Page Gets Probation For Real Estate Fraud Conviction

The U.S. Attorney in the northern district of Indiana asked the federal district court judge, Robert Miller, Jr., to go easy on Page after it botched the case against his alleged co-conspirators, John Bales and William Spencer, by failing to offer the most damaging evidence against them, resulting in their acquittal. Judge Miller granted the prosecution its request and then some. Page will get two years of probation instead of the 14-month sentence prosecutors urged. He was also ordered to pay a $10,000 fine. That forfeited money former Marion Co. Prosecutor Carl Brizzi allowed his drug-dealing client to retain to pay the legal bill he owed Page can cover the fine as a courtesy for cutting Brizzi in on a 50% stake in the real estate deal without investming a dime will cover that. According to the IBJ's Cory Schouten, Judge Miller scoffed at the prosecutor's request to sentence Page to jail time.

The judge scoffed at the government's sentencing request for Page, noting the crime resulted in no losses to either the lender or the state. He said Page, a father of three without a criminal record, does not pose a danger of offending again.

Page spoke briefly during the hearing, after taking a few moments to compose himself.

"Hopefully a man is not defined by one action," he said, before turning away from the judge to thank a courtroom full of friends and family members.

Page declined to talk after the sentencing hearing, but his attorney Robert W. Hammerle described the ruling as "utter relief." Hammerle described the offense as an "isolated technical violation" that is actually quite common.

The judge seemed to agree, noting that he hadn't seen "many or any" cases with "less aggravating circumstances."

The article says Bales will lose his license to practice law in Indiana because of his conviction. That remains to be seen. No charges have been initiated against him by the disciplinary commission yet.

UPDATE: If you don't have much confidence in our criminal justice system, this won't disabuse you of that notion. A former Simon executive, Mark Palombaro of Carmel, was sentenced to 18 months in federal prison by a federal judge in Pennsylvania for receiving kickbacks from a construction company to which he steered business while he was employed by Simon Property Group. Can someone explain to me why Bales, Page, Brizzi, et al. can use our taxpayer dollars in self-dealing schemes without consequences, while the federal government is prosecuting a private citizen for earning money under the table while performing work for his employer in a way that didn't financially harm his employer? I'm not condoning Palombaro's actions, but it looks to me like this case should have been handled strictly as a civil matter between Simon and Palombaro. Why involve the resources of the federal government in handling internal problems Simon has with its executive employees?

The IBJ's Cory Schouten has posted a story explaining his view on why the feds' public corruption case against Carl Brizzi fell apart. He's much too generous to the federal prosecutors, who in my view, acted in a way that ensured the case would fall apart. Nobody wanted to back Carl into a corner. Desperate men can't be controlled.

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.

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.

Brizzi Comes Unhinged During Weekend Radio Show

Carl Brizzi

Most live radio talk shows employ a delay that allows the station to filter the broadcast for inappropriate material, normally coming from callers, but in rare instances, from the show's host. Somebody failed badly to do that during the live broadcast this afternoon of Carl Brizzi's weekend radio show on WIBC-FM, Crime Beat. Brizzi could have anticipated he might get calls inquiring about his relationship with indicted Ponzi scheme operator Tim Durham given his close friendship with him. An unidentified female caller hit Brizzi with direct questioning of his financial ties to Durham implying that he too may have engaged in some white collar criminal activiity with his best pal. Rather than cutting the caller's question short before airing her damning statements, Brizzi let her level very pointed charges against him before unleashing on her. He called her out by name repeatedly. Brizzi then called the woman "crazy," a "stalker" and "residual nutcase" against whom he said he would get a restraining order if she lived in Marion County because he "feared for his safety."

Brizzi accused the caller of rummaging through his divorce and business records after she questioned him about the timing of a mortgage recording an interest in real estate in Elkhart that he and his business partner, Paul Page, purchased and redeveloped after getting a lucrative long-term lease agreement with the Indiana Department of Child Services. The lease agreement was negotiated by a Brizzi political pal, John Bales, on behalf of the state. Bales' Venture Real Estate also handled the leasing of costly office space for the Marion Co. Prosecutor's Office downtown, which Brizzi maintains was entered into by his predecessor, Scott Newman. The caller further suggested Brizzi traded in significant sums of Cellstar stock as part of an investment group headed up by Durham without being identified as a part of the investment group as required by SEC disclosure regulations. News reports have suggested FBI officials have been investigating Brizzi's business dealings while serving as Marion Co. Prosecutor.

Another caller hit Brizzi for his acquisition of an interest in a liquor license held by Harry & Izzy's in violation of an Indiana law that prohibits law enforcement officials from owning an interest in liquor licenses. Brizzi got around the law while he was Marion Co. Prosecutor by getting his friends in the state Attorney General's office to write an advisory opinion suggesting he could own an interest in a liquor license so long as his interest was owned indirectly as a shareholder in a corporation. Brizzi insisted to the caller that Indiana law permits law enforcement officers to own an interest in alcohol permits without mentioning the slight of hand he engaged in to circumvent the law's restriction. The indirect ownership exception recognized in the AG opinion has the effect of consuming the rule prohibiting law enforcement officials from owning an interest in a liquor license.

Brizzi refused one caller's request to comment on the charges against his friend Durham. Because of his former role as Marion Co. Prosecutor, Brizzi said anything he would say ran the risk of doing real harm. Brizzi did say Durham had never been investigated for any crimes in Marion Co. during his eight years as county prosecutor, which should come as no surprise given the nearly $1 million Durham had spread around to area politicians, including Brizzi, who received over $200,000 in campaign contributions from the indicted Ponzi scheme operator. Despite having ample left-over funds in his campaign account to return the ill-gotten money to the bankruptcy trustee for Fair Finance Co., a company upon whose board Brizzi briefly served, for the benefit of investors defrauded of more than $200 million of their hard-earned savings, Brizzi has so far refused to return the money as have Gov. Mitch Daniels, House Speaker Brian Bosma and other politicians who accepted contributions from him.