FIRST SUPERSEDING INDICTMENT ALLEGES: "... b. Defendant KOVALL attempted to have the seller pay a commission to Shambaugh's [Windermere Coachella Valley Indian] real estate agency as the Tribe's purported real estate agent, despite the fact that, as KOVALL knew,  Shambaugh and her agency had done little work to assist the Tribe in its purchase of the 47-acre parcel.

c. When the seller refused to pay the commission to the Tribe's purported agent, defendant KOVALL convinced the Tribe to authorize Heslop to increase Echo Holdings, LLC's offer for the 47-acre parcel for the purpose of paying a significant commission to Shambaugh through her [Windermere Coachella Valley] real estate agency.

d. On or about September 19, 2007, defendant KOVALL negotiated an option agreement for the Tribe to purchase the 47-acre parcel for $31.7 million, which called for Shambaugh and her [Windermere Coachella Valley] real estate agency to be paid a commission of several hundred thousand dollars from the amount of the purchase price paid by the Tribe..."

DOWNLOAD THE COMPLETE FIRST SUPERSEDING INDICTMENT HERE. READ OR DOWNLOAD ORIGINAL INDICTMENT HERE.

 

Bennion & Deville Fine Homes/Windermere Coachella Valley Indian Wells office agent Peggy Anne Shambaugh and husband, attorney Gary Edward Kovall (left), indicted on federal bribery and money laundering charges; also named are Paul Phillip Bardos and David Alan Heslop.

 

DOWNLOAD A PDF COPY OF THE COMPLETE INDICTMENT HERE

READ THE U.S. ATTORNEY'S PRESS RELASE HERE

INDICTMENT

FILED 2012 MAY 9

 

UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

 

September 2011 Grand Jury

 

UNITED STATES OF AMERICA,

 

Plaintiff,

 

v.

 

GARY EDWARD KOVALL, DAVID ALAN HESLOP,

PAUL PHILLIP BARDOS, and PEGGY ANNE SHAMBAUGH,

 

Defendants.

 

No. CR 12 00441

 

I N D I C T M E N T

 

[18 U.S.C. § 371: Conspiracy; 18 U.S.C. § 666(a)(1)(B): Receipt of a Bribe by an Agent of an Indian Tribal Government Receiving Federal Funds, Paying a Bribe to an Agent of an Indian Tribal Government Receiving Federal Funds; 18 U.S.C. § 1957(a): Engaging in Monetary Transactions in Property Derived From Specified Unlawful Activity; 18 U.S.C. §§ 981(a)(1), 982(a)(1), 21 U.S.C. § 2461(c): Criminal Forfeiture]

 

The Grand Jury charges:

 

COUNT ONE

[18 U.S.C. § 371]

 

A. INTRODUCTORY ALLEGATIONS

 

At all times relevant to this Indictment:

 

1. The Twenty-Nine Palms Band of Mission Indians ("Tribe") was a Native American tribe. The Tribe's reservation was located in the Mojave Desert. The Tribe is governed by a Tribal Council led by an elected Tribal Chairman.

 

2. The Tribe owned Twenty-Nine Palms Enterprises Corp. through which the Tribe operated the Spotlight 29 Casino in Riverside County, within the Central District of California.

 

3. Defendant GARY EDWARD KOVALL (“KOVALL") was a member of the State Bar of California who represented the Tribe as its legal counsel. Defendant KOVALL maintained an office on the Tribe's property and, according to defendant KOVALL's invoices to the Tribe, defendant KOVALL worked for the Tribe on virtually a daily basis. Among other things, defendant KOVALL attended Tribal Council meetings, negotiated and drafted contracts on behalf of the Tribe, and advised the Tribal Council to enter contracts, including contracts between the Tribe and defendant DAVID ALAN HESLOP ("HESLOP") and contracts between the Tribe and defendant PAUL PHILLIP BARDOS (“BARDOS”). On the advice of defendant KOVALL, moreover, the Tribe created Echo Trail Holdings, LLC, a California limited liability company of which the Tribe is the sole member, to purchase real estate on behalf of the Tribe. Defendant KOVALL drafted the Operating Agreement of Echo Trail Holdings, LLC, and advised the Tribe to enter into it.

 

4. Defendant HESLOP was introduced to the Tribe by defendant KOVALL. On defendant KOVALL's advice, the Tribe named defendant HESLOP the manager of Echo Trail Holdings, LLC. Pursuant to the Operating Agreement of Echo Trail Holdings, LLC, defendant HESLOP was authorized to manage the company's assets; borrow money (including borrowing money from the Tribe); grant security interests in the company's assets; refinance debts owed to the company for borrowed money; compromise or release the company's claims or debts; employ persons or entities for the operation and management of the company's business; open bank accounts for the benefit of the company; sign contracts, conveyances, assignments, leases, and agreements affecting the company's business and assets; sign checks and other orders for payment of the company's funds; and sign promissory notes, mortgages, deeds of trust, security agreements, and similar documents. The Tribe paid defendant HESLOP to manage Echo Trail Holdings, LLC, and, on the advice of defendant KOVALL, also paid defendant HESLOP to provide the Tribe with demographic consulting, beginning no later than the mid-2000s.

