Judge Rules Imprisoned Executive Looted Statek

An American executive, imprisoned for hiring Irish hit men to kill associates who ousted him from control of Statek Corp., looted the Orange-based electronics maker of $28.5 million to pay for his lavish lifestyle, a judge ruled.

Frederick Johnston and fellow executive Sandra Spillane diverted Statek funds to cover their personal travel expenses, art purchases, furniture and dry cleaning bills and then tried to hide the diversions through sloppy record-keeping, concluded Delaware Chancery Court Judge Jack B. Jacobs.

Johnston, former chairman of the holding company that owns Statek, is serving six years in a British prison. He was convicted last year of paying Irish criminals to kill former business partner Miklos Vendel and others involved in lawsuits over control of Statek and the company’s missing millions. The killings were never carried out.

“Johnston and Spillane systematically looted [Statek], treating [its] assets as their private preserve,” Jacobs said in a 161-page decision ordering the return of the missing funds.

Three months ago, the court blocked Johnston from access to $32 million in gold bullion stashed in Switzerland.

Allan Pepper, a New York attorney representing Johnston in the Delaware case, said Wednesday that his client believes he has accounted for all the money.

“We are considering our options,” Pepper said about a possible appeal.

Jacobs ousted Johnston as Statek’s controlling shareholder in 1996 after Vendel accused Johnston of siphoning company funds to prop up his lifestyle. Vendel, a Swiss businessman, filed suit in Delaware to recover that money. Statek is incorporated in Delaware.

English prosecutors in September convinced a jury that Johnston had sought revenge against Vendel and Statek director Margaritha Werren, who forced him out of Statek.

Johnston, 72, hired members of Dublin’s “Three Micks” gang to carry out the hits on Vendel, Werren and the Delaware lawyers who helped them remove Johnston. British police were tipped off about the murder contracts before the killings could take place.

While they controlled the company, Johnston and Spillane made nearly $6 million in interest-free loans to themselves from company funds, rang up $1.1 million in charges on the company’s American Express cards and illegally diverted $11.5 million from company coffers, Jacobs found.

The pair also paid more than $2.3 million for the services of consultants who turned out to be rare art, book or stamp dealers and paid $3.7 million to lawyers who did no work for the company, the judge said.

“Johnston and Spillane lived like jet-setting potentates,” Jacobs noted. “They traveled extensively and lavishly in this country, in the Bahamas and throughout Western Europe, all at the corporation’s expense.”

The pair tried to hide the mishandling of company funds through questionable corporate bookkeeping or by not keeping records at all, the judge added.

“It is abundantly manifest that the defendants have engaged in a pattern of massive fraudulent diversions of Statek’s assets and the concealments of the same,” Jacobs said. He ordered Johnston and Spillane to return all funds wrongfully diverted from Statek.

Vendel and his lawyers believe they’ve located some of the missing funds.

When British police arrested Johnston in London in April 1998 on the murder solicitation charges, they seized paperwork for an account containing $32 million in gold bullion.

Johnston has sought to have the gold account documents returned to him, but Jacobs has barred the former executive from seeking access to the account until the judge can decide who owns it.

On Wednesday, Pepper said Johnston contends that the gold account is not his and that he has no assets.

“Mr. Johnston was found to qualify for legal aid in the criminal case in England,” his attorney said. “That leads me to believe he doesn’t have any money to give back to the company.”