FAST AND LOOSE: JUICE VS. JUSTICE Scratching BacksJUICE VS. JUSTICE JUICE VS. JUSTICE
One good turn leads to another for judge and his friends
By MICHAEL J. GOODMAN and WILLIAM C. REMPEL LOS ANGELES TIIMES Without help from a friend, James Mahan might never have become a Las Vegas state judge. Certainly he wouldn't have gotten one of the top judicial jobs in town: a lifetime appointment to the federal bench.
Then again, without Mahan, his friend George Swarts would never have gotten to run an Internet porn business, a hotel-casino hair salon or a Southern California software company. Indeed, the careers of Judge James C. Mahan, 62, and his friend George C. Swarts, also 62, whom he appointed again and again as a receiver to manage troubled businesses, might be the ultimate example of how juice replaces justice in Las Vegas courtrooms.
In this town, people speak reverently of having juice, or an "in," and Mahan -- bearded, likable but sometimes caustic -- has made it a striking feature in his courtroom. First as a state judge and now as a federal judge, he has approved more than $4.8 million in judgments and fees during more than a dozen cases in which a recent search of court records found no statement that he disclosed his relationships with those who benefited from his decisions.
On the state bench for three years, and since his appointment as a U.S. District Court judge four years ago by President Bush, Mahan has approved many of these fees for Swarts, a certified public accountant who had served as his judicial campaign treasurer and whose political connections got him appointed. Mahan approved additional fees for Frank A. Ellis III, 51, a former law partner with whom the judge still owned property and participated in a profit-sharing plan. Ellis also provided free legal services for Mahan's family and for his executive judicial assistant.
Mahan, like a number of Las Vegas judges, has taken on cases despite state and federal prohibitions against such apparent conflicts. Some Las Vegas judges have ruled in cases involving their friends, even those to whom they owe money.
The practice harms visitors and business people alike, especially Californians, who come here in large numbers to work and play. They fall victim to an untamed style of justice, blatantly tangled in clashing local interests.
Las Vegas is a town of instant millionaires, 60-second weddings, six-week divorces and a sly wink at conflicts of interest, to say nothing of the abuses that go with them. Some California lawyers view Las Vegas justice as just another crapshoot. When they are pressed about it, some Nevada lawyers openly condemn the system. The excuse, says Las Vegas attorney Charles W. Bennion, "is that this is the way it's always been done -- fast and loose."
Even in Las Vegas, however, Judge James Cameron Mahan stands out.
When owners fight over a business, judges often appoint someone independent as either a special master, to investigate the dispute, or as a receiver, to run the business until the differences are settled.
On 13 occasions in state and federal court, Mahan has installed Swarts, a large man in a business suit who tells people how to spell his name -- "think of 'wart' with an 's' on each end" -- or his son, Curtis, 41, taller and more often casually dressed, at up to $250 an hour, to be a special master or receiver in cases that come before him.
Mahan has then given his approval when George Swarts hired Ellis, low-key and quiet-spoken, or his firm, at up to $250 an hour, to represent Swarts in nine of these cases. In all, Mahan ordered plaintiffs and defendants to pay Swarts and Ellis more than $700,000, the records show.
U.S. and Nevada judicial canons say judges should withdraw from cases where their impartiality might reasonably be questioned. Nevada canons also say: "A judge should disclose on the record information that the judge believes the parties (in a case) or their lawyers might reasonably consider relevant to the question of disqualification, even if the judge believes there is no real basis for disqualification."
A recent search of court records in the 13 cases involving Swarts or Ellis, as well as interviews with litigants and their attorneys, found no disclosure of Mahan's relationship with either of the two men. Complaints of excessive fees and inaction occasionally united opposing sides to implore him to remove Swarts. In case after case, he refused.
Mahan's judicial power and soaring reputation silenced many of those who suspected or knew of his undisclosed ties, according to lawyers. He was Southern Nevada's top-rated state judge in 2000 and 2002 in a biennial survey of attorneys by the state's largest newspaper, the Las Vegas Review-Journal.
In an interview with The Times, Mahan acknowledged that he routinely did not disclose personal relationships. He dismissed them as insignificant and bristled at being questioned.
