Governor Daniels Complicit in Shady Brizzi Real Estate Deal Or Just Hiding Egg on Face?

Dirty.

I don't care whether it's "technically" legal if it is, which is a huge if. But the Indianapolis Business Journal's Cory Schouten all but proves what I've believed all along.

Let's put together the pieces.

Paul Page says that Carl Brizzi brought an Elkhart property to his attention, so they bought it.

Really, Paul? I hadn't heard you dabbled in commercial. I thought you were a residential guy. But, hey, diversification is good. Just one question. What made you think this was a good deal?

Really, Carl? That's how you spend your free time? Trolling Elkhart, Indiana for hot commercial properties?

Did I mention that only a few months after Brizzi and Page bought the building, its value shot up $500,000 (from $700,000 to $1.2 million ) based on a 10-year lease with the Indiana Department of Child Services at a rate that, if all proceeds were applied to the mortgages, would have had the owners owning free and clear a building in about five years.

I bet if somebody knew that the Indiana Department of Child Services was looking for 13,000 square feet in Elkhart (in other words, a property exactly like the one Brizzi bought), that would be very valuable intelligence, wouldn't it?

But you'd have to know somebody with that kind of information, and I'm sure Brizzi didn't.....what's that? John Bales? You mean Brizzi's business partner? Wait. Isn't he the same guy who represents the state in about every county brokering deals for state agency office space?

But wait! We get confirmation from Page himself.

From Schouten:

[Page] said Brizzi earned his stake in the Elkhart building by bringing him an attractive investment opportunity. He said Brizzi and Bales, a Brizzi partner on previous deals, approached him about the Elkhart building.

It gets worse.

Schouten provides these details on the Elkhart deal. Read closely. You need to hear it all - the good, the bad, and the ugly about this property.

1. The property has two mortgages: A $1.2 million first mortgage with Huntington Bank and a second mortgage for an unspecified amount with a company called BAB Equity LLC, which lists a post office box real estate broker John Bales has used for his companies and political contributions.

2. A spokesman for the Indiana Department of Administration said the second mortgage does not appear to violate Bales’ state leasing contract, which bans him from any direct or indirect ownership interest in properties the state leases.

3. Bales said in an e-mail that he does not control BAB Equity but refused to say who does. He did not respond to follow-up questions including why the company uses his post office box.

4. Bales and his firm, Venture Cos., orchestrated the $2.5 million, 10-year deal that put the state’s Department of Child Services into the building a few months after L & BAB LLC acquired the one-story building at 1659 Mishawaka St. in February 2008.

Interesting. Does DCS know who runs BAB Equity? If not, how can its legal counsel offer any comment on whether Bales has an ownership interest? BAB. What could that possibly stand for? Brizzi AND....hmmm. I need a "B" name.

I wouldn't tell who owns it either if I were Bales because I'd know the follow-up question would be, "Who financed the 2nd mortgage?" As a perhaps related question, does anybody think it's weird the second mortgage wasn't recorded until the day before the FBI raided Tim Durham's office?

Some other choice tidbits:

- Venture (Bales' company) arranged to list the building for sale with an asking price of $1.8 million in late 2008, immediately after the DCS executed its lease deal. The property did not sell.

- The Elkhart building had a market value of about $700,000 before the state lease and $1.2 million after the lease, according to an April 2008 appraisal prepared for Huntington Bank. The appraisal says the building would be difficult to market to traditional office users because it is surrounded by industrial properties and has no street frontage.

- The 1986 building had been vacant for several months and badly in need of repairs when L & BAB put the property under contract. The appraisal noted the 15,200-square-foot building had interior mold, three broken AC units and deferred maintenance on windows, exterior bricks and parking-lot pavement.

- L & BAB had planned to spend $422,500 to renovate the building and prepare most of it, about 13,000 square feet, for the arrival of DCS. The company eventually paid $825,000 for the property, and got a $15,000 allowance from the seller to remedy an animal infestation.

- Financial documents included in the offering show the building owner, building seller, DCS and an insurance company split more than $577,000 of expenses to renovate and outfit the building. The owner’s portion was about $315,000, while DCS paid about $200,000 for upgrades including new restrooms.

The records show Page invested $321,835 in the building and financed $993,750. That includes a commission of $88,400, and a development fee of $45,600, both going to Venture (Bales' company).

- Records suggest Brizzi was added as a co-owner of the building late in the process. Financial documents provided to potential buyers in 2008 list Bruce Zeller of Carmel-based Zeller Construction Co. as co-investing with Page. Zeller did not return a phone message.

