Prosecutors allege that Marin County developer Bijan Madjlessi and his attorney, David Lonich, worked with Sonoma Valley Bank executives Sean Cutting and Brian Melland to defraud the bank by obtaining loans for the Park Lane Villas mixed-use development in Santa Rosa.
Here is a timeline of the allegations, which are laid out in an indictment unveiled Thursday by the U.S. Attorney's Office:
April 2008 — Madjlessi defaults on IndyMac Bank loan for more than $30 million that had been used to fund construction of Park Lane Villas East. IndyMac files a civil lawsuit seeking to recover the loan one month later.
July 2008 — IndyMac collapses and the bank is taken over by the Federal Deposit Insurance Corp. To recoup money owed by Madjlessi, the FDIC decides to auction off the Park Lane Villas loan.
Prosecutors allege Madjlessi, Lonich, Cutting and Melland conspired to have Madjlessi bid on the loan and regain control of the project, in violation of FDIC regulations. Madjlessi would allegedly use a "straw borrower" to mask his true identity, according to prosecutors.
February 2009 — Sonoma Valley Bank receives $8.7 million from the federal bank bailout fund, the Treasury Troubled Asset Relief Program (TARP).
March 2009 — Lonich creates 101 Houseco LLC and installs James House as its nominal owner. "In fact, (House) was a straw who exercised no meaningful control of 101 Houseco; instead Madjlessi and Lonich exerted control of the company," according to the indictment.
Madjlessi seeks a loan for 101 Houseco from Cutting and Melland. The two bank executives authorized the loan, even though they allegedly knew that Madjlessi and Lonich were the true borrowers and that House was a straw borrower, according to prosecutors. Cutting and Melland also knew the loan would likely violate the bank's legal lending limit to Madjlessi, prosecutors alleged.
101 Houseco becomes the winning bidder for the defaulted IndyMac loan. It paid $4.2 million for the deed, considerably less than the $27.5 million Madjlessi still owed on it, according to a 2011 Press Democrat story.
November 2009 — Sonoma Valley Bank nearly doubles the size of the 101 Houseco loan, from an initial balance of $5.5 million to a final balance of $9.5 million. More than $4.5 million went to Masma Construction, a company controlled by Madjlessi, according to prosecutors.
2009 to 2010 — In a bid to refinance the loan, Madjlessi and Lonich convert the condo project into an apartment complex by purchasing condominium units, allegedly using straw buyers. "Cutting helped accomplish the purchases by issuing letters on Sonoma Valley Bank letterhead falsely stating that potential buyers had sufficient funds at Sonoma Valley Bank for purchase," the indictment states.
101 Houseco settles the civil lawsuit filed by IndyMac against Madjlessi over the defaulted loan and forecloses on Park Lane Villas East in January 2010, giving it title to the project.
August 2010 — Sonoma Valley Bank collapses. The $8.7 million taxpayer-funded TARP loan is lost, along with an additional $350,000 owed to taxpayers. The bank has multiple outstanding loans to Madjlessi and his associates, including a loan related to Park Lane Villas.
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