Motive lacking in Stapley land deals

Conley Wolfswinkel was about to lose the second largest civil case in state history as Maricopa County Supervisor Don Stapley watched silently from the back of the courtroom. Stapley had nothing to do with the lawsuit. He had not attended any other hearing in the monthlong trial.

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But he did show up without explanation for the closing arguments two years ago before the jury assessed damages of up to $360 million against Wolfswinkel and family-owned companies he represents. The verdict was later thrown out by the judge.

“It was an oddity in a case that was completely chock-full of oddities,” Daniel Dowd, the lawyer for landowners who were suing Wolfswinkel, said of Stapley’s presence. “We didn’t know what the connection would be for him to appear.”

The connections between Stapley and Wolfswinkel are the foundation of a 118-count indictment issued against the longtime supervisor in November. They also are at the core of what has been characterized as an ongoing bribery investigation by the Maricopa County Sheriff’s Office.

Stapley, a Mesa Republican, is charged with failing to list business and real estate interests on financial disclosure forms.

There is no dispute that Stapley has been paid about $2 million by Wolfswinkel-connected companies since August 2003, when they did their first land deal together. Those payments were to maintain “options” that allowed the Wolfswinkels to buy back the land.

There is no question that many of Stapley’s properties are not listed on his financial disclosure forms. His lawyers contend they did not need to be disclosed individually.

But what is missing so far is any allegation that there was something improper about the land deals themselves, or an explanation of why Stapley would risk his political career, family name and personal freedom to conceal the transactions.

The law does not require prosecutors to prove a motive to get a conviction. But without some evidence that Stapley had something to hide, it will be tough to get a jury to convict him on felony charges of perjury and forgery, according to defense lawyers who have represented politicians in past criminal cases.

“The area of battle is going to be, was he intending to defraud anybody?” said Melvin McDonald, a former county prosecutor, U.S. Attorney for Arizona and Superior Court judge. “If you are defending the case, you are going to attack what is his motive? Why in the world would he do it?”

The why is rooted in the land deals between Stapley and Wolfswinkel and his sons, according to statements made by police and prosecutors since the indictment was announced.

Representatives of the sheriff’s and county attorney’s offices would not discuss the details of the case against Stapley, or the ongoing investigation into his relationship with Wolfswinkel.

But they have made clear in court documents that the most fertile ground for establishing a motive is Stapley’s connections with Wolfswinkel, who was convicted of federal fraud and conspiracy charges in 1993 and now works as a consultant to real estate companies owned primarily by his sons.

Since the indictment was announced, sheriff’s deputies have carried out a series of searches on Wolfswinkel-related companies, business associates and even a water district that encompasses large chunks of Wolfswinkel land near Gilbert that was created by the Board of Supervisors in 2002.

Sheriff’s investigators have suggested in court documents that the land deals between Stapley and Wolfswinkel may be sham transactions concocted to justify payments to the influential supervisor.

Public land records do document the sales, as well as the fact that options are attached to the properties. However, they do not reveal the terms of the option agreements or the amount of money Stapley was paid to maintain them. Those details were only revealed after deputies searched the Wolfswinkel offices in January.

“He continued to mislead the public,” deputy county attorney Lisa Aubuchon wrote of Stapley in a recent court filing. “Why? Because he was receiving payments as 'options’ from convicted felon Conley Wolfswinkel and he didn’t want the public to know that.”

Neither Wolfswinkel nor anyone connected with the companies he represents has been charged with a crime in relation to their dealings with Stapley.

Earlier this month, Maricopa County Attorney Andrew Thomas sent the case to Yavapai County for prosecution in an effort to resolve his long-standing disputes with Stapley’s fellow board members.

MARKET MASTER

Stapley and Wolfswinkel have been friends since they attended Westwood High School in Mesa together in the late 1960s, according to Lee Johnson, a lawyer for Wolfswinkel’s companies.

Wolfswinkel built one of the largest land investment empires in Arizona through the 1980s. But his apparent mastery of the markets crashed in the real estate collapse at the end of that decade. Wolfswinkel declared corporate bankruptcy in 1990, and personal bankruptcy a year later.

In 1993, he was convicted of fraud and conspiracy for floating about $150 million in bad checks. He was sentenced to probation and has since rebuilt his land portfolio to an estimated 70,000 acres throughout central Arizona.

However, Wolfswinkel technically owns none of it. He acts as a consultant, running the companies owned primarily by his sons.

Stapley, a descendant of Arizona pioneers, also built his own land business, though not on so grand a scale. Stapley entered politics in 1994 and was elected to his first term on the Board of Supervisors, a job he has held since.

Stapley and Wolfswinkel were briefly partners in 1996, when they were involved in a short-lived and unsuccessful attempt to buy the Scottsdale Galleria, a then-defunct downtown shopping mall.

What happened next is in dispute.

DAMNING EVIDENCE DISPUTE

The most damning evidence that has surfaced so far is the allegation that Wolfswinkel began paying Stapley $10,000 per month in 2002, a year before their first documented land sale.

That allegation came from Joan Stoops, a former bookkeeper for Stapley’s company, during an interview with detectives in January. Stoops later said in a sworn statement for defense lawyers that she was mistaken about the 2002 payments.

She refused to comment when contacted by the Tribune.

If those payments can be verified, they would provide the motive for Stapley concealing his connections to Wolfswinkel, according to affidavits filed by sheriff’s deputies in seeking search warrants. Stapley cast votes in 2002 that led to the creation of a water district in the Gilbert area that included large tracts of Wolfswinkel land. Wolfswinkel’s son, Brandon, was later appointed to the district’s board of directors.