What does this all mean? Carl Brizzi got "inside" information from a guy who works for Governor Daniels. Because the Governor hates government owning things, we got fleeced. The State could have bought that building and saved a bundle. Instead, the guy Daneils entrusted to find it deals (and the one who advised and negotiates rates, right?), handed valuable intelligence to a business partner crony, and on top of that, the State even paid $200,000 to make the building better. Wow.

I asked a colleague of mine who is in commercial real estate how he thought this might have gone down, and here's his hypothesis:

(Bales) knows he has a 15,000 SF requirement in Elkhart. He identifies several possibilities, one of which is the building in question ("Building A"). He tips off Brizzi and Page. Brizzi and Page put the building under contract (or get an option with the owner) for 60 day "due diligence period" w/no penalty for not moving forward with deal - it's called a "free look" in the industry. This contract allows Brizzi/Page to purchase Building A at a fair market price (or a bit higher to sweeten the deal for the owner), but for a vacant property. So relatively cheap.

Bales decides w/state signoff that Building A is the best location for the state. Brizzi/Page exercise their option or otherwise move forward on their contract and close on the property. The contract might even have a clause that makes closing contingent on landing a deal. Regardless, state lease on Building A signed at closing or shortly thereafter. This has immediate impact on value of Building A, taking it from a vacant property to a fully leased (10-years), $17 per square foot (e.g., rich) property. Building A also becomes (theoretically) immediately marketable for its income stream to an investor, so it should be easy to flip.

Payoff for Brizzi/Page - at least $500k-$1million each, for almost no risk. Bales without doubt gets something something (like 50%) under the table from Brizzi/Page (without technically violating the self-dealing clause in his state contract).

Not bad for a days work. This scenario is comparable to Gordon Gekko, trading on inside information that the market does not possess. If Building A were a stock/security, there would be a good case for securities violations under federal law... Bales surely violated his ethical duties as a licensed broker, but I'm sure there is no paper trail! So good luck proving it.

All we know for certain is that Bales got $120,000 in commissions. What we don't know is if there were any other buildings in play. What if there weren't? At some point, isn't there a conflict when a broker helps a third party become an owner to consummate a deal that's already on the table? What we also know is that Bales has previously pitched crappy space to government decision makers. Remember when Bales tried to move the Metro Drug Task Force to a rat-den?

You know what I want to see now? Every contract with John Bales' name associated with it. How many friends has he enriched or gotten better deals than the market would have born, but for his intercession and trading on information only available to him? How much did he cost the taxpayers with Governor Daniels' blessing?

Were I the Governor or the Mayor of Indianapolis, I'd end any and all Bales' contracts right now pending a formal investigation.

Will you, Governor? Will you Mr. Mayor?

(Crickets chirp. Tumbleweeds roll through).

Governor Daniels Complicit in Shady Brizzi Real Estate Deal Or Just Hiding Egg on Face?

How Much Disrepute Can One Man Bring to a Prosecutor's Office? Ask Carl Brizzi.

The Indianapolis Business Journal’s Cory Schouten reported yesterday that Carl Brizzi intervened in a drug dealer case to get a plea deal that neither law enforcement nor deputy prosecutors wanted, and coincidentally, Brizzi’s business partner, Paul Page, was the defense attorney.

As most iPOPA readers probably know, Page gave Brizzi an ownership interest of between $50,000-$100,000 in an Elkhart office building worth $900,000 with no investment or co-signature on any loan because he said Brizzi found the property. Of course, almost immediately after obtaining the building, Page earned a lease from the Indiana Department of Child Services.

(I suppose we should write it off as coincidence that Brizzi’s ex-wife, Melanie Brizzi, is the director of the Bureau of Child Care, so in her work circles, she might learn that DCS was looking for a new space in Elkhart).

The story also notes that Brizzi directed law enforcement to return $10,000 in cash seized from the dealer, Joseph Mobareki, and that money was routed back to Page.

Schouten reports that Brizzi has gone from mostly hands-off in his early years to intervening on numerous cases, in particular with certain attorneys involved, including Page.

"We knew there was a quid," said a Prosecutor's Office source familiar with the Mobareki case. "We just weren't sure about the pro quo."

Schouten writes about the case:

Mobareki, a bodybuilder and personal trainer, was caught with anabolic steroids valued at more than $100,000, five unlicensed firearms and more than $17,000 in cash, records show. He was charged with seven felony counts of possession and dealing controlled substances and marijuana, for which he could expect six to 10 years in prison based on state sentencing guidelines.

