HOA fraud trial kicks off this week

In the wake of a high-profile investigation that began more than seven years ago, the suicides of three key targets and the guilty pleas of 37 co-conspirators, the long-awaited trial in the unlawful scheme to take over valley homeowners associations is set to get underway this week.

The HOA investigation, spearheaded by the Justice Department’s fraud section in Washington, is regarded as the largest public corruption case federal authorities have brought in Southern Nevada.

But most of the work is done in the massive case, as Justice Department attorneys this week zero in on four remaining defendants — a lawyer, a ballet teacher, a real estate agent and an ailing 87-year-old ex-HOA board member.

To some, the trial is seen as anticlimactic after last month’s guilty plea of former construction company boss Leon Benzer, who prosecutors say was the mastermind behind the multi­million-dollar scheme to corrupt, take over and defraud 11 HOAs from 2003 to 2009. Straw buyers were recruited, and elections were rigged to get them on the HOA boards so Benzer could obtain lucrative construction defect contracts.

Benzer’s plea agreement with the government does not require his cooperation, but he is on the list of 67 prosecution witnesses who could be called to testify during the trial, which is expected to last three to five weeks in the courtroom of U.S. District Judge James Mahan.

For Bruce Wallace, who prosecutors says was one of the honest HOA board members during the takeover at Vistana, the trial has been a long time coming.

“I’m feeling a sense of relief that it’s going to be coming to a conclusion,” said Wallace, who is on the government’s witness list. “I’m optimistic that there will be a substantial amount of restitution to our association, which was the biggest victim.”

Wallace, who is no longer a board member, estimates that Vistana in southwest Las Vegas was swindled out of $8 million earmarked for construction repairs.

The biggest name left to be tried this week is attorney Keith Gregory, who according to prosecutors, was secretly on Benzer’s payroll while providing legal advice to Vistana and Sunset Cliffs as their general counsel.

Joining Gregory are Benzer’s half-sister Edith Gillespie, a ballet teacher who prosecutors say bought a condominium at Chateau Versailles with Benzer’s money; David Ball, a real estate agent whom Benzer got elected to the Chateau Nouveau HOA board; and Salvatore Ruvolo, a Benzer-controlled board member at Chateau Nouveau and Park Avenue.

The 87-year-old Ruvolo, who has told Mahan he has serious health issues, plans to show up in court with a walker and a service dog named Scooter that he says helps him deal with his physical impairments.

All four defendants were among those originally charged with Benzer in January 2013 in a conspiracy and fraud indictment.

The trial was delayed for 18 months as defense lawyers struggled to review more than 3 million pages of documents prosecutors collected during the long-running investigation. The jury selection process is set to begin Wednesday.

A pool of about 225 prospective jurors has been asked to fill out a 20-page questionnaire to help guide the lawyers and the judge through the selection process. Both sides expect to use the questionnaires to weed out some of the members of the pool before they get to court Wednesday.

Gregory’s lawyers had sought a change of venue, fearing they could not get a fair trial because of what they argued was years of prejudicial news coverage, primarily by the Las Vegas Review-Journal, but they lost that effort.

Benzer pleaded guilty several weeks after the Review-Journal published a story on his failed plea negotiations in summer 2011. The story was based on government reports, briefly made public in the electronic court file, in which Benzer laid out his leading role in the scheme to investigators.

Without Benzer to stand trial, prosecutors are streamlining their case against the remaining defendants.

The case dates to November 2007, when the FBI launched the investigation after construction defects lawyer Scott Canepa secretly provided them with evidence he had uncovered. Less than a year later, the investigation, aided by Las Vegas police and the Internal Revenue Service, became public with raids across the valley at law firms, HOA offices and Benzer’s businesses, including his Silver Lining Construction Co.

Justice Department lawyers took the reins of the case from the U.S. attorney’s office in Nevada in late 2010 after allegations surfaced that leaks were coming from the office to the targets of the investigation. The Justice Department investigated the allegations but could not substantiate them.

