Scheme Mastermind Pleads Guilty

The mastermind of an illegal condo-conversion scheme involving a former Huntington Beach mayor pleaded guilty to fraud charges this week and will be sentenced Feb. 6, a federal prosecutor said Thursday.

Phil Benson, 73, who has cancer, traveled from his home in Hailey, Idaho, to appear Wednesday in U.S. District Court in Santa Ana.

He admitted devising a scheme and working with several other real estate professionals, including former Mayor Pam Julien Houchen, to convert apartments and sell them for huge profits.

Benson’s admission of guilt to 24 counts of mail and wire fraud carries a maximum sentence of 240 years in prison and $6 million in fines, though federal Judge David O. Carter has the discretion to sentence as he sees fit. Prosecutors will probably recommend the shortest sentences for those who testify against the two defendants still facing trial.

Houchen and two other defendants entered their pleas Sept. 1 and also will be sentenced Feb. 6.

A fifth defendant who signed a plea agreement, Harvey DuBose of Stewart Title, has not been scheduled to formally enter his plea, Assistant U.S. Atty. Andrew Stolper said.

The remaining defendants, investors Howard Richey and Jeffrey Crandall and alleged straw-buyer Michael McDonnell, have pleaded not guilty and are scheduled for trial Oct. 4. The other defendants have agreed to testify.

Benson devised the scheme to convert as many as 15 apartment buildings in Huntington Beach into condos by falsifying documents, according to his plea. He sold more than 40 units for $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 modify the properties and pay a $7,000 conversion fee before the units could be sold.

City officials discovered the first illegal conversion in 2002 after receiving a complaint that work was being done without proper permits.

After receiving additional complaints, the city opened a broader investigation.

Those who bought the illegally converted condos faced $20,000 in city fees, although title companies that insured the sales later agreed to pay those bills as part of a settlement with the city.