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Feds used wire tap, undercover agent in Land Bank probe

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A federal public-corruption task force used a wire tap and an undercover FBI agent to unravel a fraud scheme authorities say was orchestrated by two city employees and three co-conspirators.

A grand jury indictment unsealed Tuesday afternoon in U.S. District Court for the Southern District of Indiana brings the details of the alleged fraud at the Indy Land Bank into sharper focus. IBJ was first to report on a morning raid and arrests in the case and to detail the charges.

The eight-count indictment alleges Reginald Walton, an assistant administrator in the Department of Metropolitan Development, and colleague John Hawkins, another DMD employee and a former special assistant to Mayor Greg Ballard, abused their positions for their own profit.

Authorities allege Walton worked with Hawkins to transfer vacant or tax-delinquent residential properties from the city's Land Bank to not-for-profits run by co-defendants David Johnson, executive director of the Indiana Minority AIDS Coalition, and Randall Sargent, owner and president of New Day Residential Development.

The not-for-profit executives allowed their organizations to be used as "pass-throughs" to funnel properties to private investors in exchange for payments, the indictment alleges. Private investors, including co-defendant Aaron Reed, would pay kickbacks to Walton, who distributed a portion to Hawkins, investigators charge.

The arrangement allowed the buyers to exploit a loophole for not-for-profit buyers of Land Bank properties, bypassing a sealed-bid process and buying real estate for well below market value.

Authorities say Walton arranged the deals, and Hawkins appeared before city boards to seek approval.

Walton also was a silent partner with Reed in the for-profit Naptown Housing Group, allowing him to make money both for greasing the deals via his city post and by renting out or selling homes acquired from the Land Bank, according to charging documents.

One example of how the scheme worked involves a home at 3959 Carrollton Ave. The city's Land Bank sold the property to the Indiana Minority AIDS Coalition for $1,000 on Feb. 22, 2013, state records show.

Just a month later, on March 26, Johnson of the AIDS Coalition flipped the home for $17,500.

Federal prosecutors allege Reed paid Walton a $7,500 bribe in exchange for arranging the cheap sale to the not-for-profit group.

The five defendants each face three wire fraud charges. Each charge carries a potential penalty of 20 years in prison and a $1 million fine.

Walton also is charged with three counts of bribery involving an organization that receives federal funds, each of which could carry a maximum penalty of 10 years in prison and a $250,000 fine. Sargent and Reed are facing one count each of bribery.

Two of the charges spelled out in the indictment reference a sting by an undercover FBI agent. One is a wire-fraud count based on Walton's sending an email over state lines of a list of available Land Bank Properties to an undercover agent. A second charge, for bribery, alleges Walton accepted $500 in cash in January from an agent posing as an individual interested in buying real estate.

Two other charges make reference to phone conversations, suggesting the wiretap that authorities confirmed on Tuesday targeted Walton's phone. The wire-fraud charges reference text messages between Walton and Hawkins and a cell phone conversation between Walton and Reed.

The suspects made their first appearance in federal court midday Tuesday, where U.S. Magistrate Judge Denise K. LaRue read them the charges and explained their rights. The defendants were released pending trial.

The government is also seeking forfeiture of Walton's 2005 BMW 45I sedan and Yamaha motorcycle and Johnson's 2004 Volvo, along with cash sums equal to the proceeds of the scheme. The total illicit gain for all defendants was in excess of $100,000, authorities said.

The U.S. Attorneys Office said the investigation began after a tip from a confidential informant facing charges in an unrelated case.

Walton and Hawkins have been suspended without pay from their positions with the city, according to a statement Tuesday from Mayor Greg Ballard.

"I appreciate the work of federal officials in this matter, and my team will continue to assist them in this investigation," Ballard said in prepared comments. "The alleged acts of these two individuals do not reflect the dedication of the thousands of employees who work hard to improve our city every day."

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  • say again?
    Indygo Transit Center? Did Eden win this, or did Mr. Theis work for Arup/Libeskind, or are you just crazy?
  • DMD dirt
    The DMD director's former architecture firm wasn't even on the short list for the transit center, but got the contract
  • John
    You must be involved with the Feds. Tell us what you have been over there orchestrating to them. You know the whole truth so let us all in on your secrets.
  • first or default choice?
    sh8man are you talking the original selection, or the convenient default choice for the transit hub? Was it smelly too?
    • AGREED
      I totally agree with you Alex. There are many more to be investigated. I have a theory of "why" these in the article have been targeted but will withhold my opinion. I know of one non for profit in particular that bought hundreds of these properties and didn't do what he agreed to. ALL non for profits who have purchased multiple properties at once should be thoroughly investigated. This is very FISHY!!!
    • look into the INDYGO Architecture selection
      does anyone remember how the voting went on the INDYGO trasnit Center? DMD strikes again
      • IndyLandBank Reggie Walton Scandal
        More information on the IndyLandBank Reggie Walton Scandal here: http://www.kubepharm.com/indylandbank/IndyLandBank.html
      • nice work
        Cory, nice job with the coverage here. I just can't believe someone could read the Nov 2012 article without knowing this program would be targeted, and STILL accept a bribe.
      • I call Bull....
        "I appreciate the work of federal officials in this matter, and my team will continue to assist them in this investigation," Ballard said in prepared comments. "The alleged acts of these two individuals do not reflect the dedication of the thousands of employees who work hard to improve our city every day." The main difference between Misters Walton & Hawkins and the majority of City employees is that the most of the others were hired based on their qualifications, whereas these two unqualified individuals were put in place directly on the orders of the Mayor's office. Apparently, Mayor Ballard has no shame whatsoever. He should be apologizing personally for the actions of these two and then purging all the rest of the unqualified, politically-connected cronies from city government.
      • Chicago
        Mayor Ballard, we want Indy to be like Chicago in terms of urbanity and commerce NOT CORRUPTION!!
      • Non-Profit
        Well I thought that these non profit organizations are allowed to buy these homes as long as they are revitalizing and rehabilitating them. In this article it mentions the non for profit organizations but it does not mention that they committed bribery. I only see reference to this Naptown Housing group which was a silent partner to this city official. Shouldn't it just be that party because from what I am hearing they are the ones that have committed the act. It does not say any evidence of Indiana Minority Aids Coalition or New Day Residential Services. So out of all the non profit groups that Mr. Walton has dealt with why are these 2 the only ones being sought out? Sounds like they are looking for somebody to take the fall for the corruption of our City i.e. Greg Ballard and his 2 cronies that were over this program. All the non-profit organizations need to be investigated as well. Something smells in this case and it is Ballard.

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        1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

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