Charles La Bella, a Justice Department deputy chief, is leading the HOA prosecution team, which includes two veteran investigators, FBI agent Mike Elliott and Detective Robert Whiteley.

From its beginning, the investigation struck deep into the heart of the justice community, targeting judges, lawyers and former police officers. No judges were ever charged, but four lawyers —David Amesbury, Jeanne Winkler, Brian Jones and Barry Levinson — ended up striking plea deals with the government.

Months after his guilty plea, Amesbury hanged himself at his brother’s home in Northern California. His March 2012 death came five days after wealthy construction defects lawyer Nancy Quon, one of the conspiracy’s central figures, committed suicide in a drug overdose at her Henderson condominium. Quon had not been charged in the investigation at the time.

Jones worked at the once-influential law firm Kummer Kaempfer Bonner Renshaw & Ferrario, which abruptly broke up in 2009.

Several lawyers on the periphery, but not charged — John Leach, Mark Kulla and Sigal Chattah— are among the government’s trial witnesses.

Canepa’s name, however, is conspicuously absent from the witness list.

Retired Las Vegas police officers Frank Sutton and Morris Mattingly, who became HOA board members during the scheme, are among those who pleaded guilty. A third former officer who was targeted, Christopher Van Cleef, shot himself to death a few days after the September 2008 FBI-led raids.

Still another former officer, retired Lt. Ben Kim, pleaded guilty in a related bank fraud scheme involving the once-popular Courthouse Cafe he co-owned with Benzer and Amesbury.

With Kim, a total of 38 defendants have pleaded guilty since August 2011. Most are cooperating and on the government’s witness list and will be sentenced in the weeks after the trial. Two defendants, Benzer-planted HOA board members Arnold Myers and Darryl Scott Nichols, died of natural causes after striking plea deals with the government. Another targeted former HOA board member, Robbi Castro, died in 2010 of a suspicious drug overdose. He was not charged.

Longtime Republican political operative Steve Wark, a former Benzer business partner, was the first defendant to strike a plea deal and cooperate with prosecutors.

He is a former Vistana board president and could testify.

Allegations surfaced during the investigation that Benzer had ties to organized crime. Benzer denied the rumors, but he did little to discourage the talk as the takeover scheme unfolded, according to court documents. He often was seen with bodyguards, and he admitted to investigators that he had financial dealings with one suspected mob figure.

In his plea agreement last month, Benzer also admitted that he developed the scheme with Quon, who gave him a $2 million loan to get things moving.

The goal was to gain control of the HOA boards and steer construction defect litigation contracts to Quon’s law office, the agreement said. Quon was to give Benzer 10 percent of any defect judgments she won, and then Benzer would obtain the construction repair contracts from the corrupted HOA boards.

Benzer admitted in his plea agreement that he had the scheme covered from all angles, including setting up straw buyers to infiltrate HOA communities and getting them elected to their boards.

Members loyal to Benzer were elected through ballot stuffing, bribery and other dirty tricks, the plea agreement said. Attorneys on Benzer’s payroll were hired to provide legal advice to the boards and to oversee the election rigging, and Benzer-friendly community management firms were put in place to run the daily affairs of the HOAs.

Prosecutors have identified 11 condominium associations as victims of the scheme: Vistana, Park Avenue, Chateau Versailles, Chateau Nouveau, Jasmine, Sunset Cliffs, Palmilla, Pebble Creek, Mission Ridge, Mission Pointe and Horizons at Seven Hills.

The scheme went the furthest at Vistana, where Quon in 2007 obtained a $19 million construction defect settlement that provided Benzer and Silver Lining Construction with $8 million in repair work, most of which was never done, according to prosecutors.

Conspirators had gained control of half of the 11 HOA boards and were working on the others when authorities broke up the scheme in 2008 with the raids across the valley.

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