Developer Sirotin, Wife Charged With Theft

Former Pasadena developer Stanley Sirotin and his wife have been charged with five counts of grand theft for allegedly embezzling $3.7 million from 34 investors through an intricate scheme that employed European bank accounts, offshore corporations and an embellished past that helped to lure victims.

Deputy Dist. Atty. Timothy Browne, who filed the charges Wednesday, said that his office will initiate extradition proceedings to bring Sirotin, 62, and his wife, Alice Beryl, back from England, where they have resided on a country estate since April, 1984.

In their wake, the Sirotins left one retail project that was bankrupt, two others that were in financial trouble and dozens of investors who had gone to court charging that the developer had defrauded them out of millions of dollars.

Browne cautioned that it could take years before the Sirotins might be brought back for trial because they could appeal extradition through Britain’s House of Lords. If found guilty, Sirotin could be sentenced to nine years in prison while his wife faces a maximum term of seven years and eight months.

Sirotin has an unlisted telephone number in England and could not be reached for comment.

Two-Year Investigation

The charges against Sirotin, once one of the city’s premier developers, and his wife resulted from a two-year joint investigation by the state Department of Corporations and the major fraud division of the Los Angeles County district attorney’s office.

Browne said in an interview that the investigation is continuing and may yield additional charges against the couple.

“Because of the extremely convoluted business transactions, we don’t have a full accounting of what the Sirotins did,” Browne said. “There are other business entities involved, and money flying all over the place. I want to hold off on predicting any more charges. We have to see what turns up.”

The Sirotins were charged as co-defendants with five counts of grand theft. In addition, Sirotin was charged with two counts of violating the state’s corporation codes for failing to register a partnership agreement.

Six of the counts grow out of the developer’s role in forming the limited partnership Lake Avenue Associates, which from 1980 to 1984 developed The Commons, a three-story, 75,000-square-foot retail complex in downtown Pasadena designed to hold small specialty shops on the ground floor and offices on the second and third levels.

The seventh count is related to a second investment group, Lake Avenue Commons. Sirotin was listed as a general partner and his wife as a limited partner in the two groups. Browne said that much of the money was embezzled through checks written and signed by Sirotin’s wife or checks written to her.

In a 1980 solicitation letter for The Commons, Browne said, Sirotin told potential investors that he had obtained an $8.5-million construction loan from Bank of America, engaged the services of a well-known general contractor and presold all of the office space at an average price of $150 per square foot.

Dozens of investors eventually bought into the project, only to discover later that neither a construction loan nor a contractor had been secured and Sirotin had not sold a single office space, Browne said.

He said that the Sirotins, using a maze of Panamanian corporations and Swiss, French, English and local bank accounts, diverted large sums of money from the project for personal and business uses.

Took $10,000 From Account

Even after Sirotin wrote investors in February, 1984, that the project was in financial trouble and the partnership was filing for bankruptcy to preserve its assets, his wife took $10,000 from the partnership’s bank account, Browne said.

A few days later, the couple left for England with Sirotin asserting that he was broke and in ill health and was traveling to Britain to obtain heart treatment not available in the United States.

“Using bankruptcy proceedings to go behind the backs of investors and steal money was just one in a long list of ruses used by the Sirotins,” Browne said in an interview.

The Commons was one of three financially troubled downtown Pasadena development projects headed by Sirotin. Each has left behind a string of angry investors and creditors. Apart from the criminal case, 10 civil suits have been filed against the Sirotins on behalf of 70 investors and creditors.

The suits, now moving through the courts, seek a total of about $134.4 million for alleged acts of fraud, racketeering and nonpayment of fees. Judgments totaling more than $5.5 million already have been awarded in eight other suits against Sirotin, most of them brought by creditors for nonpayment of fees. But almost none of the investors has recovered a penny.

Last year, a London law firm representing Weston-Lusk, the general contractor for all three of Sirotin’s developments, obtained a court order freezing European bank accounts belonging to him.

Some of the investors had told state Department of Corporations investigator Al Lomas that articles in The Times featuring Sirotin lent an air of credibility to the man and his ambitious plans.

In articles that appeared in 1979, Sirotin told of earning a law degree from Columbia University, of building the first bowling alleys in Europe and of erecting office buildings in Madison, Wis.

He portrayed himself as a world traveler who ate at the finest restaurants, drove a Rolls-Royce and lived happily in his hilltop home in Malibu.

Copies on Wall

“He had one of the articles on the wall of his office, and he made other copies that he attached to fund-raising letters,” Browne said.

But only part of that record was true, the remainder proving to be evasions and embellishments, according to a investigation by The Times earlier this year.

It found that Sirotin never received a law degree from Columbia, and his past was checkered with a half-finished luxury hotel in Madison and court judgments totaling $180,000, mostly for unpaid loans.

Anita Baumoel--who along with her husband, Kermit, has filed a suit against the Sirotins alleging fraud and asking for $20 million in punitive damages--said that she was pleased by the filing of criminal charges.

‘Think It’s Great’

“I think it’s great. I hope he gets his due reward,” she said. “We certainly haven’t given up hope of getting our money back.”

Browne said that the grand theft charges were divided into five counts to delineate between different time frames and pools of investment.

“There was an initial group of investors in 1980. When he wanted to get more money later on, he collected funds from a separate but overlapping group of people,” Browne said.

