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Owners Reported Suspicions

September 30, 2008

By Lawrence Mower

By LAWRENCE MOWER

(c) 2008 REVIEW-JOURNAL

On Aug. 22, 2005, Bill Farnsworth, Wanda Murray and three other owners of condominiums at the Rhodes Homes development of Vistana walked into the local headquarters of the Federal Bureau of Investigation.

In their possession was a 3-inch thick, three-ring binder full of records and other papers documenting – at the least – what they thought were serious conflicts of interest involving their home- owners association board of directors.

At the most, they believed the records showed a possibility of collusion between members of the board, which included a former Las Vegas police lieutenant, to steer work toward a Las Vegas construction firm, Silver Lining Construction.

They left disappointed.

“We all pretty much felt defeated because we weren’t getting anywhere,” Murray said.

Last week, more than three years later, the FBI and Las Vegas police raided nine sites around the valley, including the headquarters of the management company Vistana used and the headquarters of Leon Benzer, owner of Silver Lining Construction.

Federal authorities are not only looking into Vistana. They are also looking at six other condominium complexes.

Law enforcement officials have been largely silent about the raids, but a look at court records shows some of the developments share the same board members. And there are links between developments and Benzer’s companies and associates.

But the Vistana complex on Durango Drive just south of the Las Vegas Beltway appears to be at the heart of what a law enforcement source has described as an investigation into whether individuals were placed on homeowners association boards and, in turn, directed business stemming from construction defect lawsuits to select companies.

The group of angry and diligent homeowners appears to have been onto something. The names contained in their three-ring binder largely correspond to those in a federal warrant served on Wednesday and obtained by the Review-Journal.

The warrant requests “any and all documentation, correspondence and notes” relating to 43 people, including the owners of two large home-owners association management companies and prominent construction defect lawyers.

Being named in the document does not necessarily mean the individuals or entities listed are suspected of wrongdoing or are under investigation.

One of the construction defect lawyers named, Nancy Quon, had her office raided on Friday, according to media reports.

Another lawyer listed in the warrant, Scott Canepa, was first named in the Review-Journal on Friday.

A statement by the FBI sent shortly afterward to some local media outlets, but not the Review-Journal, said neither Canepa nor his law firm are “subjects of this pending investigation.”

Several calls to the FBI seeking to clarify the statement, and to receive the statement directly from the agency, were not returned.

Attempts to reach Canepa and Quon for comment have been unsuccessful.

There was little doubt that the 732-unit, 20-building Vistana complex had significant problems. Farnsworth, who became the first president of the association in 2003, said he looked to find a solution.

Cheap tiles were brittle and would blow off in the wind, he and Murray said.

“You can just grab any tile at random and rub it with your fingers and the tile will crumble,” Farnsworth said.

Walkways were also faulty. Instead of sloping away from the building, they sloped inward, causing rainwater to run into the building.

Both defects caused water damage, and mold began to form in some units.

Farnsworth and the board hired a team of lawyers and the association filed a lawsuit in July 2003. They quickly entered into mediation with Rhodes.

A construction company, Draeger Construction – also named in the warrant – had agreed to do emergency repairs, according to court records.

The association board wanted to keep the suit in mediation, Farnsworth said, because it’s very difficult to sell and buy a property in a development engaged in a defect lawsuit that’s not in mediation.

A team of inspectors from Rhodes worked with the two construction firms the association board hired and went through the entire complex, documenting problems along the way.

The process took more than a year, and the teams found the same problems, Farnsworth said.

“Rhodes did not dispute the fact there were problems out there, because their team went right along with our team, and they all found the same stuff,” he said.

The settlement figure being discussed during informal talks with Rhodes was $30 million, Farnsworth and Murray said. Farnsworth said he didn’t have any reason to believe Rhodes would balk from that amount.

“They were receptive to doing the work without taking it to court,” Murray said. “Rhodes was willing to do the repairs and fix the place up.”

Formal talks with Rhodes were set to begin in November 2004. But in October, two people were elected to the association’s board of directors and began talking of sacking both the legal team the association hired and the construction company currently doing emergency repairs, Farnsworth and Murray said.

Morris Mattingly, a former Las Vegas police lieutenant and candidate for sheriff in 2006, and Charles Hawkins, who described himself as a union foreman in campaign literature for the seat on the association board, took two of the five spots on the board.

“Their resumes, they looked impeccable,” Murray said. “You couldn’t find anything wrong with them.”

