Sixth Guilty Plea in Connection with Scheme to Fraudulently Control Condominium Homeowners’ Associations
|U.S. Department of Justice October 20, 2011|
WASHINGTON—A California man pleaded guilty today for his role in a scheme to fraudulently gain control of condominium homeowners’ associations (HOA) in the Las Vegas area so that the HOAs would direct business to a certain law firm and construction company, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Special Agent in Charge Kevin Favreau of the FBI Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Special Agent in Charge Paul Camacho of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Edward Lugo, 47, pleaded guilty before U.S. District Judge Lloyd D. George in the District of Nevada to one count of conspiracy to commit mail and wire fraud. Lugo is the sixth person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.
Lugo admitted that from approximately August 2003 until February 2009, he participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to a law firm and construction company designated by Lugo’s co-conspirators.
According to plea documents, to accomplish the scheme, co-conspirators used straw purchasers to obtain mortgage loans for units within HOA communities. Lugo agreed to act as a straw purchaser of a property at Mission Ridge and a property at Park Avenue, both HOA communities located in Las Vegas. In fact, Lugo’s co-conspirators were the true owners; they provided the down payments and monthly payments, including the HOA dues and mortgage expenses for the properties. Lugo admitted that he signed and submitted false and fraudulent loan applications and closing documents to financial institutions to finance and close on these properties on behalf of his co-conspirators.
Lugo admitted that he managed and operated the payments associated with maintaining many, if not all, of the straw properties owned and controlled by co-conspirators by running a so-called “Bill Pay Program.” At the direction of a co-conspirator, Lugo maintained several limited liability companies (LLC) for the purpose of opening bank accounts and concealing the funds for the Bill Pay Program. According to court documents, a co-conspirator transferred funds to the LLC accounts and Lugo used the funds to wire payments associated with the properties in Nevada.
Court documents indicate that Lugo and other co-conspirator straw purchasers agreed to run for election to the respective HOA boards. Lugo and the co-conspirators were paid in cash, check or promised things of value for their participation, resulting in a personal financial benefit to the co-conspirators. Lugo was elected to the HOA board at Park Avenue. He admitted that once he was on the board, he breached his statutory fiduciary duties to the homeowners by accepting from his co-conspirators compensation, gratuity and other remuneration that improperly influenced, or reasonably appeared to influence, his decisions, resulting in a conflict of interest. Lugo admitted that he voted in a manner directed by and favorable to his co-conspirators.
Lugo admitted that he and his co-conspirators employed deceitful tactics in their attempts to win the board elections, including creating false phone surveys to gather information about homeowners’ voting intentions, using mailing lists to vote on behalf of out-of-town homeowners unlikely to participate in the elections, and submitting fake and forged ballots. Co-conspirators also hired private investigators to find “dirt” on the bona fide candidates in order to create smear campaigns.
Lugo also admitted that he assisted in sending forged out-of-town homeowner ballots from California to Nevada to make it appear that the ballots were completed and mailed by bona fide homeowners residing outside Nevada.
According to plea documents, co-conspirators also attempted to create the appearance that the elections were legitimate by hiring independent attorneys, or “special election masters,” to run the HOA board elections. However, these individuals were paid in cash, and by check and promised things of value, by or on behalf of Lugo’s co-conspirators for their assistance in rigging the elections.
Court documents indicate that, once elected, the co-conspirator board members would meet with other co-conspirators to manipulate board votes, including the selection of property managers, contractors and general counsel for the HOA and attorneys to represent the HOA. The co-conspirators created and submitted fake bids for “competitors” to make the process appear to be legitimate while ensuring co-conspirators were awarded contracts.
Lugo admitted that, at the direction of his co-conspirators, he worked at a property management company. Lugo and other co-conspirator property managers received and accepted cash, checks or things of value for using their positions to gain inside information and recommend that the HOA board hire a co-conspirator for remediation and construction defect repairs and another co-conspirator for the construction defect litigation.
Lugo’s sentencing is scheduled for March 22, 2012, at 10 a.m. The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.
The case is being prosecuted by Deputy Chief Charles La Bella and Trial Attorneys Nicole H. Sprinzen and Mary Ann McCarthy of the Criminal Division’s Fraud Section. The case is being investigated by the FBI, IRS-CI and the Las Vegas Metropolitan Police Department, Criminal Intelligence Section.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.