9th Found Guilty in Condo Scheme

A retired teacher was convicted Thursday of selling apartment buildings in Huntington Beach that had been fraudulently converted to condominiums, becoming the last of nine defendants, including former Mayor Pam Julien Houchen, to be found guilty in the scam.

A federal jury in Santa Ana deliberated 2 1/2 days before finding Howard Richey guilty of 13 counts of wire and mail fraud in the conversions of three apartment buildings.

The panel deadlocked on four additional counts related to a building he had sold to Houchen. U.S. District Judge David O. Carter declared a mistrial on those charges.

Richey, 80 and hard of hearing, lightly tapped a pen but otherwise showed little reaction as he listened to the verdict through a pair of headsets he wore throughout his five-day trial. He declined to comment afterward, as did his wife, who left the courthouse in tears. Richey is scheduled to be sentenced Dec. 11.

The outcome marked another victory for the Huntington Beach police, the FBI and U.S. attorney’s office in an investigation that mined the complexities of real estate transactions and destroyed the promising political career of Houchen.

She is among a group of defendants to be sentenced Monday.

“This is the end of the Huntington Beach condo case,” said Assistant U.S. Atty. Andrew Stolper, the lead prosecutor. “The government’s pleased that, hopefully, justice has been done.”

Richey’s attorney, Kenneth M. Miller, plans to appeal Richey’s case and is considering a motion for a new trial.

“I’m severely disappointed,” he said. “I still wholeheartedly believe that Howard is innocent and the jury made a mistake.”

The conversion scandal became public in 2004 when city officials acknowledged that as many as 120 condominiums had been converted from apartments without the proper permits or modifications. Investigators discovered that fraudulent documents were used to carry out the transactions, flouting a 1984 city law requiring apartment owners to modify the properties and pay thousands of dollars in fees before units could be individually sold.

As a result, many of the condo owners have had a difficult time selling or refinancing their units and faced thousands of dollars in remodeling expenses to meet the city’s condo standards.

Richey was accused of knowingly executing false documents in the conversion and sale of several apartment buildings and bribing Stewart Title officer Harvey DuBose to help provide title insurance.

Investigators estimate Richey earned nearly $1 million more by selling the units as condos rather than as apartment buildings.

Houchen, who bought the first building Richey sold, admitted in a plea agreement to converting two apartment complexes into eight condos she sold for a total of $1.74 million.

At his trial, Richey testified that he was duped into going along with the scam, relying heavily on the credentials of Houchen and her partner at Pier Realty, Phil Benson.

Benson, the alleged mastermind, admitted in a plea agreement that he grossed about $11 million in the sale of more than 40 units. He died this year before the start of a six-year prison sentence.

Richey partly cited his trust in Houchen, Benson and DuBose in explaining why he would sign contracts without reading them closely enough to realize they were backdated, contained forged notaries and created phony businesses.

“I felt like they all had expertise and knew what they were doing,” Richey testified.

Stolper, however, argued that Richey was hardly a novice when it came to real estate. Instead, the prosecutor portrayed him as an experienced investor motivated by greed. He told the jury how Richey had become a millionaire by trading properties and described the documents in question as “not just false” but “obviously false.”

For Richey’s story to hold together, Stolper added, he would have had to sign his name “with a blindfold on.”

DuBose, who like Houchen agreed to cooperate with the government, testified that “consulting fees” he received from Richey and other defendants were really payments to ensure title insurance for the fraudulent condos.

Jurors said there was significant disagreement about whether Richey knew what was going on in the first deal that involved Houchen. But they concluded he went ahead with the other deals even though he knew they were shady.

“The jury believed he was an astute businessman,” said juror Andrew Brett, 33. “After that first transaction, we concluded he was in full knowledge of the scheme and still participated in it.”

christine.hanley@latimes.com