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October 2, 2014

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J. Patrick Coolican:

On order for Danny Tarkanian’s congressional term: a ‘stacked failure sandwich,’ complete with FDIC suit

Image

Sam Morris

Congressional candidate Danny Tarkanian gets a congratulatory hug from a supporter at his primary election night party at Born and Raised tavern, Tuesday, June 12, 2012. Tarkanian will face Steven Horsford in the general election.

Danny Tarkanian

Policy director Ben Stecker (L) and volunteer Dean Stump help Danny Tarkanian prep for a Republican debate Friday, April 30, 2010. Launch slideshow »
J. Patrick Coolican

J. Patrick Coolican

If the voters of Nevada’s newly created Congressional District 4 aren’t careful, they could wind up with a congressman who is in bankruptcy. But that’s just the start of the weirdness. They’ll also have a congressman who is being sued by an independent agency of the federal government.

I’m speaking of Danny Tarkanian, son of the legendary UNLV basketball coach and the perpetual Republican candidate. He’s lost three political campaigns since 2004.

This time, given a significant name recognition advantage over his opponent, state Senate Majority Leader Steven Horsford, he’s again in the hunt and leading in some polls.

As voters in the district make their decision, they will have to consider that the Federal Deposit Insurance Corporation claims Tarkanian owes it $17 million, and a federal judge agrees.

Let’s review how Tarkanian and his family got themselves into this bind.

As my former colleague Michael Mishak reported during Tarkanian’s failed 2010 Senate bid, Tarkanian was approached by a friend and business partner in 2007 to invest in Dignitary Downs, an “equestrian destination resort” in Anza, Calif., complete with a 200-room hotel, restaurant and jockey school.

The Tarkanian family company, Diamond Properties, would play the role of “hard money lender.” It would borrow money from La Jolla Bank, using its own property as collateral, and then lend it to the developer at high interest. This was faddish during the boom, especially for “unconventional” development schemes — such as, say, a horse resort — that couldn’t get regular financing.

Tarkanian personally guaranteed the loan from La Jolla Bank, which means he was on the hook. He used a nearly 9-acre undeveloped parcel near the M Resort as collateral. Needless to say, it’s worth a fraction of what it was in 2007.

Horse resort ... Anza, Calif. ... hard money loan ...2007 ... La Jolla Bank: This is a thickly stacked failure sandwich.

Almost immediately, the developer went into default. Sadly, there would be no horse resort after all.

Meanwhile, La Jolla Bank failed and was seized by the FDIC, the independent government entity that insures depositors and supervises the soundness of banks, managing them when they fail.

Quick review of the FDIC: When you deposit money in a bank, up to $250,000, it’s insured by the FDIC. So when a bank fails, the FDIC goes after money owed to the bank so that depositors can get their money. It’s one of the institutions created during the Great Depression that is an important pillar of a stable banking system.

With the FDIC having seized La Jolla Bank, Tarkanian and his business partners now owed all that money to the FDIC.

Tarkanian countersued, alleging he was defrauded by the developer who, he said, was in cahoots with the bank.

A federal judge ruled against the Tarkanians in a summary judgment in May, which is the legal equivalent of the referees stopping the game at halftime because it’s such a blowout.

The government foreclosed on the property that the Tarkanians were using as collateral. It was sold at auction for $3.2 million, far less than what it was worth in 2007 when it was used as collateral.

That means the Tarkanians are still on the hook for $17 million, as a judge declared in May.

Tarkanian’s counsel now argues that California law requires that the government forgive the remainder of the debt following the auction of the land. The government disagrees, noting that this kind of “anti-deficiency” protection doesn’t apply in this case because of Tarkanian’s personal guarantee.

I spoke to Tarkanian campaign spokesman Ron Futrell, who said the judge’s decision isn’t “binding,” which I’m sure would come as a surprise to the judge. What Futrell meant was that with the appeal, the ruling isn’t final, which is true. He said that given the appeal, the litigation will go on for years and thus won’t force Tarkanian into bankruptcy anytime soon.

Futrell said the real story is that the FDIC is pursuing Tarkanian for political reasons. (On this point, he said that’s his personal opinion and that he wasn’t speaking for Tarkanian.)

The FDIC doesn’t comment on ongoing litigation, but a spokesman noted that the agency is pursuing litigation against 647 individuals nationwide.

“Danny is always going to be out there as a fighter. He believes he’s right about this case,” Futrell said.

I asked to speak to Tarkanian directly. I never heard back. Calls to Tarkanian’s attorney were not returned.

Bottom line: This doesn’t look good for Tarkanian, who has acknowledged he doesn’t have the money for a bond against the $17 million and would become insolvent if the FDIC is successful.

If this occurs and Tarkanian wins the election, Nevada would be something of a national embarrassment. We would be sending to Congress a man who owes the government millions of dollars and, presumably, will be forced to declare bankruptcy because he can’t pay.