 

5. Defendant BARDOS was a licensed general contractor and the sole owner and shareholder of Bardos Construction, Inc., Cadmus Construction Co., and Cadmus Construction, Inc. Defendants HESLOP and KOVALL introduced defendant BARDOS to the Tribe and persuaded the Tribe to contract with defendant BARDOS to act as the Tribe's "owner's representative" in connection with a number of construction improvements to the Spotlight 29 Casino and grounds. Defendant HESLOP explained to the Tribe that, as the Tribe's owner's representative, defendant BARDOS would "review and oversee work of construction contracted by the Tribe with others and protect them [the Tribe] from harm." Defendant KOVALL drafted defendant BARDOS’ "owner's representative" agreement with the Tribe, pursuant to which defendant BARDOS was, among other things, to review design and construction proposals, negotiate contracts with contractors and suppliers, inspect construction work, review invoices, "protect [the Tribe's] interests" with respect to change orders, and verify that all work was completed to the Tribe's satisfaction.

 

6. Defendant PEGGY ANNE SHAMBAUGH (“SHAMBAUGH”) was, at various times relevant to this Indictment, defendant KOVALL's cohabitant, girlfriend, fiancee, or wife.

 

7. On an annual basis, the United States Environmental Protection Agency ("EPA") provided the Tribe hundreds of thousands of dollars in federal assistance. EPA grant monies were disbursed to the Tribe throughout the year.

 

B. OBJECTS OF THE CONSPIRACY

 

8. Beginning no later than in or about September 2006, and continuing through in or about August 2008, in Riverside, San Bernardino, and San Luis Obispo Counties, within the Central District of California, and elsewhere, defendants KOVALL, HESLOP, BARDOS, and SHAMBAUGH, together with others known and unknown to the Grand Jury, conspired and agreed with each other knowingly and intentionally to (i) corruptly accept and agree to accept things of value from a person, that is, monetary payments, intending to be influenced and rewarded in connection with a transaction and series of transactions of the Tribe involving $5,000 or more; and (ii) corruptly give, offer, and agree to give things of value, that is, monetary payments, to any person intending to influence and reward Gary Edward Kovall and David Alan Heslop in connection with a transaction and series of transactions of the Tribe involving $5,000 or more, in violation of Title 18, United States Code, Section 666 (a) (1) (B) and (a) (2).

 

C. MEANS BY WHICH THE OBJECTS OF THE CONSPIRACY WERE TO BE ACCOMPLISHED

 

9. The objects of the conspiracy were to be accomplished in substance as follows:

 

a. Defendants HESLOP and KOVALL would introduce defendant BARDOS to the Tribe and recommend that the Tribe hire defendant BARDOS as the Tribe’s “owner’s representative” in connection with construction work planned by the Tribe.

 

b. Defendant KOVALL would persuade the Tribe to enter into a contract with defendant BARDOS, whereby defendant BARDOS would act as the Tribe's "owner's representative" in connection with a number of construction improvements to the Spotlight 29 Casino and grounds.

 

c. When additional construction or construction oversight would become necessary, defendant BARDOS would submit proposals to perform the work, and defendant KOVALL would advise the Tribe to accept defendant BARDOS, proposals.

 

d. Defendant BARDOS would pay kickbacks to defendant HESLOP who, in turn, would pay kickbacks to defendant KOVALL, though defendant SHAMBAUGH.

 

D. OVERT ACTS

 

10. In furtherance of the conspiracy and to accomplish the objects of the conspiracy, defendants KOVALL, HESLOP, BARDOS, and SHAMBAUGH, and others known and unknown to the Grand Jury, committed various overt acts within the Central District of California and elsewhere, including but not limited to the following:

 

a. In or about September 2006, defendants HESLOP and KOVALL introduced defendant BARDOS to the Tribe and recommended that the Tribe hire defendant BARDOS as the Tribe's "owner's representative" in connection with construction work planned by the Tribe.

 

b. On or about February 1, 2007, defendant KOVALL advised the Tribe to enter into a contract with defendant BARDOS, whereby defendant BARDOS would act as the Tribe's "owner's representative" in connection with a number of construction improvements to the Spotlight 29 Casino and grounds, including a "parking structure located adjacent to the Spotlight 29 casino," for which the Tribe initially paid defendant BARDOS $12,500.00 per month and later $12,500.00 twice per month.

 

c. On or about March 12, 2007, defendant BARDOS proposed that his company, Cadmus Construction Co., construct the temporary parking lot and access road for $751, 995.00.

 

d. In or about March 2007, defendant KOVALL informed the Tribe that he had compared defendant BARDOSI $751,995.00 proposal to proposals obtained from other contractors, advised the Tribe that accepting defendant BARDOS’ proposal would save the Tribe money, and persuaded the Tribe to contract with defendant BARDOS and Cadmus Construction Co. to construct the temporary parking lot and access road for $751, 995.00.

 

e. On or about March 21, 2007, defendant BARDOS contracted with another construction company to construct the temporary parking lot and access road for $291, 258.00.

 

f. On or about May 4 and May 9, 2007, defendant BARDOS provided defendant HESLOP with two checks, totaling $209, 082.48, from $751,995.00 the Tribe paid defendant BARDOS to construct the temporary parking lot and access road.

 

g. On or about May 10, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $80,000.00.

 

h. On or about May 7, 2007, after the Tribe was required to clear an 80-acre parcel of land as a fire abatement measure, defendant BARDOS proposed that his company, Cadmus Construction Co., perform the disking for $22,250.00.

 

i. On a date unknown, but between on or about May 7, 2007, and September 20, 2007, defendant KOVALL persuaded the Tribe to accept defendant BARDOS' proposal to clear the 80-acre parcel of land for $22,250.00.

 

j. On or about August 20, 2007, defendant BARDOS paid another construction company to clear the 80-acre parcel of land for $2,836.19.

 

k. On or about September 26, 2007, defendant BARDOS, after having been paid $22, 250.00 by the Tribe, provided defendant HESLOP with a check in the amount of $11,125.00.

