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by
Daniel Blackburn
The three men had been the best of friends for nearly 30 years. Their Manhattan Beach offices were adjacent. They golfed regularly at Palos Verdes Country Club. They lunched almost daily; they knew each other's families like their own. And, like a well-lubricated machine, the partnership they formed made money together -- lots of money, even in difficult times.
And then, one of these tres amigos noticed some of their money was missing.
Bitter memories
Robert Stuart (Stu) Johnson slumped on a rock-hard bench in the hallway outside a Los Angeles County courtroom where soon he would become a key witness in a complicated felony criminal trial pitting his credibility against that of a man who had been his friend.
It was a moment Manhattan Beach's Johnson approached with bittersweep anticipation.
Johnson, 86, his wispy white hair combed straight back, began a slow walk toward the courtroom, his progress aided by a bentwood cane. He spoke hesitantly but firmly.
"This kind of thing takes a lot out of a man. When you trust someone...." Johnson's voice trailed off. These were to be the pleasant twilight years of his life.
Inside the courtroom of Superior Court Judge Frederick N. Wapner Jr., the subject of Johnson's dismay sat in the defendant's chair next to his very expensive Avenue of the Stars attorney.
Morgan S. (Stan) Ralls Jr., one Manhattan Beach’s most prominent attorneys, with a long history of community involvement, had been accused of three felony counts of grand theft and was not at all happy about it. But despite the tension, during what remained of an afternoon break in testimony, Ralls and his lawyer enjoyed a joke and a few laughs with a courtroom baliff.
This was a complicated case, prosecutor Bill Pinzen had said in his opening comments to a six-man, six-woman jury. It "involves thefts that took place in 1990, 1992, and 1994." It also incorporated, Pinzen said, a breach of confidence and a painful exploitation of friendship.
Pinzen, a UCLA grad whose conservative style of dress leaned toward mismatched suits, gestured softly with his hands as he talked, actions which seemed to call attention to his mind-of-its-own hair.
Methodically and thoughtfully, his delivery punctuated by mid-sentence pauses, the chief of the Los Angeles County District Attorney's Major Fraud Division laid out the framework for his prosecution:
"The evidence will show," he said, "that the defendant, Morgan Ralls, unlawfully took money to which he was not entitled from men who trusted him."
According to Pinzen, a total of $229,330 had been stolen by Ralls from his partners, in increments of $75,000, $105,000, and $49,330. Each represented one count in the people's case against Ralls.
Ralls' attorney, Roger J. Rosen, said the evidence would demonstrate no such thing.
"Mr. Ralls stole nothing," Rosen told the jury.
He pointed to an intense, round-faced man sporting a clipped, grey mustache who was perched at the prosecution table.
"Ed Medlock, whom you see sitting next to Mr. Pinzer, was absolutely wrong in his conclusions."
Medlock is the Manhattan Beach police detective who investigated the alleged thefts for more than four years before the case finally went to trial.
"The evidence," said Rosen, "will show that each sum of money was done in a way absolutely consistent with good and acceptable accounting and business practices."
Thus was set the stage for a 10-day criminal trial showcasing the complex twists and turns of a wheeling-and-dealing business world, and defining limits to the bonds of a venerable partnership.
Old Manhattan ties
Johnson, Ralls and Allan H. Juckes were principals in numerous development and investment partnership entities, operating from the mid-1970s from unassuming, utilitarian offices at 1001 6th Street in Manhattan Beach.
Each man brought different talents to the partnership table. Johnson had been a banking executive for 40 years, authorizing and writing thousands of residential and commercial loans, many for South Bay construction.
During the course of his banking career, Johnson met Ralls, a frequent commercial loan customer whose business record Johnson perceived as exemplary. Ralls had law and accounting degrees and was licensed in the state of California to practice both law and real estate brokering.
In 1975, Johnson and Ralls teamed with successful South Bay builder Juckes to form Niblick Inc., a partnership with the purpose of funding second mortgages for real estate. The name of the company was derived from a graying term for a golf club used to "pitch" to a green. Utilizing their widespread contacts, the partners would locate both lenders and loan applicants, and put together the deals.
A partnership called JRJ -- using the initials of each man's last name -- was consolidated. Its mandate was to maximize Niblick profits by buying and selling real estate. Eventually, with profits rolling in, the partners decided to enter the real estate construction business directly, subsequently constructing an upscale, three-unit beach condominium on 12th Street in Manhattan Beach.
