Indy Land Bank scandal widens with new promise of kickbacks

The Indy Land Bank corruption scandal widened Thursday with an allegation that its former administrator steered a city mowing deal to a contractor in exchange for the promise of kickbacks.

A new indictment handed down by a federal grand jury named Reggie Walton, the since-fired assistant administrator who oversaw abandoned housing efforts, and Mark Harsley, the mowing contractor. Both were charged with wire fraud.

Harsley became the sixth man to face charges in a joint FBI and Indiana State Police investigation that first rocked Indianapolis city government in May, when agents raided the City-County Building.

The lead prosecutor on the Land Bank probe says investigators have found no evidence of actual kickbacks from Harsley to Walton, thanks to bad timing: Harsley didn't get his first payment from the city until June, after Walton's indictment in the first case.

"Kickbacks, bribes, fraud — these are words we've heard all too often lately to describe the actions of these public officials," U.S. Attorney Joe Hogsett said during a news conference. "It is time we begin calling the waste and abuse of tax dollars exactly what it is: theft."

Walton, Hawkins and three men outside city government stand accused in the earlier case of engineering sales of Land Bank properties that could be fixed up and sold at a profit, with kickbacks flowing back to the city employees. Walton and Hawkins worked together in the Department of Metropolitan Development. They were fired following their indictments.

In October, Hogsett's office added new allegations that Walton and a nonprofit director also profited off victims of an earlier Indianapolis housing fraud whom they were asked to help.

Hogsett — seen by some as a potential Democratic candidate for Indianapolis mayor or another elected office — said the the latest indictment, focusing on the mowing contract, offered more of the same.

He expressed hope that such prosecutions would inspire confidence among residents of Indianapolis and other cities that wrongdoing is being taken seriously.

Also during the news conference, Bob Jones, the FBI's special agent in charge of the Indianapolis office, announced the formation of a new Public Corruption Task Force that will zero in on similar investigations.

The scandal has hit close to home for two-term Indianapolis Mayor Greg Ballard, a Republican who's considering seeking a third term in 2015.

Hawkins, 28, was Ballard's one-time special assistant before he became a special projects manager for DMD.

Last week, Hawkins filed a document indicating his intent to plead guilty to a count of wire fraud. The plea petition says Hawkins' potential penalty ranges from no time in prison to 20 years, depending on federal sentencing guidelines.

No hearing for his formal guilty plea had been set. It would be the first in the case.

The Land Bank has acquired more than 1,000 distressed or abandoned properties that didn't sell in county tax sales. The city aims to make the houses more attractive to buyers by scrubbing their titles and tax liens, then selling them for as little as $1,000.

The new allegation over Harsley's mowing contract — one of many the city uses to maintain its Land Bank stock — comes as city officials prepare for the public relaunch of the Indy Land Bank next month.

Officials have been working with a nonprofit partner, called Renew Indianapolis, to increase accountability measures and add some controls over how buyers can use the properties.

"The Department of Metropolitan Development appreciates the continued efforts of investigators in this matter," said a statement issued Thursday by DMD Director Adam Thies. "DMD has been in full cooperation with the Justice Department throughout the process and will continue to do so in the future."

Harsley's mowing contract, for a business that went by the names ABS LLC and Core Contracting, was among several approved by the Metropolitan Development Commission in March. It was set to run through Dec. 31.

A DMD spokesman said the amount paid to Harsley so far wasn't available Thursday.

Assistant U.S. Attorney Brad Blackington, who is leading the prosecution on the Land Bank cases, said the contract set Harsley's payment at $24 for each lawn mowed, with a cap of nearly $40,000.

Harsley works for the Indiana Department of Workforce Development, Blackington said. But he did not think Harsley's state employment was related to the alleged scheme. (A LinkedIn profile under Harlsey's name says he is a constituent coordinator, but his employment status could not immediately be confirmed.)

Before Harsley won the contract, the indictment says, Walton solicited and accepted gifts, payments and other items of value from Harsley in exchange for "favorable official action."

But the document doesn't specify what Walton received, beyond the promises for future kickbacks.

Walton's attorney, Michael Donahoe, declined to comment on the new indictment. Harsley's newly assigned attorney, Brent Westerfeld, also declined to comment.

Both men were released after appearing in court.

Besides Walton and Hawkins, the other men indicted last spring were David Johnson, the Indiana Minority AIDS Coalition's executive director; Randall K. Sargent, the president of New Day Residential Development; and Aaron Reed, Walton's partner in the for-profit Naptown Housing Group.

The defendants face a mix of charges including wire fraud, bribery and conspiracy to commit money laundering.

The trial is set for Feb. 24 in U.S. District Court in Indianapolis, but prosecutors said a request for a delay by Johnson's attorney is likely to be granted by the judge.

Call Star reporter Jon Murray at (317) 444-2752. Follow him on Twitter: @IndyJonMurray.