A secret informant wearing an electronic wire helped federal agents build their case against two former Sonoma Valley Bank executives and two borrowers accused of defrauding the bank before it collapsed in 2010, according to an affidavit unsealed in U.S. District Court.
The document provides the most detailed account made public so far of the conspiracy alleged in a grand jury indictment against Marin County developer Bijan Madjlessi, Santa Rosa lawyer David Lonich, and former bank executives Sean Cutting and Brian Melland.
Madjlessi was killed in a car wreck discovered Tuesday off a steep Marin hillside. The three remaining defendants are scheduled to appear in court Friday.
The informant, an unnamed construction contractor who borrowed money from Sonoma Valley Bank, recorded conversations with Madjlessi and Lonich in 2011 as they tried to calm his fears about testifying before the federal grand jury, according to the document.
The degree of detail imparted by Madjlessi and Lonich is evidence of their participation in the alleged scheme, as well as their apparent effort to coach the informant about his testimony, according to the affidavit filed by a federal agent investigating the case.
The indictment, unsealed April 9, accuses the four defendants of bank and wire fraud, money laundering and conspiracy. Thirteen of the 29 charges carry maximum penalties of 30years in prison and $1 million fines, according to the U.S. Attorney's Office. The defendants, if convicted, also could be subject to asset seizures.
All four men entered not guilty pleas in the case and were freed on $250,000 bonds. None agreed to be interviewed after a brief appearance April 18 before District Court Judge Susan Ilston in San Francisco.
Attorney Steven M. Bauer, who appeared with Madjlessi, questioned the charges. "How fair is it for the government to try to blame four gentlemen for the Marin real estate crash?" Bauer said outside court last month.
On Tuesday, Bauer said Madjlessi "firmly believed he would defeat his accusers."
The case centers on two loans totaling $9.4 million made by now-defunct Sonoma Valley Bank to a corporation called 101 Houseco in 2009, shortly after the bank obtained an $8.65 million bailout from the federal government's Troubled Asset Relief Program.
The confidential informant, who started cooperating with federal investigators in April 2011, played a key role in the government's case by detailing his role in a complex series of financial transactions surrounding the 2009 loans to 101 Houseco.
Lonich filed papers to create 101 Houseco in March 2009, two weeks before it borrowed money from Sonoma Valley Bank. The government informant was made the nominal owner, but Madjlessi and Lonich "fully controlled" the company, according to the affidavit.
101 Houseco was registered to James House, a business associate of Madjlessi, according to documents obtained by The Press Democrat in the wake of the bank's collapse. Calls to House, an Orange County resident, were returned by his attorney, Carl Faller, who said he could not comment on any aspect of the investigation.
Prosecutors contend that Madjlessi and Lonich created 101 Houseco to reacquire the rights to Park Lane Villas East, a southwest Santa Rosa mixed-use project that Madjlessi built in 2006 with a $31.9 million construction loan from IndyMac Federal Bank. Madjlessi lost the project in 2008 when he defaulted on the IndyMac loan. He was prohibited from bidding on it when the Federal Deposit Insurance Corp. placed the IndyMac loan up for auction the following year.