Investors not impressed with Harmon testimony

Jace Radke

Tuesday, Feb. 11, 2003 | 9:21 a.m.

Harley L. Harmon, a former assemblyman on trial for mail fraud in connection with a multimillion-dollar mortgage scandal, admitted Monday that he diverted investor money to troubled construction projects.

Taking the stand in his own defense, Harmon told Assistant U.S. Attorney Dan Schiess that he didn't think he had done anything wrong in transferring money from one construction project to others without first notifying investors.

"I believe I had the authority to do what I did, and I don't believe it was necessary to tell (the investors)," said Harmon, whose father and grandfather were prominent Nevada politicians. "These people left all the details up to me, and I did what I thought was in their best interest.

"I told them I was going to ride herd on the costs and funds, and that's what I did."

Louise Ellsworth, an investor who said her family lost about half of the $320,000 they invested with Harmon, said she didn't believe Harmon was working for her best interests.

"I know he was lying through his teeth up there today," Ellsworth said after Harmon finished testifying before a jury and U.S. District Judge Philip Pro. "It's too bad they can't try him for perjury.

"He must think we're all idiots."

About 15 investors were in the courtroom Monday to hear Harmon's testimony, which they characterized as cocky and arrogant.

Harmon, 55, was indicted in April 2001 and charged with 71 counts of mail fraud after a joint FBI and Metro Police investigation into the operations of the now defunct Harley L. Harmon mortgage company. Those charges were reduced to 51 counts because of the unavailability of some witnesses for various reasons.

Harmon, who served as speaker pro tem of the Assembly in 1977 and as its majority leader in 1979, has a political lineage that extends back to his grandfather, Harley A. Harmon, a former chairman of the Nevada Public Service Commission. Harmon's father, Harley E. Harmon, served in the Assembly and on the Clark County Commission.

Ellsworth said that the Harmon name was one of the reasons she invested in construction loans.

"It's sad because my son grew up with (Harmon) since grammar school and I used to work with his father at Nevada State Bank," Ellsworth said.

Harmon said Monday that investors came to him because they trusted him and because he was offering annual interest rates of 15 percent. But many investors soon learned that they were placed in certain loans without their consent or discovered that their money was used to pay off other investors, according to court documents.

The case focuses on loans Harmon's company, which operated at 1108 S. Eighth St., made to developers of two housing projects, a mobile home park and a storage center between 1994 and 1997. Harmon's company was handling 44 separate loans involving $23.9 million from 694 investors when the Nevada Financial Institutions Division stripped the company of its license in December 1997.

Harmon said Monday that he was always open and honest with investors, but at the time didn't think it was necessary to tell them that he had diverted funds to other projects that were in danger of being foreclosed.

"If I hadn't given these projects some help, they would have gone down the dumper," Harmon said. "We had an obligation to build projects, and that's what we tried to do."

After Harmon was stripped of his license in 1997, the Sun reported that many investors had given Harmon money without knowing that he was under state investigation. That and other revelations reported by the Sun led the Nevada Legislature in 1999 to revise state mortgage broker laws aimed at giving investors more protection from potentially unscrupulous companies.

Some of Harmon's investors got all of their money back, while others got back about 30 cents on the dollar when the assets of Harmon's company were liquidated.

Closing arguments in the case were expected today, and the trial was expected to be turned over to the jury this afternoon.