Houchen pleads guilty to fraud

A former Huntington Beach mayor formally pleaded guilty to eight

counts of fraud and public corruption in federal court in Santa Ana

last week.

Pam Houchen, 48, told U.S. District Judge David Carter she

participated in a real estate scheme to sell apartments that had been

converted into condos without the proper permits.

The news sent shockwaves through City Hall and drew mixed

reactions from the dozens of victims who had purchased the apartments

in the belief they were condominiums.

“I feel terrible for her kids,” homeowner Theresa Ferber said,

recalling when Houchen -- then pregnant with triplets -- first sold

her a unit.

Although Houchen could face 40 years in prison, Assistant U.S.

Atty. Andrew Stolper is recommending a five-year sentence. Houchen is

scheduled to be sentenced Feb. 6.

“She’s accepted responsibility for her actions,” Houchen’s

attorney John Barnett told reporters after the court hearing.

When asked why he recommended that his client plead guilty,

Barnett said, “I thought it was appropriate in this case; I don’t

often.”

“I don’t think you can prepare yourself for a possible prison

sentence,” he said. “She has 3-year-old triplets. That’s trouble

without already having any trouble.”

Barnett said he would seek an “appropriate” sentence for his

client but didn’t offer any details.

Homeowner Ferber said she felt bad for Houchen despite the fact

that the former mayor sold her an illegally permitted condo.

“It hasn’t really been any skin off our backs. The title companies

have taken care of everything,” she said. “We’re just waiting to hear

from the lawyers.”

Others weren’t so optimistic about their units.

Marie Acosta recently purchased one of the units in the Green

Street property Houchen admitted to converting illegally. The seller

never disclosed the permitting problems with the property, and the

issue has not been resolved. “Once we found out, it tied up our

escrow and pushed us back a month,” she said. “We were in limbo for a

long time.”

Her title company, Stewart Title, still must present a blueprint

of the unit and draw up plans to create a small homeowners

association among the four condos.

Acosta said she’s worried the conversion problem has lowered the

value of her home and might make it difficult to sell.

“If I were to sell it, I’d have to disclose all these problems

right away, unlike the people who sold it to me,” she said.

The scandal created havoc for homeowners and the city officials

who had to help clean up the mess. From the beginning, local

politicians contended the city was a victim in the conversion scandal

because it lost rental properties often inhabited by the city’s

low-income residents.

The city originally insisted each resident pay $17,900 to a

special affordable housing fund to clear up their titles. The amount

eventually dropped to $10,000 after a negotiated settlement between

the city and the five main title companies, who have agreed to pick

up the tab.

Property owners must also submit new blueprints and building

plans, a requirement that has slowed the selling or refinancing of

some housing units.

Everyone in Steve Worley’s four-unit housing complex has agreed to

properly convert their units -- except for one elderly resident who

Worley said doesn’t seem interested in undertaking the complicated

process.

“Unless everyone in your complex agrees to participate, it’s a

little difficult,” he said. “We’ve spent a lot of time explaining why

this is important, but it’s just difficult to motivate certain

people.”

Without clearing up their titles, the condo owners will have a

difficult time refinancing or selling their units. Worley said he

thinks Houchen and the others should be punished for selling the

illegal units.

“I’m happy that she pled guilty, although it doesn’t do anything

to help my situation,” he said.

Houchen and four others have agreed to plead guilty to

participating in the scheme to illegally convert apartments into

condominiums and sell them to unsuspecting buyers. Houchen was also

charged with public corruption for purchasing property in a

redevelopment zone while in office.

To circumvent state laws barring the practice, Houchen paid former

border patrol officer Mike McDonnell to buy and then sell the

apartments in exchange for help with building permits at City Hall,

the U.S. attorney’s office alleged.

Fifteen apartment buildings were converted into about 45

condominiums, generating about $11 million. Houchen reportedly sold

two four-unit apartment buildings, netting about $500,000.

Realtor Phil Benson, who now lives in Hayden, Idaho, and is

battling terminal cancer, allegedly masterminded the scheme. Benson

pleaded guilty and could face $6 million in fines and a sentence of

seven to nine years in prison.

Title officer Harvey Du Bose also pleaded guilty in the case, but

he was absent from the courtroom Sept. 1. Du Bose is charged with

forging documents to insure the transactions. He faces a seven-year

prison sentence.

Realtor Tom Bagshaw and investor Michael Cherney were in court

Sept. 1 and pleaded guilty to several counts of fraud. Bagshaw faces

18 to 24 months in prison for two counts of wire fraud, while

Cherney, who pleaded guilty to making a false claim to federal

authorities, faces up to six months in prison.

Jeffrey Crandall, Howard Richey and Michael McDonnell have all

pleaded not guilty in the case. Houchen and the four other real

estate professionals who pleaded guilty could be called as witnesses

in the trial, set to begin Oct. 4.