered to pay $4.3 million in restitution.

U.S. District Judge George King in Los Angeles sentenced Lucy Looney Rau to a 6 1/2-year term. King said he wanted to impose a longer sentence but couldn’t under federal law.

Rau’s husband, Charles Rau III, was sentenced to five years and three months.

The Raus, of Newport Beach, pleaded guilty to conspiracy, financial fraud and tax evasion Feb. 17.

Through leasing and equipment sales companies they controlled, the Raus created 260 phony equipment leases from April 1991 to April 1994, Assistant U.S. Atty. Richard Robinson said.

The bogus leases were sold for $14.2 million to three financial institutions. The Raus were accused of using some of the proceeds to pay for real estate and personal luxuries.

Bank of Newport, which bought $13.7 million in bogus leases, collapsed after discovering the fraud.

Also victimized were Commonwealth Thrift and Tustin Thrift.

The Raus and their leasing company, Sonora Group Inc., are in bankruptcy liquidation. The couple will be on supervised release for five years after getting out of prison, during which time a probation officer will oversee their finances, U.S. Atty. Nora Manella said.

Sonora Group Vice President Pennie Pleasant , who worked closely with Lucy Rau in preparing the bogus leases, earlier was sentenced to 18 months in prison in the case after entering guilty pleas.