Face flushed and jabbing a forefinger in anger, Mahan said he appointed receivers in lawsuits based upon their ability and experience. He said he had named Swarts as a receiver for those two reasons and not because of any favoritism.
Mahan also said he had never influenced Swarts to choose Ellis to represent him as receiver's counsel.
"I don't see any conflict of interest," Mahan said.
At one point during the interview in his chambers at the Las Vegas federal courthouse, Mahan moved in his chair, and a holstered semiautomatic pistol became visible on his right hip. In written questions submitted for this story, Mahan was asked about the pistol. He did not respond.
In a separate interview, Swarts said his appointments from Mahan were proper. "I don't think that is a problem," he said. "In fact, if you were going to put someone in a position of responsibility, why wouldn't you put in someone you know, someone you trust ... somebody you knew had integrity?"
When he was asked if Mahan was favoring him with lucrative court assignments, Swarts replied: "Me and Judge Mahan? That's amazing. That's crazy! That's the craziest thing I've ever heard. ... Judge Mahan's only appointed me two or three times."
When he was told that Mahan had in fact appointed him in a dozen or more cases, Swarts replied: "No way! No way! I know what you guys are going to do. You're just trying to make us look bad. I don't see any reason to talk to you. ... Judge Mahan? He's a fine person. I can't believe you're looking at him."
Ellis was given written questions about his relationship with Mahan and cases in Mahan's court. He did not respond.
One Las Vegas attorney willing to speak out about Mahan, P. Sterling Kerr, who represented two clients in a case before him, said the judge appointed Swarts simply "to give his friends some business."
Kerr called it "a travesty of justice."
CHAPTER 1
The Lee Case
Mahan has been dismissive of conflicts from the start.
He came to Las Vegas as a lawyer in 1973 and went to work for John Peter Lee, a veteran Nevada attorney. Seven years later, Lee hired Frank A. Ellis III. Two years after that, Mahan and Ellis set out on their own.
Within six months, Mahan sued Lee, claiming that Lee had stiffed him on a profit-sharing bonus. Lee sued back, claiming that Mahan took office furniture, including a desk, and left behind an interest-free IOU, payable only when he got his bonus.
With Ellis representing him, Mahan pursued the matter to the Nevada Supreme Court. It ruled in Lee's favor and ordered Mahan to pay for the furniture -- desk and all. "I was surprised at (Mahan's) deep-seated resentment," says attorney Richard McKnight, who had spent five years with him at Lee's firm.
Seventeen years later, when Mahan became a state judge in Las Vegas, Lee asked that he disqualify himself "from all of our firm's (cases) due to past problems between you and the firm ... so we may protect our clients."
Court records show Mahan wrote back: "I have instructed court administration to recuse me from all of your cases."
Mahan did disqualify himself shortly afterward during a case in which Lee was an attorney, court records show. But in another case seven months later, Mahan refused to withdraw when Lee and his son James, also an attorney, asked him to when they appeared in his courtroom as co-counsel, according to court records and interviews.
The Lees were representing a woman in a palimony suit over a $35 million estate.
A jury ruled against the Lees' client. The Lees asked Mahan to order a new trial, saying, among other things, that he had wrongly instructed the jurors. Court records show that Mahan denied the request.
"It was improper," John Peter Lee said in an interview. "I still feel that way."
When he was asked why he did not withdraw, Mahan said in an interview: "I decided I was going to hear that case. Judges are supposed to hear cases."
Asked about the desk and other furniture he took from Lee's law firm, Mahan shrugged, smiled and patted an unremarkable but ample wooden desk in front of him.
"This is the desk," he said.
CHAPTER 2
Swarts and Rogich
Many of Mahan's undisclosed relationships were with Swarts, a politically connected businessman who grew up in Las Vegas.
His financial relationship with Mahan began as early as 1988, when the law firm of Mahan & Ellis formed the first of at least 12 companies or joint ventures for Swarts, several in partnership with Frank Ellis' father, according to Nevada secretary of state records. Often either Mahan or the younger Ellis -- or both -- served as resident agents or directors.
One such project drew Swarts and the elder Ellis into a lawsuit against investors in a development deal. Court records show that Ellis and Swarts were represented by Mahan and another attorney.
