Federal prosecutors in Robert Kahre's tax evasion and fraud trial have drilled into new territory: the question of whether Kahre and his longtime girlfriend, Danille Cline, hid taxable assets by buying shared homes in her name using falsified documents.
Thomas Browne, a local real estate agent and loan officer, testified recently that he helped prepare false loan documents for Kahre and Cline, who have three children and have been together almost 20 years.
"I had a corporation," Browne explained on the witness stand. "I created a document that she actually worked there (at Browne Ltd.). It was a fake document."
According to Browne, the document assigned Cline a substantial but fictitious income as an asset manager.
Cline would use the paper to get a type of home loan that requires the buyer to state income but, on the strength of the buyer's good credit rating, does not require proof of income, according to Browne.
Defense lawyers made it clear Browne has been spared from prosecution for other acts of real estate fraud, involving his own home purchases, by striking a plea agreement that requires him to testify against the defendants.
Browne's testimony represents an expansion in focus at the trial before Judge David Ezra.
Prosecutors used prior witnesses to explore the unconventional payroll system Kahre ran for his own construction-related businesses, and for more than 30 client businesses. The system doled out pay in gold and silver coins but allowed workers to immediately exchange them for paper money.
The cash equaled the coins' market value, but workers say they were told they could use the coins' face value for tax purposes.
Gold coins surfaced in the real estate testimony, too. At one point, Browne said he listed $300,000 in gold coins as an asset on a mortgage application for one of the Kahre homes. Browne said Kahre or Cline showed him receipts from a coin shop to corroborate the amount, but Browne did not say whether the sum represented the coins' face value or market value.
At the signing to close the purchase of one home, which was riding on Cline's gainful employment, the stay-at-home mom made a playful remark as she viewed her fictitious stated income, along the lines of, "Ooh, I'm a rich girl," according to Browne.
At another point in the trial, Cline's lawyer, Lynn Panagakos, said Cline receives $10,000 a month from Kahre for their household expenses.
Browne is now divorced from Cline's sister but testified that he once considered Kahre his best friend. Their friendship ended before Browne's divorce.
Browne said the two men grew apart shortly after armed federal agents and local police pulled a surprise search of Kahre's business premises in May 2003. Records and equipment for a tax investigation were seized during the raid.
Kahre's earlier tax trial -- which ended in a hung jury as to his criminal charges -- did not address the tax implications of any real estate transactions. In that trial, before Judge Robert Jones, there were nine defendants. Four were acquitted of all counts; two others were partially acquitted but dropped when the government reformulated the indictment that led to the present trial.
This time around, the only new defendant is Cline. Besides Cline and Kahre, the other defendants are Alex Loglia, who is a former Kahre business assistant, and Lori Kahre, a sister to Kahre who has worked in his businesses and was the buyer of one of the homes now under scrutiny.
Browne was indicted on felonies, too, but received the plea agreement. In it, he pleads guilty to three misdemeanor counts for helping Robert Kahre conceal assets in connection with three separate house purchases. Two houses were titled to Cline, one was titled to Lori Kahre.
A defense lawyer, Michael Kennedy, confronted Browne during cross examination with a loaded question: "You're hoping as part of the plea agreement to receive no jail time, no felony, and they didn't charge you for your own fraud?"
Browne signed his agreement in March 2008, but the government will not officially remove the felony charges until after the present trial is over and only if it decides his testimony constituted "substantial assistance" to prosecutors.
A self-made business owner, Robert Kahre suffered a recent setback in a lawsuit related to the criminal matter. On June 29, a panel of three appeals judges upheld the dismissal of his so-called RICO lawsuit. Kahre's attorney, William Cohan, recently said they hope to reinstate the federal appeal, before a larger panel of judges.
In the lawsuit, Kahre alleges government prosecutors, IRS agents, FBI agents and local police officers illegally conspired to investigate and indict him in a way that ruined his businesses, by driving off clients and workers with threats of prosecution.
Kahre asserts it was improper for prosecutor J. Gregory Damm and IRS investigator Jared Halper -- who were already the targets of a civil rights lawsuit Kahre had filed regarding rough treatment of workers during the 2003 raid and Kahre's simultaneous arrest -- to continue to play key roles in the grand jury process that led to Kahre's indictments, in Kahre's two trials and in the upcoming sentencing of several anti-Kahre witnesses.
Since his original indictment in 2005, Kahre has failed three times to have Damm replaced. Meanwhile, at the trial underway, Halper sits with Damm to assist.
Other government witnesses besides Browne are also testifying as a condition of plea bargains they made -- all signed by Damm -- to reduce their own tax or fraud charges. Two of them, Heidi Molesworth and Robert Whitney, belong to a large group of Kahre associates who have sued Damm and Halper in the postponed civil rights lawsuit.
In 2004, Judge Philip Pro put that lawsuit -- which has more than 20 plaintiffs, including Kahre -- on hold until after the criminal case is done.
Pro also stripped both Halper and Damm of immunity in connection with the search, during which workers were held outdoors at gunpoint for several hours in high heat without water or shade. That means, if the civil rights lawsuit goes to trial and the two men lose, their government jobs and pensions would be at risk.
This week, the defense probably will call witnesses.
Contact reporter Joan Whitely at email@example.com or 702-383-0268.