A third defendant pleads guilty in
government auction scheme
ST. THOMAS, V.I. – A
third man accused of participating in a scheme to defraud the government
through a property auction has admitted to – and has been sentenced for – his role
in the conspiracy.
Edward McKenzie, 61, pleaded guilty to taking part in
the scheme that occurred between January 18, 2012, and June 26, 2013, in which
the Office of the Lieutenant Governor (“OLG”) initiated a series of real
McKenzie faced four charges – conspiracy, obtaining
money by false pretense, conversion of government property and Criminally
Influenced and Corrupt Organizations Conspiracy (CICO) – in connection with the
crime. However, rather than face a jury,
McKenzie accepted the terms of a plea bargain.
Appearing before V.I. Superior Court Judge Michael Dunston on March 17, he
pleaded guilty to the single charge of compounding a crime and was sentenced to
a suspended jail term of 90 days, supervised probation for one year and 100
hours of community service.
On August 30, 2012, an auction in the St. Thomas-St.
John District was conducted and one of the properties auctioned was 97 Estate
Frydenhoj. An investigation by the Office of the Inspector General determined
that there were certain irregularities in the conduct of the bidding at the
auction. Based upon the investigation,
the Department of Justice filed criminal charges against McKenzie alleging that
he and others conspired and associated with an enterprise, through a pattern of
activity with the intent to defraud the Government by manipulating the OLG
property auction process with the ultimate purpose of fraudulently transferring
and obtaining the property located at 97 Estate Frydenhoj.
The Government of the Virgin Islands was prepared to
file a civil action under the Criminally Influenced and Corrupt Organizations
Act (“CICO”), alleging that McKenzie engaged in CICO civil violations, but on
March 31, DOJ entered into a civil settlement with McKenzie.
Commenting on a resolution of McKenzie’s criminal and
civil cases, Attorney General Claude Earl Walker stated, “DOJ has resolved
criminal charges against a third defendant in the tax assessor's property
auction scam. McKenzie has pled guilty for his role, and like two other
defendants who have also pleaded guilty, he has agreed to cooperate. The
prosecutors will continue to go through its mountain of evidence in this case
to prepare for trial against the fourth and final defendant. In addition, DOJ
has settled its civil CICO claims against McKenzie, whereby he has paid
$100,000.00 dollars to the Government of the Virgin Islands, and is barred from
personally participating or associating with any real estate, agent, broker or
other person for purposes of participating in any real property auction
conducted by the Office of the Tax Assessor.”
In all, four men – Sylvester Warner,
Calford Charleswell, Paul Sabers and McKenzie – were taken into custody and
charged in connection with the public auction scheme. On Feb. 8, Charleswell, 51,
of Est. Anna’s Retreat, who faced 14 charges stemming from the incident,
admitted his wrongdoing and pleaded guilty to the single count of conspiracy. Warner,
43, of Est. St. Peter, also pleaded to a single charge of conspiracy at a change-of-plea
hearing on Feb. 3.
An investigation by Nicholas
Peru, special investigator in the office of the Inspector General, led to the
apprehension of the four men. In his
affidavit supporting the arrests, Peru gave the following details:
A property auction was
conducted on Aug. 30, 2012. One of the properties being auctioned was 97 Est.
Frydenhoj, on which the opening bid was placed at $6,442.28. The first bidder
offered $75,000, a second person bid $42,000 and the third bid was $10,100;
however, the bidder tracking sheet prepared by Charleswell showed that there
were only two bidders on the property, according to Peru.
unwritten policy developed by officials in 2012 required that the three highest
bidders be recorded in the event that the highest bidder failed to meet the ten
percent deposit amount, but the day after the auction, the winning bidder did
not make the required deposit and the second highest bidder should have been
contacted, Peru wrote.
On Sept. 4, 2012, a deposit
of $2,000 was paid on a bid that was not noted on the record and on Oct. 11,
2012, a man paid the balance of $8,000 on the Est. Frydenhoj property and the
office of the lieutenant governor transferred the property to that man for
$10,000. Then, on Sept. 25, 2013, the man transferred the same property to
another man, according to Peru.
A woman whose name appeared
on the bidder tracking sheet told Peru that she accompanied Warner to the
auction and he completed the registration form using her name, but used his
address. She said Warner bid on the Frydenhoj property and told her that he was
bidding for a friend. On the day of the auction, Warner bid on three other
properties, but although he was the highest bidder, he failed to pay deposits
or take any of the properties, according to Peru.
The investigation revealed
that certain procedural changes made by officials at the office of the
lieutenant governor allowed individuals to fraudulently manipulate the bidding
process in a scheme in which the highest bidder purposefully makes a substantially
inflated high bid, then fails to post the ten percent deposit so that the
property would go to another bidder or individual for a substantially low
price, Peru wrote.
This manipulation prevented
potential bidders from making fair and legitimate bids on properties offered at
public auctions and potentially reduced the likelihood of the property owner
recouping any excess proceeds from the sale after taxes and fees are paid,
according to Peru.