Banker Told Auditors He Had Raised Capital

But Stock Sale To Ensure Solvency Was Phony


Journal-Bulletin Staff Writer

Wednesday November 21, 1990

Joseph Mollicone Jr. tried to stave off a takeover of his bank, Heritage Loan and Investment Co., by telling insurance examiners he had raised $1.15 million to ensure the bank's solvency.

Mollicone, president and controlling stockholder of the privately held bank, told examiners that he had sold stock to new investors and had added another $200,000 in cash himself.

But, according to insurance and state regulators, the stock sale was phony. People whose names appear on the stock certificates said they did not invest with Mollicone, said Susan D. Hayes, state superintendent of banking.

Peter A. Nevola, president and chief executive officer of the Rhode Island Share and Deposit Indemnity Corp., the bank's private insurer, said the scheme went further.

Mollicone "appeared to make withdrawals from some savings accounts and took those withdrawals to purchase stock in the name of the people who had the deposits," Nevola said.

"But," Nevola said, "they never authorized it."

State investigators, he added, are looking into whether signatures on deposit slips were forged.


Hayes said two people whose names appear on the stock certificates have signed affidavits swearing that they never bought any Heritage stock. Those affidavits have been turned over to state investigators.

A third person, Arthur Coia, whose name appears on a stock certificate, said he never talked to Mollicone about buying stock.

"I just heard from you something that is totally foreign to me," said Coia, general secretary-treasurer of the Laborers International Union, in a telephone interview.

Coia later met with investigators and told the Journal-Bulletin his signature on the certificate was forged.

Since Nov. 13, a state grand jury has been investigating criminal misconduct and possible embezzlement at the small Providence bank.

Several people whose names appear on loans at the bank told the Journal-Bulletin they testified yesterday. They said they testified that they did not borrow the money, and that the signatures on loan documents were not genuine .

Mollicone owns 70 to 75 percent of the bank's stock and controlled its operation, said Nevola.

Mollicone, 47, of Providence, has substantial real estate holdings in Rhode Island and is well known in political and social circles. He has been missing for two weeks.

State regulators and insurance examiners said that the last time they saw him was when he left the bank at the close of business on Nov. 7. No one from Mollicone's family has reported him missing to Providence police, said Capt. Bernard Gannon.

RISDIC took control of Heritage on Oct. 18, when RISDIC's examiners found millions of dollars of incomplete or missing records.

RISDIC disclosed its seizure on Nov. 12, sparking a run on deposits. During the next four days, depositors withdrew $13.6 million.

The state, saying there were $13 million in bogus loans on the bank's books, declared the bank insolvent and won court approval Sunday to close the bank temporarily.

Fred J. Franklin, director of the state Department of Business Regulation, said no reopening date has been set.

Franklin, the bank's court-appointed receiver, said the $8.5 million still on deposit is safe and will earn interest while the bank is closed. RISDIC looks at books

The problems at Heritage were uncovered during a RISDIC examination that began June 28 - the first state or RISDIC exam of the bank in about three years.

During the examination, Nevola said, examiners sent verification requests to banks where Heritage said it had investments, or where Heritage held accounts with money on deposit. Nevola said examiners also asked the banks whether they had loaned Heritage any money.

The verifications came back with lists of loans that Heritage had taken out but never recorded on its books, said Nevola.

Examiners entered the loans on Heritage's books and subtracted them from the bank's capital, its cushion against loan losses. When those subtractions drained the bank's capital below minimum requirements, Nevola said, Mollicone told RISDIC he would raise additional funds.

Nevola said that in September, examiners talked with Mollicone about the dwindling bank capital and loan records they were still researching.

"He continually told us he knew the loans were a mess but that he did have the documentation, and he would make it available to us," said Nevola. "And he started doing that. He started to bring us records that began to make some sense, and he led us to believe he would continue doing that.

"He said he would provide documentation to ultimately show he would not need new capital but said, 'I'll put capital in to make you comfortable. I will find the documentation; and ultimately, if it is determined the bank needs more capital, I will put more capital in." "

According to Hayes, the superintendent of banking, the names that appear on the apparently bogus stock certificates, all dated Oct. 16, are Harry Harootunian, $350,000, 700 shares; Coia, $450,000, 900 shares; Bernard Renzi, $150,000, 300 shares; Paul or Gail Calenda, $200,000 for 400 shares.

Hayes said Harootunian and Calenda have told regulators that money was withdrawn from their accounts at the bank without their permission, and that they did not buy stock in the bank.

"That is what they have represented to us, and they have signed affidavits to that effect," said Hayes.

Harootunian, president of Harootunian & Associates in Warwick, told the Journal-Bulletin: "I'm not discussing anything about the situation."

Calenda, president/treasurer of N.E. Industries in Providence, and Renzi could not be reached for comment yesterday.

The fourth certificate was in the name of "Arthur Coia, trustee," said Hayes.

Coia told the Journal-Bulletin that he works for the union in Washington and is not a trustee of any unions in Rhode Island. He said the international union had no assets at the bank.

He said the Laborers local affiliates had in various accounts at the bank about $450,000, the amount of stock that appears on the certificate in his name.

"I am obviously concerned about the safety of the money,'' he said.

He also said he had an "individual personal savings account" at the bank, which he has withdrawn.

Nevola said the $200,000 cash infusion that Mollicone told regulators he made is entered on the bank's books, and that Mollicone did put a $200,000 certified check in the bank.

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With staff reports from Kevin Sullivan.

Contents copyright 1982 to 1998 by The Providence Journal Co.

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