Conspirators have come clean about cheating Katakis, he says in new-trial demand

Lies helped convict Andrew Katakis, exposing him to a potential 20-year sentence. But two conspirators now are telling the truth, so he wants a new trial.

That’s the latest claim of the Modesto real estate investor, whose conviction in federal court nearly three years ago has been on hold while a new legal firm presses his appeals. The firm uncovered startling new evidence when two conspirators agreed to explain how they and others pulled off the very crime for which Katakis was convicted, while keeping him in the dark and cheating him in the process, a court document says.

The revelation led Katakis, who has been out of custody pending appeals, to sue some accused of being conspirators, including a former partner, in a separate civil lawsuit filed in Stanislaus Superior Court.

Federal authorities are to submit a response to his new-trial demand by March 13. Katakis’ legal team asked U.S. attorneys if they also were duped, but has not received a reply, according to the document, filed last week in Sacramento’s federal court.

“Katakis wants to clear his name,” reads a briefing submitted by his lawyers. “He wants to demand that the government prove his guilt beyond a reasonable doubt in a fair trial, before anyone can take his reputation, brand him a felon and force him to stand before this court for sentencing.”

Katakis, 52, owns Modesto-based California Equity Management Group and was managing partner of Lenders Financial Group LLC, and long has said he was tricked by his own agents and other conspirators. All were accused of cheating at public auctions of foreclosed homes in 2008 and 2009 in Stockton by freezing out honest buyers and splitting proceeds among members of their group.

After a four-week trial, federal prosecutors in March 2014 persuaded jurors to convict Katakis and another man of rigging bids; 11 others already had pleaded guilty and received relatively light sentences, and several testified against the men. Katakis also was found guilty of obstructing an investigation. But the judge threw out the latter verdict and appellate justices also sided with Katakis, calling prosecutors’ trial strategy “half-baked.”

Katakis has sought a new trial since, reasoning that prosecutorial misconduct “irreparably tainted” evidence and “poisoned the jurors’ minds against him.” Prosecutors have fought to preserve the conviction, saying Katakis masterminded the conspiracy and pocketed $1.9 million.

Wiley Chandler was among those who testified in exchange for a seven-month prison term. In a court statement, also filed last week, Chandler explained that he plotted with others to run up bids eventually awarded to Katakis through his agent, who he says was in on the scheme. Katakis was not present and paid the inflated price while the conspirators split the proceeds and used his money to pay off an auctioneer, Chandler said.

“(A conspirator) and I concluded that we could trick Mr. Katakis into contributing to the payoffs,” Chandler said.

Chandler said he hired another man, Philippe Lauren, to help drive up bids; Lauren also submitted a court statement outlining parts of a conspiracy.

Katakis had no idea his agents “were taking bribes, kickbacks and investment opportunities worth millions of dollars to cheat him,” his court brief says. The admissions of Chandler and Lauren lead “to the inexorable conclusion that Katakis deserves a new trial,” the document says.

“Either these cooperating witnesses concealed these highly relevant facts from the government in breach of their cooperation agreements, or the government simply chose not to make this information available to Katakis,” the new-trial demand says. His attorneys asked for clarification, the document says, but prosecutors “have thus far declined to respond.”

Katakis is suing his former partner, Steve Swanger, and brother Ken Swanger, who was Katakis’ chief agent, as well as several others he says were involved in the conspiracy, claiming fraud, breach of contract, illegal use of trade secrets and other wrongdoing. The lawsuit’s next court date is in June.

In the criminal case, a judge will consider Katakis’ new-trial request after reviewing arguments from both sides later this month.

This story was originally published February 27, 2017 at 6:39 PM with the headline "Conspirators have come clean about cheating Katakis, he says in new-trial demand."