Showing posts with label John Bales. Show all posts
Showing posts with label John Bales. Show all posts
Thursday, February 07, 2013
FSSA Office Building In Kokomo Owned By Bales Closed Due To Unsafe Conditions
Well, this makes for a fitting postscript to the acquittal of John Bales and his business partner, William Spencer, in a federal courtroom in South Bend. An inspector for the city of Kokomo ordered a building occupied by the Family & Social Services Administration closed indefinitely until its owner, John Bales' Venture Real Estate, addresses persistent water leaks that posed the risk of fire to damaged electrical wiring and falling ceiling tiles, raw sewage in the building's basement and falling bricks. FSSA employees who worked in the building experience respiratory problems and allergic reactions to mold. Other testing by inspectors found elevated levels of lead and carbon dioxide in the building. The Kokomo Perspective has the story:
Bales And Spencer Found Not Guilty: Federal Prosecutors Have Egg On Their Face
The U.S. Attorney's Office in the Northern District of Indiana has egg on its face after a jury found real estate developer John Bales and his business partner, William Spencer, not guilty on multiple counts of fraud arising out of their roles as the state of Indiana's exclusive real estate leasing agent for state office space. Defense attorneys pummeled the faceless and voiceless co-conspirator, Indianapolis attorney Paul Page, whose conspicuous absence from the government's roster of witnesses leaves many unanswered questions about the government's handling of this case it claimed was of great importance.
Last month, Page, a criminal defense attorney by trade, pleaded guilty to a wire fraud charge for his role as a straw buyer of an Elkhart office building that Bales and Spencer intended to lease for the state's Department of Child Services. Bales fronted the money Page needed to secure a loan from a bank and Bales and Spencer made everything else happen, as long as Page agreed to kick back Bales' original investment, plus a share of the profits from a quick flip of the property after the office space was built out for DCS and a quarter of a million dollar a year long-term lease was in hand according to Page's plea agreement. Yet the jurors in the federal court room in South Bend never learned that Page had pleaded guilty to his role in the scheme last month, nor were they allowed to hear one word from Page about the scheme because federal prosecutors chose not to call him as a witness. Instead, the jurors were treated to endless personal attacks by defense attorneys on the absent Page, who referred to him as a "lazy and broke-ass bitch", a "pig", a "thief" and a "crook."
The jurors also never learned that the man who was given a 50% stake in the company Bales set up for Page to act as a straw buyer without investing a single dime of his own money was the state's most powerful prosecutor at the time, Marion Co. Prosecutor Carl Brizzi, whose campaign committee Bales' criminal defense attorney chaired. Jurors didn't hear that prior to Brizzi obtaining his interest in the Elkhart real estate that he had publicly told reporters for the Indianapolis Star he was opening a criminal investigation of DCS' handling of an abused child in Indianapolis, Tajanay Bailey, who died a brutal death at the hands of her abusive mother shortly after DCS employees returned the young girl to her care despite ample evidence in the case file that their actions were not in the young girl's best interests. A source witnessed Gov. Daniels angrily confront Brizzi about his investigation of DCS at a cocktail reception during an Indiana Society gathering at a Chicago hotel shortly after Brizzi opened his investigation. Brizzi's office later quietly dropped the case before Page acquired the Elkhart Building with Bales' money and obtained a long-term lease with DCS. Months later, Brizzi would receive his 50% stake in the company without investing a dime. The federal judge hearing the case refused to let jurors see e-mails that showed Spencer and Brizzi discussing a potential ownership stake for Brizzi in another Bales real estate project in Indianapolis.
The jurors also didn't hear that the law firm defending Bales had helped him land the sweetheart deal leasing all of the state agency properties for state agencies from the Daniels administration, or their continued role in assisting Bales' dealings with the state, which included help directly from a deputy chief of staff in the Governor's office whose brother was a partner at the same law firm defending Bales. The jurors heard nothing about the tens of thousands of dollars Bales showered on Daniels' campaign committee in consideration for his sweetheart deal or the campaign committee of Brizzi chaired by Bales' criminal defense attorney.
The jurors never heard that the law firm defending Bales is the same law firm that has been paid tens of millions of dollars by the Daniels administration to defend the state's losing lawsuit over the welfare privatization debacle against IBM, which lost the contract to another client of the law firm, ACS, IBM's former partner in the privatization deal. And what about that call center lease in Marion that was awarded to a powerful state lawmaker and his son, who just coincidentally purchased the building before being awarded a lease that would make them millions of dollars?
Jurors never saw the e-mails Bales and his underlings sent to state employees who tried to keep his shady dealings in check, boasting to them that he was close to Governor Daniels whose phone number he had on his speed dial, or the threats he made to sick his powerful attorney-lobbyists on them if they didn't give him what he demanded. More importantly, the jurors heard nothing about the other real estate leased to state agencies in which Bales' company also held a financial stake, which the IBJ's Cory Schouten had previously reported in his detailed investigative reporting that led to the indictments of Bales, Page and Spencer. Instead, we have one guilty plea from one straw buyer and bit player who could not have committed the crime to which he confessed if the decision reached by the jurors in South Bend was a legally correct verdict. All in all, it was a pretty sad day for justice in Indiana. The federal prosecutors in South Bend should be holding their heads in shame tonight.
The IBJ's Cory Schouten, the only reporter to provide daily coverage of the trial had Bales' reaction to the verdict:
Please see the timeline I developed for the John Bales saga here. It provides the road map of the trail of deceit, fraud and self-dealing that exemplifies how the public's business is conducted in this state. The bottom line is that only the people who lie, cheat and steal get ahead. There's no reward for honesty, integrity and trust.
Last month, Page, a criminal defense attorney by trade, pleaded guilty to a wire fraud charge for his role as a straw buyer of an Elkhart office building that Bales and Spencer intended to lease for the state's Department of Child Services. Bales fronted the money Page needed to secure a loan from a bank and Bales and Spencer made everything else happen, as long as Page agreed to kick back Bales' original investment, plus a share of the profits from a quick flip of the property after the office space was built out for DCS and a quarter of a million dollar a year long-term lease was in hand according to Page's plea agreement. Yet the jurors in the federal court room in South Bend never learned that Page had pleaded guilty to his role in the scheme last month, nor were they allowed to hear one word from Page about the scheme because federal prosecutors chose not to call him as a witness. Instead, the jurors were treated to endless personal attacks by defense attorneys on the absent Page, who referred to him as a "lazy and broke-ass bitch", a "pig", a "thief" and a "crook."
The jurors also never learned that the man who was given a 50% stake in the company Bales set up for Page to act as a straw buyer without investing a single dime of his own money was the state's most powerful prosecutor at the time, Marion Co. Prosecutor Carl Brizzi, whose campaign committee Bales' criminal defense attorney chaired. Jurors didn't hear that prior to Brizzi obtaining his interest in the Elkhart real estate that he had publicly told reporters for the Indianapolis Star he was opening a criminal investigation of DCS' handling of an abused child in Indianapolis, Tajanay Bailey, who died a brutal death at the hands of her abusive mother shortly after DCS employees returned the young girl to her care despite ample evidence in the case file that their actions were not in the young girl's best interests. A source witnessed Gov. Daniels angrily confront Brizzi about his investigation of DCS at a cocktail reception during an Indiana Society gathering at a Chicago hotel shortly after Brizzi opened his investigation. Brizzi's office later quietly dropped the case before Page acquired the Elkhart Building with Bales' money and obtained a long-term lease with DCS. Months later, Brizzi would receive his 50% stake in the company without investing a dime. The federal judge hearing the case refused to let jurors see e-mails that showed Spencer and Brizzi discussing a potential ownership stake for Brizzi in another Bales real estate project in Indianapolis.
The jurors also didn't hear that the law firm defending Bales had helped him land the sweetheart deal leasing all of the state agency properties for state agencies from the Daniels administration, or their continued role in assisting Bales' dealings with the state, which included help directly from a deputy chief of staff in the Governor's office whose brother was a partner at the same law firm defending Bales. The jurors heard nothing about the tens of thousands of dollars Bales showered on Daniels' campaign committee in consideration for his sweetheart deal or the campaign committee of Brizzi chaired by Bales' criminal defense attorney.
The jurors never heard that the law firm defending Bales is the same law firm that has been paid tens of millions of dollars by the Daniels administration to defend the state's losing lawsuit over the welfare privatization debacle against IBM, which lost the contract to another client of the law firm, ACS, IBM's former partner in the privatization deal. And what about that call center lease in Marion that was awarded to a powerful state lawmaker and his son, who just coincidentally purchased the building before being awarded a lease that would make them millions of dollars?
Jurors never saw the e-mails Bales and his underlings sent to state employees who tried to keep his shady dealings in check, boasting to them that he was close to Governor Daniels whose phone number he had on his speed dial, or the threats he made to sick his powerful attorney-lobbyists on them if they didn't give him what he demanded. More importantly, the jurors heard nothing about the other real estate leased to state agencies in which Bales' company also held a financial stake, which the IBJ's Cory Schouten had previously reported in his detailed investigative reporting that led to the indictments of Bales, Page and Spencer. Instead, we have one guilty plea from one straw buyer and bit player who could not have committed the crime to which he confessed if the decision reached by the jurors in South Bend was a legally correct verdict. All in all, it was a pretty sad day for justice in Indiana. The federal prosecutors in South Bend should be holding their heads in shame tonight.
The IBJ's Cory Schouten, the only reporter to provide daily coverage of the trial had Bales' reaction to the verdict:
"Few things have brought more pride than the small part I played in helping the children in need," Bales wrote, referring to his role in finding office space for Indiana's Department of Child Services. "I won't let this legal ambush change that. I did not deserve this nightmare and pray that no other citizen suffers what I experienced."This is utter crap from a greedy and an overly ambititous real estate broker who could give a damn less about the children DCS is charged with protecting in this state. The losing federal prosecutor, Jesse Barrett, had no comment on the verdicts. No surprise there. Anyone want to take a guess where Mr. Barrett worked before he became a federal prosecutor. You knew it. The dutiful public servant worked in Barnes & Thornsburg's South Bend office, the same law firm defending Bales!
Please see the timeline I developed for the John Bales saga here. It provides the road map of the trail of deceit, fraud and self-dealing that exemplifies how the public's business is conducted in this state. The bottom line is that only the people who lie, cheat and steal get ahead. There's no reward for honesty, integrity and trust.
Wednesday, February 06, 2013
Where Was Paul Page?
Did I miss something? The government's case against John Bales and William Spencer ended this week without testimony of the key co-defendant, Indianapolis attorney Paul Page, who pleaded guilty last month to federal wire fraud charges and agreed to cooperate with the government's prosecution of Bales and Spencer, as well as ongoing investigations by the U.S. Attorney's Office in Indianapolis, which reportedly has former Marion Co. Prosecutor Carl Brizzi as one of its targets. After the defense offered several witnesses yesterday afternoon and this morning, the IBJ's Cory Schouten says the parties were to offer their closing statements in the case this afternoon before sending the case to the jury.
Page's testimony would have seemed critical. After all, according to his plea agreement, Bales solicited Page to act as a straw purchaser for a building in Elkhart that Bales' company, acting as the state's leasing agent, would in turn have the state lease from him for the state's Department of Child Services. According to Page, Bales set up the business entity Page used to buy the building, and Bales' Venture Real Estate fronted the money to the business on behalf of Page to secure a loan and mortgage from Huntington Bank to acquire the building, with the understanding the advanced funds would be repaid to Venture and the profits split between Page and Bales' Venture Real Estate after the building was resold. Page's plea agreement says the company he owned, L&BAB, kicked back more than $55,000 in development fees that were paid by the state to his firm to companies controlled by Bales, in addition to the nearly $110,000 Venture Real Estate earned in commissions and brokerage fees on the purchase of the building.
Page's plea agreement further claimed that Bales prepared and had him execute a backdated mortgage representing the more than $360,000 Bales fronted him to purchase the building more than a year after he acquired the Elkhart Building with a loan and mortgage he received from Huntington Bank that prohibited him from taking out a second mortgage on the real estate. Huntington Bank did not know that Bales had fronted Page the down payment required to secure the original loan, or that Bales had later secured his interest in the building by recording a second mortgage. Page later amended the operating agreement for L&BAB to make Carl Brizzi an equal co-owner, although he made no investment in the business in consideration for his ownership stake according to Page. E-mails between Spencer and Brizzi also discussed a possible ownership stake in a strip center owned by Venture at 49th & Pennsylvania Streets in Indianapolis around the same time Brizzi was made an equal partner in L&BAB.
The defendants' attorneys insist that their clients held no equity interest in the Elkhart Building, a contention contested by their company's own former controller, who testified that it had not been booked as a loan, and that there was no repayment schedule or other documents classifying it as a loan. According to the controller's testimony, the belated, backdated mortgage filing was made as an after thought to give the appearance Venture's interest in the building was truly no more than a loan secured by a mortgage. A commercial real estate broker from Fort Wayne, David Nugent, testified for the defense that Venture's second mortgage was a "shared-appreciation loan" and not an equity interest. A shared-appreciation mortgage, commonly referred to as a "SAM", is typically a mortgage-backed loan whereby the lender agrees to loan money to a borrower for a reduced rate of interest in consideration for receiving a fixed percentage of the appreciated value of the property when it is resold. The trial coverage doesn't specify the terms in the mortgage instrument to indicate whether the backdated mortgage recorded by Venture contained language reflecting a true SAM.
