Jurors mull fraud case in Trop case

Bill Gang

Friday, May 8, 1998 | 10:29 a.m.

After deliberating five hours Thursday, a federal jury returned today to consider the fates of three men charged in what prosecutors said was a bankruptcy fraud that diverted millions from the sale of the Tropicana hotel-casino.

The jury in the courtroom of Senior U.S. District Judge Justin Quackenbush of Seattle was given the case after two days of closing arguments concluded shortly before noon Thursday.

Prosecution and defense attorneys struggled to help the jury make sense of the volumes of evidence, sometimes contradictory witnesses and the financial trail of millions of dollars.

Justice Department prosecutor Lynn Panagakos argued that former Tropicana landlords Ed and Fred Doumani, aided by tax attorney John Jagiela, scammed the bankruptcy court and lied to legitimate creditors to put money in their own pockets.

She said the defendants fabricated stories and documents to coerce creditors into accepting half of what they were owed. Some people involved in the sale of the Tropicana to the Ramada hotel chain and the resulting litigation over the past two decades are said to have walked away with no compensation.

Defense attorneys for the Doumanis and Jagiela, who represented himself, argued to the jury that the government's case was built on bogus information provided by the star prosecution witness Deil Gustafson.

He had been a business associate of the Doumanis but turned against them to get favorable treatment on his own legal troubles.

Panagakos conceded that Gustafson was a convicted felon and an admitted liar but she said the jury should believe his story about joining the defendants in siphoning off funds that should have gone elsewhere.

"They were involved in it up to here," she said, holding her hand head-high.

The Tropicana was sold in 1979 but the proceeds were tied up in litigation for a decade until a $34 million judgment was won by the Doumanis.

The government has contended that most of the $34 million was supposed to go to their bankrupt company, Hotel Conquistador, and its creditors.