Former Head Of Landbank Caught In Dallas

Runnells Gone For 2 Years

Charged With Massive Fraud

March 30, 1990|By DAVID CHERNICKY Staff Writer

The former head of Landbank Equity Corp. was caught in Dallas Thursday morning, ending a two-year hunt by authorities who had charged him with bilking the company's investors out of millions of dollars while living an expensive lifestyle.

William R. Runnells Jr., 49, and his wife, Marika, 47, were arrested Thursday morning at an apartment where they had been living, said Bob Webster, assistant United States attorney in Dallas.

The two had been fugitives since April 1988, when they and three other former officials of Landbank were named in a 73-count indictment that included charges of wire fraud and racketeering.

A month before he disappeared from Hampton Roads, Mr. Runnells had been indicted on 24 counts that included making false tax returns, 10 counts of bankruptcy fraud, seven counts of contempt of court and conspiracy, according to court records.

The Runnellses had been living in the apartment in North Dallas since October under an assumed name, said Special Agent Woody Specht of the FBI's Dallas office Thursday. They were arrested at 7:10 a.m. when agents went to the apartment and Mr. Runnells met officers at the door, he said.

He said the couple had set up a business to offer hypno-therapy to people who needed to lose weight and quit smoking, and were making money at it.

After a hearing in U.S. District Court in Dallas, a federal magistrate denied bail and ordered the Runnellses placed in the custody of federal marshals for return to Norfolk, said Assistant U.S. Assistant Attorney James A. Metcalfe of the Eastern District's Norfolk office said.

Mr. Runnells, a man with less than a ninth-grade education, founded Landbank Equity Corp. in Virginia Beach in 1980, principally to orginate and sell mortgage-backed loans, federal authorities said.

On Sept. 17, 1985, Landbank filed for a reorganization in U.S. Bankruptcy Court in Norfolk. By the time Landbank went out of business, it had sold more than 10,000 second mortgages to about 40 banks and lending instutitions nationwide.

The loans amounted to about $200 million, according to a statement from the U.S. Attorney's Office in Virginia.

In a trial of other former Landbank officers in 1988, there was evidence that banks and savings and loans that had done business with Landbank lost more than $50 million after Landbank went bankrupt.

Mr. Runnells was indicted March 24, 1988 on a 24-count indictment charging him with five counts of making false tax returns; 10 counts of bankruptcy fraud; seven counts of contempt; one count of obstruction of justice and one count of conspiracy, according to court records.

He never showed up for his initial appearance and bond hearing April 6, 1988, Metcalfe said.

Federal authorities believe that Runnells and his wife fled Virginia soon after the indictments were issued. At the time, Mrs. Runnells had not been indicted, Metcalfe said.

After the couple fled, a federal grand jury on April 21, 1988, returned a 73-count indictment against Mr. and Mrs. Runnells, Ross E. Schumann Jr., a former senior vice president of Landbank, Owen R. Thornton, a certified public accountant from Virginia Beach, and Frank E. Butler III, a Virginia Beach lawyer.

The five were charged with racketeering and 36 counts of wire fraud involving Landbank's activities.

The same indictment also charged Mr. Runnells and Butler with 10 counts of bankruptcy fraud.

Mr. Runnells and his wife were charged together in 19 counts of making false statements and fraudulently overvaluing property to influence federally-insured institutions, according to the indictment.

If convicted of all counts in the second indictment, Mr. Runnells would face up to 293 years in prison and Mrs. Runnells would face up to 272 years, Metcalfe said.

Schumann, Butler and Thornton were prosecuted in Norfolk in September 1988. During a recess in the trial, Schumann killed himself.

In October 1987, William R.Runnells' mother, Lucille P. Runnells, 74, his adopted son Steven Z. Runnells, 22, and a brother, John Runnells were indicted on 65 counts with conspir acy, various counts of fraud and contempt.