During the 1990s, Mahan expanded his ties with Swarts.
A booming Nevada economy gave him the opportunity. The boom attracted entrepreneurial opportunists with more brass than bankroll. Business disputes and bankruptcies began choking the Nevada courts. In some cases, judges appointed receivers to protect investors, preserve assets and manage troubled businesses while the conflicts dragged on.
Like special masters, receivers are independent, neutral officers of the court, answerable only to the judges who appoint them and typically give them absolute control over the businesses in dispute. Receiverships are easily abused. Historically, state and federal courts appoint receivers only as a last resort.
In contrast to California's rules, Nevada's requirements for receivers are loose. In both states, receivers are governed by court orders. In Nevada, lawyers write the orders and judges sign them, sometimes changing them as they see fit. But in Los Angeles County, for instance, judges begin with standardized orders and use or rewrite them. Steve Morris, a prominent Las Vegas trial lawyer with 35 years of legal experience in Nevada, said, "Rules for receivers here are short, ambiguous and elastic."
By the mid-1990s, Swarts had become a receiver in both state and federal courts. He brought in his son, Curtis, also a CPA. In 1996, the law firm of Mahan & Ellis incorporated them as Swarts & Swarts.
With increasing frequency, Swarts asked judges to let him hire his own counsel at the expense of the parties in dispute. Most often, he chose Mahan & Ellis.
In 1998, Mahan decided to become a state judge.
His decision put him in Swarts' debt for two favors. In Nevada, state judges are elected. Mahan ran for a judgeship in Las Vegas, and as the first favor, Swarts, seasoned in local politics, agreed to be his campaign treasurer.
Mahan lost the election.
"I decided not to stop," he said in an interview. Two state judges from Las Vegas had won seats on the Nevada Supreme Court, creating a pair of vacancies. Newly elected Gov. Kenny Guinn, a Republican, would fill them after his inauguration in January 1999. "I began 'running for appointment,'" Mahan said.
In this quest, Mahan needed only one vote -- that of Nevada power broker Sig Rogich, a Republican fundraiser and media specialist who had been a consultant to Presidents Reagan and George H.W. Bush. It was Rogich who was responsible for the elder Bush's TV ad showing Democratic opponent Michael S. Dukakis perched on a tank with a helmet dwarfing his head.
More important to Mahan, Rogich had masterminded Guinn's gubernatorial election. Guinn had never run for public office.
Rogich was part of old Las Vegas. By contrast, Mahan was a newcomer, but he knew an insider: Swarts. He and Rogich had been friends since grade school.
Indeed, while Swarts had been Mahan's campaign treasurer, Rogich had entrusted him with keeping the books for Guinn's $6 million campaign as well. Records show that Swarts donated his time.
Now, in the second of the two favors, Swarts spoke to Rogich on Mahan's behalf.
"I put (Mahan's) name in with Sig," Swarts said in an interview. "And why did I do that? Because I believe Jim Mahan is one of the finest people I have ever known. ... I'd put his name in again."
Mahan was summoned to Rogich's office. "He wanted to meet me," Mahan said in an interview. After the meeting, said a participant who requested anonymity, Rogich promised to "go to the governor."
It worked.
On Feb. 22, 1999, during his second month in office, Guinn appointed Mahan to the bench in the state's 8th Judicial District in Las Vegas.
In an interview, Rogich refused to discuss the matter publicly.
Seventeen days after the appointment, Mahan was assigned to decide the appeal of a lawsuit that Rogich won in Justice Court against Phillip Crenshaw, a Las Vegas store owner, over a damaged stereo.
Despite the canons demanding that judges disqualify themselves when their impartiality might reasonably be questioned, Mahan sat in judgment on the appeal.
He reduced Rogich's $3,449 award by $90, but decided in his favor.
R. Clay Hendrix, the attorney for Crenshaw, said he was unaware of Mahan's connection to Rogich until after the case ended, when he received an invitation from Rogich to a Mahan fundraiser. Hendrix was asked how he felt when he found out about Mahan's ties to Rogich. He shrugged and looked away.
This was, after all, Las Vegas.
Mahan was given written questions about this and other cases in this story. He did not respond.