The IBJ's Cory Schouten discusses additional testimony offered by Nugent for the defense claiming that real estate brokers are permitted to represent both sides of a transaction without disclosure to all parties. "On cross-examination, Barrett read Nugent portions of the code of ethics for the National Association of Realtors, which appeared to contradict Nugent's claim that brokers can represent multiple parties at once on a deal," Schouten wrote. "Barrett said the code makes clear that brokers may not accept payment from multiple parties without disclosure; Nugent contended that a broker can be paid a sale commission, lease commission and development fee on a building because each of those transactions is separate." Really? I did not know that.
Schouten also reports on a retired IRS agent the defense found to make the case that Bales and Spencer stood no chance of gaining financially from the transaction. Marion Siara claimed that, in addition to a $50,000 payment Page pulled out of L&BAB for himself, he also withdrew another $93,700 for other family members and associates, including a $50,000 payment to his defense attorney, Robert Hammerle. Siara claimed that Venture would have lost about $25,000 if it managed to sell the building for $1.65 million. The government contended the building could be worth as much as $2,000,000 million after the state invested money in the improved build out for the DCS offices and signed a long-term lease worth at least $250,000 a year. Siara acknowledged under cross-examination by the government that defense counsel had not retained his services until December of last year, less than two months before the start of the trial.
Page's testimony would have seemed critical. After all, according to his plea agreement, Bales solicited Page to act as a straw purchaser for a building in Elkhart that Bales' company, acting as the state's leasing agent, would in turn have the state lease from him for the state's Department of Child Services. According to Page, Bales set up the business entity Page used to buy the building, and Bales' Venture Real Estate fronted the money to the business on behalf of Page to secure a loan and mortgage from Huntington Bank to acquire the building, with the understanding the advanced funds would be repaid to Venture and the profits split between Page and Bales' Venture Real Estate after the building was resold. Page's plea agreement says the company he owned, L&BAB, kicked back more than $55,000 in development fees that were paid by the state to his firm to companies controlled by Bales, in addition to the nearly $110,000 Venture Real Estate earned in commissions and brokerage fees on the purchase of the building.
Page's plea agreement further claimed that Bales prepared and had him execute a backdated mortgage representing the more than $360,000 Bales fronted him to purchase the building more than a year after he acquired the Elkhart Building with a loan and mortgage he received from Huntington Bank that prohibited him from taking out a second mortgage on the real estate. Huntington Bank did not know that Bales had fronted Page the down payment required to secure the original loan, or that Bales had later secured his interest in the building by recording a second mortgage. Page later amended the operating agreement for L&BAB to make Carl Brizzi an equal co-owner, although he made no investment in the business in consideration for his ownership stake according to Page. E-mails between Spencer and Brizzi also discussed a possible ownership stake in a strip center owned by Venture at 49th & Pennsylvania Streets in Indianapolis around the same time Brizzi was made an equal partner in L&BAB.
The defendants' attorneys insist that their clients held no equity interest in the Elkhart Building, a contention contested by their company's own former controller, who testified that it had not been booked as a loan, and that there was no repayment schedule or other documents classifying it as a loan. According to the controller's testimony, the belated, backdated mortgage filing was made as an after thought to give the appearance Venture's interest in the building was truly no more than a loan secured by a mortgage. A commercial real estate broker from Fort Wayne, David Nugent, testified for the defense that Venture's second mortgage was a "shared-appreciation loan" and not an equity interest. A shared-appreciation mortgage, commonly referred to as a "SAM", is typically a mortgage-backed loan whereby the lender agrees to loan money to a borrower for a reduced rate of interest in consideration for receiving a fixed percentage of the appreciated value of the property when it is resold. The trial coverage doesn't specify the terms in the mortgage instrument to indicate whether the backdated mortgage recorded by Venture contained language reflecting a true SAM.
The IBJ's Cory Schouten discusses additional testimony offered by Nugent for the defense claiming that real estate brokers are permitted to represent both sides of a transaction without disclosure to all parties. "On cross-examination, Barrett read Nugent portions of the code of ethics for the National Association of Realtors, which appeared to contradict Nugent's claim that brokers can represent multiple parties at once on a deal," Schouten wrote. "Barrett said the code makes clear that brokers may not accept payment from multiple parties without disclosure; Nugent contended that a broker can be paid a sale commission, lease commission and development fee on a building because each of those transactions is separate." Really? I did not know that.
Schouten also reports on a retired IRS agent the defense found to make the case that Bales and Spencer stood no chance of gaining financially from the transaction. Marion Siara claimed that, in addition to a $50,000 payment Page pulled out of L&BAB for himself, he also withdrew another $93,700 for other family members and associates, including a $50,000 payment to his defense attorney, Robert Hammerle. Siara claimed that Venture would have lost about $25,000 if it managed to sell the building for $1.65 million. The government contended the building could be worth as much as $2,000,000 million after the state invested money in the improved build out for the DCS offices and signed a long-term lease worth at least $250,000 a year. Siara acknowledged under cross-examination by the government that defense counsel had not retained his services until December of last year, less than two months before the start of the trial.
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.
"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.
Wednesday, January 30, 2013
There Really Is No Honor Among Thieves
A defense attorney's description of his client's former co-defendant after he decided to plead guilty and testify as a government witness is precious. Bernard Pylitt, who is defending William Spencer in the real estate fraud case involving the state of Indiana and Huntington Bank as its victims, told jurors in his opening statement that Indianapolis attorney Paul Page was a "pig" and a "thief" because he pulled money out of the business to which his client fronted money to purchase and turned down offers to flip the property for a quick profit. Bear in mind that his client is accused of keeping his ownership interest hidden so he could make money not only as the state's exclusive real estate leasing agent but as an owner of the property despite a specific prohibition against said ownership in his contract with the state. Larry Mackey, the attorney for Spencer's co-defendant, John Bales, assured the jurors it was only Page who did the lying in the transaction. The IBJ's Cory Schouten describes the humorous musings of Pylitt:
Mackey's claim that state officials approved of his client investing money into buildings the state planned to lease in order to get deals closed more quickly hit a bit of a roadblock with the government's first witness, Carrie Henderson, who headed up the Department of Administration from 2006-09 and oversaw Bales' contract. She recalled her reaction to Bales' suggestion that he could invest money in buildings the state planned to lease. "I told him that was creative, but we absolutely couldn't do that kind of deal with the state of Indiana, even if fully disclosed," Henderson said. "I made a very strong statement to say we can't do that kind of deal here. You have to be transparent. You can't work both sides of a transaction." Ouch!
Schouten said the government was expected to call Matthew Dwyer as its next witness, a former controller for Bales' company. Schouten says the defense plans to impeach Dwyer with evidence that he submitted a false insurance claim on a stolen vehicle at the same time he was allegedly giving false statements to the FBI. Yeah, there really isn't honor among thieves.
In his opening statement, Spencer attorney Bernard Pylitt called Page a "pig" for withdrawing $50,000 out of an account tied to the Elkhart building, a "pig" for turning down reasonable offers to sell the building, and a "thief" for collecting more than $150,000 in income from a building he got for free.
Pylitt suggested Bales and Spencer had no choice but to deal with Page's demands so they could meet a deadline to secure safe office space for the Department of Child Services. Other developers had turned down the deal, and Page only wanted in if he didn't have to put up any money.
Bales attorney Larry Mackey noted that his client is the only individual to lose money on the deal. Bales invested about $362,000, while Page borrowed the rest—about $931,000, including funds for preparing the space for occupancy—from Huntington Bank. He told the bank he would be the 100-percent owner with no other debt.
"Paul Page lied to Huntington Bank," Mackey said. "We're not going to disagree with that. Bales and Spencer had nothing to do with that lie."Schouten oberves that neither side mentioned in their opening statements that Page had pleaded guilty to committing a crime already. Typically, defense attorneys argue to jurors that government witnesses who reach plea agreements with the government have a motive to lie in order to receive a lighter sentence for their own criminal wrongdoing. Page's attorney, Robert Hammerle, likened the attack of his fellow defense attorneys to Lance Armstrong's treatment of his teammates when they first came forward admitting their roles in illegal doping to win competitions. "These types of childish accusations remind me of Lance Armstrong's personal dismissal of former teammates who, like Paul Page, came forward and told the truth," Hammerle wrote in an e-mail. "Once he was forced to come out from hiding, Mr. Armstrong now looks like a colossal cheating fool, and who can trust him?" Schouten observes that calling Page a "pig" was actually an improvement over Bales' choice of name for Page's front company for Bales, L&BAB, which allegedly stood for "lazy and broke-assed bitch."
Mackey's claim that state officials approved of his client investing money into buildings the state planned to lease in order to get deals closed more quickly hit a bit of a roadblock with the government's first witness, Carrie Henderson, who headed up the Department of Administration from 2006-09 and oversaw Bales' contract. She recalled her reaction to Bales' suggestion that he could invest money in buildings the state planned to lease. "I told him that was creative, but we absolutely couldn't do that kind of deal with the state of Indiana, even if fully disclosed," Henderson said. "I made a very strong statement to say we can't do that kind of deal here. You have to be transparent. You can't work both sides of a transaction." Ouch!
Schouten said the government was expected to call Matthew Dwyer as its next witness, a former controller for Bales' company. Schouten says the defense plans to impeach Dwyer with evidence that he submitted a false insurance claim on a stolen vehicle at the same time he was allegedly giving false statements to the FBI. Yeah, there really isn't honor among thieves.
Tuesday, January 29, 2013
Bales Trial Underway In South Bend; Only The IBJ Is Covering
The fraud trial of the politically-connected real estate broker, John Bales, that began in a federal courtroom in South Bend yesterday should be big news in the state's largest city and seat of state government. After all, the key man on trial is someone that is oh so close to former Gov. Mitch Daniels and involves charges of serious public corruption in state government. Oddly, or perhaps not, only the IBJ is providing day-to-day coverage of the trial. The Indianapolis Star has had nada, and none of the local TV stations have reporters covering the story. The South Bend Tribune, the only major newspaper in the area of trial, is apparently unaware the trial is taking place a few blocks from its offices. The IBJ's Cory Schouten ticked off a list of names that Judge Robert L. Miller, Jr. read off to potential jurors as jury selection began, which reads like a who's who of Indiana politics and which underscores why coverage of the trial is worthy of media attention:
According to the government's case, Bales and Spencer, while acting as the state's exclusive real estate broker for leasing state property, fronted money to a company owned by Page (and perhaps Brizzi) to purchase a building in Elkhart in which they intended to enter into a long-term lease on the state's behalf with the Department of Child Services. The plan was to have Page flip the building for a quick profit and split the net profits with them, along with repaying the money they fronted for the building's purchase and kicking back the developer's fee and brokerage commission earned by Page to them. The government also says the two schemers shorted the state money it earned from a commission on the lease, which it later paid to the state after the feds launched their investigation.
Bales has hired Barnes & Thornburg top white collar defense lawyer, Larry Mackey, to defend him, along with Jason Barclay of the firm. It's unclear how attorneys for the firm can represent Bales since it was attorneys for their firm who helped hook Bales' company up with the exclusive real estate brokerage agreement with the state and ran interference for them when veteran state employees balked at the company's actions and course of conduct while acting on the state's behalf. Barclay also worked in the Daniels' administration as the Governor's Special Counsel and Policy Director and had intimate knowledge of what Bales was doing on behalf of the state. It's unclear who they're defending: Bales or their law firm? Former Hamilton Co. judge Bernard Pylitt is representing Spencer. Robert Hammerle of Indianapolis represented Page in reaching his plea agreement with the government.
Mackey, who you may recall was the first criminal defense lawyer for Ponzi schemer Tim Durham when government prosecutors in Indianapolis were convinced to drop a civil forfeiture action against Durham before quietly fading away after that fete, told jurors in his opening statement that "there was no scheme to defraud the state of Indiana." "No matter how thin the pancake, there is another side," Mackey said. "Neither of these men did anything wrong or intended to harm anyone."Yeah, just like the "exercise of civic virtue" when Mackey's law firm engineered the awarding of the welfare privatization deal to its client. I'm still shaking my head over the lack of a prosecution by the U.S. Attorney's Office in that case, given that the federal government was snookered out of hundreds of millions of dollars in that debacle. Mackey claims that state officials knew what Bales' company was doing and didn't object to his actions, even though they clearly violated the express terms of his written contract with the state. The sad thing is that he's probably telling the truth. Some of these people who worked for Daniels saw it as their number one priority in state government to help make money for Daniels' political cronies. That's how Keith Bulen taught Daniels the business of politics was conducted back when he worked for his political consulting business back in the early days of Uni-Gov under Mayor Richard Lugar.
According to Mackey, the defendants' actions were based on a plan to save the state money on leases and procure as much money as possible for it from the sale of surplus state property. To hear Mackey explain it, Bales and Spencer were so concerned about getting a state office in place for DCS to protect abused and neglected children that it became necessary to cut corners and even dig into their own pockets to get the deal done. "This was a scheme, frankly, to help," Mackey explained. The prosecutors insist state officials had no idea Bales' company owned a financial stake in the building, and the bank that loaned money to Page had no idea it had fronted Page the money to close on the original loan and mortgage. According to prosecutors, Bales waited more than a year before preparing and recording a backdated mortgage executed by Page in his company's favor to secure his investment in the building, which also violated Page's original mortgage agreement with his lender. Bales and Spencer committed financial fraud on the state and the bank in doing so and then lied about it the government contends. Schouten said the defense plans to call several former state officials to provide positive testimony, including former DCS Director James W. Payne and and Indiana Department of Administration Director of Real Estate Steve Harless. I know. I laughed too!
