Thursday, January 31, 2013

Venture's Controller Believed Company Held Equity Interest In Elkhart Building

The IBJ's Cory Schouten reports on very damaging evidence the government offered in its prosecution of Venture Real Estate's John Bales and William Spencer from the company's former controller, Matthew Dyer, as a continuation of his daily coverage of the high-profile public corruption case taking place in a federal courtroom in South Bend. The defendants insist they never held an equity interest in the Elkhart building Indianapolis attorney Paul Page's company bought with money fronted by Venture; they maintain they simply loaned the money to Page's company because he was unable or unwilling to put up any money and they were urgently trying to get the deal closed to help DCS get into its leased office space in the building. Dyer contradicted the defendants' contention that it was a loan, telling jurors he understood it to be an equity interest.

"Equity means ownership," Dyer said Wednesday. "If it was truly a loan, I would have called it BAB Loan or BAB Mortgage." Dyer, who was responsible for managing the Elkhart property for Page, told jurors there was no repayment schedule for the money Venture invested into the building, which would be typical of a loan. During conversations he had with Bales, Dyer indicated that Bales and Spencer wanted their interest characterized as a loan. Dyer said Bales blamed Spencer, lamenting that he had "trusted" Spencer to protect him, and he "fucked him."

According to Dyer, he discovered in the summer of 2009 that Page had withdrawn $50,000 from L&BAB, the business which acquired the Elkhart building. When he alerted Bales to the withdrawal, Bales became concerned and sought belatedly to record his investment in the building as a mortgage interest. After Bales recorded the mortgage on the building, Page responded by firing Venture as the property manager for the building. That's new information that had not previously been reported, indicating that Page was willing to play hardball with Bales with the knowledge that he was aiding him in doing something prohibited under his contract with the state--once again reinforcing my point that there is no honor among thieves.

Dyer also discovered that Venture had failed to pay a $22,000 lease commission it owed to the state of Indiana. Instead, Bales had paid Venture the entire $88,400 commission to pay down the $362,000 down payment he made to Page to acquire the building. Dyer told jurors that Bales was dismissive of his concerns over payments owed to the state. "His boss' response, as Dyer recalled it: "F--k them," Schouten wrote. "They owe us money, so I can pay them whenever I want," quoting Bales.

Schouten says Bales' attorney, Larry Mackey, tried to discredit Dyer's testimony by suggesting that he submitted an insurance company a fraudulent claim for a stolen car. Dyer acknowledged the insurance company refused to pay his claim, but he told jurors police caught the man who stole his car.

The government called former Deputy Mayor Mike Huber as one of its witnesses against Bales. Huber worked for the Department of Administration when state first entered into the contract with Bales. Huber recounted discussions he had with Bales to lease storage space for the Indiana Stadium and Convention Building Authority. When Bales provided him a list of about a dozen choices, Huber asked him if he had an interest in any of the properties. Bales acknowledged to Huber that Venture held an interest in several of the properties. Huber asked and Bales agreed to omit discussing any properties in the future in which Venture held a interest.

If Huber had concerns about Bales, he must not have been very vocal in expressing them. When he later joined the Ballard administration, early on the administration entered into a similar exclusive real estate brokerage agreement for the City of Indianapolis' surplus property. Huber was handpicked by Barnes & Thornburg's Joe Loftus, who helped Huber land a job in the Daniels administration, to work in Ballard's administration. Loftus, of course, played a key role in helping Bales land contracts with both the state and the city. Huber has since left the city to go to work for the Indianapolis Airport Authority in a job that pays nearly twice what he earned as a deputy mayor. The Ballard administration quietly terminated its contract with Bales when it was tipped off the FBI was investigating Bales.

More damning evidence was offered by another former administration official, Steve Harless, who had originally believed Venture's claim that it did not own an interest in the Elkhart building until he read Schouten's report in the IBJ on Venture's dealings, which caused him to doubt their claims. Harless said he skepticism grew when Bales dodged answering questions he sent him via e-mail. Harless' testimony irritated Bales' attorney. On cross-examination, Schouten reports that Mackey asked Harless if he had a "hard on" for Venture. Harless said no.

One additional item of particular note is Schouten's report that defense attorneys objected whenever witnesses brought up Carl Brizzi's name in connection with the deal. He reportedly obtained a 50% interest in the building sometime after Page decided to go through with the purchase of the building. Defense attorneys insisted that Brizzi's name be stricken from the record according to Schouten.

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