Ex-Mayor in O.C. Pleads Not Guilty to Fraud

Former Huntington Beach Mayor Pam Julien Houchen and three others pleaded not guilty before a federal magistrate Monday to multiple criminal indictments of illegally converting apartments to condominiums that they sold for huge profits.

Houchen spoke only briefly to Judge Arthur Nakazato when entering her plea. She declined to comment before the court hearing.

Houchen, who resigned her council seat in September, was among eight defendants indicted this month and accused of ignoring city laws regulating the conversion of condos, including failing to make mandated structural improvements and failing to pay thousands of dollars in fees. She also is accused of concealing her ownership of an apartment building in a city redevelopment area, which is prohibited by state law because of the City Council’s oversight of such projects.

She made $229,000 when the apartments were sold, according to the indictment.

Houchen, 47, is facing 11 counts of mail fraud and seven counts of wire fraud. Each count could bring as much as five years in prison.

Other defendants pleading not guilty Monday were Michael McDonnell, who, according to the indictment, acted as Houchen’s straw buyer for the redevelopment-area property and who is charged with converting other units; Thomas Bagshaw Jr., a real estate agent and notary public who worked with Houchen associate Phil Benson; and Benson client Michael Cherney, who also invested in the condos.

Appearance bonds were set at $5,000 for each defendant; trial was scheduled for Feb. 1 before U.S. District Judge David O. Carter.

An arraignment date has not been set for Benson, 72, a former broker at Pier Realty in Huntington Beach who worked with Houchen, a real estate agent. Ill with cancer, he moved to Idaho and told the court he was unable to travel. The indictment described him as the mastermind of the conversion plan.

A sixth defendant, Harvey DuBose of Santa Ana, the supervising officer at Stewart Title Co. in Irvine, will be arraigned Jan. 3.

Another defendant, investor Jeffrey Crandall, pleaded not guilty a week ago to the charges against him; the final defendant, investor Howard C. Richey of Hemet, made a plea agreement with prosecutors last week but has not been sentenced.

The case against Houchen involves the sale of at least eight condos that she knew were illegally converted apartments, according to the 74-page indictment.

The conversions violated a 1984 city law requiring apartment owners to modify the properties and pay fees before the units could be individually sold, according to the indictment. The units sold by Houchen grossed more than $1.7 million.

The sales left scores of owners unable to refinance or sell their units, and facing at least $20,000 in city fees.

Title companies that insured the sales agreed last month to pay the fees as part of a settlement agreement with the city. Several homeowners, however, have not accepted the terms of the agreement, saying they may be liable for thousands of dollars more in repairs and upgrades to bring their units up to city building codes.