CHAPTER 3
Elkind-Wilson Case
When Mahan became a state judge, he left Mahan & Ellis. But the law firm did not exactly leave him. He remained a part owner and landlord of the law firm property and continued to draw interest from the Mahan & Ellis profit-sharing plan, according to land records and financial disclosures required of state and federal judges.
The disclosures show that he received income from the law office building until June 2001 and from the profit-sharing plan until mid-December 2002, when his share of the proceeds was rolled over into an IRA.
Meanwhile, the financial fortunes of his former law firm were tied in part to the fortunes of one of its most active clients -- George Swarts. On the eve of Mahan's appointment to the bench, court records show, the law firm represented Swarts in three receiverships involving combined legal fees of about $150,000.
During the first weeks of his judgeship, Mahan acknowledged a conflict if he were to preside over a case involving Ellis, court records show. On March 26, 1999, he disqualified himself from a case "to avoid the appearance of impropriety and implied bias" because Ellis was his former law partner.
But 2 1/2 weeks later, in his second month as a judge, Mahan recommended and then appointed Swarts as a $200-an-hour caretaker in a business dispute -- and then approved Ellis as Swarts' attorney, according to court records.
The case involved Stuart Matthews Wilson, a hairstylist who finally struck gold: The Desert Inn hotel-casino on the Las Vegas Strip had selected him to take over its exclusive four-star spa.
The Desert Inn wanted him to expand. He didn't have the money, so he took on a partner, Abbott Elkind, a contractor and client who chipped in about $400,000 for 51 percent ownership.
Right away, they fought. Soon they sued each other.
In an interview, Wilson recalled their first hearing: "We get to the courtroom and this guy, George Swarts, is already there, waiting. Out of the blue, Judge Mahan has this guy come in as a receiver to take over our beauty salon."
There was a glitch. Wilson's attorney, James Lee, said appointment of a receiver would violate the salon's lease with the hotel-casino. So Mahan decided to call Swarts a special master.
Lee would later write into the court record that, "in fact, Swarts was appointed to be a receiver ... (and) to act as a receiver in every sense of the word."
At the start, according to court minutes, Mahan promised Wilson and Elkind that they would "be included in (Swarts') business decisions." Within a month, however, Robert Goldstein, Elkind's lawyer, said in a court filing that they were no closer to a buyout -- and that Swarts, in effect, had frozen Elkind out of the business.
In response, Mahan wrote that Swarts "shall run the salon business as he sees fit."
That August, court records show, Ellis billed $4,694 for three months, and Swarts presented a three-month bill for $95,928. "My lawyer and I looked at each other in disbelief," Wilson recalled. "Swarts was charging $30,000 a month for basically having somebody pick up the salon's receipts each night."
Both sides filed motions pleading with Mahan to remove Swarts and sell the business before there was nothing left. They said a bookkeeper or payroll service could do for $1,000 a month what Swarts was doing for 30 times that amount.
But Mahan refused to remove him.
In March, a year after Mahan appointed Swarts, Wilson filed for bankruptcy in federal court. "Swarts and Judge Mahan ... destroyed everything I built up in this town for 20 years," Wilson said. "Nobody -- lawyers, anybody -- wanted to go up against Judge Mahan or Swarts.
"Anything Swarts wanted from the judge, Swarts got."
The Desert Inn closed in August 2000. Elkind, 66, died in January 2002. Wilson now works at a beauty salon in another hotel on the Strip.
When asked about the propriety of appointing his friend Swarts, Mahan responded, "I appoint receivers based on their backgrounds and the job at hand." Citing another case, he added, "I know George (Swarts) has done securities work before, so I picked him for a securities case."
Mahan said Swarts was just one of several receivers he had used. He named two others. "I just want someone who is competent. I knew (Swarts) was competent. That's why I appointed him."
When asked about the propriety of approving Ellis, his former law partner, to represent Swarts, Mahan responded angrily: "It's up to the receiver to pick his own attorney. I never select them. Receivers select their own attorney. I've never imposed an attorney on any receiver. I don't care who the attorneys are."
Regarding his financial interests with Ellis, Mahan said he made no profit from the income listed on his financial disclosure report as rent from the Ellis office building, because it equaled his share of the mortgage payment. He noted that he sold his interest in the building to Ellis in June 2001.
