Las Vegas NowElected Officials Respond to FBI Raids in Vegas, San Diego (May 16)

Elected Officials Respond to FBI Raids in Vegas, San Diego (May 16)

(May 16) -- Federal agents are sifting through piles of evidence seized earlier this week in dramatic raids staged here and in San Diego. We have new information on just what the feds were looking for, and some hints about what they found.  George Knapp of the I-team is here with exclusive details, including the single document that started it all.

In order to launch those synchronized raids this week, federal agents needed this--a warrant which spells out what evidence they were looking for and who their ultimate targets are.   We've reported about this warrant in the past, but tonight, viewers get to see it for themselves for the first time.  What's more, we have an update about what agents found during Operation G-Sting.

On a dark night last October, our camera was poised outside Cheetahs topless club, hoping to catch a glimpse of an elected official known to be inside. According to law enforcement sources, then-county commissioner Erin Kenny was allowed by the owners of Cheetahs to come onto the property to solicit campaign donations from topless dancers. Kenny was running for Lt. Governor at the time.  Although our camera didn't catch Kenny, FBI cameras did, not only at Cheetahs but later the same night at Jaguars. Sources familiar with the FBI probe say that agents have a mountain of video and photo evidence of elected officials visiting the topless clubs, some of it snapped by agents tailing the suspects, but an amazing amount of it taken from the clubs themselves. This is the warrant that authorized the raids staged earlier this week. 

Among the items that FBI agents were seeking--video surveillance tapes, recorded inside the clubs.   And some of what is on those tapes is said to be shocking and explicit. One tape recorded at Cheetah's reportedly contains explicit scenes of an official entwined with a dancer.  The FBI would not confirm the identity of the official, but it is not a name previously associated with this investigation.
  
The names which are known are spelled out elsewhere in the warrant the FBI wanted any records, ledgers, journals or notes regarding payments to Michael McDonald, Erin Kenny and husband, Dario Herrera and wife, Mary Kincaid and her husband.  The FBI won’t say if it found such records, but a source familiar with the evidence said agents couldn't believe the types of financial records that were easily located during the raids.  Said one source, they knew there was an investigation, but still left this stuff laying around.
   
The warrant also Okayed the seizure of any records that might show a hidden ownership of the clubs, and it sought any records of campaign contributions to the various officials. Overall, we are told, the feds are elated over the amount and quality of evidence this warrant helped produce.

The FBI will not comment on the status of its investigation, but sources familiar with the probe say the feds think they have solid evidence of financial links between the clubs and local politicians.  As we reported at five o’clock, the people named as targets of the probe have hired, or are negotiating to hire, some of the best legal talent in town, including defense lawyers Tom Pitaro, John Momot, Tony Sgro, Frank Cremen, and perhaps, just perhaps, Oscar Goodman. The mayor's son, Eric, has been hired by Dario Herrera. Mayor Goodman says, for the time being, the case belongs entirely to his son.

Earlier this week, we reported that the FBI would be sending notification to the targets of this probe. Has it happened? Depends on who you ask.  The few comments we've been able to get from the political folks this week have all indicated that no papers have been served.  The I-Team was told by people familiar with this case that the officials aren’t being truthful and that papers have been served, giving notice that these individuals are, in fact, targets. Soon enough, we should have a definitive word.

(May 15) -- George Knapp’s Update on Operation G-Sting: A still-sealed federal warrant, the one that authorized Wednesday’s raids in what we've dubbed ‘Operation G-Sting,’ mentioned the names of four local politicians as being subjects of some interest: former County Commissioners Dario Herrera and Erin Kenny, current Commissioner Mary Kincaid Chauncey, and City Councilman Mike McDonald.  The most intriguing name however, is the one not listed---that of former County Commissioner Lance Malone, who tonight, still hasn't surfaced.

How did Malone move from cop to commissioner to suspected Bagman?  And will he take the next step to become a witness?

Lance Malone’s brief career as a politician was punctuated by ethical bruises, a far cry from his promising beginning.  He was a Metro officer, running as a reform candidate--a breath of fresh air--but even his first campaign had a brush with scandal when he accepted $80,000 in campaign money, all from the same unidentified source. Malone won anyway and dove into public life.

He resigned from Metro in 1997, assumed the role of the politician, and while on the commission, often preached against the evils of adult businesses, authoring ordinances to slap controls on the clubs.
 
In 1999, Malone cast a vote that caught the attention of the FBI: he voted to cut off funding for a Metro investigation of strip club owner Jack Galardi, who's ties to a mafia-tainted club in Atlanta were the subject of much interest. Also voting to cut off the cops were Erin Kenny, Dario Herrera and Myrna Williams.
   
Malone’s bid for reelection was severely damaged by ethics charges after he helped cronies land business deals at the airport.  Nasty campaign fliers chastised him for accepting big money then flip-flopping on neighborhood casino issues.

Malone lost his reelection bid in Sept. 2000.