Schouten says attorneys expect the trial to last through the end of next week. We'll look forward to catching Schouten's ongoing trial coverage.
U.S. District Judge Robert L. Miller Jr. read a panel of 48 potential jurors the names of about 60 potential witnesses and key players likely to be mentioned during the case, including several Indianapolis power brokers.
Among them: former Marion County Prosecutor Carl Brizzi; former Indianapolis Deputy Mayor Michael Huber; former chief of staff to Gov. Mitch Daniels Earl A Goode; former Indiana Department of Child Services Director James W. Payne; Indiana Department of Workforce Development Commissioner Mark W. Everson; current DCS Director John P. Ryan; and real estate developer Paul Kite.
The judge wanted to know whether the potential jurors knew any of the people or recognized their names. They did not.I'm frankly a bit surprised the trial is taking place after a key defendant, Indianapolis attorney Paul Page, agreed to plead guilty to wire fraud charges and cooperate in the government's prosecution of Bales and his business partner, William Spencer, as well as cooperate with the U.S. Attorney's Office in Indianapolis in an ongoing investigation that reportedly has former Marion Co. Prosecutor Carl Brizzi as one of its targets.
According to the government's case, Bales and Spencer, while acting as the state's exclusive real estate broker for leasing state property, fronted money to a company owned by Page (and perhaps Brizzi) to purchase a building in Elkhart in which they intended to enter into a long-term lease on the state's behalf with the Department of Child Services. The plan was to have Page flip the building for a quick profit and split the net profits with them, along with repaying the money they fronted for the building's purchase and kicking back the developer's fee and brokerage commission earned by Page to them. The government also says the two schemers shorted the state money it earned from a commission on the lease, which it later paid to the state after the feds launched their investigation.
Bales has hired Barnes & Thornburg top white collar defense lawyer, Larry Mackey, to defend him, along with Jason Barclay of the firm. It's unclear how attorneys for the firm can represent Bales since it was attorneys for their firm who helped hook Bales' company up with the exclusive real estate brokerage agreement with the state and ran interference for them when veteran state employees balked at the company's actions and course of conduct while acting on the state's behalf. Barclay also worked in the Daniels' administration as the Governor's Special Counsel and Policy Director and had intimate knowledge of what Bales was doing on behalf of the state. It's unclear who they're defending: Bales or their law firm? Former Hamilton Co. judge Bernard Pylitt is representing Spencer. Robert Hammerle of Indianapolis represented Page in reaching his plea agreement with the government.
Mackey, who you may recall was the first criminal defense lawyer for Ponzi schemer Tim Durham when government prosecutors in Indianapolis were convinced to drop a civil forfeiture action against Durham before quietly fading away after that fete, told jurors in his opening statement that "there was no scheme to defraud the state of Indiana." "No matter how thin the pancake, there is another side," Mackey said. "Neither of these men did anything wrong or intended to harm anyone."Yeah, just like the "exercise of civic virtue" when Mackey's law firm engineered the awarding of the welfare privatization deal to its client. I'm still shaking my head over the lack of a prosecution by the U.S. Attorney's Office in that case, given that the federal government was snookered out of hundreds of millions of dollars in that debacle. Mackey claims that state officials knew what Bales' company was doing and didn't object to his actions, even though they clearly violated the express terms of his written contract with the state. The sad thing is that he's probably telling the truth. Some of these people who worked for Daniels saw it as their number one priority in state government to help make money for Daniels' political cronies. That's how Keith Bulen taught Daniels the business of politics was conducted back when he worked for his political consulting business back in the early days of Uni-Gov under Mayor Richard Lugar.
According to Mackey, the defendants' actions were based on a plan to save the state money on leases and procure as much money as possible for it from the sale of surplus state property. To hear Mackey explain it, Bales and Spencer were so concerned about getting a state office in place for DCS to protect abused and neglected children that it became necessary to cut corners and even dig into their own pockets to get the deal done. "This was a scheme, frankly, to help," Mackey explained. The prosecutors insist state officials had no idea Bales' company owned a financial stake in the building, and the bank that loaned money to Page had no idea it had fronted Page the money to close on the original loan and mortgage. According to prosecutors, Bales waited more than a year before preparing and recording a backdated mortgage executed by Page in his company's favor to secure his investment in the building, which also violated Page's original mortgage agreement with his lender. Bales and Spencer committed financial fraud on the state and the bank in doing so and then lied about it the government contends. Schouten said the defense plans to call several former state officials to provide positive testimony, including former DCS Director James W. Payne and and Indiana Department of Administration Director of Real Estate Steve Harless. I know. I laughed too!
Schouten says attorneys expect the trial to last through the end of next week. We'll look forward to catching Schouten's ongoing trial coverage.
Friday, January 04, 2013
John Bales Investigation Timeline
I've put together this timeline of the investigation of John Bales' corrupt real estate dealings with the State of Indiana and the City of Indianapolis over the years, which should provide a useful tip sheet to readers to follow during this ongoing corruption case, connect the dots and wonder when a panoply of co-conspirators will be indicted along with him.
2001--John Bales, a Carmel High School graduate and Ball State University alum, is working as an up-and-coming real estate broker at CB Richard Ellis when Marion Co. Prosecutor Scott Newman retains Bales' services to assist his office in consolidating its office space at 251 E. Ohio Street. Newman also convinced Marion Co. Coroner John McGoff to retain Bales' services to lease office space for the coroner's office at 521 West McCarty Street. Unknown to Dr. McGoff, the building leased by the coroner's office is linked to Bales' business partner, Greg Rankin. The Indiana company that owns 521 West McCarty is financially linked to a business controlled by Fred Dorsey, the father-in-law of Bales' business partner, Greg Rankin.
2002--Carl Brizzi is elected as Marion Co. Prosecutor, succeeding Scott Newman, who becomes a partner with Barnes & Thornburg. Newman introduces Brizzi to Bales to work out details on the build-out of space for the prosecutor's office at 251 E. Ohio Street under the lease agreement signed off on by Newman. The Metropolitan Development Commission approves a $25 million condominium project proposed by Bales and his partner, Steven Pittman, to develop 148 condominiums at 6600 Westfield Blvd. on a 12-acre site over the objections of environmental activists.
2003--John Bales leaves CB Richard Elllis and forms his own company, Meridian Asset Development, a forerunner of later Bales' companies, including Venture Companies and Venture Real Estate Services. Brizzi develops a close friendship with Bales, who in turn includes Brizzi as a partner in some of his real estate deals, including Curtailing Investments. Bales suddenly emerges as a major political contributor to the campaigns of Carl Brizzi and Mitch Daniels and other Republican candidates and committees, with his contributions reaching well above $50,000 in a relatively short period of time. Bales later lands a lucrative lease for office space to be occupied by a community court operated by the Marion Co. Superior Court for a building he owned at 902 Virginia Avenue. Bales is part of a development team awarded the right to redevelop the former Buggs Temple building on the downtown canal.
2004--Brizzi borrows $325,000 to invest in a couple of condominiums at a Broad Ripple condo project known as The Reserve. That project was developed by Bales, Steve Pittman and Barnes & Thornburg's Benjamin Pecar. Pecar, incidentally, was involved in a proposed $30 million Florida real estate venture with Bales and Brizzi as well to invest in distressed properties. According to the IBJ's Cory Schouten, Brizzi was able to flip both of those condos for a quick profit. He made $24,000 on one of the units he sold in 2006 according to Schouten. Brizzi owns a stake in two other companies, Vergina, LLC and CJB Management, LLC, according to Schouten.
2005--The Marion County Alliance of Neighborhood Associations releases a report distributed to Mayor Bart Petersion, the Marion Co. Commissioners and the City-County Council urging that three current members of the Metropolitan Development Commission, including John Bales, not be reappointed to the MDC, for failing to respect the Comprehensive Development Plan.
2006--Bales is reappointed as a member of the Metropolitan Development Commission on January 13, 2006 by the Marion Co. Board of Commissioners on the motion of then-Marion Co. Auditor Marty Womacks, which was approved "with caution to watch attendance at meetings." Bales' Venture Real Estate lands an exclusive real estate leasing agreement with the state of Indiana with the help of attorneys at Barnes & Thornburg, including Bob Grand and Joe Loftus. Venture earns more than $3 million in commissions on office space leases it brokered for the state over the next several years. Venture's contract with the state explicitly bans Venture and its partners and employees from “any ownership interest” or any “attempt to acquire” properties to be leased by the state.
2007--On January 18, 2007, Bales is replaced by the Marion Co. Commissioners as a member of the MDC. Brizzi invests in Harry & Izzy's, a restaurant chain launched by St. Elmos' Steve and Craig Huse, which also included as investors Thomas Brown and Christopher Clifford. Legal questions later arise over how Brizzi can have an ownership interest in an establishment that holds a liquor license under a state law that prohibits law enforcement officials from owning an interest in liquor licenses. An Attorney General's opinion is crafted by Brizzi's friend, Attorney General Greg Zoeller, that permits Brizzi to hold a financial stake in Harry & Izzy's as long as his interest is held indirectly through a separate business entity. Zoeller had also hired Tim Durham's step-son to work as an investigator in his office by this time.
November, 2007--Brizzi tells reporters he is troubled by the Department of Child Services' handling of Tajanay Bailey, a 3-year old girl who died after DCS officials removed her from the care of a foster parent and returned her to her mother's home where she had previously been abused. Bailey died after enduring a weekend of torture. "She was hung on a hook. She was punched in the chest several times, causing her to fall. She was kneed in the head by her mother all because she had defecated and urinated in her pants," said Brizzi. "We will not stop until we find out the answers," Brizzi said. The prosecutor's office confirms they're looking into the possibility there was a court order in TaJanay's file preventing her from going back to her mother according to WTHR.
December, 2007--Gov. Mitch Daniels, according to at least one eyewitness, angrily confronts Brizzi during an Indiana Society event at a Chicago hotel about comments Brizzi had made to reporters about investigating DCS' handling of the Tajanay Bailey case through a grand jury proceeding. No subsequent action is taken by the Marion Co. Prosecutor's Office against DCS in connection with the Tajanay Bailey case.
February 22, 2008--L&BAB, LLC, a company owned by Indianapolis attorney Paul Page is formed. Barnes & Thornburg's Benjamin Pecar is listed as the registered agent of the company, as well as several other companies linked to Bales.
April 18, 2008--John Bales wires $361,635.63 to a title insurance company for the purchase by L&BAB of a building located at 1659 Mishawaka Street, Elkhart, Indiana (the “Elkhart Building”) as part of a real estate fraud scheme to kick back money to Bales. L&BAB agreed to borrow the money necessary to purchase the Elkhart Building, which was valued at a little over $900,000. Using his position as real estate broker for the state, Bales negotiated a lease of the Elkhart Building for the Department of Child Services, which employs Carl Brizzi's ex-wife, Melanie, for an annual rental rate of $248,500. According to Page, the plan was to flip the building at which time Bales was to receive a share of the profit,. as well as be repaid the $361,635.63 he wired to L&BAB. Venture earned an $88,400 commission and a $28,875 broker fee when the deal to purchase the building closed. L&BAB later kicked back a more than $33,000 development fee it was to earn on the deal to Bales' Venture Real Estate.
May 18, 2008--Bales is appointed to the City-County Administrative Board through a resolution sponsored by Councilor Marilyn Pfisterer.
Mid-2008--Acting on Bales' behalf, Barnes & Thornburg's Bob Grand and Joe Loftus help Bales secure an exclusive real estate brokerage agreement with the City of Indianapolis to handle the disposal of city-owned property. Ironically, a key Ballard official, Mike Huber, had overseen Venture's contract with the state in 2007 while working at DOA before Joe Loftus landed him a top job in the Ballard administration. Bales continues to secure more lucrative leases with City-County government with the law firm's help, including a lease deal for the Marion Co. Probate Department in a building owned by Bales. Shortly after Greg Ballard's election and upon becoming Indianapolis mayor in January, 2008, Barnes & Thornburg's Bob Grand and Joe Loftus assume virtual control over the City, dictating to Mayor Greg Ballard who he could hire for key city positions and to whom he could award city contracts. The firm becomes the largest provider of legal services to the City of Indianapolis. The firm also hires a then up-and-coming member of the Indianapolis City-County Council and former deputy prosecutor in Brizzi's office, Ryan Vaughn, as an attorney-lobbyist for the firm. Vaughn, who is good friends with Bales, is registered with the state to lobby on behalf of Venture Real Estate, although he would later claim the lobbyist filing was made in error. Another former Barnes & Thornburg attorney, Chris Cotteril, his hired by Ballard to serve as the City's corporation counsel. He inks the deal with Bales' firm, describing it as "a creative way to save taxpayer money."
December 24, 2008--Paul Page amends the operating agreement for L&BAB to make Carl Brizzi a 50-50 owner of the Elkhart building that is to be leased to DCS. E-mail exchanges between Venture's William Spencer and Brizzi discuss the possibility of granting Brizzi an ownership stake in a retail strip center owned by Venture at 49th & Pennsylvania in Indianapolis.
