William Liddle takes stand in AEA fraud trial

PHOENIX -- Final update 9 p.m. — Taking the stand Tuesday in his defense against federal fraud charges, former AEA business lending official William Liddle testified that he was pressured into increasing business loans at the same time the credit union was suffering losses on its consumer loan side.

Liddle and his wife, Rhonda, are on trial in U.S. District Court in Phoenix on 68 counts of conspiracy, money laundering and fraud. The federal government alleges that the Liddles were involved in a kickback scheme in which they received more than $1 million in money, a house and two vehicles in exchange for Liddle approving multimillion-dollar loans that went bad and led to AEA’s insolvency.

To questions from Rhonda Liddle’s defense attorney, Liddle responded that his wife had no training in accounting, finance or business management and that he handled the couple’s finances. He also said his wife never attended any business meetings and went to AEA only to deliver birthday gifts for staff members’ children.

Nor was she ever privy to any discussions with Dan Thelen and Frank Ruiz about their financial situations, Liddle said. She had no access to any AEA files and he didn’t discuss AEA business with her, he testified.

The prosecution expects to complete its cross-examination of Liddle Wednesday morning and begin its closing arguments by early afternoon.

Liddle, hired by AEA in November 2004 to create a business lending program, testified that in late 2006, he was directed to make aggressive incremental increases in business lending. At the same time, he said, he had read that AEA reports showed big losses from consumer auto loan delinquencies and charge offs (write offs). As a result, AEA was having to put aside more money to cover those expected losses.

In addition, he said, he had discussed all but the smallest loans with Ken Bredemeyer, then AEA president and CEO, before approving either new loans or loan modifications.

During several meetings in late 2006 and early 2007, Bredemeyer directed him to increase business loans, Liddle said, resulting in his approving some he had previously rejected. Other loans or loan increases were approved to a troubled project to try to complete it and protect AEA’s investment, he said.

In response to questioning, Liddle said there was little documentation of those meetings.

Liddle also testified that thousands of dollars in cash he received from two large AEA borrowers was repayment for personal loans he had made to them or it was money they owed him for various things. Some of that debt, he said, was money he had paid upfront for expenses for Top of the Kress, which he planned to become involved in but never did.

However, when pressed by prosecuting attorney Monica Klapper for written evidence of those debts, Liddle acknowledged that he had no documentation to back up his claim he was owed any of that money.

The two borrowers, Thelen and Ruiz, earlier testified that at Liddle’s direction, they made the cash payments to him or his wife. They also testified that they didn’t owe Liddle money.

Between them, Thelen and Ruiz received about $30 million in loans for businesses that went bankrupt, including Yuma Fun Factory and Top of the Kress.

Asked if he approved loans to Thelen and Ruiz because they were friends, Liddle said no, adding that some were made to support AEA and not have a failure.

As for the house, Liddle said Ruiz bought it for his business partner, who never lived in it, so the Liddles moved and agreed to pay $3.500 a month rent. Ruiz had testified that he received only three payments by check.

Liddle said the other rent payments for about 1-1/2 years were made with cash and he obtained no receipt. But he did produce a handwritten record of the cash payments.

Klapper asked Liddle about nearly $300,000 in cash Liddle had said the couple saved while living in Japan and had shipped in a safe with the rest of the family’s household goods. Liddle said he did not declare the cash to customs and didn’t deposit it, which Klapper noted would result in no paper trail of the money.

At one point during Klapper’s cross-examination when Liddle became agitated, Liddle’s attorney objected she was “badgering” the witness. Judge Susan Bolton responded that she thought it was more a case of Liddle and Klapper were trying to talk at the same time and directed them to wait for each other.

PHOENIX -- Updated 2:50 p.m. -- After the lunch break, William Liddle’s testimony focused on the cash payments made to him by Frank Ruiz and Dan Thelen, which Liddle testified were paybacks for undocumented personal cash loans.

David Eisenberg, Liddle’s defense attorney, has ended his questioning of Liddle.

Cross-examination by the prosecution will begin after the break.

PHOENIX -- Updated 12:45 p.m. -- William Liddle continued to testify this morning.

Liddle testified that every loan and loan modification that he made was discussed with Frank Ruiz and his business partner Shelby Carl  in advance, as well as with Ken Bredemeyer, the president and CEO of AEA at the time.

Ruiz was a co-defendant in this case but reached a plea agreement in June in which he agreed to testify against the Liddles in hopes of getting a lighter sentence.

Liddle denied having any ownership interest in any of the Ruiz entities. He testified he was involved with CTW, LLC, because he was considering retiring from AEA. He testified that he filed the articles of incorporation for CTW and  acted  as the statutory agent. He testified that he did this because it was so expensive to go through an attorney, and he trying to help out a friend.

At that time, Liddle said, the purpose of CTW was to operate Top of the Kress, which he hoped at some point to be involved in, in an planned arrangement that also included Ruiz and Emma Almendarez.

Liddle said he told Bredemeyer that this was his plan, as he wanted to be upfront, but the arrangement never happened.

He also testified about his involvement with the Yuma Fun Factory construction because there were some concerns about cost overruns, and the general contractor was going to be gone for a few weeks. In order to protect AEA, Liddle said, he stepped in to help as overseer on behalf of AEA.

The judge has adjourned the court for lunch. Check back this afternoon as developments continue.

PHOENIX -- Updated 11:30 a.m. --  William Liddle has taken the stand today in the AEA fraud trial.

So far, Liddle has tesitified about his background. He started with AEA Credit Union in November of 2004. He was hired to develop the commercial loan program.

In 2006, there was a lot of pressure to increase revenue in his department, due to consumer auto loan losses.

The trial in U.S. District Court in Phoenix is of 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.

The judge has called for a recess. Check back with Yuma Sun as the trial continues today.