Land Bank trial could turn on government wiretaps

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Reginald T. Walton is guilty of "very poor judgment" and "ethics violations," and also "did a pretty good job concealing" his involvement in private real estate partnerships during his tenure leading the Indy Land Bank, but he's not guilty of any crime, his attorney argued in federal court Wednesday.

Attorney Michael Donahoe previewed what a jury will hear Walton saying on government wiretaps, including using the word "kickback" to describe payments he pocketed for directing city-owned properties to his investor partners.

On the secretly recorded calls, Walton was playing "fast and loose" with his words and "exaggerated" his influence within city government, said Donahoe, an assistant federal defender in the Indiana Federal Community Defender's Office.

In reality, Walton's actions required multiple sign-offs from other city officials. And ultimately, the deals fulfilled the city's mission of addressing troubled properties.

"I ask you to judge my client on his actions, not his words," Donahoe told the jury, which could hear the recordings as early as Wednesday afternoon. "He was trying to impress people—convince them to join him in a real estate partnership."

Walton is facing nine felony counts of wire fraud, bribery and conspiracy to commit money laundering in a trial before U.S. District Judge William T. Lawrence that's expected to last up to three weeks. Attorneys selected a jury of nine men and five women, including two alternates, on Tuesday afternoon, and made opening arguments Wednesday morning.

Co-defendant David Johnson, executive director of the Indiana Minority AIDS Coalition, is facing five felony counts of wire fraud and conspiracy to commit money laundering.

Three other defendants—real estate investor Randall K. Sargent, former city employee John Hawkins, and Walton friend Aaron Reed—agreed to plead guilty before trial in deals with federal prosecutors.

The government began its case by describing the operations of the Indy Land Bank, which seeks to return abandoned and blighted properties to productive use and the tax rolls.

Assistant U.S. Attorney Bradley Blackington told jurors that Walton used his "inside information" about which properties private investors most coveted to recruit investors interested in flipping properties for a quick profit they agreed to share with Walton. The property transfers were routed through not-for-profit entities including the Indiana Minority AIDS Coalition.

"The people of Indianapolis have the right to the honest and faithful service of their public officials," Blackington said. "We're here because Mr. Walton held an office of public trust and violated that public trust."

Prosecutors allege Walton and Johnson also secretly lined their pockets as they ostensibly helped the Marion County Prosecutor's Office provide restitution for more than a dozen victims of a separate fraud orchestrated by Sheila Amos.

"Reggie Walton saw dollar signs," Blackington said. "He saw an opportunity to defraud these victims a second time."

The first witness for the government was Jennifer Fults, a Department of Metropolitan Development administrator who supervised Walton. She said city employees are not allowed to profit from deals they orchestrate as part of their jobs.

On cross-examination by Donahoe, she acknowledged that at least three other DMD employees purchased homes that had been routed by the Land Bank through a not-for-profit.

Among witnesses the defense expects to call is Ryan Vaughn, a former deputy mayor.

The cases were developed by a public corruption task force that includes representatives from the FBI, Indiana State Police and U.S. Attorney's Office.

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