Question of forfeiture debated in Harmon case

Jace Radke

Monday, Feb. 24, 2003 | 8:39 a.m.

Prosecutors were able to prove that former Assemblyman Harley L. Harmon's mail fraud cost investors $557,451.63, but Harmon's lawyers are arguing that he shouldn't have to pay his victims a dime.

Harmon, 55, was found guilty of 34 counts of mail fraud by a federal jury earlier this month, and is scheduled to be sentenced on May 2. He faces up to five years in prison on each count -- a potential sentence of 170 years.

The lawyers on both sides agreed Friday on the amount that investors lost in the mortgage investment scandal, but they disagreed on whether federal asset forfeiture law applies to Harmon.

U.S. District Judge Philip Pro ruled that Assistant U.S. Attorney Dan Schiess and Harmon's lawyer, Frank Cremen, will have the opportunity to file briefs regarding their different interpretations of the law.

Cremen argued the forfeiture law does not apply because no evidence was presented during the trial to show that the investment money lost went into Harmon's pockets.

"My understanding is that forfeiture is used if there are assets derived from the scheme," Cremen said. "There is really no evidence that Mr. Harmon personally profited."

Schiess said that it did not matter whether Harmon put investor money in his pocket or diverted it from the construction projects investors had speculated on to less secure projects.

"The standard here is whether he obtained proceeds as a result of the fraud, not where that money went after he obtained it," Schiess said.

A hearing for the forfeiture arguments could be set in about a month, Pro said.

Harmon was indicted in April 2001 after an investigation into the operations of the now-defunct Harley L. Harmon Mortgage Co.

At issue was millions of dollars of investors' money lost through Harmon's mortgage company's loans 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.

During the trial Schiess said investors thought 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.

Money was also diverted from the investors' projects to projects in danger of being foreclosed. Interest payments and reports mailed to investors kept them in the dark about what Harmon was doing with their money, Schiess said.

Many of them said they had trusted Harmon because he had been speaker pro tem of the Assembly in 1977 and its majority leader in 1979. His political lineage 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.

After Harley L. 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.