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Liddle trial: Thelen continues testimony
Frank Ruiz later takes witness stand
The Yuma Sun and KSWT-TV â€¨are partnering to cover the AEA fraud trial in Phoenix and will have daily coverage in both the Yuma Sun and on KSWT, as well as â€¨YumaSun.com and KSWT.com.
PHOENIX — On the second day on the stand in the trial against a former AEA Credit Union official, Dan Thelen testified how he came about assuming all of the debt — about $15 million — for the Yuma Fun Factory.
The trial in U.S. District Court in Phoenix is of William Liddle, former business loan officer for AEA, and his wife, Rhonda. The Liddles face charges of conspiracy, fraud and money laundering in a case that resulted in millions of dollars in bad loans for the credit union and led to its insolvency.
Frank Ruiz, a Yuma businessman, was also indicted in the case but reached a plea agreement in June. Called to the stand later Wednesday, Ruiz provided his background up to the point where he approached AEA in 2005 for a business loan to expand Desert Best Distributing, a janitorial supply company he had formed with Shelby Carl. That was when he first met Liddle, he said.
Thelen earlier had said on the witness stand that he took on a $3.3 million loan to purchase the Fun Factory land from Ruiz and Carl. At the urging of Liddle, Thelen also took on responsibility for its development costs, a debt that quickly grew to $7.4 million.
A month after the family entertainment center opened in May 2009, Thelen said, Liddle asked him to take over the operating company and get Ruiz out of the business. According to Thelen, Liddle said “Frank had gone crazy” and was using the Fun Factory as his personal party place, and Liddle was concerned about protecting AEA's interests.
So Thelen bought out Ruiz and Carl, assuming 51 percent interest in the business, with Robert Busse holding 39 percent and LaVette Malone, who was the general manager, holding 10 percent of the interest. To do so, Thelen took on an additional $3.3 million in debt that grew to $4.7 million for operating costs.
Liddle arranged the sale and its terms, Thelen said. By now Thelen's consolidated debt was approximately $15 million for the Fun Factory. He testified that the Fun Factory was losing $100,000 a month even without making any payments to AEA. At one point, he borrowed $13,000 from Liddle to make payroll but paid back the money.
Thelen closed the doors in early April 2010 and filed for bankruptcy.
Thelen then testified that he considered Liddle to be an undocumented part-owner of the Fun Factory. Thelen said he received an email from Liddle in which Liddle referred to himself as the principal. Two other emails with contact information for the Fun Factory listed Liddle first and described him as a co-owner.
Meanwhile, Thelen said, he was getting concerned about the income tax consequences of his acting as the middleman for what Liddle said was repayment by Ruiz of a debt to the Liddles. According to the deal, Thelen received checks from Ruiz or AEA, depositing the first one for $575,000 in a Chase bank account and a second for $720,000 in a Wells Fargo account.
He used national banks because Liddle told him he wanted to avoid “stupid questions” from AEA. At Liddle's direction, Thelen made various cash withdrawals in $100 bills, which he delivered to either Liddle or his wife.
The original idea was for Thelen to explain the $720,000 transfer by creating a partnership purchase agreement into biotechnics, a chemical that supposedly showed a lot of promise in controlling HIV. But Liddle never signed the document.
The FBI visited Thelen at his home on March 4, 2010, and questioned him at length about Liddle and Ruiz.
Thelen then asked Liddle for a document to explain the transfer of the $720,000 as repayment to Thelen for a loan he supposedly made to the Liddles. Rhonda Liddle delivered the loan agreement to the Thelens' home.
Thelen said he also had a conversation with Liddle after he left AEA in which Liddle asked how information on computers and in emails might be disposed of. Thelen added that he did not participate in destroying electronic information.
Rhonda Liddle also delivered a handwritten note from her husband to Thelen in which William Liddle made several points, including that he wasn't senior management so it was OK for him to be involved in personal loans with AEA members, there was no cash book, transfers had been approved by AEA, all transactions were reviewed by auditors and banking regulators, all transactions with Thelen were standard and weren't special deals, all transactions had economic substance and AEA couldn't dictate how funds were used because they were twice removed.
Liddle also assured Thelen that the loan wasn't a problem because AEA had approved the disbursement.
In cross-examination, David Eisenberg, Liddle's defense attorney, opened with questions about Thelen's coursework for his masteruir of business administration, noting that Thelen would have received training in how to successfully run a business.
He also repeatedly asked Thelen to recall previous testimony and jumped around from one subject to another. On more than one occasion, Judge Susan Bolton cautioned him about his questioning, clarified his questions and at one point asked him to get to the point.
Eisenberg focused much of his questioning on Thelen's resume, in which Thelen acknowledged that he had lied about his professional background because at that point he was heavily in debt and needed a job.
Mark Paige, Rhonda Liddle's defense attorney, made only a few brief observations and Bolton told him to be careful about his questioning.
The cross-examination lasted only a part of the afternoon. Bolton told the jury that Thelen now lives and works in Washington, and he probably would not be back in court.
After Thelen's dismissal, Ruiz took the stand and acknowledged that as part of his plea agreement, he agreed to testify against the Liddles with the hope of receiving a lesser sentence. It also was noted that his sentencing will be determined by Bolton, the same judge presiding over the Liddle trial.