By then, however, Mahan had been on the bench for two years and had involved Swarts and Ellis in at least seven cases and approved their fees.
As for the Mahan & Ellis profit-sharing plan, Mahan continued to receive interest from it for 18 months after selling his property ownership, his financial reports show -- and during that period, court records reveal, Mahan appointed Swarts as a receiver and approved fees for Ellis' law firm as Swarts' counsel in at least five additional cases.
Swarts, in an interview, said there had never been anything improper about his court appointments from Mahan or any other judge. "I don't hobnob with judges. ... I don't solicit cases. But when a judge calls, I respond."
Swarts was given written questions about the details of this and other cases in this story. He did not respond.
CHAPTER 4
The Topless Case
Three people from Detroit wanted to open a topless bar in Las Vegas.
Ronald Sweatt, his wife, Lydia, and investor Robert Katzman formed a 50-50 partnership, called Motor City III. In 1997, they bought an empty lounge near the Strip and began turning it into a cabaret with bare-breasted dancers. Their investment totaled nearly $1 million.
Felony tax evasion convictions ended the Sweatts' chances for licensing in Nevada. So they put the lounge up for sale.
Katzman sold his interest to Ed Gardocki, also of Michigan. The Sweatts accused Katzman and Gardocki of dealing in secret and sued them in Michigan.
They, in turn, sued the Sweatts in Las Vegas.
The case was assigned to Mahan.
He appointed George Swarts as receiver. Mahan said, however, that Swarts' son, Curtis, would handle the matter because he would bill at a lower rate, according to court minutes. "No one loses if a receiver is appointed," Mahan said. Both sides "will be looking at a pile of money, not a piece of property."
Swarts hired the law firm of Alverson, Taylor, Mortensen, Nelson & Sanders to represent him. Two and a half years passed, and the topless lounge still was not sold. Moreover, according to court records, the tab for Swarts and his attorneys had climbed to more than $100,000.
Both sides tried to get rid of Swarts. Mahan refused.
On one side: Attorney P. Sterling Kerr, who represented the Sweatts, said in court documents that the fee for Swarts and his attorneys "shocks the conscience" because their only job was selling an empty building.
"Those guys raped my client," Kerr said in an interview. "Mahan was looking for an excuse to give his friends some business."
On the other side: Katzman and Gardocki said Swarts and his attorneys had been paid out of partnership funds without court approval and had failed to pay county taxes on the lounge "to the point where the property itself is in jeopardy."
A month later, Swarts reported that he had paid the taxes.
Attorney Peter Christiansen, who represented Katzman and Gardocki, reminded Mahan that he had promised that Swarts' son, Curtis, would handle the receivership and charge less. Instead, Christiansen said, "George Swarts did the overwhelming majority of the work."
Swarts and his lawyers have "treated this case as a cash cow," Christiansen said. If attorneys on both sides combined and quadrupled their fees, he said, they wouldn't approach what Swarts and his attorneys were charging.
Some charges, Christiansen said, were for duplicate services, services not rendered and services negligently rendered.
Records show that George Swarts billed $200 an hour.
A review of resumes and contemporaneous cases shows that four other Nevada receivers charged $150 to $175 an hour. A year earlier, court records show, Swarts had charged $150 an hour.
Swarts and his attorneys told the court that attacks against them were laced with distortions, sometimes fabricated, sometimes absurd and often as "appalling as they are incorrect." They accused both sides of opposing their every move and of creating unnecessary, baseless and frivolous litigation.
As for whether Swarts was running the receivership and not his less-expensive son, Swarts said that Mahan had set the same fee for both of them.
By 2005, the topless lounge was still unsold. On July 25, Swarts said his fees had reached $285,000. Michael Hall, an attorney representing Katzman, was asked what his client and others in the case thought about Swarts' fees. He replied, "They thought it was ridiculous."
State Judge Michelle Leavitt, who replaced Mahan when he went on the federal bench, discharged Swarts as the receiver. On July 27, Leavitt signed an order "approving sale" of the property and said Swarts' fee "comes off the top."
The property finally sold for $1.9 million, Hall said. After fees for Swarts and the attorneys, the pile of money promised by Mahan had vanished.