 

l. On or about October 18, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $7, 813.00.

 

m. On or about May 22, 2007, defendant BARDOS proposed that his company, Cadmus Construction Co., perform the oversight of the construction at the Spotlight 29 Casino of a co-generation power plant for $620, 000.00, with $120, 000.00 "due upon signing" and monthly payments thereafter.

 

n. On or about June 12, 2007, defendant KOVALL advised the Tribe: (i) it would need an "owner's representative" for the co-generation plant construction project; (ii) defendant BARDOS’ existing "owner's representative" contract did not include this project; (iii) he had compared defendant BARDOS' proposal to the competing proposal; (iv) the Tribe would "save more than $100,000" by selecting defendant BARDOS; and (v) to accept defendant BARDOS’ proposal.

 

o. On or about July 17, 2007, defendant BARDOS, after having been paid $120, 000.00 by the Tribe as the "due upon signing" payment for oversight of the co-generation plant construction project, provided defendant HESLOP with a check in the amount of $60,000.00.

 

p. On or about July 20, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $30,000.00.

 

q. On or about August 22, 2007, defendant BARDOS, after having been paid $31, 250.00 by the Tribe as a monthly payment for oversight of the co-generation plant construction project, provided defendant HESLOP with a check in the amount of $15, 625.00.

 

r. On or about August 27, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $8, 313.00.

 

s. On or about September 18, 2007, defendant BARDOS, after having been paid $31, 250.00 by the Tribe as a monthly payment for oversight of the co-generation plant construction project, provided defendant HESLOP with a check in the amount of $15, 625.00.

 

t. On or about October 4, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $13, 375.00, including the notation "Partner Payment."

 

u. On or about October 9, 2007, defendant BARDOS, after having been paid $31, 250.00 by the Tribe as a monthly payment for oversight of the co-generation plant construction project, provided defendant HESLOP with a check in the amount of $15, 625.00.

 

v. On or about October 18, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $24, 541.00, including the notation "Replacement for May Check."

 

w. On or about November 9, 2007, defendant BARDOS, after having been paid $31, 250.00 by the Tribe as a monthly payment for oversight of the co-generation plant construction project, provided defendant HESLOP with a check in the amount of $15, 625.00.

 

x. On or about November 26, 2007, defendant HESLOP provided defendant SHAMBAUGH a check in the amount of $7, 863.00, including the notation "Cadmus."

 

COUNTS TWO THROUGH NINE

[18 U.S.C. § 666 (a) (2) ]

 

11. The Grand Jury repeats and re-alleges paragraph 1 through 7 this Indictment as though fully set forth herein.

 

12. At all times material to this indictment, the Tribe was a tribal government that received federal assistance in excess of $10, 000 during the one-year period beginning May 9, 2007, and ending May 8, 2008.

 

13. On or about the dates set forth below, in Riverside, San Bernardino, and San Luis Obispo Counties, within the Central District of California, and elsewhere, defendant BARDOS corruptly gave, offered, and agreed to give things of value, that is, the monetary payments set forth below, to any person intending to influence and reward Gary Edward Kovall and David Alan Heslop in connection with a transaction and series of transactions of the Tribe involving $5,000 or more.

 

 

COUNT	DATE	CHECK NO.	PAYEE	AMOUNT
TW0	May 9, 2007	None	Alan Heslop	$37, 327.48
THREE	July 17, 2007	None	Alan Heslop	$60, 000.00
FOUR	Aug. 23, 2007	1009	Alan Heslop	$15, 625.00
FIVE	Sept. 18, 2007	1012	Alan Heslop	$15, 625.00
SIX	Sept. 26, 2007	1014	Alan Heslop	$11, 125.00
SEVEN	Oct. 9, 2007	1016	Alan Heslop	$15, 625.00
EIGHT	Nov. 9, 2007	1019	Alan Heslop	$15, 625.00
NINE	Dec. 3, 2007	1023	Alan Heslop	$15, 625.00

 

 

COUNTS TEN THROUGH SEVENTEEN

[18 U. S. C. § 666 (a) (1) (B)]

 

14. The Grand Jury repeats and re-alleges paragraphs 1 through 7 and 12 of this Indictment as though fully set forth herein.

 

15. On or about the dates set forth below, in Riverside and San Luis Obispo Counties, within the Central District of California, and elsewhere, defendant HESLOP, corruptly solicited and demanded and accepted and agreed to accept things of value from a person, that is, the monetary payments set forth below, intending to be influenced and rewarded in connection with a transaction and series of transactions of the Tribe involving $5, 000 or more.

 

COUNT	DATE	CHECK NO.	PAYEE	AMOUNT
TEN	May 9, 2007	None	Alan Heslop	$37, 327.48
ELEVEN	July 17, 2007	None	Alan Heslop	$60, 000.00
TWELVE	Aug. 23, 2007	1009	Alan Heslop	$15, 625.00
THIRTEEN	Sept. 18, 2007	1012	Alan Heslop	$15, 625.00
FOURTEEN	Sept. 26, 2007	1014	Alan Heslop	$11, 125.00
FIFTEEN	Oct. 9, 2007	1016	Alan Heslop	$15, 625.00
SIXTEEN	Nov. 9, 2007	1019	Alan Heslop	$15, 625.00
SEVENTEEN	Dec. 3, 2007	1023	Alan Heslop	$15, 625.00

 

 

COUNTS EIGHTEEN THROUGH TWENTY-FOUR

[18 U.S.C. § 666 (a) (2)]

 

16. The Grand Jury repeats and re-alleges paragraphs 1 through 7 and 12 of this Indictment as though fully set forth herein.

