Salt Lake Mayor Deedee Corradini and former business partners funneled assets from now-bankrupt Bonneville Pacific, through offshore companies, to themselves, according to a report filed with the U.S. bankruptcy court.
The diversion was "to the detriment of Bonneville Pacific and its shareholders," bank examiner Alan V. Funk reported to U.S. District Judge John Allen.When contacted Monday, Corradini said she didn't know enough about the investigation to know if there had been questionable transactions. "But if there have been questionable transactions, I'm not knowingly involved," she said.
By Tuesday morning, Corradini said she still had not seen the report.
The information came to light last week when Funk turned in his report, which dealt with allegations of fraud, embezzlement and misrepresentation, in Bonneville Pacific's bankruptcy.
Allen ordered Funk, an accountant and former FBI agent, to investigate Bonneville Pacific and all related companies after allegations of fraud surfaced in connection with the company.
Bonneville Pacific filed for Chapter 11 bankruptcy in December 1991, after a Portland, Ore., power company pulled out of a merger with the Salt Lake company. The Portland power company pulled out after discovering financial irregularities in Bonneville Pacific. It had already advanced $26 million to Bonneville Pacific and has since filed a civil suit for fraud against Bonneville Pacific and its accounting firm.
Corradini's name appears frequently in the two-volume report Funk filed with the court. At least one offshore company, Sallah International Inc., was created for Corradini's enrichment, the report says. She owns 25 percent of the company, the report said.
A local bankruptcy attorney said offshore companies, created in foreign countries where regulation is less stringent, can be used to hide ownership and total assets of a company and take advantage of income-tax shields.
Another 25 percent of Sallah is owned by former Utah Transportation Commissioner John T. Dunlop. In his report, Funk also discusses allegations that Dunlop embezzled $2 million from another Bonneville Pacific subsidiary: Recomp Inc. Corradini sits on the board of directors of that company.
Dunlop was a director of Bonneville Pacific and involved in the purchase or creation of several subsidiaries, including offshore companies in which Corradini was involved. Dunlop was also president and a member of the board of directors of Recomp Inc.
According to court records, Bonneville Pacific officials discovered the misuse of Recomp funds in March 1992. Company attorneys met with Dunlop. He acknowledged the misuse of funds, the court records say. Bonneville Pacific officials required Dunlop's resignation, escorted him from the building and notified the FBI, according to court records.
About the same time, Dunlop resigned from the Utah Transportation Commission.
After Dunlop created Sallah, Corradini, Dunlop and Bonneville Pacific executives Robert Wood and Wynn Johnson used Sallah assets for projects and personal use, Funk's report says.
In Corradini's case, personal use included at least one family vacation costing approximately $25,000, personal mortgage loans totaling at least $381,000, an additional long-term loan of $50,000 and assets in excess of $500,000.
Those assets are listed on Sallah account sheets for the years 1987 to 1990 under an account labeled "Deedee Corradini." The Sallah account sheet also showed that Corradini owns $27,062 in Bonneville Pacific stock.
When the Deseret News informed Corradini that court records contained a July 19, 1990, handwritten note from Corradini to Dunlop asking him to use Sallah funds to pay for a family vacation costing about $25,000, Corradini refused any further comment.
"I am not going to comment on specifics until I have seen the report."
When asked if Sallah International held the mortgage on her home, Corradini said, "I will repeat what I just said: I will not comment on specifics until I have seen the report."
In the note, Corradini said she had concluded a "once in a lifetime trip with the kids." The family had estimated the cost of the trip at $25,000 "and were way off, as you can see," Corradini said in the note. (The emphasis is Corradini's.)
She asked Dunlop to file her vacation expenses "with Sallah A.S.A.P. as American Express bills are already coming in. Any idea of how soon this could be processed?"
In her note, Corradini also acknowledged receiving a $10,000 advance from Sallah for the trip plus $5,000 for "previous Sallah statements."
In a sworn deposition, Sallah's accountant said he recalled "on several occasions Ms. Corradini submitting expense vouchers to Sallah to be reimbursed by Sallah."
