HOA fraud cases may be merged

Federal prosecutors are moving to consolidate all of the cases under one judge in the massive investigation into fraud and corruption at homeowners associations.

Senior U.S. District Judge Lloyd George is considering handling as many as two dozen plea deals prosecutors intend to file over the next six weeks in what may be the most far-reaching criminal fraud case ever in Nevada.

All of the targets striking deals are expected to testify in a push by prosecutors to obtain indictments against higher-level players. Prosecutors have identified as many as 100 co-conspirators at various levels of the scheme, including lawyers, judges and former police officers.

"This case sounds huge," said Douglas McNabb, a seasoned Washington, D.C., defense lawyer who has battled the Justice Department in court over the years. "We're talking about some 24 people who have already flipped and are cooperating against many more defendants. It's clear the government has started at the bottom and is working its way up."

Records show that the Justice Department's Fraud Section in Washington has brought in four trial attorneys to prosecute the criminal cases. A motion by prosecutors to consolidate the cases has been filed under seal in federal court.

The lead prosecutor is Charles La Bella, a Fraud Section deputy chief who oversees investigations on the West Coast. La Bella, based in San Diego, attracted national attention following the 1996 presidential race when then-Attorney General Janet Reno appointed him to head a task force to investigate possible Democratic fundraising abuses during the campaign.

Christopher Blakesley, a University of Nevada, Las Vegas law professor who specializes in criminal law, said the homeowners association investigation is as "massive and far-reaching" as any case he has seen here.

"The complexity sort of lends itself to wanting it before one judge," he said.

A former federal prosecutor agreed, saying, "The large number of voluntary guilty pleas suggests a criminal case that is unprecedented in size and scope in Nevada. From the prosecutors' perspective, the judge will understand the history of the case instead of having to explain it to a half-dozen different judges."

Last week, longtime Republican strategist Steve Wark became the first target to plead guilty in the scheme. George accepted his guilty plea to one count of conspiring to commit mail and wire fraud, and set a Dec. 16 sentencing.

At the hearing, La Bella said Wark's case was one of four prosecutors had filed under seal. Four more cases were expected to be filed in the coming days, with as many as 15 more by mid-October, he said.

George promised a quick decision on whether he would hear all of the cases. He hinted that he would take on the assignment, saying his senior status gives him more time to deal with the cases than his full-time colleagues who have busy court calendars.

Wark, 54, who is cooperating with prosecutors, admitted to participating in a sweeping conspiracy to stack homeowners association boards with members who then pushed for construction defect lawsuits against builders.

Legal work and multimillion-dollar repair contracts were funneled to lawyers and companies associated with the scheme at the expense of the home­owners, who were deprived of honest voting on their boards.

The board members friendly to the co-conspirators were "straw purchasers" in the various developments and elected by the co-conspirators through classic dirty campaigning that included conducting phony polling, hiring private investigators to dig up dirt on candidates and rigging the balloting, according to federal court documents unsealed last week.

"This process created the appearance of legitimacy, since bona fide home­owners believed the elected board members ... were, as fiduciaries, acting in their best interest rather than to advance the financial interests of the co-conspirators," the documents alleged.

"In fact, defendant Wark and others were paid by or on behalf of their co-conspirators ... for their assistance in purchasing the properties, obtaining HOA membership status, rigging elections and manipulating their votes to further the goals of the conspiracy and to enrich the co-conspirators at the expense of the HOA and bona fide homeowners."

One association dragged into the investigation, Vistana, alleges in civil court papers that it overpaid the company that did construction repairs and has suffered more than $3 million in damages.

The company, Silver Lining Construction, was one of the businesses the FBI raided in 2008, when it went public with the investigation.

Search warrants also were executed at law firms, homeowners association offices and other businesses across the valley. Since then, nearly a dozen associations have become embroiled in the investigation.

Anti-homeowners association activists were elated last week after hearing the news of Wark's guilty plea.

"I was hoping I would live long enough to see this day," said Jonathan Friedrich, a 65-year-old former general contractor who has been fighting to expose corruption at homeowners associations across the Las Vegas Valley since 2007. "I'm delighted that the light is finally shining on the cockroaches that have been bleeding homeowners."

Added Bob Robey, 72, who also has been fighting homeowners associations the past several years: "It's about time. I hope they continue their investigations, and I hope they uncover more."

Rana Goodman, 70, another activist, said she hopes the long-running FBI investigation will start to bring "some justice" to the homeowners.

"It's taken way too long, but we're thrilled," Goodman said. "We'd like to see the stranglehold that some of these attorneys have on a large group of associations broken. There's finally light at the end of the tunnel -- maybe."

But defense lawyer Thomas Pitaro, who represents construction defects attorney Nancy Quon, one of the key targets in the homeowners investigation, thinks the criminal case has veered off course.

