Bergsmark guilty of check kiting, forgery in collapse of Cavista Corp.

3/20/2003

Judge Frederick McDonald also found Bergsmark guilty of forgery for drawing up a dummy lease for an apartment that allowed a former Toledo official to keep his job with the city.

Judge McDonald acquitted Bergsmark of bribery.

Bergsmark, a lawyer and former banker, showed no emotion as Judge McDonald announced the verdicts.

Sally Bergsmark, the businessman's wife of 39 years, remained calm, sitting in the same chair she occupied throughout most of the five-day trial.

After the hearing was adjourned, attorney Jerome Phillips took his client and Mrs. Bergsmark into a jury room. They emerged 20 minutes later where they were met by television cameras, reporters, and a photographer.

Bergsmark, walking with the aid of a cane, went with his wife and Mr. Phillips to the fourth-floor elevator. He did not respond to questions from the media asking for his reaction to the verdicts. When they reached the ground floor, the Bergsmarks held hands as they left the courthouse.

In an interview later, Mr. Phillips said he was disappointed that Bergsmark was not acquitted of all the charges. He said he was pleased the judge acquitted his client of the most serious charge of bribery.

He said Bergsmark plans to appeal the forgery and passing of bad checks convictions.

“We have discussed it. He understands at this time that after completing the sentencing phase, we will go forward with an appeal on the remaining convictions,” Mr. Phillips said.

Mr. Phillips said trial transcripts would be reviewed to determine possible legal strategies for the appeal.

“We do not believe the evidence presented in court showed beyond a reasonable doubt that he is guilty of the charges. Other issues may be raised after reading the transcripts,” he said.

Sentencing was set for April 24. Bergsmark, who was banned from banking for his role in the demise of Toledo's Trustcorp in the 1980s, could get 14 years in prison.

J. Christopher Anderson, an assistant county prosecutor who tried the case, would not comment about a possible sentence recommendation.

Bergsmark also faces possible sanctions that could affect his license to practice law in Ohio.

Jonathan Cherry of the Toledo Bar Association said conviction on a felony is grounds for an interim suspension. He said the Ohio Supreme Court would later determine an appropriate punishment that could be as severe as disbarment.

“That is the discretion of the Supreme Court. It varies from case to case. There are situations in which lawyers have been convicted of felonies and they have received lesser penalties than disbarment,” Mr. Cherry said.

The forgery and bribery charges stemmed from a phony lease that Bergsmark arranged in April, 1997, for James Thurston, then Toledo housing commissioner who was involved in the city's efforts to provide financial backing for a Cavista project.

Bergsmark set up Mr. Thurston with the apartment at 2515 West Bancroft St. so Mr. Thurston could show then-Mayor Carty Finkbeiner he had moved into the city. Mr. Finkbeiner had given Mr. Thurston of Perrysburg Township until May, 1, 1997, to comply with the residency requirement.

Mr. Thurston did not pay the $750-a-month rent, and allegedly changed his voting address with the Lucas County Board of Elections in November, 1997, and allegedly voted in two elections as a city resident.

Had the case been heard by a jury instead of a judge, instructions would have been given after closing arguments that would have asked jurors to consider the elements needed for conviction on the charges.

The instructions for bribery would have asked the jurors if Bergsmark purposely corrupted or improperly influenced Mr. Thurston with respect to the performance of his job as a public employee.

Mr. Thurston, a co-defendant in the case, testified that he signed the phony lease so he could keep his job. He said he did not move into the penthouse apartment and did not pay rent. He said he did not promise Bergsmark anything in return, and he did not do anything to benefit him.

Mr. Thurston is expected to enter a plea today before Judge McDonald to a felony voting charge. Prosecutors have agreed to dismiss bribery and forgery charges in return for his testimony.

In the case of a jury trial, the instructions for convicting Bergsmark of passing bad checks would have asked if he purposely caused checks to be issued that he knew would be dishonored.

The instructions for forgery would have asked jurors to determine whether Bergsmark facilitated a fraud by forging something in writing so that it appeared to be genuine when it actually was spurious.

In this trial, where Judge McDonald substituted for the jury, he appears to have followed the letter of the law in finding Bergsmark not guilty on the bribery count, but guilty on the bad check and forgery charges.

In the trial, prosecutors presented the commission checks of 12 real-estate agents that bounced in mid-December, 2001. The checks for about $38,000 were issued from accounts the firm maintained with KeyBank.

KeyBank officials and a Cavista accountant testified that the account was frequently insufficiently funded to cover the checks. They testified the bank covered overdrafts for several months so checks would not bounce, but Bergsmark was told repeatedly that the overdrafts had to end.

John Kolpien, a consultant hired by Bergsmark in December, 2001, to save his company; John MacKay, an attorney for KeyBank, and others testified that Cavista was losing millions of dollars annually, defaulted on a $7.7 million loan to KeyBank, and was not generating enough money to meet expenses.

The bulk of Cavista's profits were generated by the commissions from property transactions through the operations of Cavalear Realty. Witnesses testified that Bergsmark insisted that the real estate agents got paid because they were needed to keep the business afloat.

However, KeyBank, after learning that Bergsmark owed more than $3.7 million to three other banks, stopped paying checks when the account was insufficiently funded, causing the checks to the real estate agents and others to bounce.

Mr. Anderson said Bergsmark knew for two years about Cavista's financial woes, yet he persuaded the banks to lend him money.

He said Bergsmark withheld important financial information from KeyBank until shortly before the problems caused the firm to close on Dec. 27, 2001.

“He had to know it was going to collapse. This was much more than a bad business plan,” Mr. Anderson said.

The indictment addressed specific checks to 12 people, but authorities said Bergsmark was responsible for more than 200 other bounced checks for more than $215,000.

Frank Stiles, chief investigator for the prosecutor's office, said other real estate agents and vendors owed money for services and equipment are among 56 people, businesses, and organizations that did not get paid.

“Obviously, we could not take up the court's time with all the cases. It would have taken over six months to prosecute,” he said.

The police and prosecutor's investigation into the white-collar crimes began in September after a series of articles in The Blade reporting on Bergsmark's financial difficulties and Cavista's involvement in the failed Beacon Place project.