Real Estate Developer Tied To Daniels And Ballard Indicted For Defrauding State

Indicted Real Estate Developer John Bales

John Bales is a young, high-flying Indianapolis real estate developer with strong political ties to the administrations of Gov. Mitch Daniels and Mayor Greg Ballard. Today, he and his business associate, William Spencer, find themselves on the wrong side of the law facing a federal indictment for defrauding the State of Indiana over a transaction involving a sweetheart lease deal for real estate in Elkhart, Indiana jointly owned by Indianapolis attorney Paul Page and former Marion Co. Prosecutor Carl Brizzi. Page also faces charges for defrauding a federally-insured institution from whom he borrowed money to finance the development of the Elkhart real estate into office space for the Indiana Department of Child Services. The IBJ's Cory Schouten explains the charges brought by the U.S. Attorney for the Northern District of Indiana:

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?