John B. Mumford, a deputy assistant secretary of labor, and Cortes W. Randell, a key figure in a multimillion dollar stock fraud in the early 1970s, were indicted yesterday on securities and mail fraud charges growing out of the 1976 collapse of a Virginia real estate investment firm.
The 17-count indictment returned by a federal grand jury in Alexandria, is the product of a year-long investigation by the Justice Department and the Securities and Exchange Commission into the failure of the Annandale-based National Commercial Credit Corp. Investigators said scores of Washington area investors lost more than $1 million when the Fairfax County firm went bankrupt.
The indictment accuses the two men of intentionally concealing from investors and financial institutions the precarious financial status of their company, which invested in residential properties in the Washington area. Mumford was president of the company before he took his Labor Department position in 1975.
Randell 43, once called a financial whiz kid went to prison in the National Student Marketing Corp. scandal. He was never an official of the Virginia firm named in the indictment but was decribed in court records as the "controlling person" behing National Commercial Credit.
A Labor Department spokesman said yesterday that the department has no plans to suspend Mumford from his $47,500-a-year job.
"If it had been a charge involving his work in the Labor Department it would have been a different matter. (But) what he has been charged with has nothing to do with the Department of Labor," the spokesman, John Leslie, said.
Mumford said he was "absolutely and beyond a shadow of a doubt" innocent of the charges brought against him.
Mumford was recently chosen as one of two Labor Department officials to attend courses on a fully-paid leave at the War College. Until then, Mumford was one of the department's top officials involved in enforcement of worker's compensation laws.
Randell, who lives in McLean could not be reached for comment yesterday. His lawyer, James Sharp, said the allegations in the lenghty indictment are "simply not true" and that Randell "is confident he will be exonerated.
The indictment charges the two men with seven counts of mail fraud, five counts of stock four counts involving interstate transportation of stolen funds and one count of submitting a false loan application to the Veterans Administration. If convicted each man faces a potential penalty of 25 years in prison and a $31,000 fine.
When the Virginia film filed for bankruptcy in 1976, it left scores of investors including some retired persons, without their personal savings or retirement funds.
One woman especially hard hit by the company's collapse was Natalie B. Barkson of Springfield who had placed for lifetime savings of $67,000 in the company.
On learning of the Randell indictment Barkson said yesterday, "that's good . . .I hope the people that were ripped off will be able to get their money back."
An SEC suit brought last year against Randell accuses him of "ravaging" the firm and says that he was a central figure in its collapse.
Randell began working for NCCC during the time he faced prosecution for his involvement in National Student Marketing and according to court papers directed the company's business while serving part of a federal prison term for securities fraud in connection with that scandal.
NCCC, once known as Potomac Valley Homes, Inc., was in the business of buying homes with assumable first mortgages and selling the homes to people who could not afford a normal downpayment the SEC has said. The first made its profits by selling second mortgages from the home buyers for cash or credit, according to court records.
In December, 1977, Randell signed a consent decree in which he neither admitted nor decided the SEC's charge that he had looked NCCC's assets.
Mumford was implicated in the stock fraud case earlier this year when the SEC sued to block him from selling any securities because of his participation in the company.
Judge Oren R. Lewis dismissed the suit, but the SEC has appealed for order to the 4th Circuit Court of Appeals.
Mumford was a part-time consultant for the Labor Department in 1975 while he was president of NCCC. Mumford said yesterday he resigned from the company when he took a full-time position with the department.
The official defended himself, saying that he was never involved in policy matters or had an ownership interest in the company.
In court testimony heard in the SEC suit earlier this year, the company's former operations manager said,however, that Mumford was in total control of the business in 1975.