Opening statements began Monday in the trial of David Lack, a former local general contractor accused of grand theft and fraud charges with two local banks as well as from a conservative blogger and former friend.
Lack is president of Lack Construction Company, which has spearheaded many high-profile construction projects, including, in an ironic twist, improvements to the Santa Barbara County Courthouse.
That’s where Lack listened Monday to a prosecutor and his defense attorney begin to tell jurors their versions of the events that led to criminal charges against him.
Prosecutor Brian Cota told jurors that Lack is charged with theft, but not the kind that uses lock picks or a ski mask.
Lack, he argued, committed theft by gaining the trust of people, including officials at two banks, as well as friends, “in order to take their money.”
During the trial, jurors would hear a lot about how Lack used his reputation to gain trust, Cota said.
In early 2007, Lack went to two separate banks to gain unsecured lines of credit.
Lack’s company made its home in a beautiful office building on Carrillo Street, adorned with photos of himself with top conservative leaders such as Gov. Arnold Schwarzenegger and former New York Mayor Rudy Giuliani.
“He presented himself as someone that was well off and well-connected,” he said, eventually convincing the Bank of Santa Barbara to give him a $700,000 line of credit and Mid-State Bank, now Rabobank, to provide a $250,000 line of credit.
Cota said that Lack inflated his personal net worth, and wasn’t forthcoming with loans or debts he owned.
In October that same year, he went back to Bank of Santa Barbara to increase that line of credit to $1.2 million, which was approved. Lack didn’t list the Rabobank liability, and both lines of credit eventually went into default.
Lack made incremental payments for eight or nine months, and the Bank of Santa Barbara asked Lack in February 2009 to secure its loan with the deed to his Danielson Road home in Montecito. After doing a title search, bank officials discovered his name was not on the title.
Lack told bank staff not to worry about it, and that the home was in the name of another person for tax purposes, Cota said.
Sometime after that, Lack filed for bankruptcy, and in that paperwork, stated that he did not own any property or transfer any.
“What these banks relied on was a complete fabrication,” he said. “It fit with the pictures on the wall … and what he portrayed, but it simply wasn’t true.”
Also expected to testify in the trial against Lack is conservative blogger Mary Belle Snow, who was friends with him and maintains that she was swindled out of $300,000 when he approached her about an investment opportunity, but actually used the money to pay bills, including payments to creditors.
Lack is facing a charge of financial elder abuse with Snow.
Snow had no reason not trust Lack when he came to her and offered her an investment opportunity “ironically for a start-up bank,” Cota told the jurors.
She invested $300,000 in the bank in March 2008, with the conditions that Lack would be the one to handle the money, and that it could not be used until the bank was approved by the federal government.
Lack took the money and started a new bank account, which he used “for his own personal expenses, including trying to pay down the Rabobank loan” and transferred most of it into his corporate account for Lack General Contracting.
“Within the period of a month, the bulk of the money was gone because he used it for his personal expenses,” Cota said.
When Snow would ask about the money, Lack would say it was sitting safe in an escrow account, but when her tax attorney started asking about whether the money would have tax implications, it was discovered that it was gone.
Defense attorney Bob Sanger argued that when Lack was given the loans, he was a successful businessman, with a 13-year track record as a general contractor in Santa Barbara before the economy began to crumble.
“The banks didn’t just rely on pictures on the wall… They relied on reviewed financial statements,” Sanger stated, and what the banks found was a high credit score, and they wanted his business.
The bank evaluated him and that he lived a modest lifestyle even though he was involved with Republican movers and shakers, Sanger said.
“There was a substantial amount of research and there was competition for his business,” Sanger told jurors.
As for Snow, she came into this situation “with her eyes open,” Sanger said, and wanted to be the director of the bank.
Sanger also argued that jurors could decide if the statute of limitations has expired for the banks to claim their money.
“At the end of the day, I submit this is a mess, but this is not a criminal mess,” he said.
The first witness called to the stand Monday was attorney Karen Grant, who had Lack as a client in 2010, when she helped him file for Chapter 11 bankruptcy.
Looking over the paperwork that Lack signed at that time, Grant said that Bank of Santa Barbara and Rabobank are both listed as creditors, as well as Snow and others.
Grant was also shown a recording of the bankruptcy hearing she and Lack attended four years ago, and testified to hearing Lack state that he didn’t have ownership interest in a Santa Barbara residence and that “the bank knows it.”
Lack also made a statement in response to questions about his lack of ownership of a Dallas property in which he replied, “it’s a big zero across the board,” Grant testified.
Sally Vito, a close friend of Lack, also took the stand.
Vito has known Lack over 20 years, and had loaned him $330,000 in 1998, and that he still owed about $181,000 in 2010.
The court also called to the stand Rabobank retail market manager Curt Cruthirds, who worked with Lack on obtaining a business line of credit with Mid-State Bank & Trust in 2007, prior to the Rabobank acquisition.
He confirmed the bank understood Lack to have full ownership of the Santa Barbara property, and even contacted Lack’s chief financial officer with his construction company who confirmed ownership.
He admitted that the lack of such an asset could have influenced the bank’s decision to offer him the loan.
The trial is scheduled to resume Tuesday.
Noozhawk intern Shaun Kahmann reported from the courtroom for this story.
— Noozhawk staff writer Lara Cooper can be reached at lcooper@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.