John L. Molinaro, chairman of Ramona Savings & Loan before it was seized by regulators 14 months ago, must pay back $6.4 million he obtained indirectly from the Orange-based institution, a federal judge ruled on Monday.
In a partial judgment in a $40-million civil fraud suit filed against Molinaro by the Federal Savings and Loan Insurance Corp., U.S. District Judge Alicemarie H. Stotler decided that Molinaro wrongly received the money in a scheme to sell his 100% ownership of the S&L in early 1986.
The funds used by a private buyer to purchase Molinaro's shares, the judge ruled, were actually provided by the S&L through a series of loans and kickbacks.
"The liability is certain," Stotler said after reading documents submitted by both sides, including excerpts from Molinaro's deposition. She said it was clear that Molinaro breached his obligations to the institution and converted the money to his own use.
Molinaro's lawyer, M. Jean Starcevich of San Jose, argued that there was "no gratuity or kickback" involved and said Molinaro was simply trying to sell Ramona. Starcevich declined after the hearing to discuss any aspect of the case, including the possibility of an appeal.
Stotler's ruling followed an earlier order requiring Molinaro to pay back $2 million that he had taken as a dividend payment on his stock in May, 1986. The declaration of the dividend was based on a 1985 audit showing a money-making operation when, in fact, the S&L was insolvent, the judge decided.
Monday's action does not end the civil court woes for Molinaro, who has been in jail since July when he was caught in San Francisco allegedly trying to pick up a phony passport.
The FSLIC, which is liquidating the old Ramona, says that Molinaro obtained at least $11.1 million from the S&L for his personal use and that, through mismanagement, he caused it to lose an additional $29 million.
The losses, according to court records, came mainly from depreciated properties and money-losing projects, some of which benefited Molinaro or other defendants, including Donald P. Mangano Sr., a one-time half owner of Ramona and one of the defendants in the FSLIC lawsuit.
The S&L, for instance, completed a 180-unit condominium complex on leased land in Palm Springs for $24 million, paying Mangano's construction firm $2.7 million in the process. Now the S&L's successor, Ramona Federal S&L, is selling the complex at a $9-million loss, said Richard Fruin, a Los Angeles lawyer for the FSLIC.
Stotler's ruling Monday concerned a scheme in which Molinaro planned to sell his stock for $7.2 million to former banker Donald W. Stump, who got the money through kickbacks on construction loans Ramona made to real estate developers Stump dealt with. Stump also is a defendant and faces a Jan. 11 hearing on FSLIC's motion for a judgment against him.
Of $30 million in loans committed to the developers, about $10.2 million was funded and $6.4 million of that was diverted to Stump, court records show. Stump, in turn, paid $5 million to Molinaro in February, 1986, an additional $1.3 million in April 1986, and kept $100,000 for himself, according to court records.
Because the deal was part of a conspiracy, the FSLIC alleged, Molinaro was liable even for the amount Stump kept.
The FSLIC says the remaining $800,000 of the purchase price was paid to Molinaro in a series of loans between Molinaro and Stump that were so complex that the agency could not unravel them sufficiently to add the amount to Monday's request for a partial judgment.
Molinaro has been in a number of county jails around San Francisco while he awaits trial--now scheduled for Nov. 24--on charges stemming from his alleged use of a dead man's name on a passport application. He was arrested July 22 when he arrived at a downtown San Francisco office to pick up the passport.
Authorities say he was planning to go to Great Britain for a few weeks and then head for two island-nations in the Caribbean, where, he told investigators, he had bank accounts containing at least $3 million.
Molinaro's former wife, Kimberleigh L. Ferm, is scheduled to go to the Cayman Islands and the Turks and Caicos Islands to retrieve the money, her attorney, Michael Morrissey of San Jose, told the court. Ferm and her mother, LaVonne Ferm, also are defendants in the FSLIC suit.
The funds, if withdrawn by Ferm, will be sent to a special account in San Francisco pending the outcome of the complex litigation.
Separately, Molinaro faces a Dec. 15 hearing on contempt of court for allegedly violating a year-old order forbidding him from transferring assets, especially sending money out of the country.
Fruin, the FSLIC's attorney, says Molinaro also may have money in Switzerland and Lichtenstein.