STUDIO OWNER DENIES ARSON CHARGE EXPLOSION ROCKED SITE IN 2004; JUDGE TO CONSIDER TRIAL.

Byline: JASON KANDEL Staff Writer

BURBANK -- William Schlegel said he was shocked when he was arrested May 15 in connection with arson stemming from an explosion at his Burbank sound studio two years ago.

He'd already spent hundreds of hours and nearly $100,000 fighting a court battle with his insurance company, which alleges he started the fire to cash in on a $12.5 million claim.

He said the fire was an accident, caused by a slow gas leak.

``It's quite devastating,'' said Schlegel 59, of Thousand Oaks, in a phone interview from the offices of his attorney, Tom Nunziato. ``I'm losing my house. I've lost everything I've spent 40 years to build up. My reputation has been libeled and slandered in the course of this. I couldn't imagine anything worse.''

Free on bail, Schlegel and his former studio manager, Daniel Medina, 29, of Los Angeles, each have pleaded not guilty to one count of arson and two felony counts of insurance fraud. If convicted of all counts, the men could spend more than 20 years in prison, according to the criminal complaint.

They are expected to appear in court July 12 for a preliminary hearing in which a judge will determine whether there is enough evidence to order a trial.

The drama began Oct. 10, 2004, when an explosion rocked International Recording Corp., where audio for the film ``Dances with Wolves'' was mixed.

The blast sent debris flying over three blocks along East Santa Anita Avenue, causing minor damage to nearby vehicles and property. No one was injured.

After the explosion, Schlegel and Medina conspired to file a phony insurance claim to cover the loss, court records allege.Medina's attorney, Maria Cavalluzzi, denies that her client was involved.

Burbank Fire Department investigators allege someone used a liquid accelerant to spread fires in the building, and that a natural gas pipe appeared to have been disconnected before the explosion, court records show. Prosecutors also allege that a video surveillance camera appears to have captured an image of a person who appears to be Schlegel near the studio on the day of the explosion.

Los Angeles County Deputy District Attorney Jean Daly called it a serious case of arson for financial gain.

``It could have been very serious if people had been walking in the vicinity,'' she said. ``It would have taken out people immediately in front of the building and across the street. Any fire has the potential to cause serious injury and even death. It's not a controllable thing. No one can control a fire.''

Before his arrest, Schlegel had been fighting a lawsuit Sequoia Insurance Co. filed against him in March 2005, accusing him of setting the fire. The suit seeks to have Schlegel's policy canceled, to have Schlegel return the $500,000 the company advanced him after the fire, and to recover costs associated with the lawsuit, court records show.

The civil case is now on hold until the criminal case is resolved.

Stephen Huchting, an attorney for the Monterey-based Sequoia, declined to comment.

Nunziato acknowledged that Schlegel has a history of cash-flow problems, usually due to his habit of spending money to upgrade his studio, but the lawyer said he is not a criminal. The building had equity, and Schlegel could have sold it for a profit, Nunziato wrote in a letter to Sequoia earlier this year. Nunziato poked holes in the arson investigation, saying it was incomplete and jumped to too many conclusions. He also denies that the person seen in the surveillance video was Schlegel.

``(Schlegel) would never do something that could jeopardize the lives of other people,'' said Nunziato, who has taken on the case for free after having represented his client in business disputes and other transactions over the past 20 years. ``He wouldn't do that.''

jason.kandel(at)dailynews.com

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