"If this is such a big investigation, I hope they investigate the developers who ravaged this community with their shoddy construction of residential homes," Pitaro said. "They should be looking at the primary cause of the problem, and that is the substandard housing developments."

Blakesley said he is not surprised that it has taken three years for the federal investigation to result in criminal charges.

He said it likely took investigators a lot of time to gather and sort out the evidence.

"It has so many sidebars," Blakesley said. "It looks like there are all sorts of avenues to travel to establish the case."

He said George, namesake of the federal courthouse, is perfectly suited to handle the consolidated cases.

"He's almost like the father of the federal system here," Blakesley said. "He's respected. He's appreciated. He's smart. On top of that, his experience gives him a lot of credibility in whatever he decides."

What makes this investigation even more intriguing is that, despite the magnitude and deep impact it is having on the community, the Las Vegas U.S. attorney's office will play no role in it.

When U.S. attorney Dan Bogden returned to take the reins of the office in October 2009, he removed himself from making any administrative decisions in the case because of a potential conflict of interest. He owns a condominium at one of the developments under investigation, Park Avenue.

In October, the U.S. attorney's office asked to be removed entirely from the case to avoid the appearance of a conflict, a Justice Department spokeswoman said last week.

The Fraud Section took over the case in November. Late last year, the Justice Department's Public Integrity Section in Washington also began investigating whether the U.S. attorney's office was leaking information about the homeowners investigation. Allegations had surfaced that Quon was getting information from the office.

The Justice Department steadfastly refused to comment on that investigation until last week after Wark pleaded guilty. A spokeswoman said the department had "completed its review and determined no further action is necessary."

Quon's saga has turned into one of the more bizarre twists in the homeowners association investigation. Her law office was searched in the 2008 FBI raids.

She denies it, but Las Vegas police believe she has tried to kill herself to escape the pressure of the federal investigation.

Her boyfriend, former Las Vegas police officer William Ronald Webb, was charged in November in a scheme to arrange her death using what the couple thought were undetectable illegal drugs.

Then on Aug. 17, both Quon, 51, and Webb, 43, were indicted in what prosecutors say was a botched suicide attempt that involved setting fire to her Rhodes Ranch home.

Both Quon and Webb pleaded not guilty in District Court in the alleged scheme last week. The lead investigators in the federal case were on hand for their arraignments.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135.

Trending topics:

• Charles La Bella
• Dan Bogden
• homowners associations
• Jeff German
• Justice Department
• Lloyd George
• Nancy Quon
• Steve Wark

Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. MidWestValues Mar. 22, 2012 | 4:17 p.m. Report Abuse

   BTW, if this shocks you, then you obviously haven't lived in Vegas for very long. "Sin City", "Whatever happens here stays here"...sheesh your mayor coined these phrases, yet you complain of ethical boundaries being crossed? Huh? Admit it, you moved here because of the history, the seedy underground, and the adult playground. You moved to the "wild west" and it bit you in the tail pipe! If you want to live in the devils playground be prepared to be burned; and I'm not even a bible thumper.
   
   BTW, your fault for buying in Vegas, obvious that the bubble wouldn't last. All of you people flipping homes are to blame, so deal with it...or wait, that's not what we do here, we just let our houses go into foreclosure and let the tax payers sort it out. LMAO (you're no better than the criminals above)

2. MidWestValues Mar. 22, 2012 | 4:04 p.m. Report Abuse

   Take a good look around, those criminals are your neighbors, fellow citizens you drive on the road with. HOA's aren't crooked the average citizen is. Love how you folks blame HOA's, yet they're chaired by you, the owners.
   
   BTW only other option is to have local gov. take over maintenance of HOA's and their assets. LMAO...you think there's corruption now? How about $500.00 for a toilet seat, and $75.00 for a roll of TP. Give up the "HOA's are scams" language, because in reality, you people, the average owner, runs them! LMAO

3. HomeBoy Sep. 23, 2011 | 8:41 a.m. Report Abuse

   It did not go unnoticed that the reason the Anthem Five were let off the hook was (according to Attorney Joseph Garin) ---- “they would be deprived of DUE PROCESS.”
   
   This bunch (The five Sun City Anthem Board members), ROUTINELY deprive the residents of their Association DUE PROCESS.
   
