Edward Tezak the only remaining defendant to be tried in the Justice Departments criminal case involving $20 million of bonds illegally issued by a Holmes Harbor, Wash., Sewer District authority for a questionable office park project is scheduled to go on trial May 16 in a federal court in Seattle, attorneys said yesterday.
Tezak allegedly made fraudulent claims that he had arranged private financing for the office park project. After the debt was issued, he accepted a payment of $50,000 from the bond proceeds. He then allegedly laundered that payment through a bogus charitable organization, according to U.S. attorneys.
Four other defendants who had been criminally charged in the case reached plea agreements with federal attorneys last year and sources expect some of them to testify against Tezak.
Justice Department attorneys would not comment on their planned witnesses, but said the jury trial is expected to last about two weeks. Presiding over the trial will be Judge Robert Lasnik in the U.S. District Court for the Western District of Washington.
The others who settled criminal charges include Terry R. Martin, the developer and alleged ringleader of the fraudulent scheme to develop the office park; J. David Smith, Martins attorney; John H. White, Martins alleged banker who was vice president of Signal Mortgage in Lynnwood, Wash., and who also was involved in obtaining private financing; and Leslie Killingsworth, an engineer who was to keep the district apprised of the project.
Martin, Smith, and White are to be sentenced on June 17. Killingsworth is to be sentenced June 22.
Tezak pleaded guilty to one count of wire fraud and one count of money laundering on Aug. 19. However, Tezak withdrew his guilty plea on Jan. 25 after prosecutors recommended that Lasnik sentence him to 18 months in prison.
Meanwhile, Washington State Superior Court Judge Alan R. Hancock has scheduled a trial to begin Oct. 11 in the bondholders civil lawsuit against U.S. Trust & Co., the trustee for the bonds, as well as Prudential Securities Inc. and Wedbush Morgan Securities Inc., which sold the bonds.
The bondholders sued the companies in October 2001, claiming they misled them about the bonds.
The bonds were sold by a local improvement district, a bond-issuing authority created by the Holmes Harbor Sewer District. But in August 2001, the state auditor issued a report concluding the bonds were issued invalidly because the project was outside the Sewer Districts area of jurisdiction.
The office park was never built. More than half of the bond proceeds were used for land acquisition and fees. The bonds defaulted soon after they were issued.
Several of the defendants in the bondholders case including the district, four former commissioners, and the co-bond counsel and their firms last year agreed to pay $1.6 million to settle the charges.
