Jury deliberates fate of Harmon

Jace Radke

Wednesday, Feb. 12, 2003 | 11:01 a.m.

As soon as today, a federal jury could decide the fate of Harley L. Harmon, a former state assemblyman accused of mail fraud in connection with a multimillion-dollar mortgage scandal.

After nine days of testimony, Harmon's attorney Frank Cremen and Assistant U.S. Attorney Dan Schiess gave closing statements Tuesday and the case was passed to the jury.

Schiess argued that it was clear that Harmon had misled investors by withholding information about the nature of their investments and where the money was going to be used.

Cremen urged the jury to find Harmon not guilty on the 34 counts of mail fraud he faces, saying his client was honest with his investors and did what he had to do to make sure he met his obligations to investors and got projects built.

Harmon, 55, could be fined and sentenced to up to five years in prison on each count if convicted.

He 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 dropped to 34 counts because of the unavailability of some witnesses for various reasons.

Schiess charges that Harmon told investors that they were in safer first deeds of trust when they were actually in second, third and even worse positions on loans brokered by Harmon's mortgage company. Interest payments and reports mailed to investors served to keep them in the dark about what Harmon was doing, Schiess said.

"Mr. Harmon knowingly made statements of half-truths to investors," Schiess said. "In some cases he told investors that the money was going to certain projects when it went to another. He didn't tell them that the money was going to projects that were in the dumper or in danger of being foreclosed on.

"It comes down to whether Mr Harmon deceived investors and whether these people would have invested with him if they had all the information."

Harmon admitted during the trial that he diverted investor money to troubled construction projects without telling investors, saying that he did it to protect investors and get projects built.

At issue are loans that 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 December 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.

Cremen argued that jurors needed to look at Harmon's actions in the context of when they happened seven years ago.

"The government is saying that he had the obligation to tell investors he'd be moving their money around, but the government is saying that after seven years of hindsight," Cremen said. "At the time he had been in the mortgage business for 16 years and people were making money with him.

"He always kept sight of the fact that the money" that was diverted to other projects "was always meant to come back, and that he had an obligation to finish the projects," Cremen said.

He said that Harmon made a business decision, but "did not commit any kind of fraud."

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.

Harmon said during the trial that investors came to him because they trusted him and his family name and because he was offering annual interest 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, Schiess said.

"(Harmon) didn't have the right to deceive new investors to try to help out old investors," Schiess said.

After being 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.