Grand Jury Scrutinizes Financier : Thousand Oaks: Olen B. Phillips is suspected of embezzling funds from almost 2,000 investors in his real-estate deals.

A decision is expected in the next few weeks on whether to indict a Thousand Oaks real-estate financier in what officials call the biggest fraud scheme in Ventura County history, a law enforcement source has told The Times.

The Ventura County grand jury has begun hearing testimony on the business affairs of Olen B. Phillips and is expected to decide whether to hand down an indictment as soon as deliberations are completed, the source said.

Phillips is suspected of embezzling funds from almost 2,000 investors in his real-estate deals, according to court documents filed by state and local authorities investigating him.

Losses from companies and partnerships run by Phillips are estimated at more than $24 million, the documents say.

In addition, The Times has learned that the FBI is investigating Phillips over possible bank fraud in connection with the now-defunct United Community Bank of Thousand Oaks and the 1988 demise of its subsidiary, Westlake Thrift & Loan of Westlake Village.

The FBI will not confirm or deny its investigation of Phillips, who was a stockholder and a director of United Community Bank. Five people have already been indicted and sentenced to prison terms in what is now a two-year investigation.

Phillips--a commercial airline pilot who continues to fly jumbo jets on United Airlines’ route from Los Angeles to the Orient--also faces a civil fraud suit filed by the state Department of Corporations and several other suits brought by investors.

Phillips, 51, could not be reached for comment. But his attorney said Phillips has testified before the grand jury and is anxious to hear the results of the 13-month investigation conducted by the Ventura County Sheriff’s Department and the state Department of Corporations.

“He’s very concerned,” Ventura attorney Louis Samonsky Jr. said. “He’s anxious to get the thing going because this has really destroyed his lifestyle and his businesses.”

Phillips was the owner and president of Phillips Financial Group, which served as an umbrella company for eight other firms specializing in almost every aspect of real estate services.

In addition to his involvement in his companies, Phillips was a general partner in about 46 limited partnerships. He raised about $16.3 million from 1,000 investors in the partnerships, court records show.

Phillips borrowed another $21.9 million from 973 people who invested in “trust deeds,” or gave Phillips money in exchange for claims on property owned by the partnerships.

Officers of Phillips Financial Group misappropriated several million dollars to keep the company operational and maintain the officers’ standard of living, according to court documents filed by the Ventura County Sheriff’s Department and the state Department of Corporations.

Law enforcement officials said the officers did this by setting up an elaborate Ponzi scheme, a swindle in which investors are paid a small initial return with money provided by new investors rather than with profits from the investments themselves.

Thus, the investors’ money was not used to complete the construction projects for which it was pledged, the documents say. Instead, investor funds were commingled with other partnerships and companies to pay interest to earlier trust deed investors and to meet payroll expenses, investigators said.

More than 70% of interest paid to old investors in the trust-deed program between March 1, 1989, and Dec. 31, 1989, was paid with money from new investors, records indicate.

The documents also trace the tangled paths of several individuals’ investments. One man put $300,000 into the trust-deed program in February, 1989. Only 0.004% of the funds stayed where they were intended, the records show.

About $80,000 of the man’s money was deposited in Phillips’ personal account. From that account, Phillips wrote a $75,000 check, which was used to purchase stock in United Community Bank, where Phillips was then serving as a director.

Phillips’ monthly expenses sometimes exceeded his income by as much as $30,000, said Tammy Walker-Catania, Phillips’ niece and personal secretary. During those times, Walker-Catania told investigators, she would go to the company financial controller, Vice President Chuck Francouer, to obtain money for Phillips’ personal account so she could pay his bills.

Phillips’ partnerships and companies have lost a combined total of more than $24.4 million from their inception through 1989, records say.

Investigators were tipped to possible wrongdoing when several people who said they had invested thousands of dollars with Phillips reported that their money was gone, Ventura County Sheriff’s Sgt. Pat Buckley said in the documents.

Investors’ allegations were supported when Rick Principe, another general partner in some of the limited partnerships, filed a lawsuit on Oct. 26, 1989, asserting that Phillips commingled funds of various partnerships, borrowed funds against partnership property without authorization and obtained funds through misrepresentation. The suit is still pending.

Authorities served a search warrant at Phillips Financial Group headquarters in Agoura Hills on Dec. 15, 1989, the documents show.

Phillips and other corporate officers were removed from the businesses and the Department of Corporations filed a suit to stop alleged securities violations and to seek damages, officials said.

A lawyer was appointed in March by Los Angeles County Superior Court to take control of Phillips’ holdings and preserve them while litigation continues.

If the state proves its allegations, Phillips’ business assets will be liquidated in an effort to salvage funds and return money to investors, said the court-appointed attorney, Richard Weissman. However, Weissman said he must try to sell some properties even before the case reaches the trial stage because they are losing value.

“Every single asset that I took over was losing money when I took it over,” Weissman said. There are no dollar recovery estimates at this point, Weissman said.

The state seized control of seven commercial buildings, a mobile home park and five tracts of land. Many other properties were already defunct, Weissman said.

A number of the properties owned by Phillips’ investors have debts against them exceeding their values, he said. Commercial buildings have poor market values because they are partially vacant. And four properties are immediate candidates for bankruptcy, Weissman said.

Only one of Phillips’ nine companies remained functional most of the past year. But Boardwalk Escrow stopped operating Friday. Notices were handed out to employees and the state is pursuing plans to revoke its license, Weissman said.

Phillips has repeatedly offered to help salvage some of the partnerships and businesses, which he believes have suffered setbacks since they were wrested from his control, Samonsky said.

And, as part of a settlement proposal with the state, Phillips has pledged to help recoup investors’ losses, said Richard M. Hoefflin, Phillips’ attorney in civil matters. One part of his plan is to sell real estate through a court-monitored company but donate commissions otherwise payable to Phillips to investors, he said.

“Mr. Phillips is dedicated to the proposition to repay all of the note holders and to devote his time and energy to do so,” Hoefflin said.