Former Huntington Beach Mayor Pam Julien Houchen and four other defendants have agreed to plead guilty to profiting from the sale of illegally converted condominiums, a federal prosecutor said Monday.
Houchen, the second Huntington Beach mayor in the last four years to admit guilt in a criminal case, could face up to 40 years in prison and a $2-million fine, in addition to restitution, according to the 95-page, signed plea agreement released by the U.S. attorney's office.
Prosecutors are recommending a much shorter punishment, roughly four to five years.
Houchen, 48, and the other defendants -- alleged mastermind Phil Benson of Pier Realty, Harvey DuBose of Stewart Title, notary Tom Bagshaw and investor Michael Cherney -- will appear Thursday before U.S. District Judge David O. Carter in Santa Ana to formally admit guilt, Assistant U.S. Atty. Andrew Stolper said.
Three remaining defendants -- investors Howard Richey and Jeffrey Crandall, and alleged straw-buyer Michael McDonnell, who prosecutors said helped Houchen sell an illegal unit in a city redevelopment zone -- have pleaded not guilty to fraud charges. They will be tried in federal court Oct. 4.
A federal grand jury indicted the eight defendants last December. All are current or former Huntington Beach residents except DuBose, who lives in Santa Ana.
Houchen, elected in 1996, resigned her seat nearly a year ago. She will plead guilty to eight counts of mail and wire fraud in connection with converting two four-unit apartment complexes into eight condominiums that she sold for a total of $1.74 million, according to the documents.
She was originally charged with 11 counts of mail fraud and seven counts of wire fraud.
Houchen's attorney, John Barnett, declined to comment Monday. Houchen could not be reached for comment.
Sentencing will take place later this year or early next year.
Benson, who now lives in Hayden, Idaho, devised the scheme to convert as many as 15 apartment buildings in Huntington Beach into condos by falsifying documents, according to the plea agreement.
He sold more than 40 units as condominiums for $11 million. Houchen, a real estate agent, worked with Benson at Pier Realty.
The conversions violated a 1984 city law that required apartment owners to modify the properties and pay fees before the units could be individually sold.
Scores of owners were unable to refinance or sell their units. Many faced $20,000 in city fees, although title companies that insured the sales later agreed to pick up those bills as part of a settlement with the city.
The illegal condo conversions came to light in 2002 when the building department received a complaint that work was being done at a residence without the necessary permits.
The Planning Department investigated and confirmed that work was being done illegally. Six months later, it received another complaint, and city officials began a wider investigation. The city turned over its findings to police, who were also assisted by the economic crimes division of the Orange County district attorney's office.
The plea agreements, which will be filed today in federal court, show that the other four defendants have agreed to the following terms:
* Benson will plead guilty to 24 counts of mail and wire fraud. He could face 240 years in prison and $6 million in fines; the suggested sentence is between 87 and 108 months.
* DuBose, charged with forging documents to insure the sales transactions, will plead guilty to 20 counts of mail and wire fraud. He could face 220 years in prison and $5 million in fines, plus restitution. His suggested sentence is 70 to 87 months.
* Bagshaw will plead guilty to two counts of wire fraud; the suggested sentence is 18 to 24 months. He could face up to 10 years in prison, restitution and a $500,000 fine.
* Cherney will admit to making a false statement to federal investigators, which carries a maximum sentence of five years in prison and a $250,000 fine.
In July, the Huntington Beach City Council took steps to approve permits for the final 42 illegally converted condos, allowing the new owners to sell or refinance their units.
The city has faced political scandal before.
In January 2002, former Huntington Beach Mayor Dave Garofalo pleaded guilty to a felony and 15 misdemeanors, a month after resigning from office.
Garofalo was accused of corruption of office by repeatedly voting on matters involving companies that bought advertising from his publishing business. He was sentenced to three years' probation, fined and ordered to complete 200 hours of community service.
Houchen entered city politics in the mid-1990s when she headed planning efforts for the town's annual Independence Day parade. After she was elected to the council, she was among those who urged Garofalo to give up his council seat as the investigation into his affairs heated up.