Another board member resigned unexpectedly, and Rodolfo “Rudy” Alvarez was picked by the board as the replacement.

Mattingly and Alvarez both have ties to Benzer, court records show.

In the case of Alvarez, records show the condominium he purchased a .005 percent stake in at Vistana was previously owned by Benzer, and the two have shared property together before.

Mattingly has also shared property with Alvarez.

Federal authorities are looking for records pertaining to Mattingly, Alvarez and Hawkins, according to the search warrant. None of the three men could be reached for comment last week.

In the weeks and months after the trio got onto the board, Draeger Construction was dropped and Benzer’s Silver Lining Construction was brought on to do emergency work, according to court records.

The legal team the original board hired for the construction defect case was fired, and the board hired Quon. Quon had been interviewed and rejected when the board was first formed.

The management company, CAMCO, was also fired, and Platinum Community Services, the target of one of last week’s raids, was hired.

Farnsworth acknowledged he voted to hire Platinum but resigned before the new legal team was fired and Silver Lining was given a contract. He resigned in October 2004 when there was talk of firing the first legal team, he said, because he didn’t want to be a part of those decisions.

“I knew that any decision the majority made I was going to have to sign, and I wasn’t going to sign it,” Farnsworth said.

From there, Silver Lining was granted the right of first refusal – in essence, a guarantee of the lowest bid – to fix the major problems in the defect lawsuit if the suit was won, Farnsworth said. Draeger Construction had no such deal with the association, Farnsworth said.

Quon brought the association out of mediation with Rhodes and refiled the lawsuit. The suit wasn’t won until this year, and the settlement – which former board members have said was $19 million – was far less than the $30 million that Rhodes had discussed with Farnsworth’s board.

Nor have the repairs been completed. Farnsworth said missing or broken tiles have been replaced with tin pieces, and the wrong- sloping walkways have been repaired with a type of sealant, which Farnsworth said is only a temporary fix.

Murray was the first to start looking into the new board members, in late 2004. Legally blind, the now 62-year-old enlisted help and began poring over county and state public records.

She and the other owners turned up ties among Mattingly, Alvarez and Benzer.

For instance, Mattingly had purchased his Vistana condo just weeks before the October election. They found the timing suspicious.

“The more we looked, the more we found,” Murray said.

After Farnsworth’s resignation from the board, he and Murray, until then a temporary board member, decided to take action and in December presented a recall petition to the board with the necessary number of signatures.

When the ballots were cast to oust the board in February 2005, however, the number of votes was suspiciously lower than the number of people in the room, Murray said.

“The room was full of people,” Murray said. “And when they said the total counts, we said, ‘What? There’s more people in this room than you just said gave votes.’ We were blown away.”

Farnsworth and Murray said in an interview and in court depositions they later found out that two people, a condo owner and a maintenance supervisor, saw board members disposing of ballots and opening sealed ballots a few days before the election.

The owner and supervisor later testified in depositions they had witnessed the activity.

The board refused to step down, however, and another recall campaign was launched, this time under the direction of the state ombudsman’s office, which oversees such elections.

That campaign was successful, with voters choosing overwhelmingly to recall the board. But when board members again refused to step down, Farnsworth, Murray and other owners took the case to court.

They didn’t know what they were getting into.

Murray said the home-owners walked into court represented by one attorney.

“In walked seven attorneys on their side. And the judge goes, ‘Is this a circus?’ “

“There was a lot at stake,” she added.

“We were just outgunned,” Farnsworth said.

They ended up losing the case after opposing attorneys managed to get a few residents to say that Murray had forged their signatures.

Murray denies the charge.

“Me, who is legally blind, is going to forge somebody’s signature?” Murray said.

The situation homeowners in Vistana experienced might have been repeated elsewhere. Allegations of voter fraud have also surfaced in lawsuits at the Pebble Creek Village and Park Avenue condominiums in Las Vegas.

Since abandoning their efforts, Murray has moved away from the complex, although she still owns a property there. Farnsworth said he still lives there because it’s convenient for him and his unit, unlike others, hasn’t had any construction defects.

But since 2005, they’ve been left wondering what happened and whether anybody would do anything about the problems they saw.

“Nobody would listen to us,” Murray said. “I thought that they gave up on us.”

Review-Journal writer Adrienne Packer contributed to this report. Contact reporter Lawrence Mower at lmower@reviewjournal.com or 702- 383-0440.

(c) 2008 Las Vegas Review – Journal. Provided by ProQuest LLC. All rights Reserved.