A federal grand jury and the federal judge presiding over two civil lawsuits are looking into the tangled affairs of a financier from the Virginia hunt country who once offered to help bankroll the failing DeLorean Motor Co.
Until two of her firms filed for reorganization in bankruptcy, Jeanne Anne Farnan, 44, ran a group of companies out of an office in the Westgate Research Park at Tysons Corner. She lived on a $600,000 farm in Prince William County, owned a stable of thoroughbreds and ran businesses that specialized in helping other companies obtain multimillion-dollar loans.
But legal proceedings involving Farnan and her companies show that several of the loans she allegedly offered to arrange never were completed. Developers of a Foggy Bottom apartment complex have won a $2.5 million lawsuit against Farnan and her companies for failing to provide a promised loan. A $10 million deal with DeLorean fell through on the same day he was arrested on cocaine conspiracy charges.
Now the developers who won the lawsuit contend money that could be paid to them has been transferred to a Cayman Islands bank account. Farnan's creditors are trying to trace her other assets. FBI agents have been investigating Farnan's business affairs in five states in connection with a Washington grand jury investigation. And the British government, in attempting to untangle DeLorean's affairs, is looking into her abortive deal with DeLorean.
Farnan has appealed the decision in the apartment loan case and denied trying to conceal her assets. She canceled one interview scheduled in connection with this article and did not return subsequent phone messages.
Court records of the lawsuits and bankruptcy filings and published reports on the DeLorean deal provide an insight into some of Farnan's labyrinthine financial dealings.
Before they filed for bankruptcy protection, Farnan operated FSI Financial Group Inc. and FSI Financial Services Inc. from a small office on Old Meadow Road in McLean. She also set up companies with similar names in Georgia, Louisiana and the Cayman Islands.
Farnan said in a court deposition given earlier this year in one of the civil lawsuits against her that she was being investigated by a federal grand jury. She testified that FBI agents had conducted inquiries about her in Utah, Florida, Texas, North Carolina and the District.
In the deposition, given in February, Farnan said she believed the FBI investigation was being conducted by the bureau's Washington field office under the direction of an assistant U.S. attorney. Federal authorities confirmed Farnan's statements but refused to discuss the specific nature of their investigation.
The Sunday Times of London, which investigated Farnan's relationship with the DeLorean company, said British financiers who dealt with Farnan described her operation as "a Charlie's Angels outfit of all-female bankers."
The loan that Farnan offered to arrange for DeLorean might have rescued the failing company, says Sir Kenneth Cork, the bankruptcy receiver appointed by the British government to sort out the affairs of DeLorean Motor Co.
"Of all the many rescue attempts and would-be bidders, this was the only one I really believed stood a chance," Cork told the authors of the book "DeLorean." Farnan told "DeLorean" authors Ivan Fallon and James Srodes that she had participated in a plan to arrange a 90-day $10 million loan in October 1982 to keep the DeLorean company afloat.
The authors and others familiar with the attempt to rescue the DeLorean company say Farnan's FSI Financial Group was approached about two years ago by DeLorean. The car maker was looking for $10 million to continue operating his company, which at that time was already in receivership.
DeLorean was introduced to Farnan through Minet Financial Management, a subsidiary of a major insurance broker and underwriter at Lloyds of London, which had previously been involved in business deals with Farnan.
According to the Sunday Times' account, Farnan informed DeLorean company receivers in London on Oct. 14, 1982, by telex that she had found investors willing to lend the $10 million needed to continue DeLorean's operations. The $10 million would be placed in DeLorean's account at a Las Vegas bank once all the paperwork had been completed.
Farnan forwarded the final loan documents to DeLorean for his signature in New York on the morning of Oct. 19, the last day for the company to come up with new financing or be forced into liquidation. DeLorean did not sign the loan papers that morning. He boarded an early afternoon plane for Los Angeles, where he was arrested a short time later by federal agents for allegedly trying to put together a $10 million cocaine deal with what turned out to be undercover officers.
DeLorean recently was acquitted of the drug charges after claiming he was lured into the deal by the undercover agents.
Farnan lives at a $600,000 horse farm 40 miles west of Washington next to the electronic eavesdropping station run by the super-secret National Security Agency at Vint Hill Farms Station, between Warrenton and Gainesville. The farm, called St. Cloud, also is the home of another of Farnan's ventures, Thoroughbreds of Virginia Inc., which has owned several prize-winning horses.
Farnan has transferred her stock in the racehorse venture to a friend who lives on the farm, court documents show. Farnan's creditors claim the transfer was an effort to put her assets out of their reach; she denies that.
An auditor appointed by U.S. Bankruptcy Court in Alexandria to look into Farnan's collapsed companies found that the records of FSI were in "complete disarray." Checks made payable to some of Farnan's companies were deposited in accounts of other firms with similar names, and Farnan conducted her operations "in a haphazard and totally irresponsible way," said Ralph M. Hitchcock Jr. in his report to the court.