Summer, 2009--Venture's controller Matthew Dyer discovers that Page has withdrawn $50,000 from L&BAB and tells Bales and Spencer, who become very upset. Dyer interprets Venture's interest in the Elkhart Building as an equity interest because there was no documentation of any loan or repayment schedule. Bales insists that Venture's interest in the building is as a lender. He becomes angry and blames Spencer, who he relied upon to do the documentation, for "fucking him" according to Dyer.
October, 2009--More than a year after the Elkhart Building is purchased by L&BAB, Bales delivers a mortgage on the property to Page securing Venture's initial investment in the building, which Page says he executes and records but which is backdated to the date of the original purchase. Bales had become concerned after learning that Page had withdrawn $50,000 from L&BAB. Page reacts angrily to the recording of the mortgage by terminating Venture's agreement with L&BAB to manage the Elkhart Building.
The recording of the Elkhart Building mortgage coincides with an investigative series launched by the IBJ's Greg Andrews looking into Tim Durham's Fair Finance Co., which we now know was operated as a Ponzi scheme that defrauded investors out of more than $200 million. Andrews discloses that Brizzi has recently been appointed as a member of Fair Finance's board of directors, a position Brizzi stepped away from within two months after questions about the company's operations begin to swirl. Durham had established himself as the largest single contributor to the campaigns of both Brizzi and Gov. Mitch Daniels, contributing nearly $1 million to their campaign committees and other mostly-Republican campaign committees.
November, 2009--Ballard's Chief of Staff Paul Okeson steps down to become a high-paid executive with Ersal Ozdemir's Keystone Construction, which has been the beneficiary of city contracts totalling in the tens of millions of dollars, had numerous business dealings with Bales and would later receive $6.5 million to build a parking garage. Okeson is succeeded as Ballard's chief of staff by Chris Cotterill. By Thanksgiving, FBI agents had raided Durham's offices to determine what had happened to the investors' money. A civil forfeiture action filed by the U.S. Attorney's Office in Indianapolis against Durham's assets is withdrawn less than a week after its filing, forcing defrauded investors of Fair Finance to seek an involuntary bankruptcy dissolution of the company and the appointment of a receiver to try to recover more than $200 million in lost investments. Unconfirmed reports claim Barnes & Thornburg's Larry Mackey, a former federal prosecutor, intervened on Durham's behalf to get the U.S. Attorney's Office to drop the civil forfeiture action.
January, 2010--About 5 or 6 FBI agents quietly open an investigation of John Bales' dealings with the state of Indiana concerning the Elkhart Building. Someone tips off the Ballard administration of the opening of the investigation and Bales' real estate brokerage agreement with the City is quietly terminated.
May, 2010--FBI agents begin investigating records of the Marion Co. Prosecutor's Office pertaining to a lenient plea agreement Brizzi's office gave to indicted drug dealer Joseph Mobarecki, who was represented by Paul Page. Questions had been raised about the deal, including Brizzi agreeing to return $10,000 in cash seized by police during his arrest, which was apparently used by Mobarecki to pay his legal bills to Page.
June, 2010--House Minority Leader Pat Bauer (D-South Bend) calls for a federal investigation after the IBJ's Cory Schouten provides details of Bales' business dealings on behalf of the state of Indiana that raise serious conflict of interest concerns. Around the same time Bales was negotiating a controversial new office lease for the Hoosier Lottery, which ultimately led to the firing of Commissioner Kathryn Densborn when details of the controversial lease became public.
May, 2011--Mitch Daniels announces he will not seek the Republican nomination for president after months of speculation that he would run.
July, 2011--Tim Durham, James Cochran and Rick Snow are indicted by the U.S. Attorney in Indianapolis on multiples counts of wire fraud and securities fraud in connection with the loss of more than $200 million of investors money in Fair Finance.
November, 2011--Brizzi turns over $195,881 to the bankruptcy trustee for Fair Finance to settle a claim brought by the trustee to recover more than $220,000 Brizzi's campaign committee received from indicted Ponzi schemer Tim Durham. Mitch Daniels later returned only a few thousand dollars of the more than $200,000 he received from Durham, claiming all the money had been spent. Daniels personal net worth exceeds $50 million. No politicians return the tens of thousand of dollars they received in campaign contributions from Bales.
December, 2011--John Bales, Paul Page and William Spencer are indicted by the U.S. Attorney in South Bend on multiple counts of wire fraud, mail fraud and bank fraud in connection with the purchase and leasing of the Elkhart Building. Controversial Oklahoma City Bombing federal prosecutor and now Barnes & Thornburg partner Larry Mackey, who chaired Brizzi's campaign committee, emerges as the attorney defending Bales. "There was no hanky-panky. There were no secret straw buyers. This was all above board," said attorney Larry Mackey. "What John Bales is going to do is demonstrate to the trial jury that no crime was committed."
December, 2011--The IBJ's Cory Schouten details dozens of state e-mails that he uncovered showing a very cozy relationship between Bales and various members of the Daniels' administration. Daniels' deputy chief of staff, Betsy Burdick, intervened on behalf of Bales knowing that her brother, Brian, an attorney at Barnes & Thornburg, represented Bales. “I hope what I am hearing is wrong with respect to the way IDOA is doing business here,” Burdick wrote on Aug. 28, 2009. “If this is true it is unacceptable and further discussion needs to take place. If what I am hearing is correct—this is not how we do business.” Bales' firm threw its weight around with state employees as well. "The firm’s chief financial officer, Greg Rankin, responded with an email threatening to seek intervention by Barnes & Thornburg partners Brian Burdick and Joe Loftus or even J. Murray Clark, then the chairman of the Indiana Republican Party," Schouten reported. One of Bales' attorneys at Barnes & Thornburg, Jason Barclay, tells the IBJ's Schouten that the state had given its blessing to Bales owning an interest in the Elkhart Building despite the explicit ban on such ownership in his contract with the state.
January, 2012--The IBJ's Cory Schouten reports key details about how the Daniels administration had rigged the state bidding process to ensure that Bales company received the exclusive real estate brokerage agreement with the state of Indiana to handle state office leases based on the accounts of whistle blowers at the Department of Administration. The whistle blowers, who disliked their dealings with Bales, complained that Bales bragged about his close relationship with Daniels and how he had his personal cell phone number. It also became clear that attorneys at the law firm of Barnes & Thornburg were called upon to assist Bales, including Brian Burdick, whose sister worked as a deputy chief of staff in Daniels' office. One of the whistle blowers, Bea Tate, quit her job after she was demoted for tangling with Bales. Rob Wynkoop, the Department of Administration's deputy commissioner, emerged as Bales' key enabler within the agency. Wynkoop was recently named to head the agency in the Pence administration. Schouten also reported that Daniels' chief of staff, Earle Goode, who formerly ran DOA when the contract was awarded to Bales' firm, purchased a residential lot from Bales in an upscale Indianapolis subdivision on the city's far north side for $450,000. Schouten said his investigation of Bales had been hampered by months of stonewalling by the Daniels' administration, which threw up continuous roadblocks to his efforts to obtain public records pertaining to Bales' business dealings with the state.
May, 2012--Ryan Vaughn steps down from the City-County Council and becomes Ballard's new chief of staff, replacing Chris Cotterill
June, 2012--Tim Durham, James Cochrane and Rick Snow are convicted by a federal jury in Indianapolis. The three are later sentenced to lengthy terms in prison. Durham was sentenced to 50 years, Cochrane received a 25-year term and Snow received a 10-year sentence. Purdue names Gov. Mitch Daniels as its next president when he steps down as governor in January, 2013.
January, 2013--Paul Page pleads guilty to one wire fraud count and agrees to cooperate with the government's prosecution of John Bales and William Spencer, as well as a parallel investigation in Indianapolis that reportedly includes as a target Carl Brizzi. Bales and Spencer are scheduled to go on trial in a federal court in South Bend later this month.
2001--John Bales, a Carmel High School graduate and Ball State University alum, is working as an up-and-coming real estate broker at CB Richard Ellis when Marion Co. Prosecutor Scott Newman retains Bales' services to assist his office in consolidating its office space at 251 E. Ohio Street. Newman also convinced Marion Co. Coroner John McGoff to retain Bales' services to lease office space for the coroner's office at 521 West McCarty Street. Unknown to Dr. McGoff, the building leased by the coroner's office is linked to Bales' business partner, Greg Rankin. The Indiana company that owns 521 West McCarty is financially linked to a business controlled by Fred Dorsey, the father-in-law of Bales' business partner, Greg Rankin.
2002--Carl Brizzi is elected as Marion Co. Prosecutor, succeeding Scott Newman, who becomes a partner with Barnes & Thornburg. Newman introduces Brizzi to Bales to work out details on the build-out of space for the prosecutor's office at 251 E. Ohio Street under the lease agreement signed off on by Newman. The Metropolitan Development Commission approves a $25 million condominium project proposed by Bales and his partner, Steven Pittman, to develop 148 condominiums at 6600 Westfield Blvd. on a 12-acre site over the objections of environmental activists.
2003--John Bales leaves CB Richard Elllis and forms his own company, Meridian Asset Development, a forerunner of later Bales' companies, including Venture Companies and Venture Real Estate Services. Brizzi develops a close friendship with Bales, who in turn includes Brizzi as a partner in some of his real estate deals, including Curtailing Investments. Bales suddenly emerges as a major political contributor to the campaigns of Carl Brizzi and Mitch Daniels and other Republican candidates and committees, with his contributions reaching well above $50,000 in a relatively short period of time. Bales later lands a lucrative lease for office space to be occupied by a community court operated by the Marion Co. Superior Court for a building he owned at 902 Virginia Avenue. Bales is part of a development team awarded the right to redevelop the former Buggs Temple building on the downtown canal.
2004--Brizzi borrows $325,000 to invest in a couple of condominiums at a Broad Ripple condo project known as The Reserve. That project was developed by Bales, Steve Pittman and Barnes & Thornburg's Benjamin Pecar. Pecar, incidentally, was involved in a proposed $30 million Florida real estate venture with Bales and Brizzi as well to invest in distressed properties. According to the IBJ's Cory Schouten, Brizzi was able to flip both of those condos for a quick profit. He made $24,000 on one of the units he sold in 2006 according to Schouten. Brizzi owns a stake in two other companies, Vergina, LLC and CJB Management, LLC, according to Schouten.
2005--The Marion County Alliance of Neighborhood Associations releases a report distributed to Mayor Bart Petersion, the Marion Co. Commissioners and the City-County Council urging that three current members of the Metropolitan Development Commission, including John Bales, not be reappointed to the MDC, for failing to respect the Comprehensive Development Plan.
2006--Bales is reappointed as a member of the Metropolitan Development Commission on January 13, 2006 by the Marion Co. Board of Commissioners on the motion of then-Marion Co. Auditor Marty Womacks, which was approved "with caution to watch attendance at meetings." Bales' Venture Real Estate lands an exclusive real estate leasing agreement with the state of Indiana with the help of attorneys at Barnes & Thornburg, including Bob Grand and Joe Loftus. Venture earns more than $3 million in commissions on office space leases it brokered for the state over the next several years. Venture's contract with the state explicitly bans Venture and its partners and employees from “any ownership interest” or any “attempt to acquire” properties to be leased by the state.
2007--On January 18, 2007, Bales is replaced by the Marion Co. Commissioners as a member of the MDC. Brizzi invests in Harry & Izzy's, a restaurant chain launched by St. Elmos' Steve and Craig Huse, which also included as investors Thomas Brown and Christopher Clifford. Legal questions later arise over how Brizzi can have an ownership interest in an establishment that holds a liquor license under a state law that prohibits law enforcement officials from owning an interest in liquor licenses. An Attorney General's opinion is crafted by Brizzi's friend, Attorney General Greg Zoeller, that permits Brizzi to hold a financial stake in Harry & Izzy's as long as his interest is held indirectly through a separate business entity. Zoeller had also hired Tim Durham's step-son to work as an investigator in his office by this time.
November, 2007--Brizzi tells reporters he is troubled by the Department of Child Services' handling of Tajanay Bailey, a 3-year old girl who died after DCS officials removed her from the care of a foster parent and returned her to her mother's home where she had previously been abused. Bailey died after enduring a weekend of torture. "She was hung on a hook. She was punched in the chest several times, causing her to fall. She was kneed in the head by her mother all because she had defecated and urinated in her pants," said Brizzi. "We will not stop until we find out the answers," Brizzi said. The prosecutor's office confirms they're looking into the possibility there was a court order in TaJanay's file preventing her from going back to her mother according to WTHR.
December, 2007--Gov. Mitch Daniels, according to at least one eyewitness, angrily confronts Brizzi during an Indiana Society event at a Chicago hotel about comments Brizzi had made to reporters about investigating DCS' handling of the Tajanay Bailey case through a grand jury proceeding. No subsequent action is taken by the Marion Co. Prosecutor's Office against DCS in connection with the Tajanay Bailey case.
February 22, 2008--L&BAB, LLC, a company owned by Indianapolis attorney Paul Page is formed. Barnes & Thornburg's Benjamin Pecar is listed as the registered agent of the company, as well as several other companies linked to Bales.
April 18, 2008--John Bales wires $361,635.63 to a title insurance company for the purchase by L&BAB of a building located at 1659 Mishawaka Street, Elkhart, Indiana (the “Elkhart Building”) as part of a real estate fraud scheme to kick back money to Bales. L&BAB agreed to borrow the money necessary to purchase the Elkhart Building, which was valued at a little over $900,000. Using his position as real estate broker for the state, Bales negotiated a lease of the Elkhart Building for the Department of Child Services, which employs Carl Brizzi's ex-wife, Melanie, for an annual rental rate of $248,500. According to Page, the plan was to flip the building at which time Bales was to receive a share of the profit,. as well as be repaid the $361,635.63 he wired to L&BAB. Venture earned an $88,400 commission and a $28,875 broker fee when the deal to purchase the building closed. L&BAB later kicked back a more than $33,000 development fee it was to earn on the deal to Bales' Venture Real Estate.
