Erin Kenny Her agreement with the government includes favorable financial terms

Government prosecutors say it's appropriate that former Clark County Commissioner Erin Kenny faces less than four years in prison for taking bribes.

Attorneys vying against them in court disagree, calling it a sweetheart deal.

Kenny herself has another opinion, which she offered to jurors earlier this month. She said the disgrace she has suffered since admitting to her crimes in 2003 has been punishment enough.

"I've served three years in public jail. It's been very difficult," Kenny testified April 3.

With considerable focus on how much time the mother of five might spend in prison, scant attention has been paid to another aspect of Kenny's plea deal: its favorable financial terms.

Under Kenny's agreement with the government, she must surrender only a fraction of the bribes she received in exchange for testifying against fellow former Clark County Commissioners Dario Herrera and Mary Kincaid-Chauncey.

Kenny, 45, has acknowledged accepting about $400,000 in bribes from strip club magnate Michael Galardi and local developers.

However, her deal with the U.S. attorney's office only calls for her to forfeit about $70,000, or about 18 percent of the illegal payments, making some wonder whether the deal is an appropriate punishment for her crimes.

"Why should she be able to keep any of the bribe money?" asked Craig Walton, president of the Nevada Center for Public Ethics. "That can't be good public policy."

The $70,000 Kenny is forfeiting equals what prosecutors can trace directly to her illegal relationship with Galardi.

But she is not being forced to forfeit other bribes that add up to several times that amount.

Among the illegal payments Kenny has testified she received but is not being prosecuted for or forced to forfeit are:

• $200,000 from developer Don Davidson.

• At least $120,000 from Triple Five Development.

• And $20,000 from a source she knew only as "China Man."

Additionally, Kenny's associates have told the government that Kenny took other bribes, which she has not acknowledged.

Kenny's accountant told the FBI she also received $70,000 to $100,000 from developer Bill Walters. Kenny testified that this is not true. Walters, who has not been charged in connection to the allegation, has declined to comment.

Galardi told the FBI Kenny was receiving $20,000 a month from developer Jim Rhodes while she was on the commission, according to an FBI document. Kenny denies this. Rhodes did not return calls seeking comment.

Kincaid-Chauncey's attorney suggested in his cross-examination of Kenny earlier this month that she is not being prosecuted for the non-Galardi bribes or being forced to surrender them because they came to light as a result of what is known as a proffer letter.

Douglas McNabb, a Houston attorney who specializes in white-collar federal cases, explained that targets of federal criminal investigations such as Kenny sometimes offer to "proffer" information about other illegal acts to the government when they are considering cooperating with authorities against other targets. In exchange, the government agrees not to prosecute them for giving up this information.

"It's basically, 'Anything I tell you that you don't know about, you can't use directly against me,'" McNabb said. "But they can use it to go after others."

Although Kenny has not been charged for accepting an illegal payment from Davidson, the developer was indicted last year on charges related to bribing Kenny.

"If she disclosed that information to the government under a proffer letter, then they don't charge her and it can't be used at sentencing to increase her sentence," McNabb said. "They could've also worked out a deal not to go after her assets."

Additionally, even though Kenny acknowledged bribes from Galardi, Davidson, Triple Five and "China Man" years ago, she testified earlier this month that she has not amended her income tax returns for the years she was accepting those bribes to reflect the additional income.

Kenny testified that she was not aware that illegal income was subject to taxation and that she would also owe interest and penalties to the Internal Revenue Service for not reporting them.

Under the terms of Kenny's deal, the IRS cannot prosecute her criminally for tax evasion. But the agency could seek civil action against her and has not done so. Local and regional IRS officials said they could not comment specifically on Kenny's case.

Natalie Collins, a spokeswoman for the U.S. attorney's office in Las Vegas, said government prosecutors also could not comment on the financial terms of Kenny's deal during the trial.

But Walton said Kenny's apparent financial health -- she sends her children to an $11,000-a-year private school and bought an $869,000 home nine months after signing the plea deal in 2003 -- raises a serious issue.

"Does crime pay?" he asked. "It would appear it has in Erin Kenny's case."

Kenny's attorney, Frank Cremen, would not comment on Kenny's finances for this story, except to confirm that Kenny currently works in her chiropractor husband's office. However, Cremen told the Review-Journal in 2004 that his client's husband has income that funds the family's lifestyle.

He said John Kenny works 60 to 80 hours a week at his practice, despite reports that he cut back his schedule to two afternoons a week to be at home with their children.

Undoubtedly, the Kenny family's finances have improved dramatically since the days before Kenny entered public office in Southern Nevada and began accepting bribes in exchange for political influence.

In 1988, a year before she moved with her family to Las Vegas, a 27-year-old Kenny filed bankruptcy in suburban Chicago. She had $1.36 in her bank account and owed $1.2 million to creditors, according to court documents.

Most of the debt stemmed from her failed advertising business and was abolished when lawsuits against her were dismissed.

Shortly after moving here, the feisty Democrat launched a successful political career, serving one term in the Nevada Assembly before securing a seat on the powerful Clark County Commission in 1995.

By 1997, Kenny was earning $54,000 a year as a commissioner, and her chiropractor husband had cut back to seeing patients just two afternoons a week to help raise their five children, according to a published report. Still, that year the Kenny family moved from a modest two-bedroom tract home into a $346,000, five-bedroom home in a gated golf-course neighborhood in Rhodes Ranch.

The year before, Kenny had pushed through an annexation measure that helped her friend Jim Rhodes build the 9,000-home master-planned community.

Galardi, who like Kenny is cooperating with the government's prosecution of Herrera and Kincaid-Chauncey, told the FBI in 2003 that Kenny told him that she had been receiving $20,000 a month from Rhodes, according to an FBI debriefing document. He did not put a time frame on the alleged relationship.

"'Jim Rhodes gives me $20,000, you only give me $10,000,'" Galardi said Kenny told him, according to the document.

Galardi told federal agents that he later confirmed with his close friend, Rhodes, that the developer was delivering that sum to Kenny monthly.

Rhodes, who has not been charged with any crimes, later contributed almost $200,000 to Kenny's unsuccessful 2002 bid for lieutenant governor. After leaving public office in 2003, Kenny went to work for the developer and lobbied on behalf of his projects.

So how were the bribes spent that Kenny has acknowledged receiving?

Kenny testified that her husband did not know about the hundreds of thousands of dollars she was receiving illegally, but that she did discuss the bribes with her father, aunt and uncle.

Kenny testified that she used the $200,000 she received from Davidson to buy her ailing father a duplex and to take care of other financially struggling relatives.

The maximum financial penalty Kenny faces when she is sentenced is a $250,000 fine, meaning she is not in danger of paying more to the government than she has acknowledged receiving in bribes.

McNabb, the Houston legal expert, said it is more likely Kenny will receive a fine between $100,000 and $150,000.

"This lady got in fairly early in the process and has provided a substantial amount of information and assistance to the government," McNabb said.

However, Walton, the ethicist, said the government's treatment of Kenny sends a dangerous message to other politicians considering accepting bribes.

"If you take bribes we're going to make you forfeit 25 percent of it, so beware," Walton said mockingly. "It is frightening. Whether intended or not, this just shows there's a fee for getting caught at bribery, but you get to keep the rest. At the least, the IRS should have a field day with her."

But it does not appear government tax collectors intend to pursue civil action against Kenny. The statute of limitations for IRS auditors to go after Kenny is three years.

McNabb said the clock started ticking under that statute of limitations when Kenny signed her plea agreement in May 2003, meaning only weeks remain for authorities to pursue a civil case.