In an interview, Swarts was asked to explain how partners so divided could be so united in their criticism of him.
"Well, Sterling Kerr hates me," he said, referring to the Sweatts' lawyer. "I have a thankless job. You've got to be crazy to do this. It's not possible to do this job and not have someone get mad at you. I've had lawyers come across the table at me. ... When I come in, both parties hate each other, and in the end, both parties hate me."
CHAPTER 5
Adult On-Line Case
Andrea Norman retired from the escort business when she was 26.
In April 2000, she said, she and her then-fiance invested $500,000 in Las Vegas Adult On-Line Productions Inc., a Web site marketing prepaid cards to anonymously view or buy Internet pornography.
"It was a great idea," she said in an interview at her gated town house near the Strip. It was late morning. She wore a nightgown, an anklet and rings on her left hand and the second toe of her right foot.
Norman and her fiance put their $500,000 investment into a corporate account.
One day, she said, she got a call from the bank. "I just about (expletive). There was $16,832 left."
Norman sued her two stockholder-managers.
Meanwhile, Mahan ran to keep his seat on the bench. Swarts served for the second time as his campaign treasurer. Mahan won without opposition, and in June 2000, midway through the race, Norman's lawsuit went to his court. While Swarts was still his treasurer, Mahan appointed him as the receiver for Adult On-Line.
Norman recalled the first hearing. "George (Swarts) was already there in court. Bam-pow! He was in as receiver. No discovery. No questions. (Mahan) just put in a receiver. It was pre-decided ... pre-set. My mouth hit the floor."
Mahan assured Norman that he saw "potential value here and that (the) asset should be preserved," court minutes show. "Mr. Swarts ... will keep the business running."
Swarts chose the Ellis law firm, where Mahan had been a partner, to represent him, and Mahan approved the appointment. Mahan was still receiving what he described as rent, or "investment income," from the law firm office building, as well as interest from the Mahan & Ellis profit-sharing plan, according to the financial reports he would file from the federal bench.
Three months after the suit was filed, the two stockholder-managers complained to Mahan, saying they feared that Las Vegas Adult On-Line Productions Inc. was "being bled dry." They said Swarts had frozen or emptied their accounts, would not pay creditors, had broken financing promises and would communicate only through attorneys charging up to $250 an hour.
Unless Mahan intervened, they wrote, they would "be headed into bankruptcy."
But Mahan allowed the receivership to continue.
A month later, court records show, Ellis told Mahan at a hearing, "There is little money" left.
Mahan ended the receivership in December, records show, and approved fees of $15,525 for Swarts and $19,293 for the Ellis law firm for the three months of July 3 to Oct. 9.
"In the end, whatever funds were in the account went to pay the receiver," Norman said. "If I ever see (Mahan) on the street, I'm going to spit in his (expletive) face."
CHAPTER 6
The NetSol Case
On June 11, 2001, dissident stockholders, escorted by armed guards, took over the offices of NetSol International Inc., a software company in Calabasas.
Although NetSol was based in California, it had been incorporated in Nevada, and its deposed managers sought assistance there. They sued in Las Vegas state court, and the case was assigned to Mahan.
"The judge, right out of the blue, said: 'Maybe we should get a receiver. ... I know a guy who is perfect for this,'" John C. Kirkland, a Santa Monica attorney for the dissidents, said in an interview.
Mahan ordered a recess, Kirkland said, and Swarts appeared in the courtroom. "Right away," Kirkland said, local attorneys told him that Mahan and Swarts "were best friends, had barbecues ... were very close. ... We were told in no uncertain terms: This is the 'judge's receiver,' and we were going to have to live with him."
Again, Swarts chose the Ellis law firm, where Mahan had been a partner, to represent him in the receivership, court records show.
By now, Mahan had sold his interest in the law firm real estate. But according to his financial disclosure statements, he was still receiving interest from the Mahan & Ellis profit-sharing plan.
Todd L. Bice, a Las Vegas attorney for NetSol management, said in a telephone interview that he had been unaware of any relationship between Mahan and Swarts. "I don't remember that the issue ever came up in court."
