Indianapolis city employees arrested on fraud, bribery charges

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Two city employees and three others are accused of using a city program aimed at tackling the abandoned house problem and turning it into a money-making venture. The five face charges involving wire fraud and bribery.

U.S. Attorney Joe Hogsett announced the indictments Tuesday afternoon following a two-month investigation that began with a tip from confidential informant.

Reggie Walton, who heads the Indianapolis Land Bank, and John Hawkins, a senior project manager with the Department of Metropolitan Development were arrested. So were David Johnson with the Indianapolis Minority Aids Coalition, Randall Sargent with New Day Residential Development and Aaron Reed with Naptown Housing Development.

"It's alleged that Mr. Walton and Mr. Hawkins turned this program on its head," said Hogsett.

Through the land bank, the city acquires distressed properties then sells them to buyers willing to fix them up. Hogsett said the scheme involved selling properties to non-profit groups (which are able to buy them for as little as $1,000) which in turn sold them to for-profit developers (which usually have to bid on them) at reduced prices.

Hogsett said Walton and Hawkins "used non-profits and a real estate firm run by the co-defendants to unload city-owned property at greatly discounted prices."

He said they accepted kickback pay for arranging the sales and that Walton accepted a $500 bribe from an undercover FBI agent. Walton was also described as a silent partner with Naptown Housing, "handpicking" land bank parcels for Reed to buy.

Asst. U.S. Attorney Brad Blackington said all five men charged profited from the deals "in excess of $100,000."

The charges were announced after FBI agents and state police spent much of Tuesday morning removing boxes of records from the land bank office on the 20th floor of the City-County Building.

Aaron Thies, executive director of DMD, said of the charges, "We're extremely disappointed to hear we had this issue with employees. In our department we strive greatly to do our best work for citizens."

Thies said both Walton and Hawkins were suspended without pay while the investigation continues.

Blackington said it was possible more arrests could following depending on what other evidence they uncover.

Statement from Mayor Greg Ballard:

"I take these allegations very seriously and I will not tolerate abuse of the public trust. That's why I initiated the toughest ethics and first whistleblower laws in the history of the city.

Mr. Walton and Mr. Hawkins are suspended without pay effective immediately.

I appreciate the work of federal officials in this matter and my team will continue to assist them in this investigation. The alleged acts of these two individuals do not reflect the dedication of the thousands of employees who work hard to improve our city every day."