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Anchorage condo king indicted on fraud, criminal charges

Four years after his financial world began collapsing, Anchorage condo king Lee Baker Jr. has been indicted by a federal grand jury on charges that he lied and cheated on federal credit union loans connected with his construction projects, the U.S. Attorney's Office announced Friday.

The 14-count indictment accuses Baker, 55, of misleading Denali Alaskan Federal Credit Union in a number of transactions in 2005, including when he sought a loan to purchase and develop Lake View Estates in Wasilla.

Federal prosecutors allege that Baker created a series of land-sales transactions to obtain the loan under false pretenses, transferring Lake View Estates property from his company, Discovery Construction, to himself, then back to the company.

When he "sold" the land back to Discovery Construction, Baker told the credit union that a legitimate deal valued at $1.4 million had taken place, and sought the loan to finance it, prosecutors said. Instead, the indictment alleged, Baker used the money he obtained from the federally insured credit union to reduce his shareholder debt to Discovery Construction.

The indictment also accuses Baker of lying to the credit union when he drew down the proceeds of a $9.2 million construction loan for the Bryn Mawr apartment project on Northern Lights Boulevard in East Anchorage.

Normally, contractors tap into a construction loan as they complete phases of a project and the bills come due. Baker claimed to have completed 12 separate work phases, and each time obtained a chunk of the total loan.

In fact, the prosecutors alleged, "very little work had been done, and the total amount completed in each request was false."

Baker eventually defaulted on the loan, prosecutors said.

Baker also faces a count of money laundering for paying a subcontractor on a different project out of the Bryn Mawr money.

Baker faced a parade of lawsuits from subcontractors and suppliers in early 2008 as the local version of the national housing bubble began to burst and he stopped paying his bills.

Baker was known for building "site condos," controversial developments where cheap houses were squeezed onto the smallest possible piece of land -- in some cases, using access roads the size of alleys in which fire trucks were unable to maneuver.

In March 2008, the Denali credit union followed the contractors and other creditors, suing him and his company to recover $16 million in delinquent loans. The credit union said the delinquent loans were the main reason it lost $2.8 million in 2007.

In its lawsuit, the credit union accused Baker of fraud. Baker acknowledged that he defaulted on the loans but denied fraud had anything to do with it.

Now it's federal prosecutors accusing him of fraud and other criminal violations. The U.S. Attorney's Office in Anchorage said the charges against Baker carry a maximum penalty of 30 years in prison and a $1 million fine, though judges rarely apply the maximum.

Baker couldn't be reached for comment.

In lawsuits and criminal cases filed across the country, the Justice Department has been targeting lenders, contractors, financial managers and others who contributed to the financial collapse associated with the burst U.S. housing bubble in the late 2000s.

Baker was investigated by the FBI and the IRS.

Reach Richard Mauer at rmauer@adn.com or 257-4345.


Anchorage Daily News