The condos were sold in 1990, and the JRJ partnership banked a profit of $705,000.
Most of this profit in turn was used as a down payment for the purchase an office building near Baldwin Hills called Stocker Plaza -- four two-story brick office buildings with more than 100,000 square feet of lease space.
To do this deal, the men formed Stocker Plaza Partnership, an offshoot of Niblick which was much more casual in its operational structure than the parent corporation.
The partnership hired J. Demitrius (Jim) Vames to manage the facility, and Vames immediately set his sights on higher rental revenues.
A short, bespectacled man, Vames took a no-nonsense approach to managing Stocker Plaza, which was generating only about $30,000 a month in lease revenues at the outset of his tenure. Despite Vames pushing the rent proceeds ever higher, Stocker Plaza badly needed extensive interior renovations in order to attract clientele willing to pay premium rentals. Only then could the investment be expected to make a respectable return.
Stocker Plaza secured a second trust deed loan from private investors for $705,000 for some initial renovation. That money would be repaid by a larger loan the Stocker Plaza partners soon would seek.
But the partners' timing was terrible. Their search in June 1994 for a $4 million loan in order to fund the necessary extended renovation, and to pay off the original mortgage holder, was proving exasperating and futile. Their efforts unfortunately coincided with a severe hit being taken by the beach cities real estate industry, and even with the formidable connections of each of the partners, no loan was forthcoming.
The situation was becoming desperate, as the partners' Stocker Plaza mortgage holder had already notified them the loan was in default and that the start of foreclosure proceedings was pending.
Vames, who had been a successful commercial real estate broker, had an ace up his well-tailored sleeve. He knew the value of Stocker Plaza was much higher than the puny loan of $4 million being sought. He convinced the partners that the property was really worth $8 million to $10 million, and then found the loan money himself, a $4 million boost from Bank of America. The burgeoning rent revenue and income performance of Stocker Plaza, coupled with the professional efforts of Vames in his management performance, would be cited in courtroom testimony as two reasons the loan was secured.
As payment for his efforts, Vames was designated a 25 percent partner in Stocker Plaza.
But a major problem faced closing of the loan. During escrow, numerous liens against Ralls were revealed, most filed by creditors of his failed investment in several El Pollo Loco chicken franchises, including one in Manhattan Beach.
Because Ralls' El Pollo Loco liens would have effectively prevented Bank of America from funding the Stocker Plaza loan, creating a domino plunge to failure, the partners anxiously sought a solution.
An agreement was reached for the partnership to purchase Ralls' 20 percent interest in Stocker Plaza for the amount of the liens -- $422,000, allowing payoff of the obligations and clearing the way for the loan's final approval.
Once received, loan proceeds were used for renovation of the office buildings, with Vames supervising ongoing daily procedures.
For the partnership, happy days were here again. The men had not only weathered a very dicey economic period, they had made a substantial amount of money during a time many others were failing.
The years were marching on, too, and Johnson and Juckes, the older partners, began to pace themselves accordingly. The office virtually ran itself. Day-to-day operations were overseen by Ralls; bookkeeping responsibilities were handled by a seemingly stable and competent woman named Pat Yarborough, who had known each partner for many years.
Yarborough had worked as a secretary to Johnson during his tenure as a vice president of Union Bank in downtown Manhattan Beach before she left to work for Ralls.
In mid-1996, Johnson wrote a $30,000 loan check from the Niblick Inc. trust account to a man with whom Johnson had done business for many years.
Several days later, the customer called to tell Johnson the check had bounced.
Stunned, Johnson promised the man he would make the check good immediately. He drove quickly to the bank to solve the matter, requesting copies of checks.
Upon returning to his office, Johnson studied the check copies and was struck by a surprising abundance of checks, all signed by bookkeeper Yarborough, to a company owned by none other than Yarborough. It all pointed to a disturbing, and likely criminal, possibility.
Johnson, without mentioning the situation to either of his partners, packed up his accumulated data and legged it over to the Manhattan Beach Police Department.
There, Det. Medlock listened to Johnson's story for nearly five hours. He examined the documents and agreed: Patricia Yarborough was a thief. Hundreds of thousands of dollars appeared to be missing from the partners' various accounts, and much of the money had been issued to Bolt, Inc., a small computer company owned by Yarborough.