Efforts to untangle Farnan's finances are continuing in the federal courts in Alexandria, where, in addition to the reorganization in bankruptcy proceedings, several lawsuits have been filed against her and her operations. Farnan appeared on the witness stand there 10 days ago to answer allegations in the latest in a series of lawsuits filed against her and her companies by the developers of a K Street apartment project called the Barclay House.
The developers, Barclay Properties Inc., said in their first legal action that in October 1981, Farnan and FSI Financial Group offered to arrange a loan of $4.1 million to purchase the building at 2501 K St. NW. Shortly thereafter, Barclay paid Farnan $82,000 in fees for arranging the loan.
The loan, however, never materialized, and in August 1982 Barclay Properties and three of its partners sued for breach of contract. They alleged that Barclay had gone bankrupt as a direct consequence of Farnan's failure to come up with the loan money. The three partners in the venture, Graydon O. Pleasants, James D. Locke and William F. Shaffner III, declared that they had lost their life savings in the aborted deal.
In June 1983, a U.S. District Court jury in Alexandria found Farnan liable for breach of contract and ordered her and her companies to pay $2.4 million in damages. Farnan has appealed the judgment to the Fourth U.S. Circuit Court of Appeals in Richmond, which has yet to make a ruling.
Unable to collect the $2.4 million in damages awarded them in the original lawsuit, the developers have filed two additional legal actions against Farnan. They contend she used property transfers and bank accounts in Caribbean tax havens to hide assets that could be used to pay the damages.
Earlier this year in that suit, U.S. District Judge James Cacheris held Farnan in contempt of court for failing to cooperate with efforts to unravel her companies' finances. Cacheris said in a ruling that Farnan had been "evasive and untruthful concerning her assets and the assets of the corporations with which she is involved. In short, this court finds her to be a witness not worthy of belief."
As part of the contempt finding, Cacheris ordered a receiver appointed to take charge of the finances of the FSI companies.
Farnan said she had given the court all the financial records she had and contended some of her documents were lost by opposing lawyers who obtained them under subpoena. The judge rejected that contention.
After hearing five hours of testimony during Farnan's latest appearance in his court, Judge Cacheris said he would rule in the next few weeks on whether further sanctions should be imposed because of her alleged attempts to hide her property from creditors.
Farnan, a New York City native, moved to Northern Virginia and established her Tysons Corner loan brokerage and financial consulting businesses after Jan. 31, 1978, when she was declared bankrupt by a federal bankruptcy judge in Atlanta. Court documents there show Farnan had operated a business called Farnan Advertising and Public Relations.
Less than a year after the discharge of her bankruptcy, Farnan bought a house in Reston. Sometime after that she opened her loan brokerage firm in Tysons Corner and bought the horse farm, court records show.
At the hearing before Judge Cacheris 10 days ago, Barclay Properties' lawyers cross-examined Farnan about a variety of financial dealings over the past several years.
During her testimony, Farnan said her finances became tangled at least in part because she was involved in a complicated court battle with her ex-husband over custody of their teen-age son.
Under questioning about the affairs of Thoroughbreds of Virginia, Farnan disclosed that at one point she had at least three prize-winning racehorses in her stable. One horse, Southern Medley, won $11,000; another, named Zoning Appeal, won at least $14,000, and a third, Canadian Calm, won more than $50,000, Farnan said.
David Grove, a lawyer for the Barclay Properties partners, told the court that Farnan transferred most of her stock in Thoroughbreds of Virginia to Linda Jennings, a friend who lives with Farnan on the horse farm. Farnan testified she transferred the stock to Jennings to repay a personal debt. Grove contended it was done to keep the horses away from the creditors.
Farnan acknowledged under cross-examination that she had deposited checks made out to some of her corporations in bank accounts belonging to other corporations or individuals. She said she did this because Washington-area banks had refused to accept deposits for herself and her companies since Barclay Properties' lawyers had begun investigating and attaching her assets in an effort to collect on their judgment.
Another lawsuit filed against Farnan in Alexandria federal court alleges that she collected a $30,000 advance fee after offering to arrange a $6.2 million loan for a Texas company called Redfish Bay Associates. That suit was settled with no finding of liability when Farnan and her companies agreed to pay Redfish $3,750.
In a personal financial statement filed in federal court in Alexandria, Farnan listed the market value of the farm at $610,000 and said she owned other Northern Virginia properties worth $274,000, including a residence in Reston.
Farnan listed assets as of January 1983 totaling $1.75 million, and liabilities of $694,872, leaving a net worth of $1.06 million. Her assets included $530,000 worth of stock in FSI companies, which she described as "unmarketable." CAPTION: Picture, $600,000 farm in Prince William County, owned by financier Jeanne Anne Farnan, houses one of her businesses, a racehorse venture. By Margaret Thomas--The Washington Post