Loan Tied to Protected Witness Blamed for Failure of Bank in Orlando, Florida
Fraust, Bart, American Banker
Loan Tied to Protected Witness Blamed For Failure of Bank in Orlando, Fla.
A loan to a company allegedly controlled by Michael Hellerman, a convicted stock swindler turned protected government informant and witness, proved fatal to the Florida Center Bank in Orlando.
The $75 million-asset Florida Center was closed late Friday by the Florida Division of Banking after loan losses had erased the bank's $5 million in capital. Florida Center's two branches reopened Monday as offices of American National Bank of Florida, Jacksonville.
For the last year, the banking activities of Mr. Hellerman have been under investigation by federal banking and law-enforcement agencies in several cities, including New York, Los Angeles, Miami, Orlando, Denver, and Oklahoma City.
Mr. Hellerman, according to federal investigators looking into his banking transactions in Orlando and elsewhere in the U. S. and documents on file in the federal court system, was given the new name of Michael Rapp in 1972 after he provided testimony that led to the convictions of several major organized crime figures.
A federal grand jury has been empaneled in Orlando to investigate whether criminal charges should be brought against Mr. Hellerman and other individuals in connection with the loan and other possibly related transactions that investigators believe contributed to the failure of Florida Center.
In addition, Flushing Federal Savings & Loan Association, an ailing thrift based in Queens in New York City, has accused Mr. Hellerman of having masterminded a conspiracy in 1984 to defraud the S&L of millions of dollars.
The charges are contained in a civil suit filed by Flushing in U.S. District Court for the Eastern District of New York. A jury trial on the charges, which include allegations of violations of the Racketeer-Influenced and Corrupt Organizations Act, is scheduled to start June 16.
Mr. Hellerman also faces a May 5 trial in New York on criminal charges that he violated a $7,000-a-day spending limit imposed on him in connection with the Flushing suit.
Mr. Hellerman is the co-author of "Wall Street Swindler: An Insider's Story of Mob Operations in the Stock Market.'
Loans to Pay-Telephone Company
At issue at Florida Center was what was intended to be a $30 million loan to PaceCom Inc., Deerfield Beach, Fla., a company incorporated in 1985 to engage in the business of installing pay telephones. About one-half of the loan proceeds were disbursed to PaceCom before state officials acted to bar any further disbursements.
William Smith, named in documents as PaceCom's president, also is a defendant in the Flushing litigation.
"The loans to PaceCom were a significant contributing factor to the failure of Florida Center,' said Rod Jones, director of the Florida Division of Banking.
Calls to Florida Center officials are referred to Michael Basile, the bank's attorney. He was unavailable for comment on Monday.
Although the name Michael Rapp appears nowhere on the company's incorporation documents, federal and state investigators said that officials of the company have informed them that Mr. Hellerman owns at least 51% of PaceCom.
"Rapp [Hellerman] is PaceCom,' according to one official investigating Florida Center's failure. "We have been presented with documents indicating majority control of PaceCom by Rapp and rapresentations by individuals that Mr. Rapp is owner of PaceCom --anywhere from 51% to 100%.'
According to investigators, Mr. Smith has told state banking officials that Mr. Hellerman arranged the PaceCom transaction. State officials said they later learned that Florida attorney Allen E. Greenfield held 51% of PaceCom's stock in trust for the wife and children of Mr. Hellerman.
Mr. Greenfield, who resigned as secretary-treasurer of PaceCom in February, declined …
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Publication information: Article title: Loan Tied to Protected Witness Blamed for Failure of Bank in Orlando, Florida. Contributors: Fraust, Bart - Author. Magazine title: American Banker. Volume: 151. Publication date: April 22, 1986. Page number: 1+. © 2009 SourceMedia, Inc. COPYRIGHT 1986 Gale Group.