New suspicions
While Medlock was digging into Yarborough's apparently rampant looting practices stretching over a six-year period, Vames resigned his position as managing partner of Stocker Plaza, for reasons unrelated to the Ralls investigation. Johnson and Juckes, as majority partners, turned the financial affairs of the partnership over to Manhattan Beach real estate and financial consultant David Arias in 1997.
It didn't take long for Arias to discover what he thought were questionable deductions by Ralls from partnership accounts.
For example, Arias asked Johnson, what is this 1990 draft to Ralls from the Niblick account in the amount of $75,000? It appeared that Ralls had taken the $75,000 out of the financial exchange when the Stocker Plaza purchase was executed by JRJ.
The payment was made with a check signed by Yarborough.
Johnson said he didn't know what the money was for, and added that he didn't believe the partnership had authorized its disbursement. Juckes later would back Johnson's recollection.
Investigator Medlock, in the meantime, started a full court press on Yarborough. He burrowed beneath the thin veneer of Yarborough's fiscal concealment and came up with more than enough evidence of embezzlement of the partners' money to validate his threat of her long prison incarceration.
By this time, Arias had come up with two additional transactions involving payment of sums of money to Ralls that Johnson and Juckes couldn't recall.
One was a $105,000 transfer in 1992, again made in a check signed by Yarborough and taken from the fund earmarked to improve the Stocker Plaza property. That money was used to pay two of the numerous El Pollo Loco-related leins.
The other was a check drawn in 1994 for $49,330, also paid to one of Ralls' El Pollo Loco creditors. This check was signed by Ralls himself.
Johnson and Juckes insisted they didn't authorize the payments as required by their rules of partnership.
Faced by imminent arrest as her financial schemes unraveled, Yarborough bolted the state, only to be apprehended in Chicago shortly after her disappearance was noticed by Manhattan Beach law enforcement authorities.
When she was caught, according to Medlock, Yarborough "promised to cooperate" and told both him and arresting officers her version of events. She spun Ralls into her story, allegedly claiming he was a co-conspirator in many thefts. According to prosecutor Pinzen, Ralls knew as early as 1991 that Yarborough was stealing from the partners, but remained mute. In fact, charged the prosecutor, Ralls "helped her steal, always from accounts in which he had no financial interests."
(No conspiracy charges were ever alleged or filed against either Ralls or Yarborough, and she was not called as a witness in Ralls' subsequent criminal trial. She pleaded no contest to a variety of grand theft charges, awaits sentencing Sept. 25, and faces possible prison time.)
"Yarborough rolled," Pinzen told a reporter during the trial. "She was going to testify against Ralls, but in the end she didn't."
While police investigated possible criminal charges against Stan Ralls, his former partners Johnson, Juckes, Vames and the Lesser brothers filed a civil action in September 1997 against both him and his brother, William R. (Riley) Ralls. That trial was heard in July 2000 in Los Angeles Superior Court, and culminated with a judgement of more than $900,000 in actual and punative damages against the Ralls brothers.
In that civil trial, Stan Ralls acknowledged that Stocker Plaza Associates was entitled to a significant judgement against him. The jury said both defendants "acted with malice or oppression" and found that Stan Ralls "breached a fudiciary duty to the plaintiffs."
The judgement also found that Ralls was not entitled to any more than the $422,000 he had been paid for his share of Stocker Plaza, and dissolved the JRJ partnership entirely.
An unhappy ending
When Stu Johnson took the stand as the prosecution's first, and key, witness, he was dressed casually in slacks and a golf shirt. Brief moments of hesitancy marked his testimony, but in a firm voice he described how he first discovered that his own partner might be responsible for some of the missing money.
"We were surprised and hurt," he said, including partner Juckes in his comment.
Johnson told the jury how he spent his life in banking "because I loved the work, and I loved helping people." He told about his long career, which started at Bank of America, then to Gateway Bank, which eventually was swallowed up by Union Bank. Johnson said he consistently rose among the ranks of other vice presidents, partly because he was writing more than 500 commercial and residential real estate loans each and every year.
Defense attorney Roger J. Rosen, fashionably dressed with thinning grey hair neatly tailored, bore in on Johnson when it came time for cross-examination.
Rosen, a USC alumni, probed at Johnson, trying to show the witness was confused and forgetful about significant points in his testimony. Jury members looked on impassively, no hint of feelings apparent.
Asking questions suggesting that Johnson's recall of important details might be fuzzy, Rosen methodically drew a timeline of the alleged thefts to attempt to show that Ralls' withdrawals of the money in each case were appropriate and legitimate.
