Lender faces criminal investigation over failed condo project

By Steve Green

Saturday, Jan. 22, 2011 | 3:13 p.m.

A formal criminal investigation has been launched into loans for a failed condominium development in the Las Vegas area involving Aspen Financial Services.

It's been previously reported that disgruntled Aspen investors have complained about the company to the FBI. A new Aspen court filing says those complaints have now prompted the formal criminal investigation, including the FBI contacting investors and a grand jury subpoena issued to Aspen.

Grand jury proceedings are secret, so it's unknown if the jury -- apparently a federal grand jury -- has yet reviewed information about Aspen.

Such proceedings are typically one-sided affairs in which prosecutors present evidence in order to obtain indictments against individuals and companies. After indictments are issued, defendants can defend themselves before judges and juries.

Aspen, a hard-money lender, pools investors' funds and loans the money to real estate developers and investors.

Owned by Jeff Guinn, son of the late former Gov. Kenny Guinn, Aspen since 2008 has been hit with four lawsuits filed in Clark County District Court by unhappy investors charging Aspen mismanaged their investments, failed to disclose problems and irregularities with some loans and executed transactions that benefited Guinn and Aspen insiders at the expense of investors.

Aspen says loan losses suffered by the investors are related to the recession that has pushed many borrowers into default, and says it's regularly found in compliance with state lending regulations.

One of the lawsuits is over the failed and stalled Milano Residences project, which was to be a 100-unit condominium complex at Cactus Avenue and Bermuda Road developed by businesswoman Susan Mardian.

In their lawsuit, the investors alleged Aspen in that loan:

• Generated handsome fees for loan originations, loan extensions and for servicing loans for the project

• Promoted the investment based on allegedly inflated appraisals

• Hid problems with the development including delays and cost overruns

• Failed to stop continued loan disbursals even after learning 50 percent of the construction budget had been spent but just 25 percent of the project was built

• Took actions to benefit Guinn's friends and family at the expense of the suing investors

Typical of the problems with the loans, the lawsuit says, was that investors were told that a $17.7 million loan issued in May 2005 would provide enough funds to finish the project.

In fact, the investors charged, that amount couldn't cover the remaining construction costs in part because -- allegedly unknown to them -- Mardian had earlier encumbered the project with a $4 million deed and that Aspen had encumbered the property with deeds totaling $3.2 million.

Funds from their $17.7 million loan were intended to be used to pay off those notes without their knowledge, the investors charged.

Attorneys for Aspen and Mardian have denied wrongdoing with these transactions.

In a Jan. 11 court filing, Aspen asked for a protective order in the lawsuit to put depositions on hold until the federal investigation is completed.

"On or about Aug. 4, Aspen was served with a grand jury subpoena requesting documents regarding the Milano loan," Aspen's filing said. "In or around November, defendants became aware that the FBI was contacting Aspen investors by letter regarding the Milano loan."

"Thus, it is apparent that an active and ongoing FBI investigation is under way," the filing said.

"If defendants or Aspen employees are required to appear for a deposition or respond to certain discovery in this matter, they face two options: 1) provide the testimony to defend against the civil allegations, which may be used against them to aid the federal investigation; or 2) assert the right against self-incrimination and hinder the defense of the civil matter," Aspen's filing said.

"Many of Aspen's employees, including Mr. (President Sean) Corrigan, want to testify. Defendants and the Aspen employees want to refute the baseless allegations that have been made against them and their business practices," Aspen's filing said. "Unfortunately, the concurrent federal investigation has made it difficult for them to step forward and do so because they have nothing to hide. Even their innocent statements -- construed incorrectly or improperly -- might somehow assist the FBI in moving forward with its investigation."

Aspen's attorneys, who have declined comment beyond their court pleadings, also said in their filing that the FBI probe was instigated by disgruntled investors led by Charles Thompson and Donna Ruthe.

They said Thompson (a former district attorney and civil attorney) and Ruthe have "attempted to wage a public media smear campaign against the defendants" and "were able to cajole the FBI into opening an investigation into Aspen regarding the Milano loan."

"Mr. Thompson and the Ruthe parties -- in coordination with some of the plaintiffs in this matter -- have attempted to brow-beat every state and federal agency who will listen to Mr. Thompson's wild theories into opening an investigation of defendants, all despite their longstanding record of exemplary compliance with state laws regulating Aspen's business practices," said the filing by attorneys John Bailey, Joseph Liebman and Brandon Kemble with the Las Vegas law firm Bailey Kennedy.

The plaintiffs have not yet responded to the motion that discovery be stayed and a February hearing is set on the request.