May 18, 2008--Bales is appointed to the City-County Administrative Board through a resolution sponsored by Councilor Marilyn Pfisterer.
Mid-2008--Acting on Bales' behalf, Barnes & Thornburg's Bob Grand and Joe Loftus help Bales secure an exclusive real estate brokerage agreement with the City of Indianapolis to handle the disposal of city-owned property. Ironically, a key Ballard official, Mike Huber, had overseen Venture's contract with the state in 2007 while working at DOA before Joe Loftus landed him a top job in the Ballard administration. Bales continues to secure more lucrative leases with City-County government with the law firm's help, including a lease deal for the Marion Co. Probate Department in a building owned by Bales. Shortly after Greg Ballard's election and upon becoming Indianapolis mayor in January, 2008, Barnes & Thornburg's Bob Grand and Joe Loftus assume virtual control over the City, dictating to Mayor Greg Ballard who he could hire for key city positions and to whom he could award city contracts. The firm becomes the largest provider of legal services to the City of Indianapolis. The firm also hires a then up-and-coming member of the Indianapolis City-County Council and former deputy prosecutor in Brizzi's office, Ryan Vaughn, as an attorney-lobbyist for the firm. Vaughn, who is good friends with Bales, is registered with the state to lobby on behalf of Venture Real Estate, although he would later claim the lobbyist filing was made in error. Another former Barnes & Thornburg attorney, Chris Cotteril, his hired by Ballard to serve as the City's corporation counsel. He inks the deal with Bales' firm, describing it as "a creative way to save taxpayer money."
December 24, 2008--Paul Page amends the operating agreement for L&BAB to make Carl Brizzi a 50-50 owner of the Elkhart building that is to be leased to DCS. E-mail exchanges between Venture's William Spencer and Brizzi discuss the possibility of granting Brizzi an ownership stake in a retail strip center owned by Venture at 49th & Pennsylvania in Indianapolis.
Summer, 2009--Venture's controller Matthew Dyer discovers that Page has withdrawn $50,000 from L&BAB and tells Bales and Spencer, who become very upset. Dyer interprets Venture's interest in the Elkhart Building as an equity interest because there was no documentation of any loan or repayment schedule. Bales insists that Venture's interest in the building is as a lender. He becomes angry and blames Spencer, who he relied upon to do the documentation, for "fucking him" according to Dyer.
October, 2009--More than a year after the Elkhart Building is purchased by L&BAB, Bales delivers a mortgage on the property to Page securing Venture's initial investment in the building, which Page says he executes and records but which is backdated to the date of the original purchase. Bales had become concerned after learning that Page had withdrawn $50,000 from L&BAB. Page reacts angrily to the recording of the mortgage by terminating Venture's agreement with L&BAB to manage the Elkhart Building.
The recording of the Elkhart Building mortgage coincides with an investigative series launched by the IBJ's Greg Andrews looking into Tim Durham's Fair Finance Co., which we now know was operated as a Ponzi scheme that defrauded investors out of more than $200 million. Andrews discloses that Brizzi has recently been appointed as a member of Fair Finance's board of directors, a position Brizzi stepped away from within two months after questions about the company's operations begin to swirl. Durham had established himself as the largest single contributor to the campaigns of both Brizzi and Gov. Mitch Daniels, contributing nearly $1 million to their campaign committees and other mostly-Republican campaign committees.
November, 2009--Ballard's Chief of Staff Paul Okeson steps down to become a high-paid executive with Ersal Ozdemir's Keystone Construction, which has been the beneficiary of city contracts totalling in the tens of millions of dollars, had numerous business dealings with Bales and would later receive $6.5 million to build a parking garage. Okeson is succeeded as Ballard's chief of staff by Chris Cotterill. By Thanksgiving, FBI agents had raided Durham's offices to determine what had happened to the investors' money. A civil forfeiture action filed by the U.S. Attorney's Office in Indianapolis against Durham's assets is withdrawn less than a week after its filing, forcing defrauded investors of Fair Finance to seek an involuntary bankruptcy dissolution of the company and the appointment of a receiver to try to recover more than $200 million in lost investments. Unconfirmed reports claim Barnes & Thornburg's Larry Mackey, a former federal prosecutor, intervened on Durham's behalf to get the U.S. Attorney's Office to drop the civil forfeiture action.
January, 2010--About 5 or 6 FBI agents quietly open an investigation of John Bales' dealings with the state of Indiana concerning the Elkhart Building. Someone tips off the Ballard administration of the opening of the investigation and Bales' real estate brokerage agreement with the City is quietly terminated.
May, 2010--FBI agents begin investigating records of the Marion Co. Prosecutor's Office pertaining to a lenient plea agreement Brizzi's office gave to indicted drug dealer Joseph Mobarecki, who was represented by Paul Page. Questions had been raised about the deal, including Brizzi agreeing to return $10,000 in cash seized by police during his arrest, which was apparently used by Mobarecki to pay his legal bills to Page.
June, 2010--House Minority Leader Pat Bauer (D-South Bend) calls for a federal investigation after the IBJ's Cory Schouten provides details of Bales' business dealings on behalf of the state of Indiana that raise serious conflict of interest concerns. Around the same time Bales was negotiating a controversial new office lease for the Hoosier Lottery, which ultimately led to the firing of Commissioner Kathryn Densborn when details of the controversial lease became public.
May, 2011--Mitch Daniels announces he will not seek the Republican nomination for president after months of speculation that he would run.
July, 2011--Tim Durham, James Cochran and Rick Snow are indicted by the U.S. Attorney in Indianapolis on multiples counts of wire fraud and securities fraud in connection with the loss of more than $200 million of investors money in Fair Finance.
November, 2011--Brizzi turns over $195,881 to the bankruptcy trustee for Fair Finance to settle a claim brought by the trustee to recover more than $220,000 Brizzi's campaign committee received from indicted Ponzi schemer Tim Durham. Mitch Daniels later returned only a few thousand dollars of the more than $200,000 he received from Durham, claiming all the money had been spent. Daniels personal net worth exceeds $50 million. No politicians return the tens of thousand of dollars they received in campaign contributions from Bales.
December, 2011--John Bales, Paul Page and William Spencer are indicted by the U.S. Attorney in South Bend on multiple counts of wire fraud, mail fraud and bank fraud in connection with the purchase and leasing of the Elkhart Building. Controversial Oklahoma City Bombing federal prosecutor and now Barnes & Thornburg partner Larry Mackey, who chaired Brizzi's campaign committee, emerges as the attorney defending Bales. "There was no hanky-panky. There were no secret straw buyers. This was all above board," said attorney Larry Mackey. "What John Bales is going to do is demonstrate to the trial jury that no crime was committed."
December, 2011--The IBJ's Cory Schouten details dozens of state e-mails that he uncovered showing a very cozy relationship between Bales and various members of the Daniels' administration. Daniels' deputy chief of staff, Betsy Burdick, intervened on behalf of Bales knowing that her brother, Brian, an attorney at Barnes & Thornburg, represented Bales. “I hope what I am hearing is wrong with respect to the way IDOA is doing business here,” Burdick wrote on Aug. 28, 2009. “If this is true it is unacceptable and further discussion needs to take place. If what I am hearing is correct—this is not how we do business.” Bales' firm threw its weight around with state employees as well. "The firm’s chief financial officer, Greg Rankin, responded with an email threatening to seek intervention by Barnes & Thornburg partners Brian Burdick and Joe Loftus or even J. Murray Clark, then the chairman of the Indiana Republican Party," Schouten reported. One of Bales' attorneys at Barnes & Thornburg, Jason Barclay, tells the IBJ's Schouten that the state had given its blessing to Bales owning an interest in the Elkhart Building despite the explicit ban on such ownership in his contract with the state.
January, 2012--The IBJ's Cory Schouten reports key details about how the Daniels administration had rigged the state bidding process to ensure that Bales company received the exclusive real estate brokerage agreement with the state of Indiana to handle state office leases based on the accounts of whistle blowers at the Department of Administration. The whistle blowers, who disliked their dealings with Bales, complained that Bales bragged about his close relationship with Daniels and how he had his personal cell phone number. It also became clear that attorneys at the law firm of Barnes & Thornburg were called upon to assist Bales, including Brian Burdick, whose sister worked as a deputy chief of staff in Daniels' office. One of the whistle blowers, Bea Tate, quit her job after she was demoted for tangling with Bales. Rob Wynkoop, the Department of Administration's deputy commissioner, emerged as Bales' key enabler within the agency. Wynkoop was recently named to head the agency in the Pence administration. Schouten also reported that Daniels' chief of staff, Earle Goode, who formerly ran DOA when the contract was awarded to Bales' firm, purchased a residential lot from Bales in an upscale Indianapolis subdivision on the city's far north side for $450,000. Schouten said his investigation of Bales had been hampered by months of stonewalling by the Daniels' administration, which threw up continuous roadblocks to his efforts to obtain public records pertaining to Bales' business dealings with the state.
May, 2012--Ryan Vaughn steps down from the City-County Council and becomes Ballard's new chief of staff, replacing Chris Cotterill
June, 2012--Tim Durham, James Cochrane and Rick Snow are convicted by a federal jury in Indianapolis. The three are later sentenced to lengthy terms in prison. Durham was sentenced to 50 years, Cochrane received a 25-year term and Snow received a 10-year sentence. Purdue names Gov. Mitch Daniels as its next president when he steps down as governor in January, 2013.
January, 2013--Paul Page pleads guilty to one wire fraud count and agrees to cooperate with the government's prosecution of John Bales and William Spencer, as well as a parallel investigation in Indianapolis that reportedly includes as a target Carl Brizzi. Bales and Spencer are scheduled to go on trial in a federal court in South Bend later this month.
Sunday, February 19, 2012
Pence's Finance Director Worked As Executive For Bales' Venture Real Estate
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| Marty Obst |
According to a federal indictment handed down last December, Bales and Spencer were working both sides of an exclusive real estate brokerage agreement the firm entered into with the Daniels administration to lease office space for state buildings. Bales and his firm were barred from having a financial interest in any real estate it leased on behalf of the state, but the indictment alleges that's exactly what happened with the lease of an Elkhart building from a company co-owned by Indianapolis attorney Paul Page and former Marion Co. Prosecutor Carl Brizzi. The building was purchased shortly before Bales' company negotiated a lease for the Elkhart building for the Department of Child Services. A company controlled by Bales wired money into an account controlled by Page to make the acquisition with a promise of a 25% share of the profits realized from any resale of the building according to the indictment. The indictment claims the state of Indiana shelled out nearly $2 million in real estate leasing commissions to Bales' Venture Real Estate. Bales is also one of Gov. Daniels largest campaign contributors according to campaign finance reports, contributing tens of thousands of dollars to his past campaigns.
The IBJ's Cory Schouten has reported claims of state whistle blowers that the Daniels administration rigged the original bid that awarded Bales' firm with an exclusive real estate leasing agreement for all state agencies. The IBJ has also reported on e-mail exchanges between Bales, employees of his company and state officials suggesting Bales was given preferential treatment by the Daniels administration, even when state employees expressed concern that he was not acting in the best interest of the state at times in negotiating leases for state agencies. None of those reports suggested any wrongdoing by Obst, who was not named in the multi-count indictment that accused Bales and Spencer of defrauding the state of Indiana and a bank that provided financing for the purchase of the Elkhart property. Nonetheless, there are concerns Pence's use of a former executive with Bales' company as his chief fundraiser could become a problem for him during this year's gubernatorial campaign given the attention that will come from Bales' upcoming public corruption trial. There are concerns the Democrats and John Gregg's campaign will seek to tarnish Pence's image because of Obst's former work for Bales through guilt by association.
Saturday, January 21, 2012
Whistle Blower Says Daniels Administration Rigged Bid To Favor John Bales
The IBJ's Cory Schouten has another great story today detailing the lengths the Daniels administration went to in order to create the impression it was conducting a competitive bidding process to award a contract to handle real estate leasing for state agencies when it had already made an advance decision to award the contract to John Bales' Venture Real Estate. The administration could have simply given the contract to Bales without conducting a public bidding process since it was a contract for services. Instead, it had the Department of Administration put out for bid a 20-page request for services to more than 400 potential bidders with a 65-point scoring process for evaluating proposals. According to a whistle blower, Marsha White, a former BMV employee who served on the selection committee, the DOA changed the scoring not once but twice after the selection committee scored the proposals to make Bales' company the winner.
Ironically, the Daniels administration would have avoided a lot of embarrassment had it simply been willing to listen to people like Tate and White. Tate told Schouten the test she applied to every decision made during her 17 years with the state was "whether a deal could embarrass the commissioner or the governor--was thrown out with Bales." Last month, of course, Bales and his business partners were indicted by federal prosecutors in northern Indiana because of the undisclosed ownership interest Bales had in a commercial real estate property in Elkhart for which he brokered a real estate lease on behalf of the state. Schouten reports that the state continued to do business with Bales firm until the FBI started investigating the Elkhart deal despite the "parade of state officials" who had raised questions about Bales' business practices.
