Investors, some of whom lent Al Moriarty hundreds of thousands of dollars, were given a promissory note but no documentation on what that money would be used for, testified A.J. Santana, an investigator with the District Attorney’s Office.
“That was all verbal,” Santana said.
The third day of the preliminary hearing of Grover Beach financier Moriarty, accused of bilking investors out of more than $10 million, continued Monday with the defense’s cross examination of a key witness to the case.
Moriarty, 80, is said to have told investors that their money would be used to purchase gold and real estate, help start-up businesses and assist teachers to buy houses.
However, during the preliminary hearing, Santana testified that those investments were used for personal expenses such as paying bills, funding construction at his home and paying other investors.
Defense attorney Scott Whitenack, through his questioning, alluded that Santana was not experienced enough to distinguish between personal and business expenses.
“They (the funds) were all there co-mingled,” said Santana, referring to money deposited into one of Moriarty’s bank accounts.
“I think it is very unusual and not appropriate,” Santana said.
Whitenack called his first witness to the stand, Kirby Gordon, an attorney and longtime friend of Moriarty who represented Moriarty in prior civil cases.
Whitenack said he hopes to use Gordon’s testimony to prove that the loans issued by Moriarty were unsecured — thus requiring him to have fewer credentials.
However, Whitenack must first prove that Gordon qualifies as an expert witness.
In May, Moriarty pleaded not guilty to seven felonies involving fraud and embezzlement. He remains in County Jail with bail set at $5 million — the minimum amount alleged to have been embezzled.
Moriarty is accused of embezzling more than that amount from investors. Additional investments could bring that figure to more than $20 million.
It is unknown exactly how many investors lost money.
Before his arrest, Moriarty filed for bankruptcy in January, owing more than $22 million to creditors and dozens of San Luis Obispo County residents who lent him money.
Before the criminal case, 19 separate civil lawsuits were filed against Moriarty in San Luis Obispo Superior Court for unpaid payments on promissory notes. The claims, which vary in amount, allege fraud, elder abuse and breach of contract by not repaying loans as promised and a lack of required security licenses needed to make investments.
The preliminary hearing is set to resume Tuesday in San Luis Obispo Superior Court.