A new political attack by Senate Majority Leader Harry Reid on a Republican congressional candidate pits Nevada’s senior senator against the state’s first family of basketball.
Reid on Monday opened fire on Congressional District 4 candidate Danny Tarkanian over a $17 million legal judgment described in court filings as having several members of the Tarkanian family "on the brink of financial ruination."
The Senate majority leader, who is backing in the race a fellow Democrat, state Senate Majority Leader Steven Horsford, said it would be "kind of embarrassing" for Nevadans to elect a congressman facing bankruptcy. Tarkanian’s financial problems stem from a legal dispute with the Federal Deposit Insurance Corp. that itself grew from a soured real estate deal.
But Lois Tarkanian, the candidate’s mother and the wife of former University of Nevada, Las Vegas, basketball coach Jerry Tarkanian, said she was shocked by Reid’s attack because the family had sought the majority leader’s advice on the matter.
"I am shocked. I am really surprised at this," said Lois Tarkanian, a Democrat and longtime Las Vegas city councilwoman.
She said that early in the case, Jerry Tarkanian wanted to seek Reid’s advice on the dispute with the FDIC and Danny Tarkanian urged them not to go to the majority leader for input.
"He felt that Harry would try and hurt us," she said. "And I was the one who said ‘Harry wouldn’t do that. ’ "
Tarkanian stopped short of saying the family regretted reaching out to Reid, but she said she was disappointed the subject matter ended up as the basis for a political attack.
"Do I think it is right that way? I don’t even know Harry thinks it is right that way. But Harry is supposed to do his job, and he did it for that Democratic candidate."
Reid’s statements about the case came during a conference call with Nevada reporters scheduled to criticize Danny Tarkanian’s role in the case.
Although public polls have shown Tarkanian to be leading Horsford despite a Democratic registration advantage in the district, Reid said, "All our polling is going just fine."
As for the lawsuit, Reid said the combination of the dispute with the FDIC, a potential bankruptcy and the failure of the initial investment is something voters should consider before casting a ballot for Tarkanian.
"It raises a question about whether he has the common sense necessary to serve in the House," Reid said.
Reid also called the FDIC’s case for the judgment "a slam dunk" and accused Tarkanian of using the legal system to delay the outcome until after the election.
"Instead of taking responsibility for this, he is using the court system to prolong the inevitable," Reid said.
Tarkanian’s campaign later responded with a statement, saying the Reid news conference, "showed a new sense of desperation and panic" on behalf of the Horsford campaign.
At issue is the judgment against several members of the Tarkanian family, including Danny, his wife, Amy Tarkanian, and Jerry and Lois Tarkanian.
Lois Tarkanian said she disagrees with efforts to blame her son for the disastrous investment outcome. She said family members made their own decisions about the deal, with some deciding to stay out of it.
"I don’t think it is right to dump it on Danny," she said. "Danny made absolutely excellent investments for the family until this one."
The judgment stems from a deal among the Tarkanians, investor Robert A. Dyson Jr. and the defunct La Jolla Bank to create a housing development near the remote mountain town of Anza, Calif.
According to court papers, Dyson had struggled for years to develop the property with loans from La Jolla Bank when in 2007 he solicited the Tarkanian investment through a business acquaintance.
The documents say that unbeknownst to the Tarkanians, Dyson had not only struggled to develop the Anza property, he also had a shaky portfolio of existing loans with La Jolla.
Dyson ran out of money, and the deal went south, leaving investors holding the bag and La Jolla Bank seeking to collect.
But the Tarkanians argue La Jolla knew Dyson was in trouble when it loaned more money on the Anza project to be secured with the Tarkanian assets.
"Because of the close connection between Dyson and (the bank), (the bank) was well aware of the perilous web created by Dyson, which it aided Dyson in accomplishing," Tarkanian attorney Gus Flangas argued in a recent motion.
The family’s efforts to sue Dyson fell through when he entered bankruptcy protection. And they were thwarted in taking action against La Jolla Bank because it, too, went bust and was taken over by the FDIC.
The FDIC is seeking to recover money from the Tarkanians though, the family argues, the entire deal was "grounded in fraud, concealment and in complete disregard of sound banking practices."
Flangas said the Tarkanians were tripped up by a federal law requiring that the FDIC only has to abide by agreements already in writing when it takes over a failing bank.
But the Tarkanians say La Jolla didn’t disclose the shaky nature of Dyson’s financial position with the project which, by its very nature, means that nothing was in writing.
"It is a Catch-22," Flangas said. "If it is in writing, it is no longer a nondisclosure, it is no longer an omission."
When the Tarkanians realized their predicament, they were divided over what to do.
Lois Tarkanian said Jerry Tarkanian sought advice from Reid in dealing with the issue, something Danny Tarkanian opposed. The younger Tarkanian ran in the Republican primary for U.S. Senate. Had he won, he would have faced Reid in the general election.
The elder Tarkanians considered Reid a friend and someone to whom they could turn for input.
"I had trusted him, and I think today was a political move on his part," Lois Tarkanian said. "I’m disappointed, I think Jerry is probably disappointed, in fact he is disappointed."
A hearing scheduled Monday in the federal District Court in San Diego chambers of Judge William Q. Hayes will cover whether the judgment should be certified, a step that would allow the FDIC to "domesticate" the ruling in Nevada and enable it to pursue the family’s Nevada assets.
Flangas said he has motions pending to set aside or reconsider the judgment.
Flangas also said Tarkanian continues to oppose the FDIC’s moves, arguing the agency should hold off on pursuing assets while the case is in progress despite Reid’s statements that resistance is futile.
"Obviously that is a partisan comment designed for purposes of helping his guy," Flangas said. "In our world, in the legal world, we are fighting this tooth and nail."
Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-383-0285 .
