Line of Attack: Did Dean Heller let a diamond scam happen under his watch?

By David McGrath Schwartz

Sunday, Aug. 5, 2012 | 2 a.m.

Line of Attack is a weekly feature in which we parse a political attack, looking at the strategy behind it, how the campaign is delivering it and what facts support or refute it. We’ll assign it a rating on the fairness meter: Legit, Eye Roll, Guffaw, Laughable or Outrageous.

Attack: Dean Heller is responsible for a fraud in which a Las Vegas shell company sold stock in fictitious diamond mines.

Method of delivery: Rep. Shelley Berkley’s campaign started airing a statewide ad Thursday with the charge. It starts with a clip of a Heller ad from 2006, when he was running for Congress, saying he stopped fraudulent marketing schemes as secretary of state. It then says, “But while Heller was supposed to be stopping fraud, a Nevada diamond company broke the law, scamming investors out of $64 million dollars.”

The narrator also says, “Heller took campaign cash from a co-conspirator, and his office authorized the sale of the company’s stock.”

And the kicker: “Dean Heller. He’s never been for you.”

Strategy: Berkley needs to change the subject from the ongoing ethics investigation that has saddled her campaign. She is under investigation by the House ethics committee for her work on kidney care issues while her husband is a nephrologist. After running ads directly responding to the alleged ethics violations, this ad intends to take some of the heat off of her — she’s not the only one with ethical problem.

Fairness meter: There was, indeed, a diamond scam in Las Vegas. A Department of Justice investigation charged that from 2001 to 2009, CMKM Diamonds, Inc., a Las Vegas company, sold billions — billions — of shares to investors, using Internet marketing and sponsoring a car at “funny car” drag races throughout the country.

But the fundamental question of the ad is: How much responsibility does the secretary of state have in investigating companies registered to do business in Nevada?

Not much. The investors in the company have sued the Securities and Exchange Commission for the fraud. The Nevada secretary of state, the office Heller held for eight years before going to Congress in 2006, primarily presides over elections.

The Secretary of State’s Office does have the authority to investigate securities fraud, but it appears there was an SEC investigation at the time (it suspended trading of the stocks in 2005), and holding Heller’s office responsible for all frauds in Nevada during his time in office is unfair.

Also, calling a campaign contributor to Heller a “co-conspirator” in the case is wrong. The contribution the Berkley campaign points to came from Rendal Williams, who gave Heller $4,200 in 2005. Williams was CEO of U.S. Canadian Minerals, which had business dealing with CMKM. But Williams was never indicted or charged.

We label this ad Laughable.