Man’s Empire Built on Fraud, U.S. Charges

On paper, Artie Gilbert Sr. was a man of means.

His business portfolio detailed a burgeoning commercial enterprise that included liquor stores, a bail bond agency, a paralegal firm, a medical laboratory and parcel upon parcel of real estate worth more than $3.4 million. When he needed fresh infusions of cash, he offered banks loan applications piled thick with impressive letterheads, invoices, real estate schedules and tax returns.

Gilbert was not carried away by extravagance, but his growing empire allowed him to indulge a few weaknesses. He favored gold chains. He furnished the den of his Inglewood home with a slot machine and a professional Las Vegas-style gaming table. His prize, parked in the driveway, was a gleaming Rolls-Royce Silver Corniche convertible. The initials “AG” were etched in solid gold into the door panels.

Artie Gilbert maintained his empire until last week, when it was undone by a new flurry of paper work.

A 20-page list of criminal allegations and an accompanying 68-page government memorandum revealed Gilbert’s indictment last Tuesday by a federal grand jury on charges of defrauding seven banks of more than $1.4 million. One prosecutor described it as a sophisticated scheme in which Gilbert built “fraud upon fraud upon fraud.”

Federal and city police investigators who have been following Gilbert’s career describe him as Los Angeles’ premier fraud artist of recent years, a man who worked overtime fashioning non-existent companies out of bogus documents and devising elaborate frauds that duped veteran bank officials and elderly homeowners alike.

“He wanted to create such a broad financial base that no one would be able to touch him,” said Richard Levos, a detective with the Los Angeles Police Department’s bunco-forgery unit. “And he was on the verge of doing just that.”

Gilbert’s real assets were not as extensive as his paper claims. Federal officials have only been able to verify his ownership of three liquor stores and the bail bond and paralegal firm. The extent of his ownership of the rest of his paper holdings depends on the outcome of the court cases he faces.

In addition to the bank fraud case filed last week, Gilbert, 39, faces a federal trial on a charge of trying to buy 110 pounds of cocaine and two state trials on charges of grand theft and filing false real estate documents to obtain more than $260,000 worth of real estate. Federal and Los Angeles police investigations of Gilbert’s operations are continuing.

Last April, Gilbert declared bankruptcy, listing more than $2 million in debts to banks, credit card companies and several smaller firms. But questions have mounted about how much he actually owed, and last week his federal trustee seized his house and liquor store amid reports that Gilbert was being investigated for bankruptcy fraud by the U.S. Justice Department’s bankruptcy fraud unit.

In the federal memorandum, authorities describe Gilbert’s financial dealings as “a continuous, tangled web of fraud and deceit.”

A day after his arrest, Gilbert sat shackled on a federal courtroom bench during a detention hearing. He talked briefly about his situation, warily insisting that commerce, not crime, was his business.

“I’m just an entrepreneur,” he said.

Law enforcement authorities and those who have dealt with Gilbert describe him as a sharp, articulate man with a finely honed business sense. “He was a money engineer,” Levos said, “a workaholic in his own way.”

At least once a week, Gilbert, 39, drove his Rolls-Royce convertible to his “AG” liquor stores in Inglewood and West Los Angeles, where he expected employees to keep shelves and inventory well-stocked and in perfect order. “He wanted it neat and clean,” said an employee at Gilbert’s Normandie Avenue store.

Gilbert furnished his two-story brick and wood-frame house in Inglewood opulently. When he was arrested, investigators found a massive desk with a six-inch marble top, a pool and Jacuzzi and a dining-room table that was perpetually set for six with expensive china.

Besides his Rolls, Gilbert once owned a Mercedes-Benz and an $18,900 Land Rover, police said. When Gilbert was arrested by a team of FBI and IRS agents and Los Angeles police detectives last Wednesday, law enforcement authorities said, his Rolls and his Land Rover were in his driveway. That evening, when a federal bankruptcy trustee showed up at his house to seize his possessions, the cars were gone.

According to the indictment and statements by Bonnie S. Klapper, the assistant U.S. attorney who headed the federal investigation, Gilbert’s ultimate fraud was his creation of a fictitious medical office called “Laboratories Unlimited.”

Between November, 1983, and December, 1985, Gilbert applied for a series of bank loans to stock his fantasy firm with expensive blood analysis machines. Posing as a laboratory technician, Gilbert applied to four banks--Heller Financial, in Chicago, and Founders Savings & Loan, Omni Bank and First Interstate Leasing, all in Los Angeles--for loans to buy DACOS blood analyzers, computer-driven devices that read the contents of blood serum.

