Investors Convicted in Condo Scheme

Jurors deliberated less than a day Thursday before returning guilty verdicts on all 39 counts of federal wire and mail fraud against two men accused of being part of a scheme to illegally sell Huntington Beach apartments as condominiums.

Real estate investor Jeffrey Crandall, 45, and straw-buyer Michael McDonnell, 38, will be sentenced Feb. 6 in U.S. District Court in Santa Ana by Judge David O. Carter.

They could face decades in prison and millions of dollars in fines.

“The government is pleased that these defendants are going to be held responsible for their criminal behavior,” Assistant U.S. Atty. Andrew Stolper said.

Attorneys for Crandall and McDonnell argued during trial that the men were duped into joining a sophisticated real estate swindle masterminded by three other people who already had pleaded guilty: former Huntington Beach Mayor Pam Julien Houchen, title officer Harvey DuBose and real estate agent Phil Benson.

“In this case, given that it’s a first offense, probation would probably be a good sentence,” said Dirk Bruinsma, McDonnell’s attorney. “But obviously the court is going to look at a lot of things.”

Prosecutors told the eight-woman, four-man jury that Crandall and McDonnell were part of a scam to create phony businesses, backdate documents and forge signatures to avoid a 1984 city law requiring apartment owners to pay fees and upgrade their buildings before selling them as condominiums.

In a plea agreement, Benson admitted he illegally sold more than 40 apartment units as condos, grossing about $11 million, while working with Houchen, also a real estate agent, at Pier Realty.

The case came to light in 2002 after a citizen questioned city officials about the sale of several apartments as condos. Eventually, buyers of the condos began complaining when they had trouble refinancing, selling or renovating the units because the city classified them as apartments.

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 through title officer DuBose, of Stewart Title.

Most of the properties have since been legally converted to condominiums under a deal between the city and the title company to pay the appropriate fees and retrofit the buildings.