A female financier from Virginia hunt country who once offered to bail out the failing DeLorean Motor Co. has been sentenced to five months in prison for criminal contempt of court.
U.S. District Judge James Cacheris imposed the sentence on Jeanne Anne Farnan of Gainesville, Va., for violating injunctions he had issued to prevent her from withholding, concealing or transferring assets that could be used to satisfy a judgment against her in cases brought by developers of a Foggy Bottom apartment complex.
The judge also imposed a $500 contempt fine on FSI Financial Group of Virginia Inc., one of several financial brokerages Farnan formerly ran from a suite of offices in the Westgate Research Park at Tysons Corner. Court officials said they believe FSI had no assets.
The developers, Barclay Properties Inc., and three individual partners in the venture sued Farnan in August 1982 after she failed to produce a $4.1 million loan she had promised them after accepting $82,000 in fees.
In June 1983, a federal jury in Alexandria found Farnan liable for breach of contract and ordered her to pay $2.4 million in damages. Farnan appealed the judgment to the Fourth Circuit Court of Appeals. In the meantime, lawyers for Barclay Properties have repeatedly gone back to court in an attempt to collect the judgment.
Cacheris charged in his ruling that Farnan had "created dummy corporations, willfully refused to produce documents and records, engaged in numerous fraudulent conveyances, established secret depository accounts, and diverted funds" to get around his orders freezing her assets.
The judge said in his ruling that he had "rarely . . . seen such a flagrant obstruction of the court's process" and that a simple order of civil contempt against Farnan "would be inappropriate or fruitless under these circumstances." He said he was holding Farnan in criminal contempt "in order to punish the willful disregard of the court's authority and to deter the occurrence of similar derelictions."
Court officials said Farnan had notified the Fourth Circuit Court of Appeals in Richmond that she intends to appeal the sentence.
Farnan could not be reached for comment on the contempt charges. John Willett, an Alexandria lawyer who has represented Farnan at recent hearings before Cacheris, also said he had no comment.
Farnan, 44, lives on a $600,000 horse farm 40 miles west of Washington. The farm, called St. Cloud, is the home of Thoroughbreds of Virginia Inc., another of Farnan's business ventures.
In October 1982, Farnan became involved in a last-ditch plan to rescue the insolvent DeLorean Motor Co. The car manufacturer had been put into contact with Farnan by Minet Financial Management, a subsidiary of a Lloyds of London insurance broker and underwriter, with whom Farnan had conducted previous business deals. Shortly before government-appointed receivers planned to declare the DeLorean company defunct, Farnan claimed to have located investors willing to put up $10 million as part of a financial package to rescue the firm. She forwarded the final loan documents to John DeLorean in New York on the morning of Oct. 19, 1982, the last day for the company to either obtain new financing or face liquidation. Instead of signing the agreements, however, DeLorean boarded an early afternoon plane for Los Angeles, where he was arrested several hours later by federal agents and charged with conspiring to arrange a $10 million cocaine deal. DeLorean was acquitted of the cocaine conspiracy charges last year after a well-publicized trial.
In presentations to Cacheris, Farnan has used reports of her role in the abortive DeLorean rescue as evidence of her activities as a reputable financier.
However, in his Dec. 6 order holding her in criminal contempt of court, Cacheris presented a lengthy recitation of alleged efforts by Farnan to shift and hide her assets to avoid their attachment under court orders.
The judge said one of the principal vehicles Farnan used to conceal her assets was a company called FSI N.V., which maintained a bank account in Curacao, a tax haven in the Dutch-ruled Caribbean island group known as the Netherlands Antilles. According to Cacheris, Farnan used FSI N.V. to transact both her personal business and the business of one of her Virginia companies at a time when she swore in court that FSI N.V. was paying her no salary and holding no money for her benefit.
According to the judge, Farnan also arranged for a woman employed as her secretary, Sally Wright, to open a bank account in her own name "for the purpose of making deposits and writing checks in order to avoid attachments" by Barclay Properties' lawyers. According to the judge, one of Farnan's friends and business associates, Linda Jennings, also deposited checks written to FSI NV in her own bank account and then transferred money into Wright's account "in knowing and willful violation" of court injunctions.
According to the judge, Farnan also failed to produce financial information and other documents for William Baskin, a receiver appointed by the court to look into her companies' affairs. When Baskin visited her Tysons Corner offices last May, he found they had been emptied without his permission. According to the judge, Baskin ended up retrieving "certain items from the trash."
The judge said that in view of this behavior, he had "little trouble in finding that the defendants, beyond a reasonable doubt, committed these contemptuous acts with the requisite wrongful state of mind."
In addition to her legal tangles with Judge Cacheris, Farnan is facing a criminal investigation by the FBI and the U.S. attorney's office in Washington. She said in a deposition last year that FBI agents had been asking questions about her in four states and the District. Federal officials have confirmed the existence of an FBI inquiry and have indicated that a federal grand jury in Washington is also involved, but they refuse to give further details of the investigations.