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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. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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