As the first day of Johnson's testimony drew to a close, Rosen concentrated on the initial criminal charge involving the $75,000.
Keeping one eye on the clock and the other on Johnson, Rosen probed the witness regarding the source as well as the lawful owners of the funds in question.
"After the 12th Street condominiums were sold and the profits banked," asked Rosen, "were there not funds in that account that belonged to all three partners?"
Johnson agreed.
"So when Mr. Ralls took the $75,000, was he not simply taking money that was his?"
Johnson hesitated, and then nodded his head.
"Yes."
"And couldn't Mr. Ralls have taken more if he wanted to... of his own money?
Again, there was a long pause from Johnson before he answered.
"Yes."
The clock struck four in the afternoon, signalling the end of the day's court proceedings.
"I have no further questions, Your Honor," he told Judge Wapner, leaving the jury to ponder the testimony overnight.
Throughout the trial, Rosen hammered on his main theme: The money in question belonged to all the partners, to Ralls as well as the other two men.
When Ralls testified, he insisted all three transactions were "well understood" by both of his erstwhile partners.
As the trial wore on, the prosecution seemed to lose steam. After Pinzen rested his case, Rosen -- with the jury absent -- asked Judge Wapner to dismiss the charges.
"Where is the crime?" Rosen asked the judge. "I have not heard a crime. I have heard evidence that Mr. Johnson's feelings were hurt that Mr. Ralls may have breached an agreement. But that is a civil matter. It is not criminal."
Rosen said, "The government is trying to use a broad brush to tar Mr. Ralls with the crimes of Pat Yarbrough."
Judge Wapner, a ruddy-cheeked man with a quick smile and a bad back that forced him to stand occasionally during the trial, agreed with Rosen on two of the three counts.
"The evidence is that the 1990 ($75,000) transaction was simply a reduction in [the partners'] capital account. The $105,000 is a straight transaction of the partnership," said Wapner.
With that, he dismissed the first two counts.
"I see [the remaining] count differently," said Wapner. "[Ralls] wrote the check on the Niblick account to pay personal obligations. Therefore, I am inclined to let the jury decide that one. So the 1994 transaction [of $49,330] is still at issue: did Mr. Ralls take money to which he wasn't entitled? Did he intend to deprive Niblick of the money?"
No slam dunk
Between court sessions, Pinzen shook his head. "This isn't a slam dunk, by any means," he said.
When he summarized his case to the jury, Pinzen reminded them of what he had said at trial's beginning: "This case is complicated. It all comes down to the credibility of the witnesses."
He added: "This defendant violated a trust and a longtime friendship. [His partners] feel like fools, idiots. A friendship is destroyed."
The jury deliberated for most of two full days before reporting to the judge that they were "hopelessly deadlocked" -- 8-4 for acquittal.
As the judge thanked and dismissed the jury, Pinzen said a decision on retrying Ralls for the alleged thefts would be made prior to Sept. 25, when the principals appear before Judge Wapner once more. He suggested that his recommendation will be to drop all charges, but that decision will be made be supervisors in the district attorney's office.
That same day, accountant Yarborough will hear her sentence, also, for her thefts which totalled between $600,000 and $700,000, according to investigators.
Following the trial, Ralls said he would make no comment.
But attorney Rosen said his client was "very relieved."
"Obviously, he was very miffed that he was enduring this. He was upset and very scared, fearing that he would end up in prison for something he didn't do."
Rosen said the reason for bringing the case was "really quite simple. The prosecutor and the detective thought they had a shot at charging a lawyer with crimes, and they jumped at it. That's what this was all about. They love to target lawyers."
Rosen said that police investigators, including Medlock, never even interviewed Ralls about the discrepancies in the money accounts.
"Medlock jumped to conclusions because of what Pat Yarborough did. Medlock acted with a singular intent, with blinders on, and that was to draw a target on Stan's forehead and draw back his bow and arrow."
Suggesting that Medlock and Pinzen "made Stan's life miserable for the rest of his life," Rosen took a shot at the four jurors who held out for conviction.
"I would have liked to see a 'not guilty' verdict, but because of these four knuckleheads, that wasn't possible," he said.
"But the prosecution made a mistake," he chuckled. "They didn't know that Mr. Ralls would hire me, a slick Jewish lawyer from the Avenue of the Stars."
As to his client, Rosen added: "This is almost behind him now." ER