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By Sal Osio, JD

From the Publisher's Corne

March 7, 2010

Mi Punto de Vista

From the Publisher’s Corner 

Gil Fuentes: An American Dream or Nightmare?

By Sal Osio

By any standard Gil Fuentes epitomized the ‘American Dream.’ As a 16 year old he emigrated from his native village in Northern Mexico to the fields of the San Joaquin Valley as a farm hand and subsequently as a laborer in the railroad yards in North/East California laying track and clearing the snow at Donner Pass. Then he worked as a dishwasher and bus boy in San Francisco until his early 20’s. Thereafter he migrated to Los Angeles working at menial jobs while educating himself in mathematics and accounting, learning English in the process, until he landed his first job as a professional – the assistant cost accountant to a manufacturing business in Los Angeles.

Subsequently, Gil followed a meteoric rise in the business and professional world. For 25 years until the middle 80’s he was a senior executive officer – Treasurer, Controller, Chief Financial Officer and/or Sr. Vice President - of the leading savings and loan financial associations in California, which included US Life Savings, American Savings & Loan, San Diego Federal Savings & Loan (name changed to Great American Savings) and Columbia Savings & Loan. He became an authority on economic forecast and cyclical mortgage interest behavior. He was invited to the White House and visited presidents Jimmy Carter, Ronald Reagan and George Bush. He received several accolades, international, national and regional, including the prestigious Mexican and American Foundation nomination as the bi-national (U.S.-Mexico) statesman of the year and the San Diego City Council designation of September 15 as ‘Gil Fuentes Day.’

For 25 years Gil bathed in a celebrity status which brought him into the company of Hollywood’s leading stars, such as Rita Hayworth, Caesar Romero, Tyrone Power, Leo Carrillo, Gilbert Roland, Anthony Quinn, John Derek, Gregory Peck and Suzanne Sommers. And, international stars such as the world famous matador, Carlos Arruza, and Mexican actress Emilia Guiu. He was in the company of the leading business and economic icons of the day, including Mark Taper, Gordon Luce, Mike Milken, Ed Gray and Frank Haas. He was a friend of Pete Wilson, former governor of California, U.S. Senator and Mayor of San Diego. Gil had become the poster child for Hispanics in quest of the American Dream – the role model exemplifying self education, determination, persistence, dedication, loyalty, hard work and giving back to his community.

The success of the savings and loan industry to a turn for the worst in the middle 80’s, the unintended consequence of the deregulation of the industry from a home financing institution to an investment bank coupled with the tax reform act which eliminated the real estate tax shelter value of non-residential assets. The industry collapsed in the late 80’s leaving in its path the most serious economic set back in real estate history with losses in the mega billion dollars with the collateral cost to the tax payer. All of the institutions with which Gil had been associated were taken over by the government at billions of dollars losses to the tax payer.

Interestingly, Gil had forecasted the coming debacle in the early 80’s and attempted unsuccessfully to persuade the management at Columbia Savings to change course, by reducing the investment in junk bonds, eliminating the investment in stocks and concentrating on the more traditional Treasury bonds and home mortgages. Regrettably, the ‘new kids in the block’ - investment banks, albeit chartered as home mortgage lending institutions - were having a field day increasing their size and profit margins over ten-fold what these had been – there was no tomorrow. Gil was rebuked by management which led to his resignation in 1985, at the expiration of his 5 year term employment contract, a few years before the beginning of the end for the real estate financial and development business sectors of the economy.

Just as the success of the savings and loan institutions was coming to a halt, Gil’s ‘American Dream’ was about to become his ‘Nightmare.’ He authored a book “The Adventures of a Mexican Teenager in Search of the American Dream” (2009) in which he details his life history of fame and fortune and its sordid ending.

Gil was offered a position in a new company, PNA Investments, as its president with a lucrative upside and compensation package, by a prominent Orange County entrepreneur, with an excellent reputation and impeccable credentials, Mike Parker. His holding company, Parker North America Corporation, had a business relationship with Columbia Savings, in connection with equipment lease financing. And, although Gil was not privy to the business relationship, he was aware that Columbia was satisfie4d, that Parker’s  legal counsel was the prestigious law firm of Gibson, Dunn & Crutcher and his accountants were Arthur Young, the national CPA firm. His bank was City National Bank. The corporate CPA was Mike Thomas, who subsequently became an FBI agent. Gil also met with Mike’s father whom he judged to be a real gentleman and very honest and conscientious. In short, the new relationship appeared to be very satisfactory and promising.

However, six months into the relationship Parker talked Gil into liquidating his Columbia Savings stock options, worth some $2 million, in order to invest in what was represented to be a most lucrative import venture. Gil put up the money for his 50% interest but Parker backed out leaving Gil holding the bag. In early 1986 Gil was suffering from deep depression and, in fact, was suicidal at the turn of events. He was destitute and ashamed. He felt he had destroyed his life’s hard work and betrayed the trust his family and friends had placed in him. He set out to confront Parker, and with the assistance of legal advisors he submitted a compromise and settlement offer of $250,000, which included the wash out of two promissory notes in the amount of $33,000. Parker, countered with $200,000 in cash which Gil accepted. The promissory notes had been cancelled. Gil licked his wounds and moved back to San Diego, engaging in odd ventures, including his active participation in community affairs, notably through the Mexican and American Foundation, at a time in the late 80’s when the real estate industry was beginning its death throb.