Browne said that Sirotin’s use of one business entity, the Great Hall Corp., illustrated the method he employed to embezzle the money.

False Claims

Sirotin claimed that Great Hall was a British concern for which he did business and to which he owed money. In fact, Browne said, Great Hall was a Pananamian corporation that had a Paris mailing address and a Swiss bank account.

In three separate transactions, Browne alleged, Sirotin diverted $432,000 from the project to develop The Commons and placed it into the Great Hall corporation account in Switzerland.

“This is how he got the money. He told some office people that Great Hall was a entity he was doing business with when in fact he was using it as his personal bank account in a foreign country,” Browne said.

“He was sending thousands of dollars to it and the investors didn’t even know Great Hall existed.”

Empty Promises

In their suits, the investors contend that Sirotin never repaid their investments, as promised, nor did he ever pay the returns of up to 60% that he had promised on those investments.

They also allege that Sirotin’s three Pasadena projects were built while Sirotin was commingling and pocketing a substantial portion of the projects’ funds.

For those few who have won judgments, the victory is hollow.

Except for his abandoned Malibu home, posted as unsafe in 1983 by Los Angeles County because it is in the Big Rock Mesa slide area, Sirotin has no identifiable assets in this country, attorneys involved in the settled suits said.

Tied up in bankruptcy proceedings for nearly two years, The Commons recently has been sold for an undisclosed sum to an undisclosed group of local investors.

Project Gone Wrong

The investigation by The Times showed that The Commons is perhaps the clearest example of how a Sirotin project went wrong.

The building, at 142 S. Lake Ave., is a striking development, modeled after European marketplaces.

As he did with Les Bureaux, at 45 S. Hudson St., and the Burlington Arcade, at 382 S. Lake Ave., Sirotin solicited a substantial portion of The Commons’ funding from private investors, according to court documents.

Three letters were written by Sirotin to Beverly Hills real estate agent Fred Gottfurcht in February and March of 1980 that offered investment opportunities in The Commons.

Promise to Repurchase

The letters, copies of which were obtained by The Times, authorized Gottfurcht to sell 50% of a newly formed limited partnership, Lake Avenue Associates, to investors for a total of $2 million.

At the end of two years, Sirotin said in the letters, he would exercise an option to repurchase the limited partners’ interests.

In one letter, he offered a 60% profit; in the other two he offered a 55% profit. One letter contained a reference to an article in The Times’ real estate section that heralded the planned office condominium and retail development.

According to a written review of the limited partnership agreements compiled by Commons’ investors Al Kaufer and Dan Lang in research for their suit against Sirotin, Lake Avenue Associates had gathered 26 private investors who contributed a total of nearly $2.1 million as limited partners by May, 1980.

More Partners

Kaufer’s and Lang’s review also found that Lake Avenue Commons, a second entity that was formed by Sirotin to sell 20% of his own interest in Lake Avenue Associates, had collected a total of more than $3.7 million from 33 investors by July, 1982, bringing the total number of limited partners in The Commons to 59 and the total of their contributions to more than $5.8 million.

None of the limited partners in The Commons has been repaid, Kaufer and Lang said earlier this year.

Unknown to investors in The Commons at the time they put their money into the project, they said, was the falsity of several claims made by Sirotin in his letters, namely that the office condominiums were “100% sold” and that Bank of America was the lender for an $8.5-million loan.

Bank of America had not loaned any money to Sirotin at that time, bank officials said. The office condo idea died after the bank refused financing, according to Daniel Hayes, who was hired by Sirotin to find tenants for The Commons.

Quick Disintegration

In 1983, when The Commons was completed, almost all of the retail space on the ground level had been leased to restaurants and shops such as the Il Fornaio bakery and the Cheese Store, Hayes said.

But things quickly began falling apart. The ground-floor merchants complained that without second- and third-floor tenants, their businesses were languishing because of lack of traffic.

Attorney’s Office Management Inc., a firm that specializes in subleasing office space to attorneys, had signed a lease for the entire second floor, but filed for reorganization under federal bankruptcy law in 1982, thereby tying up the second floor in lengthy court proceedings and making it impossible to lease the space to another tenant.

Sirotin filed bankruptcy on behalf of Lake Avenue Associates in February, 1984, claiming that the partnership had $16 million in debt and $15 million cash on hand.

Slow Recovery

Today, The Commons, under its new owners, is just beginning to recover. However, the interiors of the second and third floors never have been completed, and much of the complex is vacant. Il Fornaio and the Cheese Store have closed.

Although Sirotin’s three commercial centers in Pasadena still are praised by city officials as examples of beautiful architecture, the financial security of the structures had been rocky at best.

Les Bureaux, a nine-story office building, was sold to Equitable Life Assurance Society in 1982 for about $15.8 million. Although fully leased at the time it was sold, investors took a heavy loss, court documents show.

According to an affidavit filed by the state seeking Sirotin’s banking records, an examiner from the state Department of Corporations determined in 1983 that the Les Bureaux investors lost more than $3.4 million in the project while Sirotin benefited by more than $1.8 million.

The Burlington Arcade, a two-story retail complex modeled after the London landmark of the same name, was more than $3 million in debt and half empty when it was sold to Orange County developer Gayle Post in July, 1984.

It took almost a year for escrow to close, Post said, because of liens against the property.