 

17. On or about the dates set forth below, in Riverside and San Luis Obispo Counties, within the Central District of California, and elsewhere, defendant HESLOP corruptly gave, offered, and agreed to give things of value, that is, the monetary payments set forth below, to any person intending to influence and reward Gary Edward Kovall in connection with a transaction and series of transactions of the Tribe involving $5,000 or more.

 

COUNT	DATE	CHECK NO.	PAYEE	AMOUNT
EIGHTEEN	May 10, 2007	4990	Peggy Shambaugh	$80, 000.00
NINETEEN	July 20, 2007	5086	Peggy Shambaugh	$30, 000.00
TWENTY	Aug. 27, 2007	5120	Peggy Shambaugh	$ 8, 313.00
TWENTY-ONE	Oct. 4, 2007	4713	Peggy Shambaugh	$13, 375.00
TWENTY-TWO	Oct. 18, 2007	4736	Peggy Shambaugh	$24, 541.00
TWENTY-THREE	Oct. 18, 2007	4737	Peggy Shambaugh	$ 7, 813.00
TWENTY-FOUR	Nov. 26, 2007	4792	Peggy Shambaugh	$ 7, 863.00

 

COUNTS TWENTY-FIVE THROUGH THIRTY-ONE

[18 U.S.C. H 666 (a) (1) (B),  2]

 

18. The Grand Jury repeats and re-alleges paragraphs 1 through 7 and 12 of this Indictment as though fully set forth herein.

 

19. On or about the dates set forth below, in Riverside County, within the Central District of California, and elsewhere, defendant KOVALL, corruptly solicited and demanded and, aided and abetted by defendant SHAMBAUGH, accepted and agreed to accept things of value from a person, that is, the monetary payments set forth below, intending to be influenced and rewarded in connection with a transaction and series of transactions of the Tribe involving $5,000 or more.

 

COUNT	DATE	CHECK NO.	PAYEE	AMOUNT
TWENTY-FIVE	May 10, 2007	4990	Peggy Shambaugh	$80,000.00
TWENTY-SIX	July 20, 2007	5086	Peggy Shambaugh	$30,000.00
TWENTY-SEVEN	Aug. 27, 2007	5120	Peggy Shambaugh	$ 8,313.00
TWENTY-EIGHT	Oct. 4, 2007	4713	Peggy Shambaugh	$13,375.00
TWENTY-NINE	Oct. 18, 2007	4736	Peggy Shambaugh	$24,541.00
THIRTY	Oct. 18, 2007	4737	Peggy Shambaugh	$ 7,813.00
THIRTY-ONE	Nov. 26, 2007	4792	Peggy Shambaugh	$ 7,863.00

 

 

COUNTS THIRTY-TWO THROUGH FORTY-EIGHT

[18 U.S.C. § 1957]

 

20. On or about the dates set forth below, in San Bernardino, Riverside, and San Luis Obispo Counties, within the Central District of California, and elsewhere, defendants PAUL PHILLIP BARDOS, DAVID ALAN HESLOP, and PEGGY ANNE SHAMBAUGH, knowing that the funds involved represented the proceeds of some form of unlawful activity, conducted and attempted to conduct, and willfully caused others to conduct, the following monetary transactions, by, through, or to a financial institution, affecting interstate or foreign commerce, in criminally derived property of a value greater than $10,000, that is, the deposit, withdrawal, transfer, and exchange of United States currency, which property, in fact, was derived from specified unlawful activity, that is, commercial bribery, in violation of California Penal Code section

COUNT	DATE	DEFENDANT	MONETARY TRANSACTION
THIRTY- TWO	May 9, 2007	BARDOS	Deposit of check no. 1008, dated May 3, 2007, drawn against Pacific Western Bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $106.440.00
THIRTY- THREE	May 14, 2007	HESLOP	Deposit of unnumbered check, dated May 9, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $37,327.48.
THIRTY- FOUR	June 6, 2007	BARDOS	Deposit of check no. 1018, dated May 30, 2007, drawn against Pacific Western Bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $38, 450.00
THIRTY- FIVE	July 18, 2007	SHAMBAUGH	Deposit of check no. 4990, dated May 10, 2007, drawn against Mid-State Bank & Trust account no. XXXXX4902, payable to Peggy Shambaugh in the amount of $80,000.00.
THIRTY- SIX	July 18, 2007	BARDOS	Deposit of check no. 1038, dated July 11, 2007, drawn against Pacific Western Bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $120,000.00.
THIRTY- SEVEN	July 23, 2007	SHAMBAUGH	Deposit of check no. 5086, dated July 20, 2007, drawn against Mid-State Bank & Trust account no. XXXXX4902, payable to Peggy Shambaugh in the amount of $30,000.00.
THIRTY- EIGHT	July 23, 2007	HESLOP	Deposit of unnumbered check, dated July 17, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $60,000.00.
THIRTY- NINE	Aug. 22, 2007	BARDOS	Deposit of check no. 87537, dated August 15, 2007, drawn against Pacific Western Bank account no. XXXXX6197 and payable to Cadmus Construction Co. in the amount of $31,250.00
FORTY	Aug. 27, 2007	HESLOP	Deposit of check no. 1009, dated August 23, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $15, 625.00
FORTY- ONE	Sept. 19, 2007	BARDOS	Deposit of check no. 1058, dated September 13, 2007, drawn against Pacific Western bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $31, 250.00.
FORTY- TWO	Sept. 26, 2007	BARDOS	Deposit of check no. 1067, dated September 20, 2007, drawn against Pacific Western Bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $22, 250.00
FORTY- THREE	Oct. 2, 2007	HESLOP	Deposit of check no. 1012, dated September 18, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $15, 625.00.
FORTY- FOUR	Oct. 2, 2007	HESLOP	Deposit of check no. 1014, dated September 26, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $11, 125.00.
FORTY- FIVE	Oct. 10, 2007	BARDOS	Deposit of check no. 1068, dated December 3, 2007, drawn against Pacific Western Bank Account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $31, 250.00
FORTY- SIX	Oct. 17, 2007	HESLOP	Deposit of check no. 1016, dated October 9, 2007, drawn against Inland Community Bank account no. XXX XX5634 and payable to Alan Heslop in the amount of $15, 625.00.
FORTY- SEVEN	Nov. 13, 2007	BARDOS	Deposit of check no. 1079, dated November 5, 2007, drawn against Pacific Western Bank account no. XXX-XXX0669 and payable to Cadmus Construction Co. in the amount of $31, 250.00.
FORTY- EIGHT	Nov. 19, 2007	HESLOP	Deposit of check no. 1019, dated November 9, 2007, drawn against Inland Community Bank account no. XXX-XX5634 and payable to Alan Heslop in the amount of $15, 625.00.

