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Bank JOB

In many ways, City of Industry founder James Stafford's problems began and ended with the Bank of Industry. The wealthy rancher organized the bank's formation in the early 1980s, enlisting Ed Roski Jr. and other Industry insiders to serve on the bank's board of directors. Stafford had already established his practice of laundering checks kicked back from Industry redevelopment projects; soon after the new bank opened for business, Stafford moved his check-laundering operation there from Industry's Bank of America branch.

Lucilla Rowlett was a common denominator in his laundering scheme. She handled many of Stafford's kickback checks while employed as a Bank of America teller. She did the same after she went to work at the Bank of Industry, cashing checks Stafford had drawn on bogus accounts brimming with money skimmed from Industry construction contracts: more than $1.3 million that should have gone toward the construction of a $65 million exhibit and conference center.

Then, in the midst of a deepening FBI corruption probe, Rowlett skipped town. Stafford finally tracked down his favorite teller in her home state. He persuaded her to meet him for dinner at the Holiday Inn in Leesville, Louisiana. Stafford wanted to pay for more than dinner. He wanted to buy Rowlett's silence. Before the meal of steaks and Heinekens had ended, records show Stafford had uttered Roski's name three separate times to reassure Rowlett that he could protect her from prosecution.

The FBI, betting that Stafford would try to cover his tracks, had already persuaded Rowlett to wear a wire that night. Transcripts from this and other tape-recorded conversations not only helped convict Stafford, but federal prosecutors would also cite them as evidence of Stafford's inordinate influence over the city and his closest associates, including Ed Roski Sr. and Jr.

In 1984, after obtaining Stafford's conviction, Assistant U.S. Attorney Gary Feess submitted a sentencing memorandum in which he asked the court to mete out the stiffest sentence possible. Feess argued that the wealthy rancher had "betrayed the trust and confidence" of the city and its agencies, and "abused his position as a preferred customer of the local banks," including the Bank of Industry.

Feess' memorandum, court and bank records, and interviews with former bank officers show that Stafford, without owning a share in the bank or serving as a director, virtually handpicked its first board of directors, breached bank confidentiality by pumping its members for information, and used the bank to launder $123,000 in kickback checks. When the bank's president called a halt to Stafford's check cashing and meddling in bank business, Stafford sought the help of Roski Jr. and other board members to have the bank president fired, these sources show. Feess' allegations weren't entirely new. Reporter Scot Paltrow explored Stafford's ties to the Roskis in a 1980 investigative series in the now-defunct Los Angeles Herald Examiner.

Despite repeated attempts to interview them, Paltrow reported that Roski Sr. and Jr. had declined to return his calls or answer his questions about their relationship to Stafford. Recently, however, Roski Jr. maintained that the allegations made against him in Paltrow's articles were untrue.

Separately, Roski has claimed in court papers that in Industry, he was an innocent victim caught up in other people's wrongdoing. But five years after the publication of Paltrow's series, and a year after sending Stafford to prison, Assistant U.S. Attorney Feess concluded in a sentencing memorandum, that the "fundamental allegations contained" in Paltrow's series had "been borne out." Stafford's crimes "were not isolated; they were part of a pattern of conduct extending back to the formation of the City of Industry."

Feess never filed charges against Roski Sr. or Roski Jr. But he made a point of describing the Roskis, and other Industry insiders, as "close friends of Stafford," before concluding in his memorandum that "Through these relationships . . . Stafford has been able to exert his influence at all levels of government in the City of Industry. There is no door in the city that is closed to James Stafford, and few decisions on which his counsel is not sought." Stafford's ties to the Bank of Industry, Feess wrote, illustrated that influence.

Stafford hatched his idea for a bank over lunch at the California Country Club, then the town's unofficial City Hall and the favored watering hole for Stafford and his confidants.

In the mid-1970s, about a dozen of Stafford's closest associates were summoned to a series of meetings at the country club to discuss the bank's formation. Ten of the original 12 bank directors, including Roski Jr., attended these meetings at Stafford's invitation, said former bank officers and Stafford's son in interviews given in the mid-1980s.

Roski Jr. recruited a respected Bay Area banker, Dale E. Walter, to serve as the bank's first president, former bank officers said. With Walter at the helm, the bank's associates and board of directors, including Roski Jr., invested nearly all of the $5.5 million needed to open the bank, bank records show. Stafford bought about $275,000 worth of stock (about 3.2 percent of the bank's total shares) for his grandson, stocks that were held in trust by his former daughter-in-law, according to former bank officers.

 

Initially, although he held no official position with the bank, Stafford attended the bank's meetings, said Walter and former bank director and chairman Robert K. King. After one bank organizer complained of his presence, Walter said he barred Stafford from the bank's organizational meetings.

Stafford easily bypassed the restriction by pumping friendly bank directors for information, said King, and Donald R. Wheeler, the bank's first chairman, in separate interviews. Sometimes Stafford did not wait for meetings to end, but would telephone directors for in-progress briefings, King said. But Walter's efforts to exclude Stafford failed to reduce his meddling or derail his check-laundering scheme.

