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Because the Phoenix Economic Development Department was
unable to contact the principals of Cortez and American Products
or to secure documentation regarding the use of the Phoenix
loans, Detective Ronald Sterrett (Sterrett) of the Phoenix Police
Department Crime Bureau was assigned to investigate the
activities of petitioner regarding the Phoenix loans. The
investigation resulted in petitioner's arrest on May 16, 1990,
and his indictment on May 23, 1990.
Sterrett interviewed petitioner following the arrest, and
petitioner made several admissions regarding his connection with
the Phoenix loans and Johnson McGee. First, petitioner admitted
to filling out forms on behalf of Cortez for the loan. He also
admitted to forging the signature of Rand on documents submitted
to the revolving loan program as well as to owning a concessions
business he had purchased from Rand. In addition, petitioner
paid off the Cortez loan using funds from Johnson McGee, a
company he admitted to owning. With respect to the American
Products loan, petitioner admitted to filling out a check on
behalf of American Products for $50,500, endorsing it, and
depositing it into his personal bank account.
On his 1988 Federal income tax return, petitioner reported
$40,871 in gross income, and, on his 1989 Federal income tax
return, he reported $47,748 in gross income. Petitioner did not,
however, report as income any amount relating to the Phoenix
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