By Maria Carter
http://stream.publicbroadcasting.net/production/mp3/kcur/local-kcur-556360.mp3
Kansas City, MO – Former Jackson County Executive Katheryn Shields and her husband Phil Cardarella are facing one count each of federal wire fraud and conspiracy over a deal to sell their Kansas City home. The couple claims the charges are just politics, but the U-S attorney says they knowingly were involved in a real estate scheme using fake documents and false information. KCUR's Maria Carter reports.
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In November of last year, Katheryn Shields and her husband Phil Cardarella thought they had an agreement to sell the couple's Plaza area home for a little more than the asking price of 700-thousand dollars, but that deal fell apart almost immediately. Hours after the couple signed the paperwork, the FBI stopped the transaction and Shields and Cardarella were presented with a letter from U-S attorney Brad Schlozman saying they were targets in a federal investigation.
Schlozman: The assistant U.S. attorney sent a target letter to Shields' attorney and Cardarella's attorney and said you are the target of a grand jury investigation come on in and talk to us.
Schlozman says the couple was part of an elaborate real estate scheme that started with two other people , Ray Zwego and Michael Rodd. Schlozman alleges that Zwego had an appraiser value the house for $1.2 million, far more than he says it's worth. Then another couple, Larry and Linda Barshaw, took out a loan for that amount, but to do so the Barshaws, along with Zwego and others, sent the lenders fake financial statements. So onclosing day, the sale price is $1.2 million. Shields and Cardarella were set to receive $707,000. Where does the rest of the money go?
Schlozman: The difference would be characterized on the settlement agreement as a management fee.
Schlozman says that the fee would be split between Zwego and Rodd. He also claims Cardarella knew of the whole arrangement and that Cardarella had met with Zwego and assured him that both he and his wife Katheryn Shields were fine with the deal. The couple, allegedly, signed the closing papers, knowing fraudulent documents were used. The couple's attorney's Curtis Woods says this is simply untrue. Neither one of them had any knowledge of the complicated scheme, and even a sales contract cited in the indictment points to his clients' innocence.
Woods: They didn't have the sense to forge the right signature for Ms. Shields. They forged Katheryn Cardarella , which is a name she does not go by.
As far as the inflated sales price, Woods says its not a crime to sell a home for more than it's worth.
Woods: It's not against the law for someone to charge a fee for doing that. All of this is disclosed in the closing statement who is getting what. So the mortgage company knows that the broker is getting $400,000. The buyer Barshaw knows that Zwego's getting $400,000, and we know he's getting $400,000. Everybody knows!
This is the third time Shields has been under federal investigation, once for how she handled the COMBAT tax and another time for how she awarded contracts as county executive. This is the first time any charges have been brought against her. Shields says the case is without merit and calls the investigation is politically motivated.
Shields: Now here we are on the eve of my mayoral campaign, and they're charging me with essentially selling my house.
U.S. Attorney Brad Schlozman adamantly denies politics entered into the equation.
Schlozman: We follow the facts. The prosecutors in this office are not motivated by politics in anyway. Information comes to us, and we enforce the law.
For her part, Shields says this won't affect her decision to run for mayor. The three term county executive still plans to file her campaign paperwork today. Besides Shields and Cardarella, nine other people were indicted yesterday on one count of conspiracy and 12 counts of wire fraud.
Maria Carter, KCUR news.