Unscathed McDonald now faces feds on taxes

By Jeff German

Wednesday, July 25, 2007 | 7:14 a.m.

He made it through a high-profile political corruption probe that ensnared four former Clark County commissioners without being charged.

But former Las Vegas City Councilman Michael McDonald hasn't escaped the scrutiny of federal prosecutors just yet.

A federal grand jury is expected to hear testimony next month in a criminal tax case against McDonald stemming from business dealings dating to his two term s on the City Council, which ended in 2003, sources said Tuesday.

Grand jury subpoenas were issued last week in the investigation, being led by Eric Johnson, chief of the U.S. Attorney's Organized Crime Strike Force.

Johnson, whose name appears on the subpoenas as the issuing prosecutor, could not be reached for comment Tuesday, and McDonald's attorney, Richard Wright, declined to comment.

But sources said the grand jury probe is the offshoot of a criminal IRS investigation into McDonald's finances.

McDonald, now a developer doing business in Las Vegas, was an original subject of the political corruption probe, which became public on May 14, 2003, when FBI agents raided two Las Vegas strip clubs owned by Michael Galardi. Agents were looking for evidence of payments that Galardi made to McDonald, then-County Commissioners Dario Herrera and Mary Kincaid-Chauncey and former Commissioner Erin Kenny.

Kenny and Galardi struck plea agreements and cooperated with federal prosecutors, who later obtained corruption indictments against Herrera, Kincaid-Chauncey and another former commissioner, Lance Malone, on charges of taking bribes from Galardi. Malone also was charged with being Galardi's bagman.

Herrera, Kincaid-Chauncey and Malone were convicted and are serving prison terms. Galardi also is spending time behind bars as part of his plea deal, and Kenny last week was ordered to begin serving her 2 1/2-year prison term in September.

McDonald, however, was never indicted in the corruption case. He has denied any wrongdoing, stressing that he reported consulting money he received from Galardi to the IRS and always abstained on City Council votes relating to the former topless club owner.

McDonald also provided federal agents with his personal financial documents during the corruption probe and appeared before the grand jury that indicted the former county commissioners in November 2003.

McDonald did not return phone calls Tuesday.

Former federal prosecutor Charles Kelly, now a criminal defense lawyer who does not represent McDonald, criticized the government's latest move against the former councilman.

"They've done nothing regarding McDonald the last four years," Kelly said. "Now they're saying they couldn't get him on any substantive corruption counts, so they're going to stick him with a tax charge. It's very heavy-handed."