DALLAS -One of the 14 people facing federal charges of corruption and bribery in association with the use of tax-exempt private-activity bonds to finance low-income housing in Dallas pleaded guilty Tuesday in the U.S. District Court for the Northern District of Texas.

The plea is the first admission of guilt from a 166-page indictment handed down in September 2007 that resulted from a three-year investigation by the Federal Bureau of Investigation of Dallas City Hall. The defendants are accused of offering or accepting bribes to obtain more than $2 million of tax-exempt bonds through the Dallas Housing Finance Corp. to finance four low-income apartment complexes.

Allen McGill, the former president and vice chairman of the Black State Employees Association of Texas and the BSEAT Community Development Corp., pleaded guilty to conspiracy to commit extortion for his role in bribing local and state officials. McGill faces a prison term of up to five years and a $250,000 fine, but he agreed to cooperate with the U.S. attorney's office with the investigation of "any other person's participation in criminal activities."

The other 13 defendants, including former councilman Don Hill and his wife, former planning commissioner D'Angelo Lee, state Rep. Terri Hodge, D-Dallas, and several developers, are set to go to trial on Jan. 20.

Evidence in the case includes transcripts of more than 30,000 wiretapped telephone calls, 100 consensual recordings by a wired witness, and more than 200 boxes of documents. Prosecutors said federal investigators also seized 17.5 terabytes of electronic information from city computers, which they said is the equivalent of more than 238,000 boxes of documents.

The indictment said the conspiracy began in February 2002 and did not end until June 2005.

Assistant U.S. attorney Marcus Busch declined to discuss the case, as did the defense attorneys.

The indictment said the Black State Employees Association of Texas is a sham organization, with its only two members being McGill and Darren Reagan, who also was indicted on the federal charges. Reagan is scheduled to go to trial Monday to face separate charges he defrauded the Dallas Housing Authority of more than $40,000 in Section 8 low-income housing assistance by renting property to his mother-in-law.

The federal indictment charges McGill and Reagan began conspiring in 2004 with Hill and Lee to obtain bribes from developers in exchange for endorsing their low-income apartment projects. If the developers refused the offer, the sham employee's association would oppose the project at its consideration by the City Council.

State law limited the number of the projects that could be built in southern Dallas, and the defendants are accused of soliciting and accepting bribes and kickbacks in exchange for endorsing four projects by Southwest Housing Development Co. in Hill's council district.

Southwest Housing president Brian Potashnik and his wife Cheryl were also indicted. The Potashniks are accused of concealing bribes to Hill and Lee by categorizing them as consulting fees, birthday party contributions, and payments for professional services.

Hill spoke in favor of Southwest Housing's successful requests for tax-exempt bonds and 4% tax credits from the city's housing finance corporation at council meetings on Oct. 27, 2004, and Nov. 10, 2004. At the same meetings, Hill opposed similar projects by other developers.

Hill is also accused of lowering the development costs of favored projects through the use of city general obligation proceeds dedicated for infrastructure projects in each council district.

A transcript of a conversation from June 3, 2005, shows the former mayor pro tempore telling a potential investor that city bond funds would be available for a project:

"I have bond money that I basically control that I am going to commit for the infrastructure on this project," Hill said. "It would be several hundred thousand dollars. Obviously, bond funds, I can't use them for everything. But I can use them for infrastructure without any question at all."

Hodge, who has represented a state house district in southern Dallas since 1996, is accused of receiving at least $10,000 a year in new carpets, rent, and utility subsidies for three years from Southwest Housing in exchange for supporting the company's projects.

Hill was elected to the City Council in 1999 and left in 2007 due to term limitations.


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