O.C. Trial in Condo Scam Goes to Jury

Jurors in a federal fraud case started deliberating Wednesday as to who the real victims were in a condominium-conversion scam that ended a Huntington Beach mayor’s political career.

Prosecutors said it was those who unwittingly bought illegally converted apartments from defendants Jeffrey Crandall, 45, and Michael McDonnell, 38. But the men’s attorneys countered in closing arguments in U.S. District Court in Santa Ana that their clients deserved sympathy because they were duped by sophisticated criminals.

The blame, defense lawyers said, should rest on others who already have pleaded guilty: former Mayor Pam Julien Houchen, title officer Harvey DuBose and mastermind Phil Benson.

“All of those people were the crooks,” said Crandall’s lawyer, H. Dean Stewart. The attorney dubbed Benson “the Pied Piper” in his closing argument because, Stewart said, he had roped the defendants into his plot.

“Mr. Crandall listened to the same siren song as the buyers, and he got the same problems,” Stewart said. “He’s not guilty. He’s not part of this scheme.”

Although defense lawyers said their clients actually helped the condo buyers by selling them units at below-market prices, prosecutors disagreed. After purchasing the condos, buyers had trouble refinancing, selling and renovating the units because the city still classified them as apartments owned by Crandall or McDonnell.

“The whole plan was to deceive people,” Assistant U.S. Atty. Tom McConville told the eight-woman, four-man jury. “These defendants created a fortune for themselves.”

Benson, a Realtor, devised the scheme to illegally convert as many as 15 apartment buildings in Huntington Beach into condos by falsifying documents, according to a guilty plea agreement he signed in August. He sold more than 40 units, grossing about $11 million, while working with Houchen, a real estate agent, at Pier Realty.

The conversions violated a 1984 city law that required apartment owners to undertake a lengthy and expensive process -- obtaining a conditional-use permit and paying a $7,000 conversion fee for each unit and spending tens of thousands of dollars to upgrade the buildings -- before selling the units.

Prosecutors say McDonnell and Crandall bought several Huntington Beach apartment buildings, then skirted the law by paying Benson a $25,000 “consulting fee” to falsify documents and bribing title officer DuBose to illegally convert the buildings to condos.

The defendants potentially face decades in prison and millions of dollars in fines if convicted. Those who have pleaded guilty will be sentenced in February.

McDonnell and Crandall testified during their six-day trial on charges of wire, mail and bank fraud that they did not know their actions were illegal. In signing dozens of false documents and telling buyers that they had condos for sale, the defendants were only doing as Benson instructed, defense lawyers said.

“Obviously, there’s victims in this thing, because I represent one,” said McDonnell’s lawyer, Dirk Bruinsma.

Prosecutors described two of the condo owners they said had suffered: the man forced to sell his unit at $40,000 under market value and the woman who couldn’t get a second mortgage. The title company and city officials have been able to legally convert most of the condos in the past year, McConville said.

McConville jeered the defense’s painting of their clients as unwitting participants.

Like McDonnell, “Crandall “wasn’t getting buffaloed by the great Pied Piper, Phil Benson,” the prosecutor said. “Reason and common sense will tell you that he knew exactly what he was doing.”