FBI and IRS involvement in the biggest county corruption scandal in history is serious, far-reaching and unusual, say two legal experts and a former San Bernardino County District Attorney.
The two federal agencies served nine search warrants Thursday at homes and offices in San Bernardino and Riverside counties in connection with their investigation into the $102 million legal settlement between Rancho Cucamonga developer Colonies Partners LP and San Bernardino County in 2006.
Judging from the number of resources pulled to serve the search warrants, the federal case appears to be a top priority for the FBI and IRS, said Laurie Levenson, a Loyola Law School professor and former federal prosecutor.
"I expect there will be an extensive (federal) grand jury investigation," she said.
She said federal officials also could be using possible tax charges to follow the money and put together a fraud case. Tax charges, she said, give federal officials a longer statute of limitations.
"Also, it is fairly clear that the feds feel like the state didn't have the right statutes to deal with the case," Levenson said. "Instead of arguing bribery and conflict of interest, the feds can investigate tax charges, conspiracies and schemes to defraud. The state case can still lumber on, but the feds are going to do their own investigation.
For federal officials to bring a tax case, there has to be an exhaustive search for records, especially if they are using "net worth" theories that look at sources of all income for the suspects, Levenson said.
The San Bernardino District Attorney's and state Attorney General's offices, in a joint prosecution, have charged Colonies co-managing partner Jeff Burum and three former county officials in a sweeping conspiracy and bribery case related to the settlement.
The FBI and U.S. Attorney's Office will participate in the state's case as part of the San Bernardino County Joint Corruption Task Force despite the separate federal probe now under way, said Christopher Lee, spokesman for the District Attorney's Office.
"We can say that the Task Force is active and ongoing, and that we enjoy a strong relationship with our partners," Lee said.
He said he could not disclose the federal agencies' role in the state's case and how it differs from the separate federal investigation.
"Such conversations would lead to the investigative structure of our team, and we feel that such law enforcement information should be closely held," Lee said.
Assistant U.S. Attorney Joseph Widman, who co-authored affidavits for the search warrants served by roughly 100 FBI and IRS agents throughout San Bernardino and Riverside counties on Thursday, also declined Friday to discuss the nature of the federal investigation.
"It's certainly unusual. Whenever there's an ongoing state prosecution, the U.S. Attorney and the FBI normally don't get involved," says former San Bernardino County District Attorney Dennis Stout.
In the broadest sense, the FBI could be building a Racketeer Influenced and Corrupt Organizations Act case against their targets, said Levenson. In order to do that, they would need to prove a continuing pattern of conspiracy.
"It would be a RICO case if you had multiple cases of bribery, extortion and conspiracy. If this wasn't a one-time shot - if there was continuing racketeering activity - then they would consider a RICO charge," she said.
Jessica Levinson, a professor of law at Loyola Law School and no relation to Levenson, said that the federal government anteing up in the Colonies case means something even more far-reaching and serious is at play.
She couldn't say whether the targets of the federal probe could face charges with greater penalties than those in the state's case.
"That totally depends on what they're charged under, and what and if they're convicted of, and which judge sentences them," Levinson said.
She said RICO cases typically apply to organized crime and criminal street gangs, and she isn't aware of any RICO cases that involved government corruption.
"But that doesn't mean it's never happened," she said.
Former Board of Supervisors Chairman Bill Postmus and former Rancho Cucamonga City Councilman Rex Gutierrez already have been convicted of conspiracy charges in the Colonies case and a scandal at the Assessor's Office, cases in which Burum is alleged to have played an instrumental role.
Postmus admitted to taking a $100,000 bribe from Burum in exchange for voting in favor of the settlement. Burum arranged a job at the Assessor's Office for longtime friend and political ally Gutierrez, where Gutierrez did little assessor-related work and instead used the office to bolster his political career.
In May, a criminal grand jury indicted Burum and three former county officials on 29 felony charges including bribery, conspiracy to commit a crime and conflict of interest, among other charges. Also charged are former county Supervisor Paul Biane, former assistant assessor Jim Erwin and Mark Kirk, former chief of staff for Supervisor Gary Ovitt.
Biane, Kirk and Erwin are accused of conspiring with Burum to vote in favor of or influencing the landmark Colonies settlement, which ended nearly five years of contentious legal battle between Colonies Partners and the county over who was responsible for paying for flood control improvements at the developer's 434-acre Colonies at San Antonio residential and Colonies Crossroads commercial development in Upland.
Burum is accused of paying a total of $400,000 in bribes to the three defendants and Postmus. The alleged bribes, prosecutors allege, were funneled into political action committees controlled by the three supervisors who voted in favor of the settlement - Biane, Postmus and Ovitt - to conceal the alleged payoffs.
In a plea bargain with prosecutors, Postmus has agreed to testify against the other defendants in exchange for reduced charges.
In March, Postmus pleaded guilty to more than two dozen charges in the Colonies case and a separate case in which he was accused of using the Assessor's Office for political purposes, hiring unqualified cronies and friends, including Gutierrez, to work in the office to help bolster his political career. Postmus was elected assessor in November 2006, the same month he voted in favor of the settlement while serving on the Board of Supervisors. He took office as assessor in January 2007.
Former state Sen. Jim Brulte is suspected of arranging a 2005 trip to China between Burum and Postmus in which prosecutors allege the conspiracy to settle the Colonies was hatched.
In an April 2009 search warrant directed at Erwin, a confidential informant told district attorney investigators that Burum promised both Brulte and Erwin more than $1 million each from the $102 million settlement. Brulte and Erwin deny the allegation.
Brulte also served as a consultant during the Colonies settlement talks, and Erwin served as a go-between for Burum and the county during the heated settlement negotiations and helped shepherd the settlement through what prosecutors allege were strong-arm tactics including intimidation and extortion.
Brulte has not been charged with any crime by the District Attorney's Office.
Burum, Erwin, Biane and Kirk deny any wrongdoing, and allege the state's prosecution was politically motivated. In February 2010, when District Attorney Michael A. Ramos and then state Attorney General Jerry Brown held a news conference announcing that charges had been filed against Erwin and Postmus in what they called the biggest corruption scandal in San Bernardino County history. Ramos was seeking re-election as District Attorney, and Brown was running for governor. Ramos was re-elected, and Brown was elected governor.
Stout, who served as San Bernardino County district attorney from 1994 to 2002 and was in office during another bribery scandal involving former County Administrative Officer James Hlawek and former Supervisor Jerry Eaves, said a number of factors could be at play in the federal investigation.
He said new evidence could have emerged in the state case that prompted the FBI and IRS to launch its own investigation. He also questions the timing of the investigation, when an appeal by state prosecutors remains pending following the dismissal of most of the charges against Burum in the state's case.
"The only thing I can think of is ... the feds may be up against a statute of limitations problem with any cases they may have," Stout said.
In August, San Bernardino Superior Court Judge Brian McCarville dismissed five of the seven charges against Burum, including all bribery-related charges, after ruling that either the statute of limitations had lapsed for charging him with the crimes or that the statutes under which he was charged did not apply. McCarville also dismissed one charge of misappropriation of public funds against each of the other three defendants.
Staff Writer Will Bigham contributed to this story.