A month later, records show, Kirkland, the dissidents' counsel, accused Swarts of devaluing the firm. "What once was a multimillion-dollar company is now a penny stock," Kirkland said, adding that NetSol was doomed.
In August 2001, Mahan ended the receivership. He ordered NetSol to pay Swarts and the Ellis law firm $65,000 for two months' work.
Although many computer-based companies suffered during the technology bust, NetSol's plunge was dramatic. In March 2000, its stock traded at $75 a share. By October 2002, the stock had fallen to a nickel a share.
Earlier this month, it closed at $1.86 a share.
Kirkland scoffed at the Las Vegas justice system. "It's the most corrupt system I've ever seen," he said. "They hometown everyone."
CHAPTER 7
A Federal Judge
By February 2001, the second anniversary of his appointment to the state bench, Mahan's name had surfaced for possible nomination to the federal bench by George W. Bush, the newly elected president.
Sig Rogich had been the finance chairman of Bush's Nevada campaign. When he learned that Bush would nominate two judges in the state, he made three telephone calls on Mahan's behalf, according to a political insider who requested anonymity.
One call was to Sen. John Ensign, the Nevada Republican who would recommend potential appointees to Bush.
"I nominated Judge Mahan," Ensign said, "because of his outstanding record and reputation. Throughout his career, he has demonstrated a careful and deliberative nature, and a commitment to fairness and the proper application of the law."
The second call was to the screening panel for the Senate Judiciary Committee.
The third was to the White House.
Mahan won Ensign's approval, as well as the endorsement of Nevada's veteran Sen. Harry Reid, a Democrat.
"Senator Reid joined Senator Ensign in supporting the nomination," said Reid's spokesman, Jim Manley, "because he felt Judge Mahan had the qualifications necessary to serve as a U.S. District Court judge."
Bush nominated Mahan on Sept. 10, 2001, to be one of the five U.S. District Court judges then in Las Vegas. The Senate confirmed him without controversy, and he joined the federal bench on Jan. 30, 2002, a lifetime post.
Mahan's confidants, allies and business pals were not far behind. As his executive judicial assistant, he hired Jeri Winter, a former member of his campaign staff who had been his executive judicial assistant when he was a state judge.
Within little more than a month, he approved the hiring of the law firm of his former partner, Ellis, in a federal case while Ellis was representing Winter at no charge in a bankruptcy. Only five months before, Ellis had represented Mahan's wife in a family probate, also for free.
The federal case was over E-Rex Inc., developer of the Dragonfly, a portable printer-fax with Internet capability. Dissident shareholders had sued executives, accusing them of mismanagement, according to court records.
Mahan appointed Swarts, this time as a special master, to investigate the accusations, the records show. According to court minutes, Mahan ordered the dissidents to pay Swarts an advance of $5,000 and an overall fee of $250 an hour.
Mahan approved hiring Ellis' law firm to represent Swarts at $210 an hour.
"We had no idea that the federal judge, Judge Mahan, had a relationship to Swarts or his attorney," Ruben F. Sanchez, a Woodland Hills lawyer representing E-Rex, said in an interview. "That was never disclosed."
Sanchez said E-Rex hired Harold Gewerter, a Nevada attorney. Gewerter was asked in a telephone interview if he knew at the time about Mahan's relationships with Swarts and Ellis. He replied: "I heard indirectly that -- I have no knowledge of any relationship. Judge Mahan did a fine job."
Mahan awarded Swarts $17,267 and the Ellis law firm $1,582 for work during March, April, May and June, the court records show.
In July 2002, Mahan dismissed the lawsuit.
The dissidents appealed. In January 2004, a three-judge panel of the U.S. 9th Circuit Court of Appeals reversed Mahan's dismissal in part, saying he had erred by denying the shareholders an opportunity to amend their complaint. The appeals court sent the case back to Mahan.
In April 2005, Mahan granted a change of venue to Florida. The case was appealed again. It remains an open case.
CHAPTER 8
Interstate Mortgage
One month after he appointed Swarts in the E-Rex case, Mahan was assigned a federal lawsuit accusing Interstate Mortgage Group Inc. of Las Vegas and its former owner and president, David Ferradino, of fraud, breach of contract and breach of fiduciary duty, court records show.