Schouten's efforts to obtain public records from the Daniels administration in support of his latest investigative research was met with stonewalling. The administration cited an exemption from the state's public records law for "deliberative documents" that would have confirmed White's claim that DOA changed the scoring for the bids midstream to ensure the contract was awarded to Bales. Nonetheless, he was able to obtain a memorandum written by then-Deputy Commissioner Rob Wynkoop recommending Bales' firm for the contract that suggested a different scoring process was utilized than what had been outlined in the original request for proposals. Whoops.
In an unrelated story, Schouten reports that Daniels' chief of staff, Earle Goode, who formerly ran DOA when the contract was awarded to Bales' firm, purchased a residential lot from Bales in an upscale Indianapolis subdivision on the city's far north side for $450,000. It doesn't appear Goode got any special treatment in the real estate transaction. Bales had acquired the lot from his former business partner, Samuel Smith, two years earlier for $285,000. Goode and his wife had intended to build a home on the lot according to Schouten, but they instead are now trying to sell it for a substantial loss with an asking price of $399,000.
Venture wound up with 50.82 points, according to an IDOA memorandum obtained through a public records request. Next up was Resource Commercial Real Estate, with 49.2 points, followed by NAI Olympia Partners with 47.78 points.
"They changed the values to make Venture win," said Martha White, a member of the selection committeee who at the time handled leasing for the Bureau of Motor Vehicles. "Not until the third try did Venture actually win."A second member of the selection committee confirmed White's account of what happened to Schouten but wished to remain anonymous for fear of retaliation. The person's fears seem well-founded. White no longer works for the BMV and Bea Tate, the state's former director of leasing, quit her job after she was demoted for tangling with Bales over the manner in which he was handling state real esate leasing deals according to Schouten. Tate told Schouten that Bales bragged about his close relationship with Daniels and how he had his personal cell phone number. She said Daniels appointees distrusted anyone like her who had worked in state government before they arrived. "They wanted to hand it over without any accountability," Tate told Schouten. "Venture got by with everything--they did whatever they wanted to do."
Ironically, the Daniels administration would have avoided a lot of embarrassment had it simply been willing to listen to people like Tate and White. Tate told Schouten the test she applied to every decision made during her 17 years with the state was "whether a deal could embarrass the commissioner or the governor--was thrown out with Bales." Last month, of course, Bales and his business partners were indicted by federal prosecutors in northern Indiana because of the undisclosed ownership interest Bales had in a commercial real estate property in Elkhart for which he brokered a real estate lease on behalf of the state. Schouten reports that the state continued to do business with Bales firm until the FBI started investigating the Elkhart deal despite the "parade of state officials" who had raised questions about Bales' business practices.
Schouten's efforts to obtain public records from the Daniels administration in support of his latest investigative research was met with stonewalling. The administration cited an exemption from the state's public records law for "deliberative documents" that would have confirmed White's claim that DOA changed the scoring for the bids midstream to ensure the contract was awarded to Bales. Nonetheless, he was able to obtain a memorandum written by then-Deputy Commissioner Rob Wynkoop recommending Bales' firm for the contract that suggested a different scoring process was utilized than what had been outlined in the original request for proposals. Whoops.
In an unrelated story, Schouten reports that Daniels' chief of staff, Earle Goode, who formerly ran DOA when the contract was awarded to Bales' firm, purchased a residential lot from Bales in an upscale Indianapolis subdivision on the city's far north side for $450,000. It doesn't appear Goode got any special treatment in the real estate transaction. Bales had acquired the lot from his former business partner, Samuel Smith, two years earlier for $285,000. Goode and his wife had intended to build a home on the lot according to Schouten, but they instead are now trying to sell it for a substantial loss with an asking price of $399,000.
Saturday, December 17, 2011
IBJ Discloses Depth Of Cozy Relationship Between Bales, Barnes & Thornburg & Top Daniels Administration Officials
BALES' LAWYER CLAIMS STATE APPROVED OF CLIENT'S DOUBLE-DEALING
Folks, fasten your seat belts and get prepared for a wild ride. The IBJ's Cory Schouten uncovered years' worth of e-mails totalling in the thousands that shed light on what is increasingly becoming a major public corruption scandal that could permanently tarnish the reputation of Gov. Mitch Daniels and result in more criminal charges against more very high profile individuals on the Indiana political scene. The U.S. Attorney's Office in the Northern District of Indiana's indictment of top Daniels political supporter, John Bales, for defrauding the state on a lease agreement for state office space in Elkhart, Indiana might just well be the tip of the iceberg to rock the Daniels ship.
What emerges from the e-mails Schouten uncovered is a picture of conscientious state employees raising legitimate concerns about Bales' business practices, only to feel threatened with retaliation if they didn't play ball as Bales demanded. A top official in Gov. Daniels own office, Betsy Burdick, whose brother is a partner at the law firm which represents Bales, Barnes & Thornburg, joined in sending less than thinly-veiled threats to state officials who messed with Bales' business dealing with the state. Check out this example of Burdick intervening on Bales' behalf:
Grand and Loftus, who exercise considerable influence in the Daniels administration, are also paid advisers to Ballard. The law firm firm has been awarded millions of dollars worth of legal work with the city since Ballard took office four years ago. Barnes & Thornburg's clients have also been the beneficiaries of sweetheart deals with the city, including the 50-year parking meter lease with ACS, a firm Barnes & Thornburg has long represented in business transactions with the state and local governments in Indiana. The firm helped lobby the Daniels administration on behalf of ACS to land the controversial welfare privatization deal with FSSA. When the lead partner's contract in that deal, IBM, was nixed by the state, ACS was allowed a continuing contractual relationship with FSSA. Incredibly, Gov. Daniels hired the law firm to represent the state in a lawsuit with ACS's former partner, IBM, despite the firm's obvious conflict of interest.
The City of Indianapolis later cancelled its contract with Bales for failing to perform according to Huber. It is more likely the deal was nixed after the Ballard administration was tipped off that Bales' activities were being investigated by the FBI. Bales is represented by another Barnes & Thornburg partner, former Justice Department prosecutor Larry Mackey, in the criminal case the federal government has brought against him. Naturally, Mackey insists his client is innocent. Given the law firm's ties to the corrupt deal that led to the indictment, federal prosecutors should ask that the firm be disqualified from representing Bales in this criminal case against Bales. At least that's what the rules of professional conduct dictate, but as we've seen with the firm's representation of the state in the FSSA litigation, the rules don't seem to apply where Barnes & Thornburg is concerned. One particularly troubling aspect of Schouten's story is a claim by another Barnes & Thornburg attorney representing Bales, Jason Barclay, that the state gave its blessings to Bales having an ownership interest in the Elkhart office building he brokered for the Department of Child Services after he first disclosed it to them. That contradicts the express terms of Bales' exclusive real estate brokerage agreement with the state.
The e-mails Schouten uncovered showed that Bales' small company was incapable of handling the many leasing matters it had on its plate. One e-mail suggests Bales had involved another firm on his own to aid with his work. Other e-mails show that Bales played hardball with prospective landlords, insisting that he earn 100% of the brokerage commission and not split them with the landlord's broker as is the standard practice when both parties are represented in a leasing transaction by a broker. Bales would tell prospective landlords deals with them wouldn't happen unless they agreed to let him receive 100% of the commission. Quoting a 2008 email exchange between a state official and one landlord: “Requiring us to pay an intermediary that we do not choose or lose the contracts seems like extortion.” Schouten found e-mails where senior administration officials had shared their concerns about Bales with Daniels' top deputies. “I don’t discount the effect hard bargaining can have on one’s perception of the other side,” John Okeson wrote. “That said, how any ‘agent’ of the Governor handles a matter reflects directly on him, so I thought it important to forward what I’m hearing to you for consideration.” Okeson died suddenly a year later after a brief illness. His brother, Paul Okeson, served as chief of staff to Mayor Greg Ballard before joining Ersal Ozdemir's Keystone Construction, which has received a number of sweetheart real estate deals with the Ballard administration, including a controversial parking garage for Broad Ripple that includes a $6.3 million gift of public funds to the company. Keystone and Bales' firm have also partnered on many deals.
Schouten also wonders if campaign contributions have not played a role in Bales' success in landing business with the Daniels administration. Earlier reports suggested Bales had given as much as $31,000 to Daniels' campaign committee. A more thorough research of other entities controlled by Bales reveals that he gave $52,000 from 2003-2008. It once again points up the role Pay To Play has in Indiana. Neighboring Illinois has seen scores of officials and and political insiders prosecuted for honest services fraud and other public corruption crimes by federal prosecutors, while federal prosecutors in Indiana, particularly in the southern district, have seldom brought such cases despite the prevalence of these activities. Many observers were surprised that the indictment against Bales was brought by the northern district's federal prosecutor instead of U.S. Attorney Joe Hogsett in Indianapolis since the state agency involved in the transactions with Bales is located here.
Hats off to Schouten and the IBJ for once again demonstrating to us how good investigative journalism should be conducted.
Folks, fasten your seat belts and get prepared for a wild ride. The IBJ's Cory Schouten uncovered years' worth of e-mails totalling in the thousands that shed light on what is increasingly becoming a major public corruption scandal that could permanently tarnish the reputation of Gov. Mitch Daniels and result in more criminal charges against more very high profile individuals on the Indiana political scene. The U.S. Attorney's Office in the Northern District of Indiana's indictment of top Daniels political supporter, John Bales, for defrauding the state on a lease agreement for state office space in Elkhart, Indiana might just well be the tip of the iceberg to rock the Daniels ship.
What emerges from the e-mails Schouten uncovered is a picture of conscientious state employees raising legitimate concerns about Bales' business practices, only to feel threatened with retaliation if they didn't play ball as Bales demanded. A top official in Gov. Daniels own office, Betsy Burdick, whose brother is a partner at the law firm which represents Bales, Barnes & Thornburg, joined in sending less than thinly-veiled threats to state officials who messed with Bales' business dealing with the state. Check out this example of Burdick intervening on Bales' behalf:
The deputy chief of staff for Gov. Mitch Daniels intervened on Bales’ behalf in late 2009 after officials with the Indiana Department of Administration encouraged the state’s quasi-governmental agencies to hire the real estate brokerage Resource Commercial over Venture.
Venture had offered a lower per-square-foot commission rate, but IDOA officials saw the company's attempts to carve out side deals representing quasi-governmental agencies as a conflict with the state deal. It’s not clear whether Betsy Burdick was aware of IDOA's rationale in recommending Resource.
“I hope what I am hearing is wrong with respect to the way IDOA is doing business here,” Burdick wrote on Aug. 28, 2009. “If this is true it is unacceptable and further discussion needs to take place. If what I am hearing is correct—this is not how we do business.”According to Schouten, Bales was less than bashful at throwing out big names that he would involve to assist him if state officials didn't do as he demanded of them. "At one point, a deputy to Bales threatened to call in the chair of the Indiana Republican Party and two partners at the powerful law firm Barnes & Thornburg if the state wouldn’t reimburse Venture for disputed expenses," Schouten writes.
Kevin Ober, the Department of Administration’s deputy commissioner at the time, pushed back when Venture sought reimbursement for more than $200,000 in expenses not pre-approved by the state, as required by its contract.
That did not sit well with Venture.
The firm’s chief financial officer, Greg Rankin, responded with an email threatening to seek intervention by Barnes & Thornburg partners Brian Burdick and Joe Loftus or even J. Murray Clark, then the chairman of the Indiana Republican Party. All three have close working ties to Gov. Mitch Daniels, whose deputy chief of staff is Burdick’s sister.
Ober bristled at the name dropping by Bales’ top deputy in an email he sent to his boss, IDOA Commissioner Carrie Henderson, and the chief of staff to Gov. Mitch Daniels, Earl Goode.Schouten found that Bales was near the center of other embarrassing recent episodes for the Daniels administration for which his role had not been previously disclosed, including the leasing of lavish new office space for the Hoosier Lottery and the growing IURC scandal involving Duke Energy. There's this revelation on the Hoosier Lottery:
In 2010, Venture brokered the deal to move the Lottery into a 35,000-square-foot headquarters at Meridian and 13th streets. Bales earned more than $250,000 in commission on the deal, which ultimately cost Hoosier Lottery Director Kathryn Densborn her job.
She resigned in October amid controversy over lavish fixtures at the new headquarters including an employee gym with $25,000 of exercise equipment.
Bales' commission was based on the project's total value, including the cost of building out the space.
Schouten also learned that Mike Reed, the former IURC Daniels' administration official embroiled in the scandal involving the hiring of the IURC's general counsel, Scott Storms, after he went to work for Duke Energy heading up the utility giant's Indiana operations, played a role in getting Bales to hire a relative.
The hiring process at Venture could move quickly if you were related to a top state official.
In October 2009, then-INDOT Commissioner Mike Reed sent an email to top officials at the state, including IDOA Commissioner Mark W. Everson, touting his son-in-law Ben Jones as a “quality individual” with “a work ethic, maturity and desire to be successful not often seen in younger people today.”
Deputy IDOA Commissioner Rob Wynkoop on Oct. 19 forwarded the resume to Bales, noting “this is Mike Reed’s son-in-law. Not sure if you are looking for anybody like this. Everson asked me to forward it on.”
That was at 2:21 p.m.
At 2:55 p.m., Bales responded: “Hiring him.. Call me”
At the time, one of Venture’s assignments was working with the Reed-led INDOT on the disposition of the agency’s surplus real estate.