Federal-court records show that soon after the bank received its state charter in April 1981, Stafford began laundering money through a series of bogus accounts established solely for that purpose at the bank. From May to September 1981, Stafford cashed about $123,000 in kickback money, court records show.

Eventually, the frequency of Stafford's check cashing aroused Walter's suspicions. That, said Walter, is when he called King into his office, one morning in September 1981, to show him a desk drawer containing several uncashed kickback checks. King, who later pleaded guilty to mail-fraud charges in connection with the kickback scheme, said he was shocked when he saw the checks; he knew he would collect a third of the money himself. King said he told Walter, "Dale, don't cash them. You're gonna wind up like me. I can't get away."

Walter said he immediately ordered the bank's tellers to stop cashing Stafford's checks. The order incensed Stafford, who determined to reduce Walter's influence. That meant a move against Wheeler, who was never party to the kick-back scheme.

King said that during a fishing trip in Mexico in late 1981, Stafford and Roski Jr. told him they wanted him to succeed Wheeler as bank chairman. "Eddie [Roski Jr.] says to me, 'We're gonna make you, Bob King, chairman of the board.'

"And I says, 'I'm not interested in being chairman of the board . . .'

"Eddie says, 'What Jim wants, we're gonna give it to him,'" King said in one of several tape-recorded interviews he granted in 1985. In a recent interview, Roski Jr. said that he does not remember King ever being on the bank's board of directors. Nor does he recall Wheeler, whom he described as "a close friend," ever being forced out of the chairmanship. Bank documents list Wheeler as the bank's first chairman of the board, and King as a founding director.

A few months later, bank records show, Stafford's allies on the bank's board did indeed oust Wheeler and elect King chairman. But King said his election to chairman only made him feel more deeply enmeshed in Stafford's schemes. King, who now knew he was the target of the FBI investigation, said he ignored Stafford's orders to make Walter cash his kickback checks, further infuriating Stafford.

In March 1983, Walter again tried to reduce Stafford's "negative influence" over the bank by putting together a group of directors to buy out three of Stafford's most loyal allies. Walter's refusal to cash Stafford's checks, coupled with the successful buyout, prompted a showdown. King said that Stafford instructed him to schedule a meeting to discuss Walter's dismissal.

During a telephone conversation, King said, Stafford complained that "Dale Walter ain't gonna cash our [his and King's] checks. I think we ought to fire his ass. Why don't you and Eddie [Roski Jr.] and I have a powwow."

King followed Stafford's orders. In a certified letter dated April 6, 1983, King, acting in his capacity as bank chairman, informed the bank's directors that "A special meeting of the board of directors of the Bank of Industry, City of Industry, California, has been called by the chairman of the board for 11 a.m., Wednesday, April 13, 1983, in the Laundry Room at Industry Hills. This meeting is for the sole and express purpose [of deciding] the status of Dale Walter, CEO, Bank of Industry."

But King canceled the meeting after Walter fired back a letter in which he threatened to notify state banking authorities of Stafford's attempts to influence the board. A few days later, King, cracking under the emotional strain, announced his decision to sell his stock in the bank and resign from his position as board chairman.

 

King's resignation apparently triggered one last attempt by Stafford to take control of the bank's affairs. Walter said that Stafford's allies on the board had voted to make Gary A. Bryce, a bank director and close Stafford business partner, bank chairman, and that Roski Jr. had voted for Bryce. Soon afterward, Walter said, he was approached by the FBI. He agreed to cooperate.

In September 13, 1983, with the FBI closing in, Stafford held his first meeting with Rowlett. Stafford paid the former bank teller the first of two $1,000 bribes to "forget" about cashing his kickback checks, FBI transcripts show. During the meeting, Rowlett told Stafford that she feared Walter would blame her for the check laundering. Stafford tried to reassure her:

"Dale [Walter] isn't going to do that and Dale isn't going to remember anything either."

"Okay," Rowlett answered.

"Don't worry about that," Stafford continued.

"You have that covered," Rowlett said, as if trying to convince herself.

"With Roski," Stafford added, completing her thought.

"Roski will take care of [Walter]," Stafford said moments later, a remark federal prosecutors described as "threatening."

These transcripts, along with other evidence obtained by the FBI, persuaded Stafford to plead guilty to 18 criminal charges, including fraud, obstruction of justice and conspiracy.

Roski Jr., who was not charged with conspiring in Stafford's check-laundering scheme, remained on the Bank of Industry's board until 1992. That year, according to an FDIC official, the bank merged with Comerica Bank, a San Jose-based institution for which Roski Jr. serves as a director. Back in Industry, the vacuum created by Stafford's departure appeared to provoke a power struggle among insiders.

Victor Valle is a professor of ethnic studies at California Polytechnic State University, San Luis Obispo; Rodolfo D. Torres is a visiting professor of political economy and education at UC Irvine. Their book, Latino Metropolis, will be published this fall by University of Minnesota Press.


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