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Land baron has checkered past
What they didn't know was that Rhodes, 48, has admitted to illegally using his money to aid powerful politicians in Nevada; that he has repeatedly and successfully been sued over allegations of fraud, theft and self-dealing by his investment partners and others he's done business with; and that he has a long history of complaints for shoddy workmanship and construction defects from people who bought his homes...Rhodes' attempts to blame his underlings failed. He reached an agreement with the FEC, announced last year, admitting he controlled the scheme, ordered the reimbursement checks and directed company ledgers to be falsified. He and his companies paid a fine of $148,000 to settle and end the investigation.
Land baron has checkered past
Nev. developer gets key state land in E. Valley
By Mark Flatten
East valley tribune
Tucson, Arizona | Published: 04.22.2007
It took less than two weeks for Jim Rhodes to become the most influential developer in the Phoenix area's East Valley.
Two weeks and $58.6 million.
That's how much time and money Rhodes spent to buy more than 1,000 acres of state trust land in Apache Junction in December.
With it he gained the right to master-plan 7,700 acres in the area and set the tone for development of 275 square miles of state land extending from the eastern edge of Maricopa County to Florence.
What officials at the state Land Department knew of Rhodes when they sold him the property and planning rights was that he was one of the largest home builders in Nevada, and had plenty of cash to map out and develop the project.
What they didn't know was that Rhodes, 48, has admitted to illegally using his money to aid powerful politicians in Nevada; that he has repeatedly and successfully been sued over allegations of fraud, theft and self-dealing by his investment partners and others he's done business with; and that he has a long history of complaints for shoddy workmanship and construction defects from people who bought his homes.
Deputy State Land Commissioner Jamie Hogue said officials at the agency were not aware of those things when Rhodes' officials first contacted them about the property nine days before the auction.
If they knew then what they know today, they probably couldn't have done much differently because Rhodes met the bidder qualifications published before the auction, she said.
At that time, Land Department officials were concerned about who could bring the money to the table. The character of the high bidder was not an issue, she said. They didn't anticipate it would be someone like Rhodes.
If they had been looking, department officials could have found another state agency where Rhodes' background and character have long been a concern.
For almost two years, the Arizona Corporation Commission has been considering whether to issue Rhodes a certificate to operate a water company in Mohave County, where he has plans approved to build more than 130,000 homes on raw desert land he's been buying.
Part of the commission's concern has to do with the availability of water. But for the past year, commissioners have stalled the application as they investigate whether Rhodes is the kind of person they want running a publicly regulated Arizona utility.
Rhodes would not agree to an interview with the East Valley Tribune. He did testify in front of the Corporation Commission in March, after commissioners threatened him with a subpoena. After the hearing, Rhodes stood silently as a Tribune reporter asked him a series of questions about his ties to corrupt politicians in Nevada. He responded to only one — denying he had made secret payments to one county commissioner in Las Vegas.
In his commission testimony, Rhodes blamed many of his past problems on his underlings in an interconnected chain of companies he owns, or on unscrupulous lawyers and investment partners out to make a buck off of his success. In many cases, Rhodes claims, he is the victim.
Those who have gone up against him see it differently.
"What surprises me is how he has had the audacity to basically just screw over his partners and he hasn't ended up in a hole out in the desert," said Las Vegas attorney Albert Marquis, who represented a client who successfully sued Rhodes for using his companies to bleed one investment partnership of millions of dollars. "It doesn't matter what the contracts say. Once he is in control and operating, he's doing whatever he wants."
And now Rhodes is partnering with the state of Arizona in the initial development of what has been called the "crown jewel" of the Land Department's 9-million-acre portfolio.
In little more than two decades, Rhodes, 48, built his company into the largest privately owned home builder in Nevada. He has built more than 7,000 single-family homes in that state, and generated more than $1 billion in revenue, according to documents filed with the Arizona Land Department.
His signature projects are the gated golf course communities at Rhodes Ranch about 6 miles southwest of the Las Vegas strip and Tuscany in nearby Henderson.
Despite that success, Rhodes says he would rather be swinging a hammer than putting together multi-million-dollar land deals.
Friends with commissioner
He plays to the image well. During testimony last month at the Corporation Commission, Rhodes said he could not explain with certainty the intricate ownership chains of his various companies.
Rhodes also could not delve into detail about the roughly four dozen lawsuits filed against him and his companies, with claims ranging from fraud to faulty construction. Those are handled by his lawyers, Rhodes said.
But the image of a simple craftsman is at odds with documents related to a criminal bribery case that went to trial in Las Vegas a year ago. Rhodes was not charged in what was dubbed the "G-Sting" investigation. But the federal government's key witness in that case told the FBI that Rhodes had been paying one member of the Clark County Commission $20,000 per month to do his bidding, according to news reports published during the trial.
The commissioner, Erin Kenny, later went to work as a consultant for Rhodes and reportedly warned a county official it would be "dangerous" to go against her boss.
Arizona commissioners did not ask Rhodes about his relationship with Kenny. Her name has not come up in the Corporation Commission's case.
