Federal prosecutors pursue restitution in corruption case involving HOAs

Article Courtesy of The Las Vegas Review-Journal

By Jeff German

Published September 21, 2012


Federal prosecutors say they are working hard to obtain restitution for victims in the sweeping investigation into corruption at Las Vegas Valley homeowners associations.

Charles La Bella, the Justice Department lawyer spearheading the high-profile investigation, filed court papers Tuesday informing a federal judge of the government's efforts.

La Bella, a deputy chief in the Washington, D.C.-based Fraud Section, told Senior U.S. District Judge Lloyd George that "the government has recognized that there are potentially many victims to the widespread criminal activity under investigation."

Prosecutors have alleged that more than $8 million was funneled through secret bank accounts to fund a massive scheme to take control of 11 homeowners associations between 2003 and 2009. The conspirators were able to obtain lucrative legal, construction and community management contracts.

Homeowners, their associations and the financial institutions defrauded by straw buyers in the takeover scheme are considered victims.

George, who is presiding over several of the criminal cases, has set a Sept. 27 hearing to get a better handle on the restitution issue.

At a status check last month, the judge held up a two-inch stack of letters he received, primarily from homeowners at the Vistana condominium development in southwest Las Vegas, urging him to consider restitution for them when the defendants are sentenced.

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

The restitution figure is likely to grow as prosecutors make their final push to indict about a dozen more people by the end of the year.

In his court papers, La Bella said prosecutors have "taken several affirmative steps in order to notify potential victims and to keep potential victims apprised of developments in this ongoing investigation." Letters have been sent to the 11 homeowners associations and some 29 financial institutions.

The Justice Department asked the associations in the letters to spread the word of the case developments to residents who lived in condominiums during the years of the scheme, "as they may have suffered losses as a result of the defendants' crimes, La Bella said.

Victims have been informed in the letters that the Justice Department has set up a special web page to track developments in the corruption investigation, he said.

The homeowners associations and the financial institutions, La Bella explained, also have been told that they have a right to provide the courts with a "written victim impact statement" that will figure into the sentences handed out to the defendants in the scheme.

Through election rigging and other dirty campaign tactics, the conspirators stacked association boards with straw buyers who fraudulently voted to award them millions of dollars in contracts, prosecutors have alleged.

Former construction company boss Leon Benzer and the late construction defects attorney Nancy Quon are alleged to have pulled the strings.

Benzer has not been charged in the ongoing investigation, and Quon committed suicide on March 20. She was not charged at the time.

Vistana board members have complained that former members, community managers and others involved in the scheme squandered the association's share of a $19 million construction defects settlement won in 2007.

After lawyers fees and expenses were deducted, the homeowners association got about $8.1 million to do repair work, the board members contend. Most of that money went to Benzer's Silver Lining Construction Co. and its subcontractors, which did "very limited" repairs and produced little required paperwork documenting its work.

The board members said leaking roofs were repaired and buildings were painted, but significant insulation, electrical and plumbing problems largely were ignored.