No Slack for David Lack

A Santa Barbara jury found contractor and onetime Republican Party stalwart David Lack guilty of fraud and embezzlement after deliberating for about a day and a half following a trial that lasted three weeks. The jury was hung 10-to-2 whether Lack was guilty on charges of tax evasion. And on the alternative embezzlement charge that the victim was over the age of 65, he was found not guilty.

At the time of the crime in 2008, the victim — Montecito resident and conservative activist Mary Belle Snow — had only just turned 65. She gave Lack a check for $300,000 as an investment in a bank Lack was then attempting to start, stipulating the funds should not be touched until the bank had secured the state and federal approvals necessary to begin. The investment never got off the ground, however, but Lack spent Snow’s money to pay off his own debts and never notified her that he was doing so.

In addition, prosecuting attorney Brian Cota charged Lack lied when applying for two bank loans he sought in 2007, claiming to own $1.5 million worth of real estate that he never possessed. Based on the representation he owned this real estate — which could be used as collateral in case of default — Lack was given lines of credit from the two banks worth $1.2 million. When the economy tanked in 2008, Lack defaulted on the loans. At that time, the banks discovered that the collateral did not exist.

Lack’s attorney, Robert Sanger, argued that Lack was yet another victim of the Great Recession who got behind in his payments through no fault of his own, and committed mistakes, but not crimes. “It’s a mess,” he acknowledged in both opening and closing arguments, “but not a criminal mess.”

The jurors clearly saw it otherwise. Lack took the stand in his own defense — a rare occurrence in criminal cases — and sought to portray himself as a hapless soul too inept to execute so complex a deception. He was such a terrible reader, he testified, that he barely graduated from high school. He put his name on all sorts of financial documents, he said, without truly understanding what he was signing. And he testified that he had told Gregg Bigger, founder of one of the banks in question — Bank of Santa Barbara — that he did not in fact own the property in question. Lack said that he told Bigger he had merely been “interested in it.”

Even knowing this, Lack claimed, Bigger urged him “to put it down.” When Bigger took the stand, he denied saying any such thing. Cota asked with evident incredulity why Lack never mentioned this key fact during the numerous discussions, depositions, and legal proceedings that he had with bank officials throughout his bankruptcy proceedings.

Imbuing the trial with drama was Lack’s persona coupled with the riches-to-rags trajectory of his personal narrative. Lack emerged as a player in local Republican circles, serving as Michael Huffington’s right-hand man shortly after Huffington moved to Santa Barbara from Texas and ran for Congress in 1991. Huffington won that race in a colossal upset, bankrolling his $17 million campaign almost entirely out of his own pocket.

A moderate on social issues — Huffington would later come out as gay — Huffington appointed Lack to the board of the Republican Leadership Council, a national organization dedicated to fiscal restraint but social inclusion. After Huffington lost the 1994 Senate race — a nail-biter — to Democrat Dianne Feinstein, Lack threw himself into developing his contracting business, specializing in environmentally friendly building technologies.

For a while, he was quite successful, landing contracts with UCSB and along the Ventura waterfront. The walls of his office were lined with photographs of Lack posing with various Republican presidents and presidential aspirants. On occasion, former California governor Pete Wilson would stop by to chat. In 2008, he worked hand-in-glove with Mary Belle Snow to get Republican presidential candidate Rudy Giuliani elected, and when Giuliani came to Santa Barbara for a fundraiser, it was Lack and Snow who squired him about.

When the economy collapsed and the banks found out his collateral was no good, Lack charged they effectively put him out of business by notifying prospective employers of his deception. This, he argued, made it impossible for him to ever pay them back. Ultimately, he would be forced out of his apartment — evicted by his longtime landlords — and for a while lived out of his car.

Throughout the trial, Lack insisted he never lived a lavish lifestyle. To the extent he used funds to which he was not entitled, it appears, he spent them to make campaign or charitable contributions — in 2008, he donated $42,000 to various Republican candidates and committees. But mostly, he appears to have funneled much of the money — via a complicated series of third party transfers — back into his company. The motive was to make Lack Construction look more financially robust than it was to impress the companies who bond construction contracts. By achieving greater bonding capacity, Lack would stand a better chance competing for more lucrative government contracts.

Lack is scheduled for sentencing September 4.