Just three months later, the anti-strip-club campaigner formed a consulting company and went to work as a lobbyist for the strip clubs owned by the Galardis.  He lobbied Mayor Oscar Goodman in one meeting, and then lobbied his former county colleagues in other encounters.

He performed similar duties for the Galardi's in San Diego. 

Now, Lance Malone is the central figure in a budding political scandal. 

Informed sources say he is suspected of being the bagman who made cash payments under the table to local politicians.  FBI agents certainly hope that Malone will tell them about alleged illegal payments, and many close to the probe believe that Malone kept detailed records of financial transactions, records that could decide whether the investigation proceeds to the next level.

We've been asking the question since Wednesday afternoon--where is Lance Malone? 

The fact that his employers, the Galardis, can't find him leads many to believe he is in federal custody. We can safely assume the FBI at least knows where he is. Whether he is talking or not about payments to officials, or anything else, won't be known until the next shoe falls. 

The FBI issued a terse statement Thursdau afternoon saying the bureau has said all it’s going to say about this case, at least, for now.

QUESTION FROM ANCHOR: Anyone heard from the Galardis yet?

GEORGE:  No. I've left requests for interviews with their employees and with their attorney. No response. Their lawyer Peter Chrstiansen has also declined to comment so far. I don't think he's even seen his clients since this all came crashing down, but I’d bet there will be some sort of statement forthcoming form the Galardi's.

LuAnne Sorrell Reports on the Mood Around County Commission Chambers
The Clark County Manager says the media knows more about the investigation than he does. Thom Reilly says he's willing to work with the FBI but they have not contacted him or told him who is being investigated. Channel 8 Eyewitness News reporter LuAnne Sorrell joins us from  County Commission Chambers.

Out of the seven current board members the only one we know is being targeted in 'Operation G-Sting' is Mary Kincaid-Chauncey, and although she declined to be interviewed she did release this statement denying that her vote was or ever will be for sale. But some citizens say they wouldn't be surprised to find out that there is corruption in local government.

Although not surprising, it is disheartening for some like Stephanie Banda who still have faith in the system: “Disappointed more than anything to hear that's going on here.”

Clark county manager Thom Reilly says it's too early to jump to any conclusions: “I am concerned it casts a negative light on behalf of the county.”  

So far, no charges have been filed and Reilly says the FBI has not contacted him or any of the county commissioners.

The only person within the county who has been interview by the FBI is Business License Director Ardel Jorgensen.

According to Reilly, “It was clear that she was not someone who was being targeted.  It was more about the issues of processes.”

Sources close to the probe have told us that they were interested in Jorgensen for a time and tried to find out if she had been unduly influenced in granting licenses for the Galardi's businesses.

Reilly says, “We do have people looking at that and putting a chronology together looking at any interactions we had with Jaguars and votes that have been taken any approvals that have been given by both our elected body and our administrators.”

Reilly says if he finds any wrong doings the public can rest assured that he will deal with those responsible aggressively and severely but until the FBI tells him who's being investigated and for what he says he's not sure what he's looking for.

A spokesman for the FBI told us today that this is a federal investigation and that they are not disclosing any information to anyone outside of law enforcement.

Las Vegas City Councilman Michael McDonald to Get Letter From FBI
One of the officials getting a letter from the FBI is Las Vegas City council member Michael McDonald.  Eyewitness News talked with McDonald Thursday. He says he never voted on anything related to these clubs, and he's cooperating fully with agents.

Las Vegas City Councilman Michael McDonald says, "Timing is the worst it could be but I've never hidden anything. My books are fully open as I told law enforcement, I'm more than happy to provide them. I'm not the target. I'm here to cooperate.”

McDonald says his attorney has been told that McDonald is not a target of this investigation but that he does have information the feds might want.

What’s Happening in San Diego?
Simultaneous raids were held in San Diego as well.  The offices of three city council members were also searched.  Thursday that city's attorney was telling residents that it will be business-as-usual at city hall despite the raids.  The city attorney met with the mayor Thursday to talk about the matter and to decide how to keep it from disrupting city business.

"Operation Yobo" and the History of Vegas Corruption
This is not the first time that southern Nevada politicians have been the object of an FBI sting and in the last case people went to jail.  The sting operation was back in the early 1980s and it was called "Operation Yobo."
 
Then FBI special agent in charge for Las Vegas, Joe Yoblonsky helped bring down 5 elected officials--including 2 Clark County Commissioners and two state senators. 

In the sting an FBI agent posed as a businessman with a lot of money to spread around. Among those caught lining their pockets long time lawmaker Gene Eckels. Former FBI Agent Joe Yoblonsky remembers, "Interestingly on one occasion when he received his monthly stipend, he said ‘praise the lord as he stuffed the money into his pocket and then asked the undercover agent to pray with him.’"

Another investigation at about the same time looked into the possibility that then Nevada U.S. Senator Howard Cannon had ties to organized crime.  No connection was ever proved but Cannon lost his bid for re-election.

