Tax probe targeting McDonald

The federal government is ratcheting up a tax fraud investigation of former Las Vegas City Councilman Michael McDonald, sources familiar with the case said.

Last week, subpoenas were delivered in relation to allegedly questionable tax returns filed by McDonald. It was unclear when the federal grand jury will convene to hear the government's case against McDonald.

McDonald and his lawyer, Richard Wright, declined to comment.

McDonald, a former Las Vegas police officer, is no stranger to investigations. In the mid-1990s, police scrutinized McDonald's relationships with Michael Galardi and Rick Rizzolo, former strip club owners now in federal prisons.

McDonald was cleared of any wrongdoing.

In 2003, McDonald's financial records were obtained by federal investigators as part of their investigation into local government corruption connected to Galardi, but McDonald was not indicted.

"What did they recently find out that they didn't know four years ago?" asked attorney Charles Kelly, a former federal prosecutor who has closely followed the government's political corruption case. "If they didn't recently find something out, why the hell are they going forward at this time?"

Kelly's theory: "Probably because they can."

McDonald's name was prominent during the most recent political corruption trial, of real estate consultant Donald Davidson.

Davidson was accused of attempting to bribe McDonald in 2002 and was convicted earlier this month.

In phone calls secretly intercepted by the government, Davidson and former Clark County Commissioner Lance Malone discussed whether McDonald was a "player" and planned meetings with the councilman.

Initially, McDonald seemed interested in doing business with Davidson, but McDonald soon distanced himself from the two men. Like Davidson, Malone was later prosecuted by the government.

McDonald spoke with Malone after an April 2002 luncheon with Davidson. McDonald's community liaison attended the meeting and testified that he believed Davidson attempted to offer McDonald bribe money.

After the lunch, McDonald had called Malone.

"You're going to be in the middle of this whole thing, that's the one stipulation," McDonald said during the taped phone call.

McDonald is recorded on an intercepted phone call later that month talking to his former high school football coach.

"Son of a bitch tried to bribe me," McDonald said of Davidson.

On May 17, 2002, Malone told Davidson: "He doesn't want to get involved -- at all. I guess you made him very nervous."

In the spring of 2001, McDonald's phone was wiretapped by the FBI when it launched its investigation into whether elected officials were pocketing bribe money from strip club owner Michael Galardi.

Federal authorities also bugged the phones of Galardi and Malone.

When federal agents raided Galardi's strip clubs on May 14, 2003, McDonald was believed to be a subject of the investigation.

Although McDonald was not indicted, the taint of the corruption probe helped a political novice, Janet Moncrief, defeat him in his 2003 bid for a third-term on the City Council.

The charges against Davidson were a spin-off from the Galardi probe.

During Davidson's trial, Assistant U.S. Attorney Daniel Schiess pointed out to jurors that Davidson never paid taxes on consulting fees he collected from various developers.

McDonald ran his own consulting business while he was in office.

Kelly said there are larger targets to pursue than an elected official who lost his City Council seat in June 2003. The election took place less than a month after the federal government disclosed its sweeping corruption probe.

During Davidson's trial, Schiess suggested that Eskander Ghermezian, a Canadian billionaire who owns Triple Five Nevada Development Corp., funneled money through Davidson's personal banking account to pay local politicians.

Former Clark County Commissioner Erin Kenny, the government's star witness, said that after she voted in favor of a proposed Triple Five casino in the Spring Valley neighborhood in January 2000, Ghermezian and Davidson visited her at her husband's office.

"He said he owed me a life debt," Kenny said of Ghermezian.

In April or May, Davidson began delivering Kenny $3,000 a month. The payments continued until May 2003.

"You have this Ghermezian smoking gun laying there that the government wants to ignore," Kelly said. "It's so offensive. McDonald is a toothless tiger at this point. Now they're going to kick him around.

"Make it a fair fight. Go after Ghermezian, who has the money to hire a bunch of high-powered attorneys"

Ghermezian has repeatedly denied doing anything unlawful in connection with his attempt to develop a casino and shopping center on the western edge of the county.