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Defense attorneys turn tough in Bales trial

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SOUTH BEND — The legal team representing real estate broker John M. Bales and partner William E. Spencer haven't called their first witness and already they're putting up a spirited fight as federal prosecutors seek to prove charges including bank, mail and wire fraud.

During the trial in U.S. District Court for the Northern District of Indiana, defense attorneys have attacked state officials who oversaw the state's contract with Bales' firm Venture Real Estate Services, attacked IBJ's coverage of an unusual state lease deal in Elkhart that led to the charges, and attacked a former co-defendant who bought the Elkhart building using a down payment provided by Bales.

But Larry Mackey, a former federal prosecutor who gave the government's closing argument against Oklahoma City bomber Timothy McVeigh, on Thursday delivered the most dramatic courtroom moments in the Bales trial during his cross examination of Jeff Lozer, general counsel for Indiana's Department of Child Services.

A government witness, Lozer recalled a conversation he had with Spencer before the Elkhart deal closed. Spencer told Lozer that Venture may consider "financial assistance" to help the landlord and expedite the move for DCS, Lozer testified under direct examination.

"My response was one of gratitude — their approach was to be creative on our behalf," said Lozer, who is friends with Spencer. "I was grateful for the offer."

Lozer said he couldn't remember whether he told Spencer that Venture should seek approval of such an arrangement from the Indiana Department of Administration, which oversaw the company's contract with the state.

Prosecutors say the secret arrangement between Bales and Page was a violation of a leasing agreement between Venture and the state that barred the company from direct or indirect ownership of properties where state agencies leased space. The defense argues the arrangement was a loan and not ownership.

During cross examination, Mackey showed Lozer notes from an FBI interview and the transcript of his grand jury testimony in January 2011 and asked him why he did not appear to mention the Spencer conversation in the interview but did mention it under oath. He also pushed Lozer about his failure to disclose the conversation to anyone else at the state after IBJ began reporting on the Elkhart deal.

Lozer acknowledged he didn't follow up with Venture to ask whether they had offered the Elkhart landlord financial assistance, but said he wasn't sure whether he told anyone else at the state including Harless.

"Is not sure 'yes', 'no', or 'I don't know'," Mackey snapped.

"I don't know," Lozer answered.

"You kept that fact a secret from everyone in December 2009, even though it was in the newspaper, right?" Mackey asked.

"Right," Lozer answered.

A few minutes later, Lozer again answered a Mackey question with, "I'm not sure."

"You know this is a criminal case, Mr. Lozer, it's very serious," Mackey responded, his voice forceful. "You did not seize the opportunity to set the record straight?"

Mackey pressed Lozer on why he didn't mention the conversation with Spencer during an interview with IBJ reporter Cory Schouten, whom Mackey pointed out in the courtroom.

"Was there an ounce of regret when you hung up with Mr. Schouten ... and didn't tell him what you know?" Mackey asked, referring to the reporter.

The government objected to the question, and the judge sustained.

Mackey, his voice rising, told Lozer the stakes were different in January 2011, that Lozer could lie to a reporter, but not to a grand jury.

Eyes widened in the jury box. A trial that has featured a blizzard of contracts and email records suddenly felt like an episode of "Law & Order."

"Does it occur to you you could be prosecuted for lying to the FBI?" Mackey continued. "Either it's a conversation that you remember and never forget or one that goes out of your memory."

The government again objected to the question, and the judge sustained.

Mackey walked toward Lozer, in a softer voice, asking how sure he was on a scale of one to 10 that he told Spencer to disclose the Elkhart arrangement to IDOA.

"Five out of 10," Lozer answered.

"So at best we're 50-50," Mackey said, his voice rising again.

"Did your phone work in 2008?" Mackey asked, sarcastically.

"Yes, I believe so," Lozer answered.

"Can we just say thank you to a generous man who put up his own money ... so kids wouldn't have to be in a bullet-ridden building?" Mackey asked.

"I should've picked up the phone but I probably didn't," Lozer finished.

Thursday's courtroom action also included sharp questions from the defense for Steve Harless, who manages office leasing for the state on behalf of the Department of Administration.

Mackey said Harless treated Venture unfairly, favoring its competitor Resource Commercial Real Estate. He also asked him pointed questions about his response to an IBJ records request, which he forwarded to Venture, and his reaction when IBJ reporter Cory Schouten stopped by his office unannounced to check on the status of a records request.

"Didn't you get to know that day he didn't always get it right?" Mackay said, referring to the reporter.

Assistant U.S. Attorney Jesse Barrett objected to the question, and the judge sustained the objection. Harless didn't answer, but Mackey had sent his message to the jury.

The prosecution also took testimony from Mike Sibbing, a closing agent who worked on the Elkhart deal, to discuss several documents critical to its case. Among them: internal title company documents that show Bales wired the entire down payment for the building even though he was not listed as a buyer or lender on closing statements.

On cross examination, Barclay asked whether anyone at Venture asked Sibbing to conceal or destroy the documents showing the source of funds. Sibbing said no.

The prosecution is on track to finish its case by Monday, and the defense expects its case could take about three days. The trial began Jan. 28 and was scheduled to last up to two weeks.

The IBJ is a sister publication of Indiana Lawyer.

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  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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