The analyzers, which cost up to $125,000 apiece, were never actually ordered or purchased by Gilbert, prosecutors said. Instead, Klapper said, “the overwhelming majority of the (loan) money went into Artie Gilbert’s pockets.”

Investigators say that Gilbert presented an impressive package of documents to give the appearance of reality to Laboratories Unlimited. The federal memorandum describes Gilbert sending the banks phony income tax returns, invoices and financial statements and presenting forged letters from “numerous doctors” to give the impression that his laboratory had performed work for them.

Each loan application was granted. From Heller, Gilbert obtained $284,000; from Founders, $100,000; from Omni, $198,500 and from First Interstate, $275,000.

According to the federal indictment, Gilbert’s fraud did not stop with the four banks. In 1986 and 1987, he applied for a series of loans from Wilshire Center Bank and the Bank of Beverly Hills, using documents that originated with Laboratories Unlimited. According to the federal memorandum, Gilbert “submitted phony financial statements and tax returns,” obtaining $395,000 from the two banks.

Investigators said Gilbert’s paper shield worked because he was represented in most contacts with the banks by professional loan brokers. The brokers submitted much of Gilbert’s papers, shopped his loans to different banks and smoothed over any problems that developed.

“I’m not sure that the banks ever met him,” Klapper said.

Donald Gomes, chief operating officer and senior vice president at Founders Bank, explained that Gilbert’s application most likely sailed through because of its surface authenticity.

“It’s possible that no one would have been able to check him,” Gomes said. “He may have had a reasonable credit history.”

Officials at the other banks declined to comment on the case.

Levos, who has been the lead police investigator into Gilbert’s business dealings, said some banks are “embarrassed” about their dealings with Gilbert and were reluctant to come forward to police. Some bank officials have never returned Levos’ telephone inquiries about Gilbert.

But other banks questioned Gilbert’s paper work, demanding proof that he had purchased the blood-analyzing machines. According to prosecutors, Omni bank sent two examiners to look over Gilbert’s machine.

Gilbert met the examiners at a real medical clinic and, according to the federal memorandum, when they pressed him to see the DACOS analyzer, “Gilbert told the bank employees that the equipment was in quarantine because it was being used to test blood for the AIDS virus.”

Instead, prosecutors said, Gilbert presented the examiners with a photograph of the machine taken from a brochure. The examiners walked away satisfied.

“If you started talking to him for awhile, he could talk you out of your eyeteeth,” Levos said.

In October, 1987, Gilbert was arrested by federal authorities on charges of trying to buy 110 pounds of cocaine from a federal informant with the intent of later selling the narcotics. Several days after a U.S. district judge released him on bail, Gilbert bought his Rolls-Royce with a $145,000 loan from Sanwa Bank--the final charge in last week’s indictment.

Gilbert had provided the bank with fraudulent financial documents, the indictment charges. Included in those documents was a list of real estate properties that city police investigators say Gilbert may not have owned and had been obtained through an entirely separate series of frauds.

Deputy Dist. Atty. J. Timothy Browne, who is prosecuting two state cases against Gilbert, said Gilbert and three associates are accused of forging the deeds of seven pieces of property, four of which belonged to elderly, widowed women. The women were members of New Hope Baptist Church, where Gilbert’s aunt, a co-defendant, was a longtime parishioner.

Gilbert wrote up phony deeds showing that he owned homes that actually belonged to other people, Browne said. In court documents, Gilbert is accused of using fake notary stamps to validate the deeds.

Most of the victims did not even know that the title of their homes had changed until they received their annual property tax bills.

“I never even met Mr. Gilbert,” said Bertha Benjamin, an 80-year-old widow who noticed something was wrong when her tax bill last summer was addressed to a different person. She said she immediately called the tax assessor’s office and was informed that she was no longer listed as the owner of the home she has lived in for 38 years and had fully paid off.

“I was in shock. It has all been so confusing,” she said. “I have never borrowed a penny against this house and to have it all taken away with the signing of a pen. . . . It scares you.”

Investigators said that even when their inquiries and court cases are completed, they may never know how much money passed through Artie Gilbert’s hands.

“There’s no way to know,” Levos said. “He is the most prolific and diverse individual I have ever seen. There is nothing he wouldn’t touch.”