At the heart of this week's indictments against John Bales, his business associate Bill Spencer, and attorney Paul Page, is the federal prosecutors' contention that Bales held a financial stake in the Elkhart office building Paul Page acquired with former Marion Co. Prosecutor Carl Brizzi when he was suppose to be working exclusively for the state of Indiana as its real estate broker in the deal. Schouten found e-mails where Mike Huber, now a deputy mayor under Greg Ballard, had raised concerns about Bales' side deals while he was still working at the Indiana Department of Administration.
The records show former Deputy IDOA Commissioner Michael Huber—who joined Bales for happy hour on several occasions and mostly offered support for Venture in emails—at times had reservations about the company’s methods. Huber oversaw the Venture contract from January 2007 to January 2008.
Huber was not pleased, for example, when he heard Venture was pitching the Hoosier Lottery on a tenant-representation agreement outside the purview of its contract with the Department of Administration. The arrangement ran counter to Huber’s mission of consolidating and simplifying the state’s leasing functions.
“I have tried to give your team maximum flexibility and access to the right people throughout state government and want to continue to do so, but we need to make sure that we are on the same page,” Huber wrote in an email to the principals of Venture on Oct. 27, 2007.Whatever reservations Huber may have had about Bales while working in the Daniels administration, it didn't stop him from hiring Bales' firm for a similar sweetheart real estate deal with the City of Indianapolis after Huber left the Daniels administration to join Ballard's new administration as a top official. Huber was tapped by Barnes & Thornburg's Joe Loftus to join the Ballard administration, who likely ordered Huber to ink the deal with Bales, one of his clients. Loftus, Bob Grand and others at Barnes & Thornburg have dictated to Ballard who is hired for key jobs with the city.
Grand and Loftus, who exercise considerable influence in the Daniels administration, are also paid advisers to Ballard. The law firm firm has been awarded millions of dollars worth of legal work with the city since Ballard took office four years ago. Barnes & Thornburg's clients have also been the beneficiaries of sweetheart deals with the city, including the 50-year parking meter lease with ACS, a firm Barnes & Thornburg has long represented in business transactions with the state and local governments in Indiana. The firm helped lobby the Daniels administration on behalf of ACS to land the controversial welfare privatization deal with FSSA. When the lead partner's contract in that deal, IBM, was nixed by the state, ACS was allowed a continuing contractual relationship with FSSA. Incredibly, Gov. Daniels hired the law firm to represent the state in a lawsuit with ACS's former partner, IBM, despite the firm's obvious conflict of interest.
The City of Indianapolis later cancelled its contract with Bales for failing to perform according to Huber. It is more likely the deal was nixed after the Ballard administration was tipped off that Bales' activities were being investigated by the FBI. Bales is represented by another Barnes & Thornburg partner, former Justice Department prosecutor Larry Mackey, in the criminal case the federal government has brought against him. Naturally, Mackey insists his client is innocent. Given the law firm's ties to the corrupt deal that led to the indictment, federal prosecutors should ask that the firm be disqualified from representing Bales in this criminal case against Bales. At least that's what the rules of professional conduct dictate, but as we've seen with the firm's representation of the state in the FSSA litigation, the rules don't seem to apply where Barnes & Thornburg is concerned. One particularly troubling aspect of Schouten's story is a claim by another Barnes & Thornburg attorney representing Bales, Jason Barclay, that the state gave its blessings to Bales having an ownership interest in the Elkhart office building he brokered for the Department of Child Services after he first disclosed it to them. That contradicts the express terms of Bales' exclusive real estate brokerage agreement with the state.
The e-mails Schouten uncovered showed that Bales' small company was incapable of handling the many leasing matters it had on its plate. One e-mail suggests Bales had involved another firm on his own to aid with his work. Other e-mails show that Bales played hardball with prospective landlords, insisting that he earn 100% of the brokerage commission and not split them with the landlord's broker as is the standard practice when both parties are represented in a leasing transaction by a broker. Bales would tell prospective landlords deals with them wouldn't happen unless they agreed to let him receive 100% of the commission. Quoting a 2008 email exchange between a state official and one landlord: “Requiring us to pay an intermediary that we do not choose or lose the contracts seems like extortion.” Schouten found e-mails where senior administration officials had shared their concerns about Bales with Daniels' top deputies. “I don’t discount the effect hard bargaining can have on one’s perception of the other side,” John Okeson wrote. “That said, how any ‘agent’ of the Governor handles a matter reflects directly on him, so I thought it important to forward what I’m hearing to you for consideration.” Okeson died suddenly a year later after a brief illness. His brother, Paul Okeson, served as chief of staff to Mayor Greg Ballard before joining Ersal Ozdemir's Keystone Construction, which has received a number of sweetheart real estate deals with the Ballard administration, including a controversial parking garage for Broad Ripple that includes a $6.3 million gift of public funds to the company. Keystone and Bales' firm have also partnered on many deals.
Schouten also wonders if campaign contributions have not played a role in Bales' success in landing business with the Daniels administration. Earlier reports suggested Bales had given as much as $31,000 to Daniels' campaign committee. A more thorough research of other entities controlled by Bales reveals that he gave $52,000 from 2003-2008. It once again points up the role Pay To Play has in Indiana. Neighboring Illinois has seen scores of officials and and political insiders prosecuted for honest services fraud and other public corruption crimes by federal prosecutors, while federal prosecutors in Indiana, particularly in the southern district, have seldom brought such cases despite the prevalence of these activities. Many observers were surprised that the indictment against Bales was brought by the northern district's federal prosecutor instead of U.S. Attorney Joe Hogsett in Indianapolis since the state agency involved in the transactions with Bales is located here.
Hats off to Schouten and the IBJ for once again demonstrating to us how good investigative journalism should be conducted.
Friday, December 16, 2011
Bales, Et Al Say They're Innocent
WRTV has a story on the arraignment of accused real estate defrauders John Bales and attorneys William Spencer and Paul Page in the federal district court of Northern Indiana in South Bend. Not surprisingly, the attorneys for the three men insist that are totally innocent of the charges.
An Indianapolis real estate broker and two associates accused of defrauding the state and a bank appeared in federal court Thursday.
John M. Bales II, 44, the president of Venture Real Estate Services in Indianapolis, his partner and general counsel William E. Spencer, 44, of Carmel, and Indianapolis developer and attorney Paul J. Page, 47, were each indicted Wednesday with one count of conspiracy to defraud, one count of bank fraud, three counts of mail fraud and eight counts of wire fraud.
Page was also charged with one count of making false statements to influence the actions of a bank insured by the Federal Deposit Insurance Corporation . . .
Bales' attorney adamantly denied the charges.
"There was no hanky-panky. There were no secret straw buyers. This was all above board," said attorney Larry Mackey. "What John Bales is going to do is demonstrate to the trial jury that no crime was committed."
The indictment points to a lease deal in Elkhart for the Department of Child Services where office space was acquired in a building jointly owned by Page and former Marion County Prosecutor Carl Brizzi.
Brizzi has not been charged in connection with the case, but Page's attorney said he believes federal investigators are really interested in zeroing in on Brizzi.
"It appears that he (Page) just got caught in the middle of some battle going on that is not his," said attorney Bob Hammerle. "It is just ghastly that he has to be informed that he's been indicted, a week before Christmas, just ghastly."
You can take what Mackey, the former Oklahoma City bombing prosecutor who would have you believe that there never was a "John Doe #2" who helped Timothy McVeigh carry out that dastardly deed, with a grain of salt. Mackey also defended the Fishers money manager, Keenan Hauke, who state regulators accused of defrauding investors of his hedge fund out of $7 million. At the beginning of the case, Mackey claimed the accusations against his client were made up by a former disgruntled employee of Hauke's who was trying to lure his clients away from him. He later blamed another hedge fund manager for taking his clients' money without Hauke's knowledge and losing it in a Michigan real estate investment. Mackey dumped Hauke after he ran out of money. As we now know, he has pleaded guilty to the charges, and federal prosecutors are seeking a 17-year prison sentence for him.
Wednesday, December 14, 2011
Bales Made Large Contributions To Mitch Daniels
Not that this will surprise anyone since the only way you can do business with a governmental entity in Indiana is to stuff a bunch of campaign contributions into the pockets of the elected officials, but it turns out that indicted real estate developer John Bales made some very large contributions to the campaign committee of Gov. Mitch Daniels. According to the Indiana Election Division's campaign finance website, Daniels' political action committees received several contributions totaling $26,000 from Bales. Bales also kicked in $1,000 to the Greater Indianapolis Republican Finance Committee and $250 to Todd Rokita's Secretary of State campaign committee. Daniels also collected more than $200,000 from indicted Ponzi scheme operator Tim Durham, more than any other candidate besides former Marion Co. Prosecutor Carl Brizzi. Daniels is the only candidate to receive large contributions from Durham who has so far refused to return the money to the Fair Finance bankruptcy trustee, who is struggling to recover the more than $200 million Durham defrauded out of the company's investors.
Speaking of Tim Durham, a Hamilton Co. Superior Court judge has ordered the wages Durham is paid to run National Lampoon garnished to pay a $67,824.00 judgment he had entered against him in September, 2010 that was brought by H.E.B. Brand Savings & Retireman Plan Trust. Durham has run National Lampoon since its former CEO, Dan Laikin, was convicted and jailed for engaging in a scheme to manipulate the share prices of the company's stock. Laikin was sentenced to 45 months in jail in September, 2010. Laikin's brother, Robert, is the CEO of Brightpoint. According to Durham's indictment in the Fair Finance case, the only other person who traded more heavily in Brightpoint shares was convicted Ponzi scheme operator Bernie Madhoff.
UPDATE: An Indianapolis Star story this morning pegs Bales' total contributions to Daniels at $31,000, or $5,000 more than I counted. Also, you won't be surprised to see who is representing Bales:
The Star article also discusses Bales government work he received from local Republican officeholders in Marion County:
Speaking of Tim Durham, a Hamilton Co. Superior Court judge has ordered the wages Durham is paid to run National Lampoon garnished to pay a $67,824.00 judgment he had entered against him in September, 2010 that was brought by H.E.B. Brand Savings & Retireman Plan Trust. Durham has run National Lampoon since its former CEO, Dan Laikin, was convicted and jailed for engaging in a scheme to manipulate the share prices of the company's stock. Laikin was sentenced to 45 months in jail in September, 2010. Laikin's brother, Robert, is the CEO of Brightpoint. According to Durham's indictment in the Fair Finance case, the only other person who traded more heavily in Brightpoint shares was convicted Ponzi scheme operator Bernie Madhoff.
UPDATE: An Indianapolis Star story this morning pegs Bales' total contributions to Daniels at $31,000, or $5,000 more than I counted. Also, you won't be surprised to see who is representing Bales:
Bales' attorney, Larry Mackey, issued a statement Wednesday night, saying his client is a "good, ethical businessman."
He said Bales has cooperated with the two-year investigation and would be exonerated when all the facts come out.
"The state saved millions of dollars on the contract . . . and the bank has been paid every penny it was owed, while John Bales lost significant sums," Mackey said in the statement, which didn't elaborate on how Bales lost money. "I struggle mightily, as I imagine jurors will, to understand how those facts merit prosecution."Mackey's claim that the state "saved millions of dollars on the contract" is a patent lie. An IBJ story noted the rent for the building was unusually high for Elkhart, which was facing double digit unemployment at the time. You could have rented a building in Indianapolis where rents are higher at the time for a comparable amount.
The Star article also discusses Bales government work he received from local Republican officeholders in Marion County:
His past work includes helping to arrange a $10 million lease for the prosecutor's office in 2002, when Scott Newman was in office and moved his staff out of the City-County Building. Bales renegotiated the lease in 2007 during Brizzi's tenure. In the early 2000s, Bales also arranged the sale of buildings that were then leased by a Southside probation office and the coroner's office.
In 2008, Indianapolis Mayor Greg Ballard's office signed a controversial contract with Venture to produce an inventory and analysis of all city property, with an eye toward selling off excess property. Venture would be paid only if it later marketed property for sale.
The city later canceled the contract, said Marc Lotter, Ballard's spokesman, because Bales failed to perform the work. "He was not paid anything," Lotter said.The Star says Bales currently has no contracts with the county or the state. I guess the attorneys at Barnes & Thornburg could not ethically assist Bales in getting contracts locally as it has in the past while the firm was defending him in a federal criminal case involving the defrauding of one of his government clients. Of course, it didn't stop them from helping him get that no-bid contract with the city at the same time the firm was being paid to advise Mayor Ballard. Lest we forget the firm's dual role in helping ACS land a big chunk of the FSSA privitization agreement and its later role in defending the state in a lawsuit against ACS's partner in that deal, IBM. Don Lundberg needs to write a story for Res Gestae explaining to all of us in the legal community why the things his partners do are okay; it's just what the rest of us low-life attorneys do that's unethical.
Real Estate Developer Tied To Daniels And Ballard Indicted For Defrauding State
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| Indicted Real Estate Developer John Bales |
A grand jury in South Bend has returned a 14-count criminal indictment against Indianapolis real estate broker John M. Bales and two associates over a state lease deal in Elkhart first revealed as part of an IBJ investigation.
The complaint alleges Bales, his partner and general counsel William E. Spencer, and Indianapolis developer and attorney Paul J. Page defrauded the state and an unnamed bank.
