Part II - Wolfswinkel pulls the strings in family enterprise - East Valley Tribune: Thespeculators

Part II - Wolfswinkel pulls the strings in family enterprise

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Posted: Monday, October 10, 2005 6:21 am | Updated: 9:04 am, Fri Oct 7, 2011.

Conley Wolfswinkel would seem to be a bit player among land speculators in the south East Valley. His name does not appear on the deeds to the thousands of acres that he controls.

Even when his name does show up in records related to land ownership, it is hidden amid a chain of partnerships known as limited liability companies.

But a deeper look shows Wolfswinkel is the master of the land game in the south East Valley, the ultimate wheeler-dealer who has been the most influential real estate speculator in the area for most of his adult life.

The son of a gas station attendant, Wolfswinkel built one of the most extensive real estate empires in central Arizona in the 1980s. But that empire was toppled a decade ago. He declared corporate bankruptcy in 1990, and personal bankruptcy in 1991. He was later convicted of bank fraud and slapped with civil fraud judgments in excess of $2 billion, according to court records.

Today, his fortunes have been resurrected, with Wolfswinkel manipulating deals worth tens of millions of dollars and involving thousands of acres across the East Valley.

He works through companies titled in the names of his sons, his daughter, and his ex-wife, according to a series of lawsuits and court records related to the properties.

Together those companies own or control at least a half-dozen square miles in the south East Valley, almost all of it along transportation corridors and primed for development.

None of the companies bears Wolfswinkel’s name. That’s because he still owes the nation’s taxpayers close to $2 billion for helping to defraud the government through his dealings with the collapsed Lincoln Savings and Loan Association once headed by Charles Keating Jr., court records and interviews show.

Officially, Wolfswinkel is a consultant to his sons, Ashton and Brandon, and their primary investment vehicle, Tempe -based Vanderbilt Farms LLC.

But court records demonstrate Conley Wolfswinkel is the one controlling the deals. He puts together the partnerships, negotiates the terms, manages the properties and deals with the outside investors, an assertion that neither he nor his sons dispute.

Conley Wolfswinkel also is the one who has attempted to bully concessions from outside investors, court records show.

He insisted in an interview with the Tribune that he is nothing more than a consultant, a father in semi-retirement who is trying to use his wealth of knowledge and expertise in the East Valley’s real estate market to help his children.

"I have zero ownership whatsoever," Wolfswinkel told the Tribune in response to assertions in lawsuits that he is the real force behind the family holdings. "You can check every deed and document that there is. I’ve never asked my kids for anything. So tomorrow if they want to fire me, they’re free

to fire me.

"The only reason I go to work every day is to help them. I’m trying to semi-retire. I’ve had enough of this day-to-day work. But it’s been fun mentoring them."

Today, Wolfswinkel is free of most of his legal troubles.

He was sentenced to five years’ probation for his federal bank fraud conviction in 1993.

A $1 billion civil judgment against him, related to bogus land loans he obtained from the defunct Lincoln Savings, was cleared when his sons bought off the debt for about $1.35 million in 2004, court records show.

Still outstanding is more than $1 billion, plus interest, owed to the nation’s taxpayers under a separate 1995 civil fraud judgment in favor of the federal Resolution Trust Corp. (RTC), the agency that was set up to liquidate the assets of federally insured thrifts that failed in the early 1990s.

A renewal of that judgment filed in March by the Federal Deposit Insurance Corp., which took over the RTC’s functions, states Wolfswinkel has made no payments on the debt.

With interest, the amount Wolfswinkel owes to taxpayers is nearing $2 billion.

FDIC officials refused to comment on their efforts, if any, to collect.

But Michael Manning, the private attorney who was lead counsel for the RTC in its case against Wolfswinkel, says it is outrageous that the convicted swindler has paid such a small price for bilking investors and taxpayers out of hundreds of millions of dollars.

