Las Vegas Sun

September 27, 2021

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FBI eyes developers in expanded probe

The FBI's investigation into political corruption by local elected officials goes much deeper than a renegade strip club owner allegedly bribing a small group of Clark County officials.

"What we have so far is just the tip of the iceberg," FBI Supervisory Special Agent Kevin Caudle said of last year's federal indictments and plea agreements in the case. "This is not a case on strip clubs. It's a case on the (Clark) County Commission and what they were willing to sell their souls for."

In the last month the FBI has shifted its focus toward investigating developers and other politicians who have not been named in connection with the probe for accepting money and gifts for political favors.

Caudle is in charge of the local FBI's white-collar crimes section, and has overseen the investigation that led to November's indictments of former commissioners Lance Malone and Dario Herrera, current Commissioner Mary Kincaid-Chauncey and the plea agreements of former Commissioner Erin Kenny and former strip club owner Michael Galardi.

Caudle and Special Agent Joe Dickey, two of three agents who are working the probe, agreed to be interviewed by the Las Vegas Sun last week on the changing nature of the political corruption investigation.

When the investigation began nearly two years prior to the release of the indictments in November, agents were concentrating on the alleged ties between the commissioners and Galardi, but as they listened to more and more wiretapped recordings a bigger picture came into focus, Caudle said.

"Galardi and Erin (Kenny) were cooperating so we knew what we were looking for, but we started to be surprised over little bits of conversation we'd hear on the tapes," Caudle said. "We'd wonder, 'What was that about?' That's why we had to run the tapes for 18 months. Other things just kept popping up, and we couldn't shut it off.

"We knew Mike Galardi was using them, we just didn't know how much they were being used by others."

About three weeks ago investigators sent out more than 300 letters to politicians, developers and other citizens informing them that they have been recorded on the wiretaps. The FBI is required by law to send a notice to those who are on the intercepts, but it doesn't mean they are guilty of anything, Dickey said.

The recordings contain a lot of the daily business of the commission members and conversations with those they came in contact with, Dickey said.

Still, Caudle said he was surprised by the seeming indifference to the letters that those who received them have shown.

"We've gotten very few calls from anyone we've sent a letter to," Caudle said. "I'd think that there would be some more concern."

Caudle noted that "just about every politician in the state was sent one of the letters."

The names of the people who were sent letters remain under seal by a federal court judge, due to the ongoing nature of the case. The agents refused to disclose the names of any developers or other politicians being looked at as targets in the ongoing investigation.

Prosecutors have alleged Kincaid-Chauncey, Herrera and Malone took thousands of dollars from Galardi in exchange for their votes and influence over matters involving three Las Vegas strip clubs Galardi owned at the time, Cheetahs, Jaguars and Leopard Lounge.

The indictment charges Kincaid-Chauncey, Herrera and Malone with one count each of conspiracy to commit wire fraud, and 14 counts each of wire fraud. In addition Malone was charged with racketeering, Herrera faces eight counts of extortion, and Kincaid-Chauncey faces four extortion counts.

In plea agreements Kenny admitted to taking money from Galardi through Malone, and Galardi admitted to funneling $200,000 to $400,000 to commissioners. Galardi's plea agreement says the club owner tried to bribe public officials between 1994 and 2003, but the indictment only focuses on events from 1999 to 2003.

Prosecutors say the commissioners voted to change an ordinance regulating touching between strip club dancers and customers, changed zoning ordinances and made other efforts to help Galardi's clubs.

Kincaid-Chauncey has repeatedly said she has done nothing wrong, and Malone and Herrera have denied the charges through their attorneys.

Malone, who became a lobbyist for Galardi after he left the county commission in January 2001, is accused of being the connection between the commissioners and Galardi.

Dan Bogden, U.S. Attorney for the District of Nevada, has said that Malone "became a middleman for Galardi" to get money to other commissioners.

The middleman scenario appears to have been in effect for under-the-table deals involving development and zoning issues as well, but Caudle would not say if Malone served that role for developers.

"I can say that one of the people who have been indicted appears to have been the middleman," Caudle said. "(This person) knew how to get things done."

With more than 70,000 intercepted communications in Las Vegas, Dickey and the two other agents assigned to the case have been spending the majority of their time going over intercepts and transcripts and preparing for trial next year on the charges relating to Galardi and the strip clubs.

As they sift through the information they have been following up leads on developers, but it has been only recently that they have been able to really concentrate on the expanding investigation, Caudle said.

"I think that we'll see a lot (of new information) generated in the next six months," Caudle said of the investigation. "We've really just begun. We're closer to the beginning than we are to the end."

An example of where the investigation is headed came earlier this month when FBI agents requested records relating to the controversial commission approval of a drugstore and convenience store in 2001. Kenny was an ally of CVS drugstore developers, whose project was approved despite issues involving the location of the store and the amount of landscaping required as a buffer to surrounding homes.

"With CVS we know that there are some shenanigans that went on," Caudle said.

When asked about possible motives for developers wanting to bribe politicians, Caudle responded, "builders want to build. Expediting the process and zoning helps them to do that."

The road to opening the case and then expanding it to include development deals was not easy, Dickey said.

"Before we can even open a political corruption case the (special agent in charge) has to sign off on it," Dickey said. "We have to have probable cause.

"This is not a witch hunt. We're just going where the evidence takes us."

Other types of cases can be opened without approval from Ellen Knowlton, special agent in charge of the Las Vegas office of the FBI, but political corruption cases are handled with extra care, Caudle said.

"We are very cognizant of what we're doing with these cases," Caudle said. "They are difficult cases to prove, and we're very conscious that these kinds of cases can ruin someone's career."

The indictment has become an issue in Kincaid-Chauncey's reelection campaign.

Dickey said there were a lot of county employees and representatives who could have become entangled in illegal activities but chose not to.

"A lot more people chose to do the right thing," Dickey said. "When the affidavits are unsealed that will all come out and people will see that a lot of people had an opportunity to take advantage of the situation and chose not to."

The FBI affidavits include narratives of what Dickey and other agents found on the intercepts, and will likely be unsealed prior to a parallel case in San Diego going to trial.

Galardi pleaded guilty to one count of conspiracy to commit wire fraud in the San Diego case, which involves payments of illegal campaign contributions to three San Diego councilmen in an attempt to loosen strip club regulations in that city.

The San Diego investigation has also resulted in the additional indictments of Malone and the three San Diego city councilmen, one of whom has since died. There is no trial date for the San Diego case, but it is expected to move forward before the Las Vegas case.

In all there are nearly 120,000 intercepted communications from both cases, according to U.S. Attorney Dan Schiess, who is prosecuting the Las Vegas case.

The San Diego case will rely heavily on the intercepts from the Las Vegas case, Dickey said.

Las Vegas has had a history of political corruption, including Operation Yobo, an FBI investigation in the early 1980s that led to bribery convictions against two state senators and two Clark County commissioners.

Also in the early 1980s U.S. District Judge Harry Claiborne faced bribery charges in a trial that ended in a hung jury. In a second trial the bribery charges were dropped, and Claiborne was convicted of tax evasion, and was later impeached and removed from office.

Despite the history, and the current investigation, Las Vegas is no more of a breeding ground for these kinds of political malfeasance than other cities across the country, Caudle said, noting that political corruption ranks as the FBI's fourth priority behind only counterterrorism, counterintelligence and cyber crimes.

"There are political corruption cases all over the country," Caudle said. "It's just politics. There are going to be a few bad apples."

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