Another group of Sallah cash-flow sheets contained in the appendix to Funk's report show a series of transactions to Corradini and Hixson. Sallah made a $149,087.50 loan to Corradini in September 1989. The loan is identified only as "Loan to Ross and Deedee." Corradini is married to attorney Yan Ross.
The same cash-flow sheets list a $4,278 expenditure in August 1988 as "cash expenses - Deedee." Four months later, another $7,000 expenditure is also listed as "cash expenses - Deedee." That same month, December 1988, Hixson received $14,797.72, listed as "cash expenses - Hixson."
A month later - January 1989 - the company gave Hixson $28,977.36. It was listed as "travel exp. - Hixson."
The report does not say why Corradini, Dunlop, Hixson and Wood are receiving assets through Sallah and other offshore companies.
Funk notes that if Bonneville Pacific wanted to reward just Dunlop, Hixson, Johnson and Wood, it could do so through salaries and bonuses. In fact, Bonneville Pacific paid Dunlop $865,227 from 1989 to 1992 for his work on the company's board of directors. Hixson received $614,390 and Johnson $1,096,085. These salaries are in addition to any assets from Sallah or other offshore companies. However, Corradini is no longer an officer on Bonneville Pacific. The company could not reward her that way.
"It is, however, clear from the examininer's investigation that one of the purposes of transactions involving Bonneville Pacific and the offshore companies was to provide an economic benefit to Ms. Corradini rather than simply those principals of Bonneville Group directly involved with Bonneville Pacific, which would have excluded Ms. Corradini," Funk wrote in his report.
Bonneville Group is the parent company of Bonneville Pacific. Corradini, Hixson, Wood, Dunlop, Johnson and Carl Peterson were the group's chief executives.
In 1982, they created the company that later became Bonneville Pacific. While the others have remained involved in Bonneville Pacific, Corradini pored her energies into Bonneville & Associates - also a subsidiary of Bonneville Group.
Funk took Corradini's sworn statement during his investigation. According to his report, Corradini told Funk "she had no knowledge regarding the business affairs of Sallah and relied upon Mr. Dunlop," for her understanding of the company.
Corradini also had assets - $1.6 million - in Lio Cam Ltd., according to court records. Lio Cam is a company on the Isle of Jersey also used by Bonneville Pacific for the routing of assets, according to Funk's report. However, he could not discover the actual owners of the company.
"Ms. Corradini apparently has no recollection of any interest in Lio Cam Ltd.," Funk said in his report.
"Given the time constraints, the Examiner (Funk) has been unable to conclude his investigation in this regard and is unable to form an opinion as to the extent of the involvement of Ms. Corradini in Sallah or the offshore companies," he wrote.
In a meeting Wednesday with Judge Allen, Funk outlined several transactions that robbed Bonneville Pacific shareholders but enriched Corradini and others.
The Deseret News extracted just one of those transactions from a transcript of that meeting.
A company called CTDC had approval to build an 85 megawatt electrical facility near Rifle, Colo., but it needed financing. CTDC owners went to Bonneville Pacific and asked them to finance the project.
Bonneville Pacific said no. So Dunlop announced that he would pay $1,000 on his own for the option to develop and finance the project.
Dunlop paid the $1,000 but then turned around six days later and sold that same option to Sallah for $1.2 million.
Sallah then turned around and sold the CTDC option to Bonneville Pacific four months later for $4.2 million.
"The proceeds were distributed, at approximately half a million dollars each to Wynn Johnson, Robert Wood, DeeDee Corradini, and some of the others," Funk told Allen.
"The net effect of this transaction is that the principals of Bonneville Group - Wynn Johnson, Hixson, Corradini, etc. - converted Bonneville Pacific asset, namely the monies that went into the purchase of the option and CTDC, into their own usage."
How much money was diverted to Sallah and what use it was put to is difficult to know. Sallah maintained at least one bank account in Bahamas and one or more in Switzerland, according to court records. Both countries are known for their strict bank privacy laws, Funk reported.
The principal players in Sallah - Corradini, Hixson, Wood, Dunlop, Johnson - also benefited economically from business transactions made in the name of other Bonneville entities, Funk told Judge Allen.