Las Vegas man pleads guilty in HOA fraud scheme

By Steve Kanigher

Tuesday, Sept. 6, 2011 | 5:41 p.m.

A Las Vegas man pleaded guilty today in connection with a scheme to fraudulently gain control of Southern Nevada condominium homeowners’ associations so they could direct business to a certain law firm and construction company, the Justice Department announced today.

Darryl Scott Nichols, 47, pleaded guilty before U.S. District Judge Philip Pro in Las Vegas to one count of conspiracy to commit mail and wire fraud. The announcement was made by Assistant Attorney General Lanny Breuer of the Justice Department’s Criminal Division, Special Agent in Charge Kevin Favreau of the FBI’s Las Vegas Field Office and Metro Police Sheriff Doug Gillespie.

The maximum prison sentence for conspiracy to commit mail fraud and wire fraud is 30 years. Sentencing is scheduled for Dec. 4.

According to the plea agreement, Nichols admitted that beginning in November 2005, he joined a fraud scheme aimed at controlling various association boards so they could award the handling of construction-related lawsuits and remedial construction contracts to a law firm and construction company designated by Nichols’ co-conspirators. According to court documents, the fraud scheme operated from August 2003 through February 2009.

Co-conspirators used straw purchasers to obtain mortgage loans for units within association communities. Nichols admitted that he became a straw purchaser and used his name and credit to purchase condominiums at the Chateau Versailles, Sunset Cliffs and Palmilla condominium complexes. He also admitted that his co-conspirators provided the down payments and monthly payments, including association dues and mortgage payments, for the condominiums and were the owners of the properties.

According to plea documents, Nichols’ co-conspirators managed and operated the payments associated with maintaining straw properties owned and controlled by them. They did so by running a so-called “bill pay program” by which they funded the properties through several limited liability companies at the direction of a co-conspirator. Many of the payments were wired from California to Nevada.

Nichols admitted that he agreed to run for election to the association boards at the condominiums and became a board member at Chateau Versailles and Sunset Cliffs. Once elected, Nichols breached his statutory fiduciary duty to the homeowners by accepting from his co-conspirators compensation, gratuities and other remuneration that improperly influenced, or reasonably appeared to influence his decisions. That resulted in a conflict of interest. Nichols admitted that after being elected and accepting payments from his co-conspirators, he subsequently voted in a manner directed by and favorable to them.

According to court documents, to ensure Nichols and other straw purchasers would win board elections, he and his co-conspirators employed deceitful tactics such as creating fake labels and ballots, calling out-of-state homeowners to gather information about their voting intentions and supplying mailing lists to co-conspirators to create forged ballots for non-voting homeowners. Nichols admitted that in June 2008, at the request of his co-conspirators, he agreed to mail forged ballots from California to Las Vegas to make the forged votes for out-of-town homeowners appear legitimate.

Nichols also admitted that he was given cash payments for his assistance in purchasing the properties, obtaining association membership status, rigging elections, and using his position to manipulate their business to enrich the co-conspirators at the expense of the associations and the legitimate homeowners.

The case is being prosecuted by Deputy Chief Charles La Bella, Assistant Chief Michael Bresnick and Trial Attorneys Nicole Sprinzen and Mary Ann McCarthy of the criminal division’s fraud section. The case is being investigated by the FBI and Metro Police.