Harmon guilty of mail fraud

Jace Radke

Thursday, Feb. 13, 2003 | 11:40 a.m.

Former state Assemblyman Harley L. Harmon was found guilty this morning in federal court of 34 counts of mail fraud in connection with a multimillion-dollar mortgage scandal.

Harmon, 55, showed little emotion as the jury's verdict was read. Halfway through the verdict, he put his head down and stared at the desk in front of him.

He faces up to five years in prison on each count -- a potential sentence of 170 years. He could also be fined when he is sentenced before U.S. District Judge Philip Pro. Sentencing is set for 9:30 a.m. May 2. The judge and attorneys will discuss sentencing issues on Feb. 21.

Harmon walked out of the courtroom this morning showing no emotion.

"I have no comment," Harmon said, responding to reporters' questions. Pressed further, he said, "You have to be kidding."

His attorney, Frank Cremen, said he would "take all appropriate measures." Asked if he would appeal, he said, "absolutely."

Harmon was tried on 34 counts of mail fraud after a joint FBI and Metro Police investigation into the operations of the now defunct Harley L. Harmon mortgage company. He had been indicted in April 2001 on 71 counts, but most were dropped because some witnesses were unavailable.

At issue was millions of dollars of investors' money lost through Harmon's mortgage company through loans made to developers of two housing projects, a mobile home park and a storage center, between 1994 and December 1997. The Harley L. Harmon Mortgage Co., which operated at 1108 S. Eighth St., 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.

Kaye Ellsworth, 54, owner of a charter fishing boat company in Hawaii, said his family invested about $320,000 and lost about half of it.

"I find no pleasure in anything that has taken place today," Ellsworth said outside the courtroom. "I personally feel sad about the whole thing, I almost feel like crying."

He said his mother, Louise, worked with Harmon's father. Ellsworth said he has known Harmon since Ellsworth was 9.

"The thing that bothers me the most was the emotional effect that the betrayal had on my parents," he said. "It took all the spirit out of them and caused them to have to worry at a time in their life when they shouldn't have had to."

Louise Ellsworth said it was difficult when "you've sacrificed and saved your whole life for what is supposed to be your golden years and then just have it vanish."

"I feel badly for all the people that invested their retirement money and lost their homes and are in worse circumstances than us," she said.

Federal prosecutors 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.

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.

Cremen argued 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.

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

Assistant U.S. Attorney Dan Schiess alleged 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.

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.

After Harmon was stripped of his license in 1997 the Sun reported that many investors had given him 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.