"Up to this point he’s gotten away with it," says Manning, who no longer represents the federal agency. "He didn’t dodge a bullet. He’s dodged a howitzer shell."

In the decade since Wolfswinkel agreed to the settlement, he has become so blatant in his control of his children’s real estate companies that the federal government could show "effective ownership," if it pursues the judgment, Manning says.

That would allow federal authorities to go after the assets of Vanderbilt and other businesses titled to Wolfswinkel’s sons, he says.

"I think there should be a certain level of outrage and I think things will be different for him in a year," Manning says. "He has flaunted his wealth so much and it’s becoming the worst-kept secret in the business and legal communities in Arizona that he owns and controls virtually all of those assets. It is so painfully obvious at this point that he is in deed and in fact the real owner of these assets; not his relatives or his friends."

Wolfswinkel says he has tried to negotiate a settlement with the FDIC, but without success. Until a couple of years ago, Wolfswinkel supplied financial statements to the FDIC and the agency has never alleged he’s hidden assets, he says.

Wolfswinkel acknowledged he has not made payments on the debt, and that realistically he will never be able to repay it.

"It’s something that I’ve got to probably take to my grave," Wolfswinkel says. "It’s just an unrealistic number."

BORN SPECULATOR

Wolfswinkel was 4 years old when his father died, he said in an interview last month. He was raised in the land business by his brother, Clifford, who developed projects in southern Arizona during the 1960s and 1970s.

By the mid-1980s, Conley Wolfswinkel was emerging as one of the state’s premier land barons.

He was a fixture in East Valley business and political circles even then, and a heavy contributor to political campaigns. His most recognized project was the Western Savings and Loan building, lined with blue neon lights, at Alma School Road and Southern Avenue in Mesa, now the Bank of America building.

Wolfswinkel had holdings scattered throughout the East Valley, most in the name of his company, Wolfswinkel Group Inc., later WGI Inc., which he owned with his wife, Bernadette.

"Back in those days, if it was in the East Valley and it was for sale, Conley had a piece of it probably somewhere along the line," says Vernon Schweigert, the courtappointed trustee for Wolfswinkel’s personal and corporate bankruptcy estates in the 1990s.

Wolfswinkel’s most ambitious project at the time was Rancho Vistoso, which he acquired about 1985 using money borrowed from Lincoln.

Wolfswinkel’s vision was to turn the roughly 6,000 acres at the foot of the Catalina Mountains into a high-priced residential development complete with luxury hotels and several golf courses.

Though Wolfswinkel appeared to be a premier land investor and developer in the mid-1980s, subsequent court cases reveal he was starved for cash and his holdings were heavily mortgaged.

At one point in 1986, he agreed to pay an annual interest rate of 120 percent to get a loan.

Wolfswinkel started paying his business expenses with personal checks he could not cover. Banks soon demanded that he pay only with cashier’s checks, which represent a direct obligation of the institutions that issue them, court records show.

By June 1986, Wolfswinkel was faced with a choice: Pay his bills or begin liquidating his properties.

He chose a third option — fraud.

Wolfswinkel hatched a conspiracy with John O’Neill, then vice president of United Bank of Arizona, according to court records. O’Neill issued cashier’s checks from the bank in return for personal checks from Wolfswinkel, even though both men knew Wolfswinkel did not have sufficient funds in his personal accounts to cover the draws, court records show.

By taking advantage of the "float," Wolfswinkel was able to show substantial deposits in bank accounts, when the actual balance was negligible or negative, according to court records.

In all, Wolfswinkel used the scheme to float about $197 million in checks through seven accounts, of which about $149 million was fraudulent, court records show.

By 1990, Arizona’s real estate juggernaut was crashing, and Wolfswinkel’s real estate empire crashed with it.

The RTC filed civil fraud charges against Wolfswinkel in its case against Keating’s Lincoln Savings, claiming Wolfswinkel owed Lincoln and other failed thrifts $225 million.

