Multimillion-Dollar Land Scheme : Former Norwalk Official Pleads Guilty to Fraud

William H. Kraus, former city administrator of Norwalk, last week pleaded guilty to a federal mail fraud charge stemming from his involvement in what prosecutors have characterized as a multimillion-dollar land fraud scheme that victimized scores of investors.

The charge was one of 23 mail fraud counts filed against Kraus and seven other men in 1985, nearly two years after Kraus resigned under fire from the city administrator’s position.

At Kraus’ behest the plea was made Friday in a closed session of U.S. District Court in San Diego, according to Michael Pent, special assistant U.S. attorney. Although Pent said he could not release details of the plea agreement because it had been sealed under court order, he said Kraus would not have to go to trial on the remaining counts.

Pent also said Kraus may testify in this November’s trial of six of his co-defendants.

Maximum of 5 Years

Kraus, 48, is scheduled for sentencing in January. He faces a maximum of five years in prison and a $1,000 fine for conspiring to defraud through the use of the federal mail.

Saying Kraus had played a limited role in the purported fraud ring, Pent added that he had no proof that Kraus got any money out of the land deals. Rather, Pent said, Kraus allowed a San Diego County beach condominium to be bought under his name, transferred the title to a co-defendant, and paid for appraisals that greatly inflated the condo’s worth. An investor in the property later lost $30,000.

Kraus could not be reached, and his attorney, Michael Meza of Cerritos, said the court order barred him from commenting on Friday’s court action.

Pent asserted that altogether the ring bilked from between 50 and 100 investors of at least $4 million. The investors, most of whom lived in Utah, had hoped to make handsome profits on about 20 pieces of property in California, Nevada and Utah.

As outlined in the 1985 indictment, the fraud scheme was a complicated one using two companies, one in California and one in Utah. Lured by promises of enrichment, the victims were persuaded to make investments supposedly secured by the real estate, the value of which had been artificially inflated.

Second to Plead Guilty

Kraus, who taught public administration at California State University, Long Beach, until last year, is the second of the eight defendants to plead guilty in the case. Last year, Pent said, Lynndale Bogart of San Diego pleaded guilty to one count of mail fraud and one count of conspiracy to commit mail fraud. He is now serving a 10-year prison term on those charges and a separate counterfeiting charge, and will be called to testify against the remaining six defendants this fall. Bogart has entered the federal witness protection program and is serving his term at an undisclosed location, added Pent.

One of the defendants is from Utah, the rest from California.

After a decade as Norwalk’s city administrator, Kraus left the job in 1983, dogged by questions about his business dealings. A city-commissioned investigation into his activities did not result in any charges. After resigning, Kraus became executive director of the Orange County Apartment Assn. in Garden Grove and ran unsuccessfully for the Norwalk City Council.