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L.B. Developer Indicted for Allegedly Profiting From Fraudulent Loans

September 17, 1987|DARYL KELLEY | Times Staff Writer

Long Beach developer Craig E. Caldwell has been indicted by a federal grand jury for allegedly profiting from about $600,000 in fraudulent loans made by a now-defunct Santa Ana bank.

Caldwell, 37, owner of Caldwell Enterprises of Long Beach, faces multiple felony counts of making false entries in the records of Western National Bank, of making false statements on bank loan applications and of misapplying bank funds. He is the former chairman of the board and majority stockholder of the bank.

The indictment also accuses Caldwell of violating federal banking regulations by personally borrowing from the bank nearly $200,000, which exceeded the limit of $70,000 on loans to the bank's officers.

Federal Seizure in '82

Western National, which was founded in 1980, was declared insolvent and seized by federal banking officials in August, 1982. Investigators blamed "significant loan losses" for closure of what had been a fast-growing bank with assets of $30 million.

The indictment handed down in Los Angeles says that in 1981 Caldwell arranged for loans to three associates totaling $590,000 and that the loans were used by Caldwell without the knowledge of the bank.

He "used other people as straw borrowers and reaped the benefits," said Assistant U. S. Atty. Patricia L. Collins in Los Angeles.

In securing the loans, Caldwell allegedly had false entries made in the bank's records and had borrowers submit inflated estimates of their net worth.

Acquittal Expected

Caldwell, who lives in Rolling Hills Estates, could not be reached for comment at his Pine Avenue office in Long Beach. But his attorney, Jan Lawrence Handzlik, said Caldwell denies the charges and expects to be acquitted.

"Mr. Caldwell has cooperated with the government throughout the investigation. It is unfortunate that the government has chosen to bring these charges nearly six years after the fact," Handzlik said.

Western National's former president, John G. Willett, was sentenced in November to four years' probation on similar charges. Willett was also fined $15,000 and ordered to perform 1,500 hours of community service work.

12 Counts Outlined

Collins said that if Caldwell is convicted, he could receive a maximum sentence of five years in prison for each of eight counts of misapplication of funds and false entry into bank records, and a maximum of two years each for four counts of making false statements in loan applications.

In the first of the three loans cited by prosecutors, Caldwell is accused of arranging a $240,000 loan in May, 1981, purportedly for the purchase of two service stations. But the loan was actually part of a deal by Caldwell-owned Seabreeze Shores Inc. to buy a $717,000 duplex in southeastern Long Beach, the indictment said.

Also in 1981, Caldwell arranged for three real estate loans totaling $125,000 to an employee of Caldwell at Seabreeze Shores, prosecutors allege. The employee wrote checks to Seabreeze in the amounts of the loans to allow Caldwell to purchase more Western National Bank stock, they allege.

The indictment says that a $225,000 loan to a third Caldwell associate, whose assets were also inflated in the loan application, was laundered through two parties to Seabreeze and C. E. Caldwell Enterprises. Of the money, $100,000 was used by Caldwell to pay a debt to his father, William Caldwell, the indictment alleges.

Prosecutors also claim that Caldwell improperly received about $30,700 out of $36,100 the bank paid for repair of a property on which it had foreclosed.

Caldwell has been involved in the Long Beach real estate business for nearly a decade, investing heavily in downtown-area property. He built a condominium project of about 200 units at 4th Street and Golden Avenue in 1984.

Two of Caldwell's downtown commercial buildings were razed by the city in 1984 after a two-year condemnation proceeding that charged him with failing to correct substandard conditions.

In 1985, Caldwell sued the city in an attempt to block construction of a $130-million Sheraton hotel-and-office complex across from the Convention Center.

He maintained that because he owned about one-third of the 3.3-acre parcel, his own proposal for a hotel-and-office tower should have received preferential consideration from the city. Caldwell also claimed that the city had not adequately reponded to questions about the adequacy of parking for the hotel and the amount of traffic it would generate.

With a favorable ruling from an appellate court this year, Caldwell forced the city to reconsider those issues. However, construction on the Sheraton complex, begun 15 months ago, continues.

Times staff writer Jane Applegate contributed to this report.

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