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Photo by Jack GouldHuntington Beach City Councilwoman Pamela Julien-Houchen, under investigation by the FBI on at least eight counts of bank fraud, could face several years in prison thanks to her role in the city's ongoing scandal over illegal condominium conversions.
The Weekly first reported in October 2003 that Houchen, a real-estate agent who has served on the Huntington Beach City Council since 1996, may have illegally converted a Huntington Harbor four-plex into four separate condos for a gross profit of $500,300. Following that story, Huntington Beach Police Chief Kenneth Small sent detectives to interview at least one unsuspecting couple who bought a bogus condo from Houchen.
Two weeks ago, after the Weekly published "Arrest Houchen Now, Ask Questions Later," an open letter to Chief Small, The Orange County Register reported that the FBI had taken over the investigation. The open letter had chastised Small for inaction.
U.S. attorney Andrew Stolper, who is supervising the federal probe of Houchen and other suspects involved in roughly 120 suspicious transactions, refused to discuss the investigation. But a source familiar with the investigation said Small revealed the FBI's involvement to the Register because of his embarrassment over the Weekly article.
"Chief Small wasn't happy with the article," said the source, who requested anonymity. "So he started leaking information."
According to the source, the FBI took the Houchen probe from the Orange County district attorney's office because it involved millions of dollars' worth of questionable bank transactions and because Houchen, an elected official, was personally involved in the scandal. He said FBI agents are cooperating with Huntington Beach police detectives in the investigation.
"This just smells like a federal case," the source said. "If you're the chief of the Huntington Beach Police Department, there's no win for you here. If you prove a city councilperson is corrupt and 120 condo conversions are illegal, the City Council will hate you. If you don't prove these things, [critics will think] you are incompetent and corrupt. That explains why [the investigation] got outsourced."
Susan Schroeder, a spokesperson for the Orange County DA's office, refused to confirm the FBI's role but did say her office was no longer involved. "Responsibility for the prosecution of this case has been shifted to another agency," she said.
The FBI's takeover of the investigation is bad news for Houchen, who faces strict federal sentencing guidelines if convicted. Because she was involved in at least eight potentially fraudulent transactions—each of which carries a maximum penalty of 10 years in prison—she could face several years in federal prison if convicted.
Although Houchen's former planning commissioner, Jan Shomaker, a broker who owns Pier Realty (where Houchen worked as a real-estate agent when she allegedly sold her bogus condos), resigned her city job, Houchen has yet to step down or offer any defense. She has refused to speak to reporters about the case and has now retained John Barnett, a high-profile Orange-based defense attorney, who most recently worked on the defense team in the Gregory Haidl gang-rape trial.
In the past, Barnett represented Jeremy Morse, the Inglewood cop who brutalized a black teenager on videotape; Michael Harris, a former Catholic priest whose alleged molestations cost the Orange diocese $5.2 million; as well as one of the LAPD officers in the Rodney King incident. (Barnett failed to respond to calls seeking comment for this story.)
While it's unfortunate for Houchen, the fact that responsibility for the corruption probe has been removed from the Orange County district attorney's office is good news for anyone who wants to see political corruption in Orange County actually punished. While running for the DA job in 1998, Tony Rauckauckas asserted that his predecessor had been too aggressive in pursuing political-corruption cases; Rackauckas's platform included a promise to "de-politicize" such prosecutions.
Rauckackas investigated but failed to aggresively prosecute former Huntington Beach mayor Dave Garofalo, whose political demise began when the Weekly reported his nasty habit of voting to provide political contributors with lucrative city contracts. Shortly after the FBI took over that investigation in 2002, Garofalo quietly resigned from office, then pleaded guilty to one felony and 15 misdemeanor charges of political corruption. He is banned from public office.