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Indictments string together a web of theft

By Michael Gisick, Susie Gran, Maggie Shepard
Originally published 08:33 a.m., March 30, 2007
Updated 12:10 p.m., March 30, 2007

Smart Box

How to steal $4.2 million

• The federal indictments say:

• Contractors working on the project would submit inflated bids or false invoices.

• Then-Metro Court Administrator Toby Martinez would approve the bids and invoices.

• State Senate President Manny Aragon would find money in the state budget to pay for them.

• At least seven players, including Aragon and former Albuquerque Mayor Ken Schultz, played a role in the scheme and kept a cut of the excess money.

More than $4 million was stolen from New Mexico taxpayers - with the accused thieves including former Senate President Manny Aragon - during construction of the Bernalillo County Metropolitan Courthouse, long-anticipated federal indictments say.

Those indictments, filed Thursday, detailed a scheme in which contractors would submit inflated bids to then-Metro Court Administrator Toby Martinez, who would approve them.

Aragon, a South Valley Democrat, used his position as state Senate president to secure money for the bids, the indictments claim. He and at least six others are accused of pocketing a cut of the excess funds.

Former Albuquerque Mayor Ken Schultz and two others have taken deals with the U.S. Attorney's Office in Albuquerque in exchange for reduced sentences.

Aragon, Martinez and wife Sandra Martinez, and sub-contractor Raul Parra remain to face a variety of charges.

All seven have been charged with conspiracy and mail fraud. Money laundering charges were also filed against Parra, Aragon and Sandra Martinez.

If convicted on all charges, each could face eight to 10 years in prison, Assistant U.S. Attorney Jonathon Gerson said.

Among the defendants, Aragon, who last year accepted a $200,000 buyout to leave his post as president of New Mexico Highlands University, is the biggest name. But his alleged $700,000 take wasn't the biggest share, according to court documents.

The Martinezes are accused of pocketing $2.05 million. Parra is accused of keeping $773,000, the indictments say.

Attorneys for the Martinezes and their co-defendants did not return phone messages Thursday.

Aragon has previously denied taking kickbacks.

Gerson, the lead prosecutor in the case, said the indicted defendants must appear in court to enter a plea on the charges, likely on April 12.

In the meantime, Gerson said, they will not face arrest.

The three people who have pleaded guilty will remain free until their sentencing at an undetermined date, Gerson said.

The stage is set

The indictments claim the scheme began in 1999 and continued through 2005, a year after the courthouse opened.

A $46.5 million state appropriation funded through revenue bonds started construction of Albuquerque's Metro Courthouse in 1998.

The next year, Design Collaborative Southwest was hired as the lead architect. Marc Schiff, who has accepted a plea deal in connection with the case, was the DCSW senior partner in charge of the project.

DCSW hired Schultz to work as a lobbyist for the firm.

A communications equipment firm called Datcom Inc. was subcontracted into the project in 2002. The company was run by Manuel Guara, who has also accepted a guilty plea.

In 2003, Sandra Martinez - wife of the court administrator - started a company called Smart Solutions, which she ran from her home, consulting on courthouse projects.

With the pieces in place, the indictments allege, Toby Martinez, Aragon and the contractors set about their scheme.

"The defendants would submit and approve for payment false invoices and excessive requests for payment," the indictments state, adding:

"The defendants would seek appropriations and supplemental appropriations from the Legislature . . . for the purpose, in whole or in part, of making state funds available to pay the false and fraudulent invoices."

In January 2002, the indictments note, Aragon made a capital outlay request in the Senate for $3.6 million for audio-visual and data-processing equipment used for video arraignments.

That was one of several supplemental appropriations for the courthouse project, which wound up costing $83 million, including an adjacent parking garage.

The indictments claim the proceeds of the fraud scheme were laundered through several bank accounts, including the one attached to Smart Solutions.

Aragon, a lawyer, received his share largely through his law office.

Aragon has previously said he was paid $20,000 as a legal consultant for one of the contracting firms, but denied taking kickbacks.

The mail fraud charges stem from allegations that the defendants used the postal service to send and receive the illegal funds.

Where the money went

The government is seeking to recoup the kicked-back money, providing some clues as to where it went.

Toby Martinez invested $600,000 in fraudulent proceeds in a casino boat in Germantown, Tenn., the indictment states. The government also seeks to take his 2005 Lexus.

Aragon invested his money with Financial Network Investment Corp. in El Segundo, Calif., the indictments state.

Next . . .

Though the FBI investigation that led to the indictments also focused on construction at the state District Courthouse and the Bernalillo County Metropolitan Detention Center, Gerson emphasized that Thursday's indictments were only related to Metro Court. The building opened in 2004, with a final price tag, including an adjacent parking garage, of $83 million - nearly double the original state appropriation of $46.5 million.

Defendants Parra and Guara also had roles in the construction of the $45 million state District Courthouse, which opened in 2001 after delays caused by changing the architectural design firm - DCSW was one of the two - and disputes over funding.

Allegations of corrupt construction practices first surfaced in a 2002 lawsuit against Parra by one of his former partners. That lawsuit, which contained references to Aragon, focused on construction of the District Courthouse.

The Bernalillo County Metropolitan Detention Center, also reportedly a focus of the FBI's investigation, opened in 2003 - almost two years late and $33 million over budget. DCSW was the architect on the project.

Asked if any other related investigations were still under way, Gerson said he couldn't comment. Office policy prohibited him from even confirming whether pending cases exist.