Judge: Might be difficult for HOA scam victims to get restitution

Article Courtesy of The Las Vegas Review-Journal

By Jeff German

Published September 30, 2012 

A federal judge voiced sympathy Thursday for homeowners victimized in the sweeping scheme to defraud homeowners associations, but said it may be hard to get them restitution.

"I sure wouldn't hold my breath," Senior U.S. District Judge Lloyd George said during a rare hearing he called to address the restitution issue. "The money is not available it would appear."

Prosecutors are seeking several million dollars in restitution in the ongoing criminal investigation that so far has led to 27 convictions.

George, who is waiting to sentence four defendants in the high-profile case, called the scheme "terribly tragic" and "unfortunate" for the homeowners, adding, "I wish we could do more."

Prosecutors have alleged that more than $8 million was funneled through secret bank accounts to fund the scheme to take control of 11 homeowners associations between 2003 and 2009.

The conspirators were able to stack association boards and obtain lucrative legal, construction and community management contracts.

The government has indicated in court documents that it is seeking roughly $3.5 million in restitution from 25 defendants, including lawyers and former police officers, waiting to be sentenced in the long-running investigation. One of the original defendants committed suicide, and another defendant pleaded guilty in a related bank fraud scheme.

Prosecutors expect the restitution figure will grow as they make their final push to indict about a dozen more people by the end of the year. One of the key targets is former construction boss Leon Benzer, who prosecutors have alleged pulled the strings in the scheme. Benzer is now said to be driving a cab.

Only one homeowner, Bruce Wallace, who was on the Vistana board when the scheme was carried out, showed up for Thursday's hearing.

Wallace, who just stepped down as Vistana's president, told George that the conspirators, with the help of crooked board members, looted the association's share of a $19 million construction defect settlement in 2007.

Wallace said about $8.1 million that was supposed to go toward the repairs basically disappeared by the end of 2008 with little repair work being done.

Afterward, Wallace said he understood that many of the defendants might no longer have the money to immediately pay back the homeowners.

But he added the homeowners believe it is important to pursue restitution because, "We want the defendants to feel what they did to us."

Charles La Bella, the lead Justice Department prosecutor in the investigation, backed up the story Wallace told George, calling Wallace an honest board member who "vigorously" fought corruption at Vistana.

"If I could get back that $19 million, I would," La Bella said. "We're not giving up. The investigation is continuing."

La Bella, a deputy chief in the Justice Department's Washington-based Fraud Section, said three attorneys on the prosecution team are in town this week working the case with FBI agents.

"We take this very seriously," La Bella told George.