(May 14: 11 PM Update) -- (Associated Press Writers Michelle Morgante and Ken Ritter contributed to this article.) -- Dozens of FBI agents conducted a series of raids in a public corruption probe Wednesday seeking information about strip club owners and their relationship with current and former elected officials.

Two strips clubs in Las Vegas and another in San Diego were searched in addition to the offices of three San Diego city councilmen.  In Las Vegas, federal agents stormed two clubs -- Cheetah's and Jaguar's -- along with Galardi Enterprises, an office atop a bar in downtown. They also searched a residence at an unidentified location.

The FBI was looking for financial records dating from 1997 at the three strip clubs, according to an FBI search warrant obtained by The Associated Press.

The warrant to search Jaguars shows the FBI was seeking bills, receipts, canceled checks and ledgers showing payments to Jack Galardi and possibly others. It is not clear whether Galardi or his son, Mike Galardi, owns the strip clubs that were searched.

The financial records, the warrant says, would "establish the identity of those persons who may have a direct or hidden ownership in the clubs, in particular any ownership of Jack Galardi in the clubs."

The FBI warrant also sought all "campaign contribution records from 1997 made on behalf of or by" the strip clubs, Galardi Enterprises and two other corporations.

The warrant also asked for all "records including ledger or journals or handwritten notes of payments or gifts" to three former and current Clark County commissioners, their spouses, a Las Vegas city councilman and building inspectors.

Records were sought for Councilman Michael McDonald, former Commissioner Erin Kenny and her husband, John Kenny, former Commissioner Dario Herrera, his wife, Emily Herrera, and Commissioner Mary Kincaid, and her husband, Robert Chauncey.

McDonald said Wednesday night that the FBI had contacted him, but he declined to say what was discussed.

Repeated efforts to reach the others were unsuccessful.

In San Diego, U.S. Attorney Carol Lam said the FBI worked with police in searching the offices of Councilman and Deputy Mayor Ralph Inzunza, and Councilmen Charles Lewis and Michael Zucchet.

Officials also searched a Cheetah's strip club in San Diego, she said. Lam declined to specify the nature of the investigation because it was ongoing. No charges were immediately filed and no arrests were made, officials said.

The FBI in Las Vegas said the coordinated raids were part of a two-year public corruption probe.

Lewis left his office in the afternoon and said he did not know why he was targeted in the investigation. He said he had no relationship
with Cheetah's.

Zucchet said little to reporters waiting outside his office, other than to note "a lot of federal agents" were there.

Inzunza made no public statements, and calls to his office and home were not immediately returned.

San Diego Mayor Dick Murphy issued a statement saying his office was not a target of the investigation.

City Attorney Casey Gwinn said his office would assist Lam, but declined to give details.

"This is a very difficult day for the city of San Diego, but I want to urge everyone to be cautious and reserved in drawing any conclusions at this point," Gwinn read from a statement. "Reputations can be destroyed in an investigation such as this even though individual council members may never face actual charges of wrongdoing."

Cheetah's operates topless and nude strip clubs in Las Vegas and San Diego.

A 22-year-old dancer at the Las Vegas club, Nada Madanat, said she was in the dressing room when agents entered with guns drawn.

FBI Supervisory Agent Bob Loosle in Las Vegas said the warrants were in support of an investigation that has gone on for about two years.

He said the raid at the two Las Vegas clubs were not related to a raid in February at the Crazy Horse Too Gentlemen's Club in Las Vegas.

(Associated Press Writers Michelle Morgante and Ken Ritter contributed to this article.)

(May 14) -- An army of FBI agents are serving federal search warrants at Cheetah's, Jaguar's, Galardi Enterprises and an undisclosed residence this afternoon. The Galardi's own Cheetah's and Jaguar's as well as some clubs in San Diego.

The investigation has been underway for nearly two years and Eyewitness News Investigative reporter George Knapp has been following the story for the past year.

The investigation focuses on alleged political corruption involving current and former elected officials. The warrants are sealed. So far agents have seized computers and other items from the various locations.

According to sources, the FBI is looking for evidence of cash payments made by the Galardi's to certain officials, whose names will be known in a matter of days.

At the center of the investigation is former County Commission Lance Malone, who worked for Galardi after losing his bid for another term.

LINKS

Las Vegas - FBI's Most Wanted

Federal Bureau of Investigation - Field Offices: FBI Las Vegas
John Lawrence Bailey Building
700 East Charleston Boulevard
Las Vegas, Nevada 89104-1545
lasvegas.fbi.gov

Office Hours Monday - Friday
8:15 a.m. - 5:00 p.m.
24 Hour Availability at
(702) 385-1281
Las Vegas Division Headquarters City is located in Las Vegas, Nevada, and has oversight over the Resident Agencies in Carson City, Elko, and Reno, and investigates violations committed in the following counties: Clark, Lincoln, Nye and Esmeralda

History of the FBI