Suddenly, on October 7, 1990 the Los Angeles Times printed a sensational front page story linking Gil to the alleged fraud of Mike Parker in the sale of $160 million of bogus equipment leases to Columbia Savings. The author of the news release was the U.S. Assistant Attorney in Los Angeles, James R. Asperger. The local media, print and radio/TV, in San Diego, Orange County, California and Nationally carried the story and interviews with Asperger linking Gil to the fraud. At the time the management of the real estate financial sector was being indicted and persecuted for the alleged fraud which contributed to the demise of the industry. Gil’s name was included with the alleged wrong doers which included Tom Spiegel, the former Chairman at Columbia Savings, Gil’s old boss, and Mike Milken. Incidentally, neither Asperger nor any of the media had the courtesy to contact Gil in advance of the libelous publicity to ascertain its veracity. But the damage was fatal and irreversible: In the eyes of the world Gil was an accomplice in the criminal conduct which led to the collapse.  Overnight Gil became a social leper, an untouchable. He had fallen out of grace.

In 1990 the FBI and the IRS investigated and interviewed Gil, who was not represented by an attorney. He explained the disastrous Parker business relationship and the ensuing settlement and provided them with all of his files and records. They asked if he was willing to take a lie detector test. Gil indicated that not only was he willing, that he insisted in taking the test to prove his innocence of the unfounded charges that he was a participant in any fraud. They must have believed him because they never followed through with the polygraph test. Gil was informed by Asperger that their real target was his former boss, Tom Spiegel, and that in exchange for his testimony against Spiegel they would ‘reciprocate.’ Gil turned down the underhanded offer.

In February 1991, without any notice, Gil was arrested at his home, in front of his mother and children, in view of his neighbors, booked and jailed. He was charged with extortion, namely that he demanded and received $200,000 cash from Parker as hush money to keep quiet regarding the equipment leasing fraud; that he evaded the payment of taxes on the $200,000 he received, and, that he evaded the payment of taxes on the $33,000 ‘forgiven’ notes. It was clear that Asperger was attempting to coerce Gil into testifying against Spiegel since the investigation had cleared Gil from any wrongful participation with Parker in the equipment leasing scam. Accordingly, Asperger had changed the script to one of ‘extortion’ and ‘tax evasion’ in order to justify his prosecution and coercion and, probably equally as important, to save face since he had gone on public record through press releases alleging that Gil was part of the equipment leasing fraud.

In June 1991 Gil was tried in the court of District Judge Manuel Real, the same judge highlighted in my commentary : “When the Court Is Also the Prosecutor.” True to form as in the Dubin Case, the notorious Judge Real sided with the prosecution in limiting exculpatory evidence and gave unjustifiable leeway to Asperger, including allowing him to keep before the jury during the entire trial a 2’X4’ copy of the $200,000 check.

Despite the fact that Gil’s defense lawyer was a neophyte public defender, outclassed and outgunned, not unlike a light weight amateur boxer facing a professional heavy weight, the jury found Gil not guilty of the extortion and $200,000 tax evasion charges. However, the jury asked Judge Real for instructions and an explanation as to the $33,000 notes that had been cancelled.

A former prosecutor, and still a prosecutor at heart, Judge Real instructed the jury that if Gil had received the $33,000, the notes cancelled, and he had not reported the transaction as income in his tax return, that he was guilty of tax evasion. The jury returned a verdict of guilty on this count.

Notably, it was not the IRS that brought the charges against Gil. Single handedly it was Asperger. And the 50 count criminal charges against Tom Spiegel orchestrated by Asperger were subsequently dismissed by a jury who found Spiegel not guilty.

Judge Real was dead wrong in his instructions to the jury. If Gil had believed, as he did, that the notes were part of his settlement, a non-taxable transaction, then it was not tax evasion. Further, if reporting the transaction would have resulted in non-taxable income as a result of Gil’s losses, then there was no taxable income to report. Lastly, when a tax payer does not have the required intent to evade taxes, for instance when he believes in good faith that the transaction does not constitute taxable income, the required element of criminal intent (scienter) is absent and the defendant is not guilty.

Judge Real and U.S. Assistant Attorney James Asperger, both acting as prosecutors, gained a conviction at the expense of justice, on the back of Gil Fuentes, his family, friends and the Hispanic community at large who idolized him as a role model. Indeed, this was a pyrrhic victory that served only a prosecutor who was able to scratch another notch on his gun belt to enhance his career prospects. (Note: Asperger is now a highly paid criminal lawyer with the Los Angeles office of the national criminal law firm of Quinn-Emanuel ).

As an aside, imagine the millions of Americans who are criminally guilty of tax evasion, based on the above directive of Judge Real, for falling to report ‘debt forgiveness’ of a mortgage obligation as taxable income when they lose their home in a foreclosure. And what about Treasury Secretary Timothy F. Geithner, in the Obama Administration,  who was allowed to file an amended tax return years later, at his confirmation hearing, when inadvertently he had not list a minor item of taxable income he had received.

Gil served a couple of weekends on a halfway house. There was no fine. The IRS did not claim any taxes due or penalties; indeed there were none. But that was not his punishment. The injustice, his disgrace, his loss of an accounting professional livelihood, the disillusion of American justice and the ‘American Dream,’ and the permanent emotional hurt – these individually and collectively were his real punishment.

As Americans we should all lament the disintegration of our criminal justice system where a conviction is the main thrust albeit at the expense of justice. We need to apologize to our friend and neighbor, Gil Fuentes, for our collective failure in allowing American justice to be so desecrated. We can only hope and pray to our Almighty that somehow, somewhere, Gil’s conviction will be overturned and his civil rights, and, more important, his reputation and legacy, restored.

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Sal Osio is the Publisher of HispanicVista.com (www.hispanicvista.com). Contact at: SPosio@aol.com