 

FORFEITURE ALLEGATION I

[18 U.S.C. § 981 (a) (1) ;  28 U.S.C. § 2461 (c) ; 21 U.S.C. § 853]

[Bribery]

 

1. The Grand Jury incorporates and realleges all of the allegations contained in the Introductory Allegations and Counts Two through Thirty-One above as though fully set forth in their entirety here for the purpose of alleging forfeiture pursuant to the provisions of Title 18, United States Code, Section 981 (a) (1); Title 28, United States Code, Section 2461 (c); and Title 21, United States Code, Section 853.

 

2. Defendants KOVALL, HESLOP, BARDOS, and SHAMBAUGH, if convicted of the offense charged in Count One of this Indictment, defendant BARDOS, if convicted of any of the offenses charged in Counts Two through Nine of this Indictment, defendant HESLOP, if convicted of any of the offenses charged in Counts Ten through Twenty-Four of this Indictment, and defendants KOVALL and SHAMBAUGH, if convicted of any of the offenses charged in Counts Twenty-Five through Thirty-one of this Indictment, shall forfeit to the United States the following property:

a. All right, title, and interest in any and all property, real or personal, which constitutes or is derived from proceeds traceable to such offenses;

 

b. A sum of money equal to the total amount of proceeds derived from each such offense for which defendants are convicted, or for which defendants may be held jointly and severally liable.

 

3. Pursuant to Title 21, United States Code, Section 853(p), as incorporated by Title 28, United States Code, Section 2461(c), defendants KOVALL, HESLOP, BARDOS, and SHAMBAUGH, if so convicted, shall forfeit substitute property, up to the total value of the property described in paragraph 2 above, if, by any act or omission of the defendants, the property described in paragraph 2, or any portion thereof, (a) cannot be located upon the exercise of due diligence; (b) has been transferred or sold to, or deposited with, a third party; (c) has been placed beyond the jurisdiction of the court; (d) has been substantially diminished in value; or (e) has been commingled with other property that cannot be divided without difficulty.

 

 

FORFEITURE ALLEGATION II

[18 U.S.C. § 982 (a) (1) ]

[Money Laundering]

 

1. The Grand Jury incorporates and realleges all of the allegations contained in the Introductory Allegations and Counts Thirty-Two through Forty-Eight above as though fully set forth in their entirety here for the purpose of alleging forfeiture pursuant to the provisions of Title 18, United States Code, Section 982 (a) (1)

 

2. Defendants HESLOP, BARDOS, and SHAMBAUGH, if convicted of any of the offenses charged under Counts Thirty-Two through Forty-Eight of this Indictment, shall forfeit to the United States the following property:

 

a. All right, title, and interest in any and all property involved in each offense committed in violation of Title 18, United States Code, Section 1957, or conspiracy to commit such offense, for which each defendant is convicted, and all property traceable to such property, including the following:

 

(1) all money or other property that was the subject of the transaction in violation of Title 18, United States Code, Section 1957;

 

(2) all commissions, fees, and other property constituting proceeds obtained as a result of that violation;

 

(3) all property used in any manner or part to commit or to facilitate the commission of that violation;

 

(4) all property traceable to money or property described in this paragraph 2.a. (1) through 2.a. (3).

 

b. A sum of money equal to the total amount of money involved in each offense committed in violation of Title 18, United States Code, Section 1957, or conspiracy to commit such offense, for which the defendant is convicted.

 

3. Pursuant to Title 21, United States Code, Section 853(p), defendants HESLOP, BARDOS, and SHAMBAUGH, if so convicted, shall forfeit substitute property, up to the total value of the property described in paragraph 2 above, if, by any act or omission of the defendants, any of the foregoing money or property (a) cannot be located upon the exercise of due diligence; (b) has been transferred or sold to, or deposited with, a third party; (c) has been placed beyond the jurisdiction of the court; (d) has been substantially diminished in value; or (e) has been commingled with other property that cannot be subdivided without difficulty.

 

 

A TRUE BILL

 

_________________________________________________

Foreperson

 

 

ANDRE BIROTTE JR.