The RTC charged that Wolfswinkel conspired with Keating to artificially inflate the claimed value of Rancho Vistoso and other properties to make it appear the loans were secured with real estate of similar value.

COLLAPSE

Facing foreclosure on several of his properties, including Rancho Vistoso, Wolfswinkel declared corporate bankruptcy for his company, WGI Inc., in December 1990. Two months later, he declared personal bankruptcy.

Wolfswinkel claimed WGI owed $239 million and had assets of $172 million. However, all but about $8 million of the assets Wolfswinkel claimed was land in the midst of a real estate depression.

Schweigert, the bankruptcy trustee, says he ultimately recovered about $50 million for Wolfswinkel’s creditors.

Despite his apparent financial collapse, Wolfswinkel continued living a lavish lifestyle, according to court records. After declaring bankruptcy, Wolfswinkel racked up more than $500,000 "for his own personal benefit and consumption," according to one filing by the RTC. Among his expenses was $2,611 for a dinner party and $2,030 for vintage wine.

Wolfswinkel’s tenuous real estate empire seemed doomed in August 1991, when he was charged in a 20-count indictment alleging fraud, bribery, conspiracy and misappropriation of bank funds related to the United Bank checkkiting scheme. After a six-week trial, a jury convicted Wolfswinkel on fraud and conspiracy charges in July 1993.

After being sentenced to five years probation, Wolfswinkel declared: "It gives us a fresh start to begin honoring some of our obligations."

FRESH START

But Wolfswinkel’s fresh start had already begun.

His boldest move was to assemble a partnership to buy back Rancho Vistoso from his own bankruptcy estate.

Wolfswinkel owed Lincoln Savings about $100 million for Rancho Vistoso loans when he declared bankruptcy. In September 1993, he assembled a group of investors who bought the property for $37.5 million — a third of what he owed.

At the time, Wolfswinkel had already been convicted of fraud, but had not been sentenced. He has no ownership in the investment company that bought Rancho Vistoso, but is a consultant, says his lawyer, Lawrence Wright.

Schweigert says Wolfswinkel rebuilt his real estate fortunes by bringing in money from other investors, and by using the contacts he had built in the East Valley and other real estate markets in Arizona before his indictment. Part of Schweigert’s job was to ensure Wolfswinkel brought new money to his new real estate deals, and that he had not hidden assets in the bankruptcy.

Asked whether Wolfswinkel was able to shield some of his wealth from his creditors, Schweigert responded, "that’s a very tough question to answer."

Wolfswinkel lost what was in his name, Schweigert says. He was allowed to keep some assets that were tied up in partnerships that had not failed.

"He didn’t just have the clothes on his back," says Schweigert. "Plus he had all of his contacts. He had his friends. He had been in business a long time and he had sources that you and I as individuals wouldn’t have. He saw the future, so to speak, in terms of what was going to happen in the East Valley and he had enough contacts to take advantage of it."

REBUILDING

By 1995, Wolfswinkel was putting together new land deals involving hundreds of acres throughout the south East Valley, using partnerships titled to his children, public records show.

Wolfswinkel-related companies own or have recently sold large chunks of land along the path of the Santan Freeway near Gilbert Road. Since 1999, the Arizona Department of Transportation has paid more than $8.3 million for about 126 acres owned by Wolfswinkel’s sons or ex-wife, Bernadette, either directly or through corporations they control.

The Wolfswinkels bought large blocks of land in the path of the freeway in 1997, two years before the transportation department started acquiring those properties for the freeway in the area. They still own several prime pieces of land along the Santan.

Wolfswinkel-connected partnerships also own large tracts of land along Meridian Road and Hunt Highway in Maricopa County. Both of those properties, each roughly a square mile, are in corridors now under study as major transportation routes.

In Pinal County, Wolfswinkelrelated companies own nearly five square miles of land primed for development northeast of Johnson Ranch, and numerous smaller investments scattered throughout the area.

