Former McNall Accountant Will Plead Guilty : Jurisprudence: Houston admits to having role in preparing false tax returns and financial statements to help obtain millions in bank loans.
Robert J. Houston, a former accountant for King president Bruce McNall, has agreed to plead guilty to three criminal counts for his role in preparing false tax returns and financial statements so that McNall could get more than $150 million in loans to shore up his deteriorating business and financial situation, sources said Tuesday.
The plea is expected to be entered within two weeks. Federal officials on Tuesday charged Houston with bank fraud, wire fraud and conspiracy.
Houston was accused in court papers of being part of a group of McNall officials who for the last eight years fraudulently obtained loans by inflating McNall’s income, overstating his assets and understating or omitting previous loans. Houston’s lawyer could not be reached for comment.
Federal officials allege that the fraudulent documents, as well as a group of “sham companies,” enabled McNall officials to get money for horse and coin operations as well as a $60-million business loan and a $20-million personal loan from Bank of America. Among the financial institutions prosecutors named as victims were Bank of America, Bank of California, First Los Angeles Bank, Union Bank and Credit Lyonnais, a French bank.
Houston, whom sources said has been cooperating with the government investigation, is the second McNall executive to agree to plead guilty within the last month and one of about a dozen former McNall business associates known to have been negotiating pleas. Previously, Joanna Orehek, former vice president and controller, pleaded guilty.
Sources have confirmed that McNall, who was sole owner of the Kings before selling 72% of the team this year to pay off a bank loan, has agreed to plead guilty to four criminal counts in connection with the bank-fraud investigation. He is expected to enter the plea in October. McNall’s lawyer, Tom Pollack, said Houston’s plea was expected.
Among the allegations made in the complaint is that Houston and other McNall officials participated in a scheme to allow an officer with New York-based European American Bank to wipe clean a loan to McNall’s troubled movie production operation so the officer could get a substantial bonus. Federal officials did not identify the official, but sources confirmed it is former Chairman Raymond J. Dempsey, who left the bank in 1990. He could not be reached for comment.
It also describes how McNall officials orchestrated a phony $20-million “circular loan” to two sham companies to get McNall off the hook in personally guaranteeing film production loans. Prosecutors allege the $20-million loan was represented as an investment by a European consortium in Gladden Entertainment, a film production company McNall owned with longtime Hollywood executive David Begelman. They further allege McNall officials said the phony investors refused to allow McNall to continue to personally guarantee the film loans made by Credit Lyonnais, resulting in his release from that obligation.
McNall’s legal problems extend beyond his banking practices. The government’s case has expanded into an investigation of 399 ancient coins worth $3.3 million that had been reported missing from securities giant Merrill Lynch’s World Coin Fund. Sources said McNall was paying installments of $100,000 a month to Zurich coin dealer Hans Schram, who reclaimed them when McNall’s payment stopped. Investigators are looking at whether McNall charged the fund $4 million for the coins and wired the money to a Swiss company he owned.