United States Attorney

 

ROBERT E. DUGDALE

Assistant United States Attorney

Chief, Criminal Division

 

LAWRENCE S. MIDDLETON

Assistant United States Attorney

Chief, Public Corruption & Civil Rights Section

 

JOSEPH N. AKROTIRIANAKIS

Assistant United States Attorney

Public Corruption & Civil Rights Section

 

 

DOWNLOAD THE GOVERNMENT'S NOTICE OF REQUEST FOR DETENTION OF PEGGY ANNE SHAMBAUGH HERE

 

 

DOWNLOAD PDF COPY THE U.S. ATTORNEY'S INDICTMENT PRESS RELEASE HERE

READ THE U.S. ATTORNEY'S INDICTMENT PRESS RELEASE ONLINE HERE

 

Lawyer for Coachella Valley Indian Tribe and Three Others Charged in Bribery Scheme Related to Projects at Spotlight 29 Casino

U.S. Attorney’s Office
May 10, 2012

Central District of California
(213) 894-2434

LOS ANGELES—An attorney for the Twenty-Nine Palms Band of Mission Indians is among four people who have been indicted on federal bribery and money laundering charges for allegedly participating in scheme in which associates of the lawyer hired to provide assistance to the tribe paid kickbacks to the attorney.

The 48-count grand jury indictment returned yesterday afternoon names:

• Gary Edward Kovall, 66, of Ely, Minnesota, a licensed California attorney who acted as legal counsel for the tribe;

• David Alan Heslop, 74, of Templeton, who, on Kovall’s recommendation, was hired by the tribe to oversee some tribal business;

• Paul Phillip Bardos, 57, of Rancho Cucamonga, a general contractor; and

• Peggy Anne Shambaugh, 56, of Ely, Minnesota, who is Kovall’s wife.

All four defendants have agreed to appear for arraignments tomorrow in United States District Court in Los Angeles.

According to the indictment, Kovall advised the tribe to create a limited liability company to purchase real estate, and the attorney convinced the tribe to hire Heslop as the company’s manager. Kovall and Heslop then recommended that the tribe hire Bardos to act as the tribe’s “owner’s representative” in several construction projects at the Spotlight 29 Casino. When additional construction or construction oversight became necessary in relation to casino projects, Bardos submitted proposals to perform the work, and Kovall persuaded the tribe to give Bardos the contracts. After being paid by the tribe, Bardos paid kickbacks to Heslop who, in turn, paid kickbacks to Kovall though [sic] Shambaugh.

The indictment alleges that in 2007 Bardos paid Heslop more than $186,577, most of which was then funneled to Shambaugh.

“The United States Attorney’s Office is committed to the prosecution of corruption and fraud in all of their guises,” said United States Attorney André Birotte, Jr. ‘This case demonstrates that our commitment extends to vigorously pursuing cases against unscrupulous individuals who abuse their positions to take advantage of Native American tribes.”

The indictment charges all four defendants with conspiracy. Additionally, Kovall, Bardos, and Shambaugh are charged with eight counts of bribery, while Heslop is charged with 16 counts of bribery. In addition to the conspiracy and bribery charges based on the kickback scheme, Bardos is charged with eight counts of money laundering, Heslop is charged with seven counts of money laundering, and Shambaugh is charged with two counts money laundering.

“IRS-Criminal Investigation is committed to aggressively investigating those individuals who conspire to commit bribery and launder those illicit funds to hide their criminal activities,” said Leslie P. Demarco, IRS-Criminal Investigation Special Agent in Charge for the Los Angeles Field Office. “IRS-CI will continue to partner with other law enforcement agencies to ensure that all who secure lucrative contracts play by the same rules.”

Steven Martinez, Assistant Director of the FBI’s Los Angeles Field Office, stated, “The charges allege the defendants in this case deprived the victims—the Twenty-Nine Palms Band of Mission Indians—of honest leadership and took advantage of their positions of trust by lining their own pockets with the tribe’s money, including government funding designated for necessary services. The FBI will continue to work with our partners at the IRS and the United States Attorney’s Office to protect groups targeted through corrupt practices and investigate those responsible.”

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

If they are convicted of all counts in the indictment:

• Kovall would face a maximum statutory sentence of 75 years in federal prison and a fine of $2 million;

• Heslop would face a statutory maximum sentence of 225 years in federal prison and a fine of $5.75 million;

• Bardos would face a statutory maximum sentence of 155 years in federal prison and a fine of $4 million; and

• Shambaugh would face a statutory maximum sentence of 105 years in federal prison and a fine of $2.75 million.

The case was investigated by IRS-Criminal Investigation and the Federal Bureau of Investigation.

 

 

 

 

 

29 PALMS BAND OF MISSION INDIANS CASE (cont'd.)

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF RIVERSIDE—CASE NO. RIC10006101

DOWNLOAD A PDF COPY OF THE FULL BRIEF HERE

CLICK HERE TO PAGE ONE OF RESTITUTION BRIEF

 

 

Almost immediately after Bardos was hired as "owners representative", Bardos and Kovall began to undermine the work being performed by the Worth Group and schemed to steer work towards Bardos. (See, e.g., Exs. 25-26.)

 

D. The Scheme to Form Cadmus

 

            Kovall, Heslop and Bardos were all intricately involved in the scheme to form Cadmus, the company that succeeded Diversification Resources in the fraud scheme. All three knew from the beginning about Kovall's vested interest and role in securing work for Cadmus.

