Friday, February 14, 2003
Copyright © Las Vegas Review-Journal

Former state lawmaker convicted of mail fraud

An attorney for former Assembly Majority Leader Harley Harmon said he will appeal the former mortgage broker's Thursday convictions on 34 counts of federal mail fraud.

Harmon, the grandson of one of Las Vegas' founders, was convicted Thursday morning by a four-man, eight-woman jury after about 12 hours of deliberations. He faces a maximum of five years in prison on each count.

Harmon also faces a possible court order to pay up to $8.5 million in fines, plus restitution to victims and forfeiture of property to the government.

U.S. District Judge Philip Pro set a hearing on forfeiture for Feb. 21 and scheduled sentencing for May 2.

Defense Attorney Frank Cremen said he would appeal the verdict although he doubted Harmon, 55, would be allowed to remain free while the appeal is pending.

Harmon was the owner of a mortgage brokerage that bore his name. Harley Harmon Mortgage raised money from individual investors and loaned the funds to developers and builders. The loans were supposed to be secured by real estate.

The brokerage was declared insolvent but had $22 million in loans outstanding when the state closed it in 1997.

In the federal mail fraud trial against Harmon, Assistant U.S. Attorney Dan Schiess persuaded the jury that Harmon cheated investors when he put their money into riskier mortgage loans than promised. The federal prosecutor also said Harmon switched funds among projects without investor approval.

Cremen argued after the verdict was announced, however, that the jury misunderstood the 2-week-long trial.

"I think the one thing that people miss is Harmon didn't take any money, not 1 cent," Cremen said. "Crimes like this can only occur in the federal system. It's not a Ten Commandments crime."

Investors who lost money to Harmon viewed the verdict differently.

"I felt like he was very politically connected and wasn't going to get in trouble," said Colleen Schumacher, whose family invested with Harmon. "It looks like justice prevailed."

Another investor agreed.

"I don't have any sympathy for him. He got what he deserved," said Al Ramsey, former music director for Caesars Palace in Las Vegas, Lake Tahoe and Atlantic City. "I couldn't be happier. Made my whole year."

Ramsey, who estimated he lost $500,000 through investments with the company, said he trusted Harmon because the defendant was a longtime friend and golfing partner.

"Everybody liked Harley," Ramsey said.

Dan Gray, who organized investors to seek state and federal action against Harmon, said Thursday that the defendant caused grief for many elderly investors.

Gray recalled a widow in her 90s who told Harmon she was entrusting him with all her money, about $40,000.

" 'You remember this is all I've got,' " Gray recalled the woman telling Harmon.

She spent her final years living off only Social Security and couldn't afford to heat her mobile home in the winter, Gray said. She died before the trial.

Several other people lost their homes as a result of investments with Harmon, and others committed suicide, Gray said.

"He did break up a lot of families that could have enjoyed the later years of life" had they not lost money to Harmon, said Marshall Teallow, another investor. "He got just what was coming to him."

Schiess credited the FBI and the Las Vegas Metro Police Department with investigating the fraud scheme.

"The biggest challenge was to simplify this case," Schiess said. "The time that the jury took to deliberate shows it was conscientious in reviewing the evidence."

In the trial, Schiess argued that Harmon cheated investors by falsely promising to put their money in first mortgage loans, which would be first in line to recover funds in case the borrower defaulted and the property was foreclosed. Instead, Harmon invested funds from some investors in second-, third- and fourth- mortgage loans that get paid only after the first mortgage lenders recover their funds.

The defendant testified he gave investors documents that showed they were in subordinated mortgage loans.

Harmon admitted he diverted funds from projects for which he obtained investor money to other projects that were failing.

"He believed he was authorized to do that," Cremen said.

Cremen also complained that the government waited several years to prosecute Harmon after many witnesses no longer remembered what was said and done. A grand jury indicted Harmon in 2001. The defense, however, requested some delays.

Although Harmon was originally indicted on 71 counts of mail fraud, 37 of those were dismissed for various reasons before the jury began deliberations.