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Defense attorneys turn tough in Bales trial

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SOUTH BEND — The legal team representing real estate broker John M. Bales and partner William E. Spencer haven't called their first witness and already they're putting up a spirited fight as federal prosecutors seek to prove charges including bank, mail and wire fraud.

During the trial in U.S. District Court for the Northern District of Indiana, defense attorneys have attacked state officials who oversaw the state's contract with Bales' firm Venture Real Estate Services, attacked IBJ's coverage of an unusual state lease deal in Elkhart that led to the charges, and attacked a former co-defendant who bought the Elkhart building using a down payment provided by Bales.

But Larry Mackey, a former federal prosecutor who gave the government's closing argument against Oklahoma City bomber Timothy McVeigh, on Thursday delivered the most dramatic courtroom moments in the Bales trial during his cross examination of Jeff Lozer, general counsel for Indiana's Department of Child Services.

A government witness, Lozer recalled a conversation he had with Spencer before the Elkhart deal closed. Spencer told Lozer that Venture may consider "financial assistance" to help the landlord and expedite the move for DCS, Lozer testified under direct examination.

"My response was one of gratitude—their approach was to be creative on our behalf," said Lozer, who is friends with Spencer. "I was grateful for the offer."

Lozer said he couldn't remember whether he told Spencer that Venture should seek approval of such an arrangement from the Indiana Department of Administration, which oversaw the company's contract with the state.

Prosecutors say the secret arrangement between Bales and Page was a violation of a leasing agreement between Venture and the state that barred the company from direct or indirect ownership of properties where state agencies leased space. The defense argues the arrangement was a loan and not ownership.

During cross examination, Mackey showed Lozer notes from an FBI interview and the transcript of his grand jury testimony in January 2011 and asked him why he did not appear to mention the Spencer conversation in the interview but did mention it under oath. He also pushed Lozer about his failure to disclose the conversation to anyone else at the state after IBJ began reporting on the Elkhart deal.

Lozer acknowledged he didn't follow up with Venture to ask whether they had offered the Elkhart landlord financial assistance, but said he wasn't sure whether he told anyone else at the state including Harless.

"Is not sure 'yes', 'no', or 'I don't know'," Mackey snapped.

"I don't know," Lozer answered.

"You kept that fact a secret from everyone in December 2009, even though it was in the newspaper, right?" Mackey asked.

"Right," Lozer answered.

A few minutes later, Lozer again answered a Mackey question with, "I'm not sure."

"You know this is a criminal case, Mr. Lozer, it's very serious," Mackey responded, his voice forceful. "You did not seize the opportunity to set the record straight?"

Mackey pressed Lozer on why he didn't mention the conversation with Spencer during an interview with IBJ reporter Cory Schouten, whom Mackey pointed out in the courtroom.

"Was there an ounce of regret when you hung up with Mr. Schouten ... and didn't tell him what you know?" Mackey asked, referring to the reporter.

The government objected to the question, and the judge sustained.

Mackey, his voice rising, told Lozer the stakes were different in January 2011, that Lozer could lie to a reporter, but not to a grand jury.

Eyes widened in the jury box. A trial that has featured a blizzard of contracts and e-mail records suddenly felt like an episode of "Law & Order."

"Does it occur to you you could be prosecuted for lying to the FBI?" Mackey continued. "Either it's a conversation that you remember and never forget or one that goes out of your memory."

The government again objected to the question, and the judge sustained.

Mackey walked toward Lozer, in a softer voice, asking how sure he was on a scale of one to 10 that he told Spencer to disclose the Elkhart arrangement to IDOA.

"Five out of 10," Lozer answered.

"So at best we're 50-50," Mackey said, his voice rising again.

"Did your phone work in 2008?" Mackey asked, sarcastically.

"Yes, I believe so," Lozer answered.

"Can we just say thank you to a generous man who put up his own money ... so kids wouldn't have to be in a bullet-ridden building?" Mackey asked.

"I should've picked up the phone but I probably didn't," Lozer finished.

Thursday's courtroom action also included sharp questions from the defense for Steve Harless, who manages office leasing for the state on behalf of the Department of Administration.

Mackey said Harless treated Venture unfairly, favoring its competitor Resource Commercial Real Estate. He also asked him pointed questions about his response to an IBJ records request, which he forwarded to Venture, and his reaction when IBJ reporter Cory Schouten stopped by his office unannounced to check on the status of a records request.

"Didn't you get to know that day he didn't always get it right?" Mackey said, referring to the reporter.

Assistant U.S. Attorney Jesse Barrett objected to the question, and the judge sustained the objection. Harless didn't answer, but Mackey had sent his message to the jury.

The prosecution also took testimony from Mike Sibbing, a closing agent who worked on the Elkhart deal, to discuss several documents critical to its case. Among them: internal title company documents that show Bales wired the entire down payment for the building even though he was not listed as a buyer or lender on closing statements.

On cross examination, Barclay asked whether anyone at Venture asked Sibbing to conceal or destroy the documents showing the source of funds. Sibbing said no.

The prosecution is on track to finish its case by Monday, and the defense expects its case could take about three days. The trial began Jan. 28 and was scheduled to last up to two weeks.

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  • The face in the mirror
    Government and sloppiness go hand in hand jurors know that and that is not a excuse for Bales to give the taxpayers a kidney shot! You have Bales (who by all counts is the PIG and feeding at the public trough only because he "knew" someone in the Daniels executive office and special connected lawyers, cough cough) who now tries to appear as the Angel/problem solver. What a puke! Federal Prosecutors know he was on a greed filed binge and tried to be BMO. He didn't care how much he made taxpayers pay? I am astonished the prosecutors did not discuss specifically the other real estate options to the jurors and specifically why the state paid the price per square foot to Bales and his grafters and also pay for the rehab fees disclosed in the earlier IBJ articles. Elkhart County was a horrid real estate market in 07 and 08. Bales et.al. built in a nice profit for Page ( the "pig" according to Mackey), Brizzi(why??) and whoever is BAB EQUITY(the face in the mirror). What was the community chest card in Monopoly.... Go straight to jail do not pass go and do not collect $100.... Bales et.al had a fiduciary duty to the state and to use one of Bales favorite words he should not have F'd the taxpayers! These jurors are not simpletons and can clearly see the criminals before the court. What is truely shameful is not one TV station is covering this case and the Indianapolis Star ( perhaps the worst paper in the nation) has ignored the trial this entire week.
    • Journalism?
      The journalist is writing stories about himself? Is Schouten writing this and starring in it? Are we supposed to see it as unbiased?
    • john
      The question before the jury is not one of sloppiness on behalf of the IDOA. The question is was there bank fraud committed in the acquisition of the mortgage. The other question is did John M Bales and William Spencer commit a crime by failing to disclose ownership interest in a building in which they placed a State agency in direct contradiction to their state contract?
    • The IDOA is not innocent.
      The IDOA mishandles contracts and is careless with our tax dollars. I've had to deal with the IDOA for years and it always amazes me when I look up contracts with the commodites I could sell to them and see how much they are overpaying. There are all the "special initiatives" and "preferences" required to even be considered as a contender on one of their bid projects. I don't know all the details of this case but I know that the State of Indiana and IDOA should be accepting their share of blame. I am amazed at some of the wasteful spending done by governments and municipalities.

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