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January 27, 2000     Beverly Hills Weekly
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coverstory LOST M SEA? How did a Beverly Hills attorney end up facing prison time after three of his yachts mysteriously sunk? By Justin Levine e The next time you get caught in a fender-bender, or happen to slip on a banana peel, or say to yourself just how unlucky you are, then consider the poor case of Mr. Rex K. DeGeorge and Paul A. Ebeling of Beverly Hills. You think that you are unlucky? Just imagine yourself purchas- ing a 76-foot yacht for a cool $3.675 million, then taking it on its maiden voyage off the coast of Naples, Italy, only to have it hijacked that very day by drug runners who cut holes in the hull to have it sink. Talk about your dumb luck. Now as if that wasn't bad enough, just imagine having previous- ly lost not one...not two...but three separate boats in three sepa- rate accidents at sea before your encounter with the drug runners. Not even Leonardo DiCaprio or Kate Winslet could conceive of being that unlucky with regards to their vessels. Yet such a fate allegedly befell Messrs. DeGeorge and Ebeling. And wouldn't you know it? Their bad luck doesn't even end there. It seems that the United States government doesn't believe their story about being hijacked by drug pirates. Nor for that matter does it seem to believe that anyone can have four sailing accidents in a lifetime. Instead of offering sympathy to the would-be sailors, Uncle Sam has charged DeGeorge and Ebeling collectively with three counts of mail fraud, seven counts of wire fraud, conspiracy to destroy a vessel, destruction of said vessel, and topped it all off with one count of perjury. FOR THE RECORD According to allegations outlined in a federal indictment, DeGeorge made a $400,000 down-payment in 1992 in order to purchase a $1.9 million yacht from an Italian manufacturer. Even a well-off Beverly Hills attorney doesn't buy a nearly $2 million boat with- out making sure that it is insured. The only problem for DeGeorge was that he had already collected on claims from three previous boats that had all been mysterious- ly lost at sea. Each claim was filed with a separate insurance company. With a record like that, DeGeorge had about as much chance of insuring his lat- est boat for casualty loss as a one-legged chain-smoking tightrope walker would have in getting a good medical policy. According to the U.S. Attorney's office however, DeGeorge was ultimately able to insure his latest yachting acquisition for over $1.5 million over the original pur- chase price by setting up a series of corporate transactions that concealed his iden- tity as e boat's true owner. 10 BL=verly Hills Weekly THE ALLEGED SCAM Step l - In July 1992, while the Italians were still building the yacht, DeGeorge sup- posedly ITansferred his interest in the ship to the Continental Pictures Corporation, a Panamanian company that was run by an associate of DeGeorge. Continental never paid DeGeorge any money for its interest in the yacht. Step 2 - On October 21, 1992, Continental sold the yacht to Polaris Pictures Corporation, another company that was allegedly controlled by DeGeorge and Eheling. On paper, the sale was consummated for $3.62 million, though the government claims that no money ever actually changed hands between the two corporations. Step 3 - The same day that Polaris purchased the yacht from Continental, DeGeorge allegedly created another corporation named U.S. Inbanco, Ltd. which issued promis- sory notes to Polaris in order to help finance the purchase. In return, Inbanco received a $3 million promissory note from Polaris, with the yacht being used as collateral. Prosecutors allege that while all these million dollar wheelings and dealings were being generated on paper, no actual payments were ever made.