Two and a half years earlier, Swarts had been appointed conservator, or custodian, of Interstate Mortgage, the records show, and then had been appointed receiver of the firm, which had been seized by the Nevada Financial Institutions Division, a state agency that regulated mortgage brokers.
The suit was filed by Robert and Ruby Rogers of Phoenix, who demanded the return of $110,000 lost through what they called "fraudulent acts" by Ferradino and his company -- plus $5 million to punish them. The suit meant the firm Swarts was managing had become a defendant in Mahan's court, and Swarts was a defense witness.
Mahan had vouched for Swarts a month earlier by appointing him special master in the E-Rex case.
Now he was sitting in judgment upon a firm Swarts was managing in a case accusing the company of fraud.
Representing Swarts and Interstate Mortgage in Mahan's courtroom was the Ellis law firm, where Mahan had been a partner and where Ellis had represented Mahan's wife in a probate and was still providing free legal counsel for Mahan's executive assistant in her bankruptcy case.
"We were never told Mahan (had) any connections with Swarts or his attorney," said plaintiff Robert Rogers in a telephone interview.
Mahan dismissed Interstate Mortgage as a defendant, records show. That left Ferradino as the sole defendant. He was ordered to make restitution.
Rogers said he settled with Ferradino in 2003 for $82,000.
CHAPTER 9
The Bulloch Case
Less than a month after dismissing Interstate Mortgage and its conservator Swarts from the case, records show, Mahan decided a lawsuit in favor of Howard Bulloch, a longtime Las Vegan, and awarded him more than $4 million.
Mahan and Bulloch were former business associates.
In July 1997, Mahan, then a partner in Mahan & Ellis, and Bulloch, a Las Vegas real estate agent, were on a receivership team to sell 89.07 acres in Laughlin.
At the time, the judge in the case appointed Swarts as receiver. Swarts had hired Mahan as his lawyer and recruited Bulloch to sell the property. Mahan's billings, filed in 1998 court records, show how closely Mahan and Bulloch had worked together.
Jan. 20: "Review letter ... to Howard Bulloch." Jan. 22: "Review letter ... to Bulloch." Jan. 30: "Review proposed flyer from Bulloch. Telephone call with Bulloch: proposed revisions." Feb. 5: "Review proposed purchase and sale agreement from Howard Bulloch; revise and return to Howard." Feb. 10: "Telephone calls with Howard Bulloch." Feb. 12: "Conference telephone call with Howard Bulloch ... incorporate my suggestions and revisions, which I faxed to Howard yesterday. Conference with client; Howard Bulloch." Feb. 13: "Review marketing efforts documentation from Howard Bulloch." Feb. 19: "Telephone call ... Howard Bulloch's office." Feb. 24: "Review information from Howard Bulloch."
That March, the property was auctioned for $1.25 million, Mahan reported to the judge.
Five years later, Bulloch appeared in Mahan's federal courtroom.
He was suing Michael Shustek, a mortgage broker. According to court records, Bulloch contended that Shustek had wrongfully collected a $3.8 million fee on loans to buy land on the edge of Las Vegas.
In March 2003, at the end of a weeklong trial during which Mahan served as judge and jury, he ruled in Bulloch's favor, saying Shustek's fee was excessive and unlawful.
Mahan refunded the fee to Bulloch, plus interest -- for a total of $4.12 million.
A recent search found no statement in court records that the judge had revealed their prior relationship. Bulloch said in a telephone interview that it was disclosed.
Shustek's attorney, Steve Morris, was asked in an interview if he knew that Mahan had a prior relationship with Bulloch.
"I'm astounded," Morris replied angrily.
Six weeks later, the Nevada Financial Institutions Division, which regulated mortgage brokers, said that Shustek's fee had been lawful and appropriate.
Shustek appealed Mahan's decision. A three-judge panel of the U.S. 9th Circuit Court of Appeals decided in November that Mahan did not have jurisdiction to hear the case.
The 9th Circuit ruling is being appealed to the Supreme Court. (The U.S. Supreme Court on June 12 refused to review an appeals court decision dismissing the $4.1 million judgment won by developer Howard Bulloch in a Las Vegas federal court against Del Mar Mortgage, a predecessor of Vestin Mortgage.)
