Government witnesses details alleged scam

Tuesday, April 14, 1998 | 11:37 a.m.

Minneapolis businessman Deil Gustafson, a former owner of the Strip hotel, pleaded guilty in 1995 to bankruptcy fraud for his role in the scheme and agreed to cooperate with prosecutors.

"At that time it appeared to me that there could be several charges against me, and my health was not too good, and because of my age and the fact I knew I had committed some violations, I just thought it was wise for me to try and solve my problem by cooperating," Gustafson told a federal jury.

Gustafson, who is awaiting sentencing on the bankruptcy charge, spent 40 months in prison from 1984 to 1987 for committing bank fraud and other crimes in an unrelated case. He said he hopes to reduce his sentence in the bankruptcy fraud case by cooperating with prosecutors.

He began testifying last Thursday at the trial of former Tropicana landlords Edward and Fred Doumani, who are brothers, Minnesota attorney John Jagiela and longtime Las Vegan Nicholas Tanno. Gustafson's testimony resumed Monday.

Senior U.S. District Judge Justin Quackenbush of Spokane, Wash., is presiding over the Las Vegas trial, which centers on the 1979 sale of the Tropicana and a $34 million judgment that stemmed from a breach of contract lawsuit.

Hotel Conquistador Inc. sold the hotel to Ramada Inc. in 1979 and later accused Ramada of breaching its contract.

A federal grand jury indicted the Doumanis, Jagiela and Tanno in 1995.

Those named as conspirators had a partial stake in the judgment won in 1989 by then-bankrupt Hotel Conquistador. Prosecutors claim the group began participating in a conspiracy to defraud the U.S. government in 1987.

Gustafson testified about that conspiracy Monday, claiming he and the Doumanis entered into a false sharing agreement in the fall of 1990 in an effort to obtain as much as $22 million of the judgment directly. Authorities allege a phony document resulted in fraudulent tax savings of more than $1 million. The indictment alleges the conspirators later lied under oath about the date of its inception.

Gustafson said the agreement to share proceeds of the judgment was given a date of Aug. 18, 1988. He said Jagiela prepared the document about two years later with input from Edward Doumani.

The witness said Jagiela went as far as telling the group the document needed to be typed on old paper with an old pen, in case authorities tested it to determine its age.

Last week Jagiela, who is representing himself, told jurors the sharing agreement accurately memorialized an agreement that was reached in 1988.

A second trial will revolve around allegations of extortion and a related cover-up. The indictment claims Tanno collected more than $1 million on behalf of mob families extorting Gustafson.

Tanno was a business associate of the late Joe Agosto, who produced the Tropicana's "Les Folies Bergere" show. As a federally protected witness, Agosto once testified that he worked with Kansas City mob boss Nick Civella to skim gambling proceeds from the Tropicana in the 1970s.