Judge says HOA scam victims unlikely to get restitution

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 to address the compensation issue.

"The money is not available it would appear."

Prosecutors are seeking several million dollars in restitution in the ongoing criminal investigation, which has led to 27 convictions.

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

Justice Department lawyers have alleged that more than $8 million was funneled through secret bank accounts to fund a conspiracy 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.

In court documents, prosecutors are asking for roughly $3.5 million in restitution from 26 defendants, including lawyers and former police officers, waiting to be sentenced in the long-running investigation.

One of the original defendants committed suicide.

The restitution figure is expected to grow as prosecutors make their final push to indict about a dozen more people by year's end.

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.

George said from the bench Thursday that he had received a lot of letters urging him to order compensation for the homeowners when the defendants are sentenced, which probably will not be until early next year.

He read a letter from Dan Arcotta Jr., a homeowner at Vistana, one of the 11 victim associations.

"All these people need to be prosecuted to the fullest extent of the law," Arcotta wrote. "This is why fraud like this is running rampant in this country.

"Enormous amounts of money come up 'missing,' and no one is going to jail, and the victims are compensated very little, if anything."

George asked another Vistana homeowner, Bruce Wallace, to address the court.

Wallace, who just stepped down as president of Vistana's five-member board, was a member of the board when the takeover scheme took place.

Wallace 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 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.

La Bella called Wallace one of two honest board members 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," he told George.

Contact reporter Jeff German at jgerman@reviewjournal.com or 702-380-8135.