Stapley missed the board meeting at which the district was formally authorized and Brandon Wolfswinkel was appointed, but did vote in earlier board actions.

Sheriff’s deputies cited Stapley’s actions on the water district as a possible political payback to Wolfswinkel when they sought a search warrant of the district’s offices in Gilbert last February.

Lawyers for both Stapley and the Wolfswinkels deny there were any payments in 2002.

Unless Stoops’ allegations can be proven, the case against Stapley and the ongoing investigation of his connections to Wolfswinkel come down to a series of outwardly legal land deals that began in 2003.

Stapley would not agree to an interview about his relationship with Wolfswinkel. The Tribune sent a series of written questions about the transactions to Stapley’s lawyer, Paul Charlton, but he also refused to discuss the land sales and related option payments in detail.

A review of public records, including documents released from the sheriff’s investigation, shows Stapley was paid more than $1.8 million related to the options between August 2003 and July 2008. Those payments are still being made, but new totals are not available.

LUCRATIVE OPTIONS

Stapley had been a relatively small-time player in the Valley real estate business before his first land deal with the Wolfswinkels. In August 2003, Stapley’s company, Arroyo Pacific Investments, bought 210 acres near Arizona Farms and Felix roads in Pinal County from the Wolfswinkels for $2.3 million.

The deal was contingent on a separate “option” agreement that gave the Wolfswinkels the right to buy the land back, at the same price, for a period of two years. In return, they agreed to pay Stapley’s company a monthly fee and a commission to his real estate brokerage if the property was repurchased.

Less than a year later, the Wolfswinkels exercised their option to buy back the land, which they resold to another developer for $4.4 million. By then Stapley had received $442,309 in payments from the Wolfswinkels. That is in addition to the $2.3 million that Arroyo Pacific was paid when the Wolfswinkels repurchased the land.

Stapley used the money to buy two new parcels from a different Wolfswinkel company — 80 acres near Florence and 70 acres near the town of Maricopa.

The total purchase price for those parcels was $2.3 million — the amount Stapley received from the 2003 deal. As with the original transaction, options were attached to the two new properties to allow the Wolfswinkels to repurchase the land at the same price. Those options are still in effect, though the terms have been renegotiated, according to Johnson, the Wolfswinkel lawyer.

Stapley’s company has been paid about $1.4 million to maintain the options on the land it acquired in the 2004 transactions. That is based on payments through last July reported in a court document filed on Wolfswinkel’s behalf.

Johnson said the payments have been reduced after the option terms were renegotiated in light of the bad real estate market.

He did not have the current figures.

MAXIMUM BENEFIT

The option agreements appear to be structured to give Stapley the maximum benefit and minimum risk, according to Paul Habibi, an expert in real estate finance at the Anderson School of Management at UCLA.

At the Tribune’s request, Habibi reviewed documents related to the option agreements between Stapley and the Wolfswinkels, including affidavits from Wolfswinkel employees filed in court.

The options are legal, but unusually lucrative for Stapley, said Habibi, a lecturer on real estate investment and co-founder of a southern California development company.

In the 2003 transaction, the Wolfswinkels ended up paying Stapley about 20 percent of the sale price just to maintain the option for a year. That is a far more costly means of financing a property than a conventional bank loan, especially since the Wolfswinkels already owned the land, Habibi said.

If the land went up in value, the Wolfswinkels would buy it back and Stapley would keep the lucrative option payments.

If the value held steady or declined, Stapley would still get the monthly payments, even if the Wolfswinkels did not exercise their option.

“It seems to me like the actual structure of the deal itself didn’t have any financial merit other than to provide an option payment,” Habibi said. “I don’t want to weigh in on innocence or guilt. But if I were to think creatively, this would be a perfect structure to make something unscrupulous happen if you want it to.

“It doesn’t really make sense to me that you would sell something with an option to buy it back at what you sold it for. It doesn’t seem to me like there is any logical reason why somebody would do that except to play this shell game.”

FLEXIBLE FINANCING

Johnson said the Wolfswinkels frequently sell land with options attached as a means of raising cash without going through a bank for a loan. While banks might charge lower interest rates, they do not provide the flexibility that is needed to make strategic investment decisions, Johnson said.

With an option, company officials are free to walk away from a property without going into default, Johnson said. When the economy turned bad, many of the options — including Stapley’s — were renegotiated for more favorable terms, something banks would be reluctant to do, Johnson added.

“Selling the property gets our money back, so our cash is freed up for other uses,” he said. “We typically expect to resell the property at a high enough price that the option payments will be a relatively small factor in the transaction.”

The terms of the option agreements with Stapley are similar to those that the Wolfswinkels entered into with other land investors, Johnson said.

As yet, neither sheriff’s investigators nor prosecutors have claimed that the land deals or option arrangements are illegal.

They also have yet to cite an instance in which Stapley has used his position as a supervisor to improperly benefit Wolfswinkel or anyone else he has done business with.

Stapley declared a conflict of interest and did not vote in December 2006 when the Wolfswinkels sought zoning changes to allow an automotive testing facility on about 2,400 acres they owned in the West Valley. That is the only action the board has taken on a Wolfswinkel property since 2002, according to company officials.

“They still have absolutely no allegation anywhere that supports a belief that the Wolfswinkels were seeking improper influence or receiving improper preferential treatment on anything,” Johnson said.

“It seems to me the flaw in their logic is they never get around to saying, 'Here’s why we think there was bribery.’ There’s no allegation of any such thing that would be the missing link here.”