 

            Under the scheme, Bardos was to serve as the sole shareholder of Cadmus,⁴ but he agreed to split the profits he earned with Heslop, whom he considered "a partner," who in turn paid off Kovall via Shambaugh for his work securing the Cadmus contracts with the Tribe. (SF ¶ 16, Ex. 5.) While Heslop came up with the idea of forming Cadmus, all three of the defendants deliberately kept Heslop's interest a secret, knowing that the Tribe would not approve of continuing to pay Heslop related to construction - after it had already decided to terminate his company, Diversification Resources. (Exs. 5, 29, 37.) The Tribe had no knowledge of the Heslop's involvement with Cadmus Co. or the partner payments Bardos made to him, which he kick backed to Kovall via Shambaugh (Exs. 5-13.)

 

            The emails produced in the criminal case concerning the formation Cadmus are insightful. For example, on March 3, 2007, Heslop wrote an email entitled "Cadmus Construction LLC" to Bardos, bcc'ing Kovall, stating his intention to register "Cadmus Construction" as a limited liability company and name himself "as the designated individual on whom process can be served - so don't get us sued until we can afford insurance - and I will pay all the fees. We should be legal in 30 to 45 days." (See also Ex. 27.) Kovall snidely replied, "Let's tell the Tribe this is a new Heslop entity through which we are going to market Indian jewelry and apparel ... they might believe it." (Ex. 28) (Emphasis added.)

 

            An hour later on March 3, Heslop sent an email to Bardos entitled "Cadmus" and addressed to Kovall, outlining the fraudulent scheme in detail. Heslop wrote:

 

Gary: Here are a couple of thoughts following up on my earlier [sic] e-mail on this subject - and stimulated by the prospect of going into the jewelry business.

 

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⁴ The first entity that the co-conspirators formed was Cadmus Construction Co., which was represented to be a sole proprietorship. They later formed Cadmus Construction, Inc. (Exs. 32- 35.) The initial contracts fraud contracts (temporary access road and parking lot, disking, cogeneration oversight and granite purchase) were with Cadmus Construction Co. The later contracts which Kovall admits to steering towards Bardos (remodeling of the bathrooms (March 2008), the building of the cogeneration shell (March 2008), and the building of the casino addition (April 2008)) were with Cadmus Construction, Inc. (Ex. 5.)

 

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I will not share any of this with Paul until you give the go-ahead.⁵

 

As I understand the likely schedule, the road will come up first, followed by the EPA building; and the plan is that Paul will be responsible for both. But we don't want to endanger his position as Owner's Rep. we don't want Worth to figure out that he has moved from that role into actual construction; and we want to prepare the way for larger contracts in the future.

 

2. It seems to me, therefore, that Cadmus has several functions to perform, namely to (a) serve as a vehicle through which we can pay Paul while reserving funds; (b) provide a named entity to which Tribal checks can be sent; (c) be available as a successor to DR for future development work.

 

3. To achieve these aims we need to: (a) get the LLC into being; (b) establish an address (a P.O. Box in the Southern California area); (c) get someone to sign invoices ... and (d) figure out a way to introduce the new entity to the Tribe.

 

4. On the last point you are the expert, but it seems to me that the best way to handle it would be to tell the Tribe the truth, namely: Paul has his own company, Bardos Construction; but he also is a partner in another, Cadmus Construction; it would be better to use Cadmus because of its superior insurance (even, perhaps, to say because it is less likely to piss of Worth); and Cadmus would employ sub-contractors whom Paul could vet just as he now vets Worth. My name need never come up; and if they want additional names of partners in Cadmus, we can use Barry Elpern or Bob Howard (for who I'm doing a big favor and who will salute as needed).

 

(Ex. 29.) The email outlines the fraudulent scheme in spades. First, it shows from the very beginning the co-conspirators schemed to steer all future construction projects (contemplating here the parking lot and disking projects) to themselves via Cadmus. The three intended to exploit Bardos' position as "owners representative", and with Kovall's assistance, steer work to Cadmus. By forming Cadmus, they could protect Bardos' owners representative position and hide his selfdealing from Worth.

 

            Second, it recognizes Kovall's financial interest in Cadmus. It describes Cadmus as "vehicle" through which "we" - Kovall and Heslop - could pay Bardos as the front man, "while reserving funds", e.g., kickbacks. Having received the email from Heslop and knowing that it

 

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⁵ This obviously wasn't true since Heslop emailed Bardos this original draft and Bardos produced the email to the government.

 

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was ultimately intended for Kovall, Bardos was surely aware of Kovall's role and interest.

 

            Third, it makes clear that the three schemed to have Bardos appear as the front person to Cadmus (which at the time did not exist as a legal entity) while Heslop retained a secretive partnership interest.⁶ Fourth, it confirms that the three deliberately hid Heslop's involvement from the Tribe, whom the Tribe had just terminated as owners representative. Heslop schemed that he could convince others (Elpern or Howard) to lie to the Tribe about being a partner in Cadmus to keep his [Heslop's] interest hidden.

 

            Notably, the email was sent to Bardos, who produced it to the government. (Heslop and Bardos often exchanged drafts and ideas with each other before sending a final product to Kovall. Heslop likely sent the email to Bardos as a draft to review.) Bardos was thus aware of the overall scheme as well as Kovall's financial interest and role in securing future work for Bardos and Cadmus. That Heslop sent the email Bardos before he sent it onto Kovall (as a draft) indicates that Bardos plotted with Heslop how the scheme would unfold.