   Jon.Friedric is right ---- THERE IS PRESENTLY NO JUSTICE FOR OWNERS LIVING IN HOAs IN NEVADA

4. Sam.Judie Sep. 5, 2011 | 1:16 p.m. Report Abuse

   My understanding is: "Fausto" is a Tow Truck Driver! His income is directly related to Bully Board Members of HOAs County-Wide phoning him to have a Hapless Homeowner's Car towed which happens to be parked in their own Driveway!
   What a Great Gig Fausto has! Talk about 'Easy Money'? HOAs are a big Cash Cow that 'Fausto' certainly does NOT want to see disappear!
   HOA Corruption is Far-Reaching Indeed! I mean........corruption has NO LIMITS INDEED!
   Sam Judie of Henderson, NV - Volunteer Web Master for HOA1234.com
   
   ~

5. Jon.Friedrich Sep. 5, 2011 | 6:40 a.m. Report Abuse

   To bad FAUSTO who is afraid to use his REAL NAME does not know ALL THE FACTS. He just spouts CAI DOCTRINE.
   I guess STEALING MILLIONS OF DOLLARS from homeowners is a JOKE in FAUSTOS EYES.
   I bet he is a Board Member or makes money off of HOAs!
   The Reporter in this article has spet 2 years following this story.
   Guess FAUSTO wants the reporter to get comments from the BAD guys in this horror story to say they all they did was just fine. The FBI & law enforcement will not comment on an ongoing investigation
   What planet is FAUSTO from?

6. Jon.Friedrich Sep. 5, 2011 | 6:28 a.m. Report Abuse

   The Sun City Anthem Board made sweeping changes to the CC&Rs and never held a vote of the owners and just adopted the new CC&Rs.
   A Complaint was filed with the Nevada Real Estate Division Common Interest Community Commission
   When the hearing started on July 23 ,2011 Attorney Joseph Garin representing the past Anthem 5 Board members objected to the proceedings as the statute under which the hearing was being conducted (NRS 116.700 and NRS 116.725) had been repealed in 2005. This would deprive the Anthem 5 of Due Process he stated.
   The Deputy Attorney General Ms. Kali Fox Miller who processed this case claimed it was a “typo” but it was really sloppy legal work as we think the information was “lifted” off of a previous Complaint which was used as a template for this case.
   The Chairman for the CICC Mr. Michael Buckley an attorney, suggested that the case be dismissed without prejudice so that the complaint could be amended and refilled and heard under the proper statute.
   Unfortunately one of the Commissioners Marilyn Brainard who is the “homeowners advocate” on the Commission made a motion that the case be dismissed with prejudice. After much discussion the Commission voted to dismiss the case with prejudice as per Commissioner Brainard ‘s motion.
   This meant the Anthem 5 WALKED AWAY FREE
   The State and the Attorney Generals Office spent Thousands of Dollars on both the investigative and legal work in putting this case together, which was dismissed .
   THERE IS PRESENTLY NO JUSTICE FOR OWNERS LIVING IN HOAs IN NEVADA

7. Fausto Sep. 4, 2011 | 9:29 p.m. Report Abuse

   Quoting Freidrich, Robey and Goodman in this article is a joke, right? Why not do some real work and get quotes from people who actually worked to bring this to the FBI's attention, not some anti-HOA posers!

8. bruce.baxter Sep. 4, 2011 | 6:07 p.m. Report Abuse

   CynicalObserver:
   
   Your description of what occurred in California is mind boggling. I got my wake up call in 2004, just never imagined how corrupt things are and seriously overestimated the intelligence of most homeowners in Nevada HOAs.
   
   The Feds are doing their part, the media is an asset, but now homeowners need to step up. The long term solution is political. Homeowner unfriendly legislators need to be tossed in the next election. A questionnaire needs to be designed that can be sent to each and every legislator. Based upon their answers the survey initiators can determine if they are homeowner friendly or not homeowner friendly. The survey results are then shared with potential voters. The authors of the survey endorse those favorable to homeowner's rights. This costs very little to do. Much of it can be accomplished electronically. Want to really light them up? Print copies of the survey results and include them in a sample ballot that is given to voters as they approach the polls. I'll bet we could find volunteers that would work those precincts where Sen. Alice Copening is running for re-election.

9. Jon.Friedrich Sep. 4, 2011 | 5:57 p.m. Report Abuse

   On August 23 Commissioner Marilyn Brainard one of the three
   "Homeowners Representives" on the Common Interest Community Commission let 5 Sun City Anthem former Board member off the hook.
   These former Board members were charged with 5 Violations of State Law. The State had spent Thousands of Dollars investigating this case and the Attorney Generals Office filing a formal complaint against these 5 individuals. There was a "technical error" in the Complaint which could have been corrected.
   Instead the Commission at the direction of Ms. Brainard DISMISSED the case WITH PREJUDICE therefore giving the Anthem 5 the ability to thumb their nose at 12,000 residents in Sun City and get away with allegedly breaking the law!

10. Totellitasitis Sep. 4, 2011 | 5:36 p.m. Report Abuse

    What do you call convicting all of the HOA's, their attorneys, collection agencies and management companies?
    
    A great start!

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