Federal judge balks at enforcing subpoena for sealed state records

A federal judge Wednesday refused to enforce a subpoena prosecutors sought for records of a sealed state fraud case against an ex-Las Vegas church treasurer charged with stealing hundreds of thousands of dollars from his congregation.

Assistant U.S. Attorney Gregory Damm argued in court that the state records were crucial to the federal prosecution of Gregory J. Olson, who was indicted in September 2012 on charges of wire fraud and filing false tax returns in the church scheme.

Damm argued the government needed the state records to show that Olson used proceeds from the scheme to defraud the Calvary Lutheran Church to pay off victims in the state case. The church now calls itself the Spirit of the Desert Lutheran Church.

Damm also contended that Olson hired a lawyer with money from the church scheme to fraudulently obtain the sealing order in District Court in 2008 to hide his criminal acts from the congregation.

But U.S. Magistrate Judge Cam Ferenbach sided with defense lawyers Kathleen Bliss and Daniel Heidtke, suggesting Damm’s first course of action should be going to District Court to get the case unsealed.

“Your arguments sounds pretty good,” Ferenbach said, “but I think you need to make them in state court.”

Ferenbach later issued a hastily prepared written order denying the government’s efforts to obtain the records through the federal court system.

“When a federal court has the power to decide a dispute that would be better decided by a state court, the federal court abstains from exercising its power out of respect for the state court,” Ferenbach wrote. “Abstention is central to maintaining our nation’s balance of power.”

According to Damm, a church member discovered the state fraud case against Olson from an August 2002 news release the Nevada Attorney General’s Office put out. The release disclosed that Olson had pleaded guilty to two felony counts of securities fraud against a person 65 years or older. He agreed to pay $457,500 in restitution to his victims as part of his plea agreement.

Damm told Ferenbach that the attorney general was willing to turn over its records to the government, but wouldn’t comply with a subpoena without a federal court order because of the state judge’s 2008 ruling that sealed the case.

Afterward, Damm declined to comment.

But one of the church’s board members, Ed Cholakian, voiced displeasure with Ferenbach.

“It’s been delay, delay and delay,” Cholakian said. “It just defies belief.”

Olson’s federal trial, now set for Aug. 24, has been continued more than a dozen times since 2012.

Damm said during the hearing that if he’s forced to go to state court, it likely would delay the trial again.

The scheme by Olson to steal money from the church occurred between September 2006 and March 2008, the federal indictment alleged. Olson told church members the money was needed for remodeling.

Olson is accused of taking out six mortgages on church property totaling $1.75 million and then wiring the money to a bank account owned by his company, Ascent Holdings, which was doing business as Ascent Financial Corp.

Olson did not disclose to church officials that he owned the company and paid himself $442,500 from the loan proceeds, the indictment alleged.

The church lost about two-thirds of its membership and had to give up its property under foreclosure proceedings in the aftermath of the scheme.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135. Find him on Twitter @JGermanRJ.