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'Convinced' He Wouldn't Show for Trial on Bank Fraud : Magistrate Orders Ellsworth Held Without Bail

January 14, 1988|AL DELUGACH | Times Staff Writer

A federal magistrate in Los Angeles ordered businessman John C. Ellsworth held without bail Wednesday on a bank fraud indictment, citing the risk that he might flee if released. Ellsworth is a target of a separate criminal investigation into the alleged misuse of $60 million in pension fund investments in Commercial Acceptance Corp.

A major factor in the bail decision, Magistrate Joseph Reichmann said after an hourlong hearing, was that Ellsworth went to Europe last month for about a week and disobeyed an order to appear Dec. 12 in San Bernardino Superior Court or face a bench warrant for his arrest. That court appearance was to be for a relatively minor debtor's examination in a civil suit, the judge noted, commenting:

"It's usually the little things that come back to haunt us. I'm convinced that Mr. Ellsworth will not appear for his trial if he is out (of jail)."

Ellsworth, 41, has been in custody since last Friday, when the FBI arrested him at his Los Angeles home on a sealed indictment by a federal grand jury. He is to enter a plea at an arraignment set for next Tuesday.

The indictment accused Ellsworth and Peter L. Azer, 44, of illegally obtaining $250,000 between January and March, 1987, in a bank fraud scheme against Sanwa Bank California.

Ellsworth issued checks backed by insufficient funds in his business and personal bank accounts, and Azer deposited them at Sanwa, obtained immediate credit before they bounced and split the proceeds with Ellsworth, it was charged.

The indictment said Ellsworth would then issue replacement checks, Azer would also deposit them with Sanwa and these would also be returned for insufficient funds--a refinement that a federal prosecutor said is unusual in check-kiting schemes.

Azer was not arrested but was allowed to surrender later on the charges against him, which include obtaining $1.5 million by fraud from Sanwa, Security Pacific National Bank, California Overseas Bank and Wilshire State Bank.

Ellsworth is a principal figure in the unrelated civil enforcement case brought in November by the California Department of Corporations against Commercial Acceptance.

The state alleged that a Ponzi-type scheme was used to defraud investors in that company's securities, on which attractive interest rates were paid with money from newer investors.

Commercial Acceptance then lent millions of dollars of these funds to entities controlled by Ellsworth and by the two top officers of Commercial Acceptance, Barry Francis Gray and David A. Facciani, who did not repay the loans, the state alleged in a civil lawsuit.

Los Angeles Superior Court Judge Jerry K. Fields on Dec. 1 granted the state a receivership over the assets of the three men, Commercial Acceptance and a number of related companies. The U.S. attorney's office subsequently accepted the case for criminal investigation.

Anita H. Dymant, an assistant U.S. attorney, on Wednesday urged Reichmann to refuse bail to Ellsworth in the bank fraud case because of factors that made him a "serious flight risk."

Among other things, Dymant said, millions of dollars in the Commercial Acceptance case were "floating around . . . and not accounted for."

Several attorneys employed by Ellsworth presented evidence intended to show that he was not a risk to flee and that he needed to be "on the street" to aid in obtaining European financing to pay creditors here. His companies include U.S. Coal Corp., a Minnesota corporation, and several Delaware corporations--Apple Valley Air Service Ltd., Oasis Entertainment Ltd. and Desert Marvel Ltd.--with Los Angeles offices.

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