Testimony begins in Sun Belt case

Author(s): JOHN SEMIEN Date: February 23, 1988 Section: NEWS

A federal prosecutor on Monday said three men on trial for bank fraud used smiles, handshakes and phony bank records to hide the purpose of $8.3 million in loans they arranged through Sun Belt Federal Bank to cover a defaulted bank loan. But attorneys for former Sun Belt Bank president Larry Tullos, attorney Sidney Fazio and businessman Michael Blanton told a jury that the men had no bad intentions in orchestrating the loan.

U.S. District Judge Frank Polozola and a jury of five men and nine women, including the two alternates, also heard testimony from a Federal Home Loan Bank Board representative Monday before trial action concluded.

Earlier, Assistant U.S. Attorney Ed Gonzales said Tullos, Fazio and Blanton used a "nominee loan scheme" to remove the defaulted loan from Sun Belt bank records.

He said the $5 million loan had been secured by a trailer park in Lafayette.

Gonzales said Federal Home Loan Bank Board examiners had questioned Tullos about the defaulted loan in 1983 and that another examination was scheduled in the summer of 1984.

"Larry Tullos wanted that loan off of Sun Belts books and he wanted it off the books before bank examiners took another look at them," Gonzales said. "That meant Mr. Tullos had to call on Mr. Fazio to take care of certain details."

Gonzales said the two men made false entries on loan documents that caused the bank to overfund a loan to Baton Rouge Petroleum Center Inc. and Miller Development Corp. of Louisiana, companies that needed $4.5 million in loans to purchase property in St. Tammany Parish,

Gonzales said each company received loans of $3.75 million from Sun Belt, with the understanding that they would use the extra money to purchase the trailer park in Lafayette.

He said Tullos and Fazio funneled an additional $800,000 to the purchase through a separate loan to Ridgeland Builders Inc., a company owned by Blanton.

Gonzales said Ridgeland Builders Inc. was created by Tullos, Fazio and Blanton to serve as a nominee for Baton Rouge Petroleum Center Inc. and Miller Development Corp. and to circumvent regulations that limited the amount of money Sun Belt could loan to one customer.

Records on the nominee status of Ridgeland Builders Inc. were not

Gonzales said evidence in the case would show that Tullos, Fazio and Blanton were shrewd conspirators in the scheme and "not men who made mistakes or took orders.

"This is not about sophisticated banking," he said. "It's about convenient lying."

In other opening statements, attorney Sam D'Amico, who represents Tullos, told jurors that the government's case is "composed of lies."

1 ie said the documentation on the property loans were prepared by other Sun Belt bank officials and was only reviewed by Tullos.

"The point you need to look at is why Larry Tullos would want to jeopardize his job and his position like that," D'Amico said. "... There are situations where something can look real ugly and not be, and the government is depending on the things that look real ugly."

Fazio's attorney Thomas D'Amico agreed, calling Fazio an "innocent man" who participated in a series of simple transactions between businessmen he trusted.

Leo J. Agrillo, who represents Blanton, said the businessman had no expertise in banking or law to guide him in his dealings with Tullos and Fazio. "Mr. Blanton's position is he complied with the law as best he could and that he trusted people," Agrillo said. "The man is a carpenter who worked his way up to builder. He's a high school graduate...."

John Anderson, a Dallas supervising agent of the Federal Home Loan Bank Board, was the only prosecution witness Monday.

He said the board insures savings and loan associations. The board also monitors the business records of the associations to make sure they comply with regulations involving loan transactions and lending limits on customers and property transactions.

Anderson said he examined Sun Belt records on the trailer park in Lafayette and found no records connecting the park with loans to Baton Rouge Petroleum Inc., Miller Development Corp. of Louisiana and Ridgeland Builders Inc. for the purchase of land in St. Tammany Parish.

However, Anderson said he received a memo from Tullos in 1984 that said the bad debt involving the trailer park had been resolved without additional funding from Sun Belt.

He said the memo was received by federal bank examiners shortly before the 1984 examination of Sun Belt bank records.

Testimony in the trial is scheduled to resume at 9:30 a.m. Tuesday.

The three men were indicted by a federal grand jury in 1987 on 16 counts of bank fraud in connection with the real estate scheme, which stems from an ongoing investigation of business dealings involving the now-defunct Sun Belt Federal Bank.

Copyright 1988 Capital City Press, Baton Rouge, La.