Kenny is a friend of Rhodes who did consulting work for his companies in early 2003, said Chris Stephens, vice president of Rhodes Homes who spoke on behalf of the company after Rhodes refused to talk to the Tribune. Stephens says he does not know whether Kenny was still on the payroll when she was busted by the FBI in connection with a bribery case in May 2003. She almost immediately cut a deal with prosecutors and pleaded guilty to three counts of conspiracy and fraud.
G-Sting scandal
The G-Sting scandal was astounding, even by Las Vegas standards. It began with an FBI investigation in San Diego into whether strip club owner Michael Galardi was laundering money for drug dealers. That investigation did not pan out.
But in FBI wiretaps, Galardi was overheard boasting, "I own every (expletive) county commissioner in Vegas right now. I've got them all on the payroll."
For the next two years, federal agents built a case of bribery and corruption in both San Diego and Las Vegas, cities in which Galardi operated strip clubs and sought favorable treatment from government agencies that regulated that business.
The investigation led to Erin Kenny.
Kenny is a former casino waitress who spent 10 years rising through Nevada Democratic political circles. After a single term in the Nevada Legislature, Kenny was elected to the Clark County Commission in 1994. The commission has jurisdiction over unincorporated areas that encompass most of metropolitan Las Vegas.
According to court testimony, indictments, plea agreements and other court records, the G-Sting case unfolded this way: Galardi was operating several strip clubs in Clark County and wanted to make sure local authorities did not crack down on the industry. The first to be bribed was Lance Malone, a county commissioner from 1997 until January of 2001. Malone cast several votes favorable to Galardi's interests, and after he left the commission went to work as Galardi's lobbyist.
By the middle of 2001, Galardi and Malone were co-opting others on the commission in return for favorable votes. Commissioner Dario Herrera got free lap dances and sexual favors from Galardi's strippers. Commissioner Mary Kincaid-Chauncey got money to send her grandson to ski school.
Kenny got cash. Lots of cash. By June 2001, Kenny was being paid thousands of dollars in return for favorable votes at the commission. Kenny eventually admitted taking between $70,000 and $100,000 from Galardi.
Endorsed by Harry Reid
But in 2001 and 2002, none of it was known publicly.
Kenny was still on the Clark County Commission. So was Herrera. But both had ambitions for higher office.
Herrera ran for Congress. Kenny abruptly announced in May 2002 she would run as a Democratic candidate for lieutenant governor. Both were still seen as rising stars in the Nevada Democratic Party, and were endorsed by Senate Majority Leader Harry Reid, D-Nev.
During the last two years of their terms, Rhodes had more than 20 items related to his developments on the commission's agenda, according to federal documents. He also became one of the most generous donors to both the Kenny and Herrera campaigns.
In her testimony against Herrera and other former commissioners last year, Kenny admitted she stole money from her 2002 campaign fund. She did not say how much she took.
Just weeks before the general election, Kenny's campaign was running a deficit of more than $350,000, according to financial disclosure reports. It was Rhodes who bailed her out.
For the entire campaign, Kenny disclosed $110,000 in donations from Rhodes and his companies. Unlike in Arizona, Nevada law allows corporations to donate directly to candidates for state office.
Kenny was never prosecuted for pilfering money from her campaign, or failing to report contributions. State and local authorities did not pursue any investigation into her admissions on the stand.
Used his executives, staff
Federal investigators did question Rhodes about $27,000 in illegal donations he arranged for Herrera's congressional campaign, and $10,000 he raised for Reid's re-election effort.
Herrera was still on the Clark County Commission when his congressional campaign got its first $1,000 donation from Rhodes in April 2001. Rhodes had devised a scheme to secretly funnel illegal contributions to Herrera, according to Rhodes' own signed admissions to the Federal Election Commission.
Aside from writing a check himself, Rhodes asked his top executives and members of his staff to donate to Herrera and Reid, with the understanding they would be reimbursed from corporate accounts.
It is illegal to reimburse people for campaign contributions. It is also illegal for corporations to donate directly to federal candidates, and to conceal corporate contributions by claiming they came from individuals.
Rhodes made good on his promise to pay back employees who donated to Herrera and Reid. Rhodes ordered phony entries be made in his companies' books to cover the illegal reimbursements, according to federal documents.
Fined $148,000
Rhodes' attempts to blame his underlings failed. He reached an agreement with the FEC, announced last year, admitting he controlled the scheme, ordered the reimbursement checks and directed company ledgers to be falsified. He and his companies paid a fine of $148,000 to settle and end the investigation.
The political donations made by Rhodes had little impact in the 2002 elections. Kenny and Herrera were both defeated by wide margins. Reid did was easily re-elected in 2004.
Jon Summers, a Reid spokesman, said the senator did not keep the $10,000 from Rhodes. The money was forwarded to the federal treasury after it was discovered the donations were illegal, Summers said. Reid did not know that Rhodes was arranging the contributions, Summers said, an assertion backed by the FEC.
http://www.azstarnet.com/allheadlines/179517
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