Former Norwalk City Administrator William H. Kraus was sentenced in federal court in San Diego to five years' probation and fined $1,000 for his part in a land-fraud scheme that bilked investers out of more than $3 million.
Kraus, 50, is also required to pay $20,000 in restitution over the next 4 1/2 years to victims. U.S. District Judge Rudi M. Brewster sentenced Kraus on Monday.
The former city administrator pleaded guilty in 1987 to one count of mail fraud, which carries a maximum sentence of five years in prison and a $1,000 fine. But in an interview this week, Kraus maintained he was not involved in the scam and that he was held responsible for the actions of a co-defendant.
"If I had had the resources to have legally fought it all the way, the determination would have been different," said Kraus, who resigned from his Norwalk post in 1983 after questions arose about personal business dealings unrelated to the current case.
Kraus and seven other men were charged in 1985 with 23 counts of mail fraud in the use of two companies, one in California and one in Utah, to defraud investors. Some of the victims lost money by purchasing real estate at artificially inflated prices. The majority lost money by investing in a company that promised a 36% to 48% annual return based on what turned out to be a series of phony transactions.
In all, from 50 to 100 investors lost about $3.6 million. The victims were from California, Utah and other states.
Special Assistant U.S. Atty. Michael R. Pent, the prosecutor in the case, said Kraus received a relatively light sentence because he played a limited role in the fraud ring and because he agreed to cooperate with prosecutors. Pent said Kraus would have testified against his co-defendants had they been tried.
"We did evaluate his culpability as less than the others," Pent said. "We informed the court that he did cooperate in the manner we requested. As far as we know, he was ready to testify as per the (plea) agreement."
The charge to which Kraus pleaded guilty involved a single San Diego County property. Pent said Kraus allowed a beach condominium to be bought under his name in 1981. He then transferred the title to a co-defendant, and paid for appraisals that greatly inflated the property's worth, Pent said.
Two investors in the property lost about $50,000, said Pent, who added that there was no proof Kraus made any money off the deal.
Kraus left his Norwalk job in 1983 after a decade as the city's administrator.
Kraus said he is now self-employed, running a Garden Grove firm called William H. Kraus & Associates. The firm manages three nonprofit associations in Los Angeles and Orange counties, Kraus said.
Kraus has a Ph.D. in public administration and taught a class called "Foundations of Non-Profit Association Management" as recently as last year at California State University, Long Beach. A university spokeswoman said Kraus is not scheduled to teach at the university during the spring semester. Kraus said he will teach at three Southern California colleges this spring but he declined to identify them.
Another defendant was sentenced along with Kraus on Monday. Charles Carrasco, a former member of the Del Mar Fair Board, received a 90-day sentence, was fined $100 and paid $10,000 in restitution, Pent said. Carrasco pleaded guilty to misdemeanor obstruction of the mails, which carries a maximum sentence of six months in jail and a $100 fine.
The restitution money will go into a fund that will be divided among the victims.
Four other defendants in the case are scheduled to be sentenced next month and in May on charges ranging from mail fraud to accessory after the fact to mail fraud.
The prosecution of another defendant has been deferred and will be dropped if he pays $30,000 in restitution and serves community service, Pent said.
Yet another defendant, Lynn Dale Bogart of San Diego pleaded guilty in 1986 to one count of mail fraud and one count of conspiracy to commit mail fraud. He is serving a 10-year prison term on those charges and a separate counterfeiting charge.