Among the few south East Valley land deals in which Conley Wolfswinkel is listed in corporate records is a joint venture called Vestar CTC Phase I LLC, which built a shopping center just south of the Santan Freeway at Gilbert Road. The Tribune’s south East Valley office is in the complex. The anchor tenant, Target Corp., owns its site, but the rest of the complex is still titled to Vestar, county records show.

Wolfswinkel is a "manager" of a company that co-owns the Vestar project, records show. The owner is a family trust that benefits his children, Wright said.

In addition to land titled to Wolfswinkel-related partnerships, property records and court cases suggest they have a piece of many other land deals throughout the East Valley in the form of "options," which give them the preferred ability to acquire properties to which they do not hold legal title, or participation agreements, which pay them a percentage of a development’s profits.

Many of the land deals Wolfswinkel put together since 1995 have recently soured.

Lawsuits alleging extortion, self-dealing and misspending of partnership funds by Wolfswinkel have been filed by companies owned by his brother, Daryl, and other relatives outside his immediate family involving most of the major land deals they are involved in.

Though Conley Wolfswinkel does business primarily through companies owned by his sons, the suits describe them as peripheral figures whose involvement in the deals is largely on paper.

All of the court cases make it clear that Wolfswinkel is the man in charge.

Even a special researcher appointed in 2004 by a Maricopa County Superior Court judge to sort out a specific legal dispute made numerous references to companies owned or controlled by Wolfswinkel in his report.

UNPAID DEBT

Although money Wolfswinkel has made as the architect of land deals worth tens of millions of dollars is not being used to repay his debt to taxpayers, it is buying respectability for him and his family.

In February, HomeBase Youth Services, a nonprofit organization that helps homeless teens, announced a $1 million donation from Wolfswinkel’s family, calling it "an unexpected stroke of generosity."

The money will be used to help build a facility for homeless youth in Mesa. It will be called the Dustin D. Wolfswinkel Center for Youth, named in honor of Conley Wolfswinkel’s son who was killed in a car crash in 1987.

Wolfswinkel’s family also donated about $1 million to the Marc Center in Mesa, which helps train people with developmental disabilities. The center also bears Dustin Wolfswinkel’s name.

Conley Wolfswinkel says the money came from his children, not him.

Last month, Wolfswinkel helped unveil a bronze statue of his late son that will be displayed in the Marc Center. Among those attending the event were Rep. J.D. Hayworth, R-Ariz., and Maricopa County Supervisor Don Stapley, a Mesa Republican, both of whom say they are longtime supporters of the center.

Wolfswinkel’s criminal history has not slowed his ability to attract some of the East Valley’s most influential investors into land deals involving his sons’ companies.

Among those who have paired with the Wolfswinkels to invest in large blocks of East Valley land are Marty De Rito and Bill Lund.

Last May, Mesa voters agreed to give about $80 million in sales tax incentives and rebates to a De Rito partnership building the Mesa Riverview shopping center. He received a similar incentive package to build an auto mall in Chandler.

De Rito was involved in an investment with Wolfswinkel companies that went bad after Wolfswinkel demanded a bigger cut of the profits. De Rito sold his interest in the deal to Vanderbilt for about 30 percent of what it was worth, according to his lawyer, Robert Nagle.

"By selling his interest to Conley, Marty felt a huge sense of relief because he was now done," Nagle says. "Marty isn’t doing any business with Conley. He’s making a conscious effort not to."

Lund, who got a $60 million incentive package for an auto mall in Gilbert, also has been involved in joint ventures with the Wolfswinkels.

Though Lund has bought out Vanderbilt’s interests in the deals, he says he was never reluctant to do business with Wolfswinkel, his friend since the 1980s.

"My business dealings with him have been wonderful," Lund says. "He has

been a man of his word. And to me, how else do you measure a man?"

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