The owner of a defunct Santa Fe Springs-based record company and one of the firm's top executives were charged with bank fraud Thursday by federal authorities.
Named in a criminal complaint filed in Los Angeles by the FBI were Kimball Dean Richards, 30, president of Consolidated Allied Cos., and Robert Leslie Abernathy, 44, Consolidated Allied's vice president of finance. Abernathy was arrested Thursday morning at Whittier Union High School, where he is employed as a mathematics teacher. Richards later turned himself in at the U.S. Marshal's office in Los Angeles.
The pair were released later in the day after posting bail of $25,000 each. If convicted, they face a maximum of five years in prison and a $10,000 fine. Neither Richards nor Abernathy could be reached for comment Thursday.
Alleged Lease Fraud
But Richards' attorney, Harlan Braun, said: "The more they investigate, the better. We've had a private investigator on this from the beginning, and we're pretty confident that we can disprove any of the allegations. Basically, my client is a victim, and we're comfortable that we can prove him innocent."
The two men have been under investigation since February for allegedly defrauding Los Angeles-based Union Bank on the sale of recording studio equipment leases. "Essentially, this is the first step in a continuing investigation," said Terree A. Bowers, chief of the major frauds division of the U.S. Attorney's office here.
Richards, Abernathy and a number of other individuals connected with Consolidated Allied also have been under investigation by the major frauds unit of the Los Angeles County District Attorney's office since January, when Union Bank filed a civil lawsuit claiming that Consolidated Allied had obtained more than $7 million in loans and financing on the basis of bogus financial statements.
Consolidated Allied--which operated Allied Artists Records in Studio City and Allied Artists Recording Studio in Santa Fe Springs--has filed a petition seeking protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code and has ceased doing business.
Creditors File Suit
The company's creditors--a list of blue chip commercial finance companies that includes divisions of John Hancock Mutual Life Insurance, Great Western Financial, General Electric and First Interstate Bancorp--have alleged in a series of lawsuits that they were defrauded of more than $20 million in a scheme that involved a non-existent credit union where Consolidated Allied claimed to have $10 million in cash on deposit.
In February, 30 investigators and a 10-member special weapons team from the Los Angeles County Sheriff's Department searched the Whittier home of Richards and seized financial documents and a number of weapons, including four Uzi automatic pistols. Investigators also searched the homes of a number of Consolidated Allied employees--including Abernathy--and several companies that provided Consolidated Allied with lease financing and equipment.
Richards also is under indictment in Arizona, where he is charged with perpetrating a hoax on the Mohave County Sheriff's office by claiming that county government offices were wiretapped. That case is pending.