Also, Tarkanian seemingly would be caught in a web of conflicts of interest. He’d be working in one branch of government while in hock to a government agency. He’d be voting on issues — specifically regulation of the financial services industry — that are bound up with his personal money problems.

The question I have for Tarkanian, who has lent his campaign some of his own money: Why are you running for Congress when you should be getting your personal affairs in order?

Who knows? Maybe he thinks the FDIC will stand down if he makes it to Congress.

And maybe that horse resort will prosper after all.

Sun researcher Rebecca Clifford-Cruz contributed to this column.

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  1. We got Coolican's side of story, now let's hear from Danny Tarkanian and then let Nevadan voters decide on Nov 6, 2012.

    CarmineD

  2. I guess it's up to the voters now...

    There are certainly folks in congress and the WH with similar issues...

  3. How about a similar article on Shelly Berkley and her quest to have her then boss, Sheldon Adelson, bribe Clark County Commissioners? Or on her votes to line her MD husbands pockets? Naw, that's not relevant to her bid to become a U.S. Senator. A vote for Berkley is a vote for corruption but, since she toes the line for the "progressive" agenda, it's no big deal to the left.

  4. Yes, I am sure the FDIC has singled out Lil' Tark because of his 'politics'...

    Riiiight.

  5. Gotta love the "But wait, she did something wrong too" defense. Just like my kindergartener.

  6. Not much of a choice. Any ideas for a write-in candidate?

  7. As a voter of Nevada's newly created Congressional District 4, I am certain that I like many others in rural Nevada will be disappointed by either of the major political party candidate's winning this new seat this November.

    Jobs and water are most important in rural Nevada and being represented by corrupt people in congress shows what type of people gravitate to Politics in Nevada and that the once noble opportunity of representing "the people" has now become, what can "the people" do for my bank account?

  8. To quote: The question I have for Tarkanian, who has lent his campaign some of his own money: Why are you running for Congress when you should be getting your personal affairs in order?

    The facts are the facts.

  9. "...thickly stacked failure sandwich." Pulitzer caliber!

    "If this occurs and Tarkanian wins the election, Nevada would be something of a national embarrassment." WOULD BE?!?!? WOULD BE?!?!?

  10. "I'll take the guy that has an education and a little business sense over the government mooch!"

    The man leveraged his assets to fund a SPA FOR HORSES.

    Some kooky con-man came to Danny with the idea for a horse resort, a patently awful idea that was a guaranteed loser, and Danny said, "SIGN ME UP AND LET ME GET YOU SOME CASH!"

    That's the "little business sense" you're celebrating.

    Tark's a joke.

  11. Patrick is not embarrassed by Horsford's corruption?

    Sad.

  12. Doesn't a Congressman get a pension after one term? No wonder he keeps trying.

  13. Homer:

    Think Jon S. Corsine. Your post is prima facie evidence that moral righteousness knows no political bounds.

    CarmineD

  14. "Doesn't a Congressman get a pension after one term? No wonder he keeps trying."

    No not under the current FERS. If you have a specific example please post. One term gets a member a portable retirement account that he/she can leave alone, pending additional government service. Or, take with him/her and roll over into another qualified comparable retirement system. Remember Congressmen, since 1986, come under Social Security with a TSP account add on [think self-directed IRA subject to members' own contributions and government match subject to limitations and restrictions].

    CarmineD

  15. More Sun BS. Ignoring Horsford's flat out corruption to focus on this.

    Sad Leftists who call themselves Journalists.

    Pat---when is the Horsford corruption story running? You could do a 3 part series and still not get through it all.

  16. If this is what Danny Tarkanian does with his own money, what will he do with the public's money?

  17. Coolican, typical liberal elitism jargon. Probably never took a chance in your life, other then setting your silver spoon down. Tark took a chance, the american way and lost. Now liberalism says he is a bad guy and if up to Coolican would build a deptors prison for him and many others. Go home and watch more Big Bird

  18. Tarkanian is a proven 3 - time loser in politics. He is also a total loser in private life choices. Running on his dad's name is getting stale, like a week old carp. I don't want any loser with a multi-million dollar lawsuit pending, representing me. He already lost the lawsuit, like he lost every candidacy he has ever persued. He is a loser in all aspects of life. This teabagger candidate should be defeated, yet again, and he will be.

  19. I don't see where tying Horsford to Tarkanian's financial disaster is relevant. Tarkanian is a LOSER in every sense of the word. One of his lying ads states that he is a "job creator"; the only jobs he creates are his attorneys, and the fools who work for his ultimate 4th LOSS at elected office. This teabagger fool needs to be put on the shelf. Maybe after being a FOUR TIME LOSER, losing his multimillion dollar lawsuit, this dweeb will finally disappear for good.