The Prosecutor's Office narcotics unit-in exchange for a plea deal-had hoped to extract Mobareki's cooperation in tracking down his customers and suppliers by translating a cryptic roster of partial names, e-mail addresses and phone numbers.
But as deputy prosecutors worked the case, Page informed them he had reached a deal with Brizzi for a single count of possession of a controlled substance, a Class D felony and the lowest of the seven charges.

Deputy Prosecutor Larry Brodeur, the narcotics chief, practically begged Brizzi in an e-mail to reconsider his decision to allow for the possibility of an eventual reduction of Mobareki's remaining felony charge to a misdemeanor.

Brodeur took exception in particular to the way he learned of the plea deal, through Page directly after a conversation between Brizzi and Page.

Brodeur wrote to Brizzi, "I do not take directions on my cases from defense lawyers."

Brodeur made his case for taking a tougher position on Mobareki: He'd been caught with hundreds of steroid pills and bottles of liquid steroids, 700 Xanax pills, almost four pounds of marijuana, and log books listing his customers, including a local high school coach.

"Paul Page has contended, throughout the pendency of this case, the [sic] Mobareki is nothing more than a body builder who foolishly uses steroids," Brodeur wrote. "That is completely incorrect."

'Ill-gotten gains'

The investigation began in February 2008 when IMPD narcotics detectives, acting on a tip from a UPS employee, intercepted a package of steroids bound for Mobareki. They trailed Mobareki after he left the Center Grove Health Club on State Road 135 in Greenwood and later obtained search warrants for his home, car and a storage unit.

Police reports show they found steroids hidden inside an exercise ball, cereal box and jar of protein powder at his home, and seized five unlicensed guns including an SKS assault rifle. Detectives also confiscated $17,550 in cash-most of it hidden inside a bag of chicken in Mobareki's freezer.

"It is drug money and neither Mobareki nor Paul Page should profit from it," Brodeur wrote. "I have been working hard to convince police agencies that the [Marion County Prosecutor's Office] has both the ability and the motivation to strip drug dealers of their ill-gotten gains. Returning the money to Mobareki would certainly undercut that effort."

Mobareki, 35, spent two days in jail and paid $365 in fines, records show. He got $10,000 of the seized cash back, with the rest going to cover law enforcement expenses in a nod to those who had fought the release of the money. He has the right after a year on probation to request a misdemeanor sentence modification.

The handling of the Mobareki case veered from normal Prosecutor's Office procedure in at least three ways, said Henry C. Karlson, an Indiana University emeritus professor of law.

Typically, plea deals in drug cases keep the most serious felony charge, not the least. Defense attorneys usually deal with trial attorneys and not the elected prosecutor. And most major drug cases lead to substantial forfeiture actions-including cars, homes and cash.

"That appears to be a very good plea bargain-the kind of plea bargain lawyers dream about," Karlson said. "It appears to be a very unusual case with a very unusual plea bargain carried out in a very unusual manner."

You can see the extremely strong e-mail Brodeur sent here.

If the saying, "Where there's smoke..." is true, I wouldn't be half-surprised to see a Brizzi bribery indictment at some point in the future.

I take away three things from this story. First, the IBJ is doing some extremely impressive investigative journalism on the Brizzi-Durham-Bales-Page-Cochran axis of ethically-suspect transactions. It's turned into daily "must-read," so kudos to them.

Second, the professional prosecutors in the office know their reputations are now on the line. Those sitting quietly now know that the media is looking at their cases, and if they went along with a Brizzi plea, they'll look as suspect as he did. In short, I'm sure you can expect more of these disclosures from within the office soon as people try to prove to those who might be their new boss that they "spoke truth to power" and the hubris connected with that power rebuffed their efforts.

Finally, the Brizzi reign has reached such cataclysmically embarrassing proportions, I keep expecting an avalanche of high-ranking Republicans to ask publicly for Brizzi's resignation in concert. But nobody asks. Not Tom John, not Mark Massa, not Murray Clark, and not Governor Daniels. I can only conclude by their complete silence that they are okay with all of this.

And, of course, until some Republican buys Brizzi off with a great job offer or demolishes him so thoroughly in public that it's embarrassing to his family for him to stay, he has no incentive to leave. As Shouten points out, if Brizzi finishes his second term, he will be entitled to earn 24 percent of his highest annual salary of $125,000, or about $30,000 per year once he reaches retirement age, by IBJ's calculation.

You have got to be (expletive) kidding me.

How Much Disrepute Can One Man Bring to a Prosecutor's Office? Ask Carl Brizzi.