2 Charged With Embezzlement of $1.2 Million

Two men have been arrested near Denver and charged with embezzling $1.2 million from a savings and loan in Irvine, according to interviews with law enforcement authorities and a federal complaint unsealed Thursday.

Darrell Dean Knox, 46, of Fallbrook, and Richard Russell Holtby, 44, of Murrieta, are accused of embezzling the money from Sterling Builders Inc. (SBI), a subsidiary of Sterling Savings and Loan in Irvine, according to an Aug. 9 federal complaint by the FBI.

Knox, the former controller of SBI, was arrested Sept. 5 in Englewood, Colo. He was using an alias and had a loaded .357-caliber revolver and several ammunition clips, said Jim Donckels, head of the Federal Bureau of Investigation’s white-collar crime unit in Orange County.

Holtby, a business associate of Knox, was arrested Aug. 31 in Englewood after police stopped the car he was driving for speeding. Donckels said Colorado police found a loaded .45-caliber semi-automatic pistol, spare ammunition clips and a 16-inch machete in Holtby’s car.

Knox allegedly issued SBI checks to fictitious entities and then had Holtby and other friends assist him in laundering the money through several bank accounts, FBI special agent Dan Ray contends in an affidavit filed in U.S. District Court in Santa Ana. The FBI also alleges that the two men sometimes forged endorsement signatures on checks made out to SBI customers and deposited those checks in bank accounts they controlled.

One week ago,FRI a U.S. magistrate in Denver ordered both held without bail. They are scheduled to be transferred to Metropolitan Detention Center in Los Angeles. The U.S. Attorney’s office in Los Angeles has 30 days to seek an indictment before the charge of federal bank fraud is dismissed.

Asst. U.S. Attorney Steven E. Zipperstein said the investigation is continuing. He declined to comment further.

SBI discovered the alleged scheme early this year after making a routine call to Larry’s Weld-All, a former SBI supplier. During the conversation, Larry’s was asked to confirm that it had received a $1,590 check made out to the company.

Sterling executives could not be reached for comment Thursday. But they said in an interview with FBI agent Ray, recounted in the affidavit, that they would ask the Federal Savings and Loan Insurance Corp. to reimburse the institution for the missing $1.2 million.

Times staff writer James S. Granelli contributed to this article.