The charges, brought by the U.S. Attorney for the Northern District of Indiana, include eight counts of wire fraud, three counts of mail fraud, one count of bank fraud, and one count of conspiracy to defraud. Page was also charged with one count of making false statements to influence the actions of a bank . . .
According to the indictment, Page bought the office building without putting up any cash through a company called L&BAB LLC, then leased it to the state's Department of Child Services. Page put up $361,000 in cash for the property, which had been wired from Bales' account under an entity called BAB Equity.
"Page promised to repay BAB Equity and to give it 25 percent of the profits when the Elkhart building was resold, even though Bales and Spencer could not have any sort of ownership interest in the building and even though Venture told the state that it would only be compensated through commissions," U.S. Attorney David Capp said in a statement.
The indictment alleges that Page also borrowed $531,000 from a bank without disclosing he wasn't investing his own money.As Schouten's story explains, under an exclusive real estate brokerage agreement Bales' Venture Real Estate entered into with the State of Indiana, the company and its partners and employees were barred from having an ownership interest in the real estate the firm assisted the state in leasing. According to the indictment, Venture was paid by the state an $88,400 commission on the lease of the Elkhart property. The firm also collected a $28,875 brokerage fee and $22,700 development fee in violation of its agreement with the state. "Page promised to repay BAB Equity and to give it 25 percent of the profits when the Elkhart building was resold, even though Bales and Spencer could not have any sort of ownership interest in the building and even though Venture told the state that it would only be compensated through commissions," U.S. Attorney David Capp said in a statement. Bales has earned to date nearly $2 million in commissions paid by the state under the terms of the exclusive real estate brokerage agreement the Daniels administration inked with him according to the indictment.
You may recall that early on in the administration of Mayor Greg Ballard, Barnes & Thornburg's Bob Grand negotiated on behalf of Bales a controversial no-bid, exclusive real estate brokerage agreement with Bales' Venture Real Estate firm that allowed Bales to market city-owned real estate. This blog also exclusively reported that City-County Council President Ryan Vaughn, an attorney/lobbyist employed by Barnes & Thornburg, had been registered to lobby the Daniels administration on behalf of Bales' Venture Real Estate, along with other attorneys at Barnes & Thornburg, including Bob Grand and Joe Loftus, both of whom are paid by taxpayers to advise Mayor Greg Ballard. The information on Vaughn's work for Bales was scrubbed from the state's lobbying website after it was disclosed here.
Vaughn, who represents a council district that includes Broad Ripple, has been a leading proponent of a parking garage deal pushed by the Ballard administration that gives the politically-connected real estate developer, Ersal Ozdemir of Keystone Construction, $6.3 million in city funds to develop a parking garage that turns out to be more of a commercial retail development for Ozdemir's exclusive personal benefit. Keystone Construction and Bales' Venture Real Estate have worked together in other taxpayer-funded projects, including a BMV branch on South Madison Avenue in Indianapolis. The two companies also submitted a joint bid to manage the assets owned by the CIB.
Under the terms of the Broad Ripple parking garage deal, the city did not require Ozdemir to invest a single dollar of his own money in the deal despite the fact that he will own it entirely and get all of the revenues from it. It's a theft of public funds, pure and simple. There is no public benefit to this deal at all. Your money has been given to reward a fat cat contributor of Ballard's. The Ballard administration simply rewarded Ozdemir's Keystone Construction with a $6.3 million gift with your tax dollars in consideration for the tens of thousands of dollars he stuffed into Ballard's campaign re-election account. Ozdemir also hired Ballard's former Chief of Staff, Paul Okeson, who helped broker the corrupt deal. Okeson was actually sitting on the CIB's board while his company submitted a joint bid with Bales' Venture Real Estate to manage the CIB's assets. When will a grand jury be convened to investigate these crooked real estate transactions in Indianapolis that are being used to bilk taxpayers here?
Saturday, December 19, 2009
Brizzi Wants To Be Donald Trump Too
He's supposed to be the full-time prosecutor of our state's largest county. In recent weeks, we've learned about Marion Co. Prosecutor Carl Brizzi's penchant for following the stock investments of alleged Ponzi scheme perpetrator, Tim Durham, his largest campaign contributor, ala Martha Stewart. Now it emerges that Brizzi has been busy trying to become the next Donald Trump in the world of real estate investment with another political insider, John Bales.
Advance Indiana first made a financial connection between Brizzi and real estate developer John Bales more than a year ago when I disclosed Brizzi's participation in a proposed $30 million real estate venture headed by Bales that intended to buy up distressed properties in Florida's one booming real estate market. At that time, controversy erupted over the Ballard administration's decision to award a no-bid contract to Bales to help dispose of "surplus" park lands. Last week, Advance Indiana exclusively reported on Brizzi's investment in another Bales real estate venture, Curtailing Investments, LLC. Borrowing heavily on my original reporting (without attribution, of course), the IBJ's Cory Schouten uncovers more real estate investments by Brizzi since he became prosecutor seven years ago, mostly involving deals with Bales. One of Bales' companies initiated a deal that landed a lease for the office building where the prosecutor's office leases 72,000 square feet.
Brizzi first made news with his investments while in office two years ago when he emerged as one of five investors in Harry & Izzy's, a new restaurant chain launched by the owners of St. Elmos steakhouse, along with the Colts' superstar quarterback, Peyton Manning. Although Brizzi is barred under Indiana law from holding an interest in a liquor license because he is a law enforcement officer, he got around the bar on his 10% ownership stake in Harry & Izzy's that was raised by the state's ATC by getting an opinion letter from his friends in the state's Attorney General's office that carved out an exception for him.
While the Harry & Izzy's story garnered public attention, Brizzi's other real estate investments have largely gone unnoticed until now. According to Schouten's story today in the IBJ, Brizzi invested in the development of a Key Bank branch in Broad Ripple in 2005 as part of his investment in Curtaiing Investments, and he took an ownership interest in an office building in Elkhart, Indiana, which recently received a lucrative state contract to lease most of the space in that building for the state's Department of Children Services. Brizzi also considered buying an interest in property that is home to the Cafe Patachou restaurant at 49th Street and Penn earlier this year. Neither Brizzi nor Bales would return calls from the IBJ seeking comment from them on their real estate investments.
Schouten's story raises questions about whether Bales and Brizzi received a sweetheart deal from the state on the lease of the Elkhart property. Brizzi disclosed on his federal disclosure statement he filed earlier this year when he briefly considered a bid for U.S. Rep. Dan Burton's fifth district seat an interest in L & BAB LLC, owner of the Elkhart real estate, that’s worth $50,000 to $100,000. "One such building is at 1659 Mishawaka St. in Elkhart, where the Department of Child Services agreed in July 2008 to lease 13,000 square feet for $19.12 per square foot, or $248,500, per year," Schouten writes. "It’s one of the highest per-square-foot rates for a state agency, and well above the $6-$10 range for available Elkhart office space listed on LoopNet," he continues. "Other state agencies pay less for space in downtown Indianapolis." Unbelievable. We're paying more to rent real estate space in economically-depressed Elkhart than we are in downtown Indianapolis?
Brizzi also borrowed $325,000 in 2004 to invest in a couple of condominiums at a Broad Ripple condo project known as The Reserve. That project was developed by Bales, Steve Pittman and Barnes & Thornburg's Ben Pecar. Pecar, incidentally, was involved in that Florida real estate venture with Bales and Brizzi as well. It looks like Brizzi was able to flip both of those condos for a quick profit. He made $24,000 on one of the units he sold in 2006 according to Schouten. Brizzi owns a stake in two other companies, Vergina, LLC and CJB Management, LLC, according to Schouten, although I believe they may be one and the same, the latter being the name to which he changed the former, which appears to carry a sexual connotation.
So the question becomes: How can Carl Brizzi afford all of these investments on his $125,000 a year salary as a prosecutor, not to mention his stock portfolio? According to his divorce documents, he and his ex-wife owned three homes together, each with first and second mortgages. Brizzi is paying $1,000 a month in child support to his ex-wife for the couple's four children. Ironically, an ethics expert tells Schouten that it does not appear that any of Brizzi's investments violated the City of Indianapolis' ethics ordinances. Actually, Brizzi is considered a state officer. That is why he files a financial disclosure statement with the State of Indiana and not the City of Indianapolis. A tough federal prosecutor would likely find plenty of legal wrong with what has been publicly disclosed to date about Brizzi's investments. If this were Chicago instead of Indianapolis, U.S. Attorney Patrick Fitzgerald would have already convened a grand jury and began issuing subpoenas to investigate Brizzi. But we have interim U.S. Attorney Tim Morrison, the guy who inexplicably unfroze Durham's assets days after filing a forfeiture action in the U.S. district court in Indianapolis.
I'd rather not sit around and wait so see what happens to Brizzi. I will once again renew my call as an elected Republican precinct committeeman for Brizzi to resign his office immediately so we can appoint someone to clean up his tarnished office, and to run for election to his office next year.
Advance Indiana first made a financial connection between Brizzi and real estate developer John Bales more than a year ago when I disclosed Brizzi's participation in a proposed $30 million real estate venture headed by Bales that intended to buy up distressed properties in Florida's one booming real estate market. At that time, controversy erupted over the Ballard administration's decision to award a no-bid contract to Bales to help dispose of "surplus" park lands. Last week, Advance Indiana exclusively reported on Brizzi's investment in another Bales real estate venture, Curtailing Investments, LLC. Borrowing heavily on my original reporting (without attribution, of course), the IBJ's Cory Schouten uncovers more real estate investments by Brizzi since he became prosecutor seven years ago, mostly involving deals with Bales. One of Bales' companies initiated a deal that landed a lease for the office building where the prosecutor's office leases 72,000 square feet.
Brizzi first made news with his investments while in office two years ago when he emerged as one of five investors in Harry & Izzy's, a new restaurant chain launched by the owners of St. Elmos steakhouse, along with the Colts' superstar quarterback, Peyton Manning. Although Brizzi is barred under Indiana law from holding an interest in a liquor license because he is a law enforcement officer, he got around the bar on his 10% ownership stake in Harry & Izzy's that was raised by the state's ATC by getting an opinion letter from his friends in the state's Attorney General's office that carved out an exception for him.
While the Harry & Izzy's story garnered public attention, Brizzi's other real estate investments have largely gone unnoticed until now. According to Schouten's story today in the IBJ, Brizzi invested in the development of a Key Bank branch in Broad Ripple in 2005 as part of his investment in Curtaiing Investments, and he took an ownership interest in an office building in Elkhart, Indiana, which recently received a lucrative state contract to lease most of the space in that building for the state's Department of Children Services. Brizzi also considered buying an interest in property that is home to the Cafe Patachou restaurant at 49th Street and Penn earlier this year. Neither Brizzi nor Bales would return calls from the IBJ seeking comment from them on their real estate investments.
Schouten's story raises questions about whether Bales and Brizzi received a sweetheart deal from the state on the lease of the Elkhart property. Brizzi disclosed on his federal disclosure statement he filed earlier this year when he briefly considered a bid for U.S. Rep. Dan Burton's fifth district seat an interest in L & BAB LLC, owner of the Elkhart real estate, that’s worth $50,000 to $100,000. "One such building is at 1659 Mishawaka St. in Elkhart, where the Department of Child Services agreed in July 2008 to lease 13,000 square feet for $19.12 per square foot, or $248,500, per year," Schouten writes. "It’s one of the highest per-square-foot rates for a state agency, and well above the $6-$10 range for available Elkhart office space listed on LoopNet," he continues. "Other state agencies pay less for space in downtown Indianapolis." Unbelievable. We're paying more to rent real estate space in economically-depressed Elkhart than we are in downtown Indianapolis?
Brizzi also borrowed $325,000 in 2004 to invest in a couple of condominiums at a Broad Ripple condo project known as The Reserve. That project was developed by Bales, Steve Pittman and Barnes & Thornburg's Ben Pecar. Pecar, incidentally, was involved in that Florida real estate venture with Bales and Brizzi as well. It looks like Brizzi was able to flip both of those condos for a quick profit. He made $24,000 on one of the units he sold in 2006 according to Schouten. Brizzi owns a stake in two other companies, Vergina, LLC and CJB Management, LLC, according to Schouten, although I believe they may be one and the same, the latter being the name to which he changed the former, which appears to carry a sexual connotation.
So the question becomes: How can Carl Brizzi afford all of these investments on his $125,000 a year salary as a prosecutor, not to mention his stock portfolio? According to his divorce documents, he and his ex-wife owned three homes together, each with first and second mortgages. Brizzi is paying $1,000 a month in child support to his ex-wife for the couple's four children. Ironically, an ethics expert tells Schouten that it does not appear that any of Brizzi's investments violated the City of Indianapolis' ethics ordinances. Actually, Brizzi is considered a state officer. That is why he files a financial disclosure statement with the State of Indiana and not the City of Indianapolis. A tough federal prosecutor would likely find plenty of legal wrong with what has been publicly disclosed to date about Brizzi's investments. If this were Chicago instead of Indianapolis, U.S. Attorney Patrick Fitzgerald would have already convened a grand jury and began issuing subpoenas to investigate Brizzi. But we have interim U.S. Attorney Tim Morrison, the guy who inexplicably unfroze Durham's assets days after filing a forfeiture action in the U.S. district court in Indianapolis.
I'd rather not sit around and wait so see what happens to Brizzi. I will once again renew my call as an elected Republican precinct committeeman for Brizzi to resign his office immediately so we can appoint someone to clean up his tarnished office, and to run for election to his office next year.
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