 

            Bardos did not receive the email by accident. Several days later, on March 6, Kovall responded to the "Cadmus" email. Kovall wrote to Heslop, "Let me think about all of this, but it sounds good. Keeping Paul in the front assuming he pleases the Tribe [if that is even possible] is a good idea." (Ex. 30.) Heslop forwarded the email onto Bardos and wrote: "Paul. FYI. AH." (Id.) The fact that Heslop forwarded Kovall's response to the initial email outlining the scheme to Bardos makes clear that Bardos was always in the loop and knew he would be the front person of the fraud.⁷

 

^{_________________________________}

 

⁶ Heslop's suggestion that they could sell it to the Tribe on the grounds that Cadmus would have superior insurance was an outright lie since as discussed below, Cadmus was not yet formed and could not in fact obtain insurance because it was unlicensed.

 

⁷ While Heslop and Bardos now claim that the Tribe was aware that they had a business relationship and that Heslop would continue to advise Bardos on the construction work (all evidence indicates this was false), during the civil litigation which predated the criminal case, Bardos went to great lengths to conceal Heslop's interest and involvement in Cadmus, even lying under oath. (Ex. 36.) (Bardos Deposition transcripts stating he was the sole owner of Cadmus and claiming he stopped doing business with Heslop at the end 2006). During civil litigation, Bardos also filed sworn declarations claiming that Cadmus account records and checks, sought in discovery, had nothing to do with the dispute. (Exs. 38-39.) This was a lie because the

 

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            Kovall also advised Heslop and Bardos how to legally structure the entity. (Ex. 31.) The co-conspirators ultimately determined that the Cadmus Construction Co. would be set up as a sole proprietorship with Bardos as its registrant. (Ex. 32.) Cadmus Construction Co. was ultimately replaced by Cadmus Construction, Inc., Bardos was designated as the registered agent and responsible managing officer for Cadmus, Inc. (Ex. 35)

 

E. Temporary Access Road and Parking Lot ($418,160.96 + $160,101.82 (Prejudgment Interest ("PI") ⁸ = $578,262.78)

 

            The first construction contract secured as a result of the scheme was for the temporary access road and parking lot, which Kovall sold to the Tribe around the same time the coconspirators formed Cadmus. Bardos was aware that Kovall would be financially rewarded for securing contracts for Cadmus and plotted with Kovall and Heslop as to how to introduce the new entity to the Tribe and obtain work. Moreover, Bardos directly discussed his inflated profit margins with Heslop and later Kovall, contrary to statements he made to the FBI. All three conspired about how to structure and sell Cadmus projects and gouge the Tribe.

 

            As discussed above, between March 3 and 6, Bardos, Kovall and Heslop hatched their plan to form Cadmus. On March 7, Bardos wrote Heslop informing him that he had identified a subcontractor who could construct the temporary access road and parking lot. (Ex. 40.). Heslop immediately forwarded the email to Kovall, who replied "Great." (Ex. 41).

 

            Later that same day, Heslop again emailed Bardos, "I talked to Gary today ... "[H]e is agreeable to all our proposals with Cadmus, including the way to broach it with the Tribe. He knows that you will do the road first, followed by the EPA building." (Ex. 40.) Heslop further wrote, "I think you should agree with him NOT to raise the fact with the Tribe that you will use a sub-contractor -otherwise they may want to know why they are contracting with Cadmus rather than with the sub." (Id.) (emphasis added.)

 

The correspondence demonstrates that all three defendants plotted to secure the contract

 

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checks Bardos was ultimately compelled to produce led to the initial discovery of the fraud. During his FBI interview, Bardos admitted that he lied during his civil deposition. (Ex. 37.)

 

⁸ Amounts indicated in headers include prejudgment interest calculations.

 

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for Cadmus, knew that Bardos would be subcontracting all of the actual work out for substantially less, and deliberately hid this information from the Tribe. Why else would the Tribe's fiduciary instruct the parties bidding on a construction project to hide the fact that they were subcontracting the entire project out at less than half of the price to his client?

 

            The tribal council meeting minutes reflect that on March 14,2007, Kovall advised the Tribe that "there is a proposal from worth [sic] about the temporary parking and the temporary road, and there [sic] number is reaching almost a million dollars, [sic] to give the tribe options Mr. Paul Bardos is going to do another proposal for the tribe to consider." (SF ~ 20; Ex. 42.)

 

            That afternoon, Kovall emailed Heslop and stated, "I think Cadmus is going to get their first job today. So make sure you (we) are well taken care of." (Id.; Ex. 43.) On March 16, 2007, Heslop replied "Bank on it. AH." (Id.)

 

            This same day, Bardos sent Heslop an email containing the "competing proposals for the temporary parking and construction road." (Ex. 44.) Bardos attached the Worth Group's bid and a quote from Laird construction. The proposals were different. The Worth Group's proposal covered additional work than the Laird proposal, including grading, erosion! dust control, paving, patching and insurance. It also gave the Tribe two different options for building the temporary access road, one of which required the demolition of a structure. The first option was estimated at a cost of around $805,258. The second option estimated the cost at around $707,019.⁹

 

            The Laird construction quote, which was for less work, was for $335,135. Bardos' handwritten notes on the attached quote from Laird state that with an $800,000 proposal and $335,135 cost, Cadmus' net would be $464,865. Bardos further wrote that he would "do up a proposal to Gary and email it to him in the morning for a little under $800,000." (SF ¶ 22; Ex. 44.) Hours later, Bardos emailed Helsop Cadmus' Temporary Parking Lot Proposal" which called for Cadmus to be paid more than $750,000 for the work. (Ex. 45.)

 

            Bardos submitted the Cadmus bid to Kovall on March 20,2007 but back-dated it

 

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9 Note that Bardos' handwritten notes on the Worth Group's estimate listing the price of "Option A" as around $900,000 and "Option B" as $100,000 less are inaccurate. Bardos double counted the listed demo pricing -$94,957, in "Option A".

 

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