The only person charged and then cleared of criminal wrongdoing in the investigation of P.I. Properties Inc. testified yesterday that he felt it was improper but not illegal for the firm to use tenants' security deposits as collateral for loans to a companion company.
Charles W. Rinker Jr., testifying as the first defense witness at the fraud and conspiracy trial of Mary Treadwell, the firm's former president, said P.I. Properties made loans in the mid-1970s to another Treadwell-run venture, Pride Environmental Services, in a desperate attempt to save the sister firm from financial ruin.
"We did some things a good and prudent businessman may not have done," said Rinker, P.I. Properties' former secretary-treasurer. Fraud and conspiracy charges against Rinker were dropped last spring after he passed a lie detector test professing his innocence.
Rinker yesterday told the federal court jury of eight women and four men that none of the impoverished tenants of Clifton Terrace, the Northwest Washington apartment complex owned and managed by P.I. Properties, was hurt by the use of the security deposits as collateral for the firm's loans.
"We were trying to save a company," he said, noting that Pride Environmental Services was $80,000 to $100,000 in debt. "We did some desperate things.
"We shouldn't have used security deposits" as collateral, Rinker said under questioning by one of Treadwell's court-appointed attorneys, Robert G. Joseph. "It was improper, but I don't think it was illegal."
Another former Treadwell employe, Pamela Roch, testified last week for the prosecution that she had told Rinker, Treadwell and others at P.I. Properties that D.C. law requires that security deposits be kept in a separate account.
Rinker testified for an hour and 45 minutes yesterday after U.S. District Judge John Garrett Penn, presiding in the case, rejected a defense bid to dismiss the remaining 21 charges against Treadwell of conspiracy, fraud, tax evasion and making false statements to federal officials.
She is accused of using P.I. Properties to defraud the federal government and Clifton Terrace's tenants of thousands of dollars to enrich herself.
Rinker's testimony was cut short yesterday by a series of lengthy bench conferences between Penn and the prosecution and defense attorneys about the scope of questions that Rinker could be asked.
Before Rinker even sat down on the witness stand, the judge ruled that defense lawyers could not bring out the fact that Rinker has been cleared of charges in the case. Still, Rinker at one point prefaced a statement by saying, "When I was involved in the case . . . . "
The defense has repeatedly attempted during the trial to lay the blame for any wrongdoing on Joan M. Booth, Treadwell's sister and Clifton Terrace's former general manager, and Robert E. Lee, P.I. Properties' former general manager. Both Booth and Lee have pleaded guilty to conspiracy and other charges.
In his testimony, Rinker pointedly noted that during P.I. Properties' ownership of Clifton Terrace between 1975 and 1978, "more and more Bob made the decisions and Joan Booth worked for Bob. They made the day-to-day decisions."
Later, one of the prosecutors in the case, Assistant U.S. Attorney Stephen R. Spivack, strenuously objected in two bench conferences--with the jury out of the courtroom--to a defense bid to ask Rinker about a chance conversation he had in March or April, 1982, with Booth.
Rinker declined to tell reporters what Booth told him in the conversation at the Judiciary Square subway station shortly after they were indicted, but said that it "cast me and the defendant Treadwell in a favorable light."
Rinker said the prosecution apparently did not know of the comment until yesterday, but that he had written his lawyer about Booth's statement at the time she made it.
Penn, undecided about whether to let the jury hear about the Rinker-Booth conversation, sent the jurors home for the day and told the lawyers that he would rule this morning on the issue.