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Payments to Diehl during bankruptcy raise new questions about ties to Utah power brokers

Published May 23, 2017 11:50 am

Transit projects • Checks from companies, power brokers to the developer and former UTA board member after his 2012 bankruptcy were not reported to court, federal prosecutors say.
This is an archived article that was published on sltrib.com in 2017, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

About two months after developer and former Utah Transit Authority board member Terry Diehl filed for bankruptcy in March 2012, the money began pouring in. 

Over 11 months, Diehl raked in at least $550,000 from real-estate companies and politically connected developers, including from a company partly owned by Utah House Speaker and former UTA board Chairman Greg Hughes, according to a federal indictment that accuses Diehl of bankruptcy fraud. Other payments came from former House Majority Leader Kevin Garn, a major partner with UTA on transit-oriented developments around TRAX and FrontRunner stations, and Jeffrey Vitek, Diehl's partner in a multimillion-dollar development near UTA's Draper train stop.

Filing for bankruptcy doesn't prevent the debtor from making money. And there is nothing in court papers that suggests these seven payments are illegal or inappropriate — beyond the accusation that Diehl hid them from the bankruptcy judge.



The payments, however, raise new questions about the embattled developer's relationships with Utah power brokers, particularly Hughes, whose name has been cited in two separate civil lawsuits related to the sale of land near the Draper FrontRunner station.

Twice examined by legislative auditors, the 12800 South site is one of several transit-oriented development projects now under scrutiny by federal prosecutors as part of an ongoing criminal probe into current and former UTA board members, employees and real-estate deals. 

An April announcement of the criminal investigation and UTA's immunity deal came one day before Diehl, 61, was indicted on 12 criminal counts for allegedly lying about his income and concealing assets — including more than $1 million from the sale of land related to the Draper train station — both in his initial bankruptcy filing and the monthly operating reports required by the court. 

Diehl, who declined to be interviewed for this story, has denied any wrongdoing in a text sent to The Salt Lake Tribune on the day he was charged.

"I obviously disagree with the government regarding the details involved with my bankruptcy," he wrote. "I look forward to proving my innocence and having my day in court."

Diehl is scheduled for an initial court appearance in June.

Checks cut • Seven of the indictment's charges — counts of concealment of assets — are tied to the payments Diehl received from companies tied to Hughes, Garn and others, which documents show began in May 2012 and continued through February 2013.

All but one were checks cut to Skyline Venture Associates (SVA), a company founded in November 2011, that lists Diehl's daughters, Bobbie Jo and Mercedes, as its owners.

Federal prosecutors say, however, that Diehl controlled SVA's business operations, using its bank accounts to conceal significant amounts of money.

The largest payment to Diehl was from Urban Chase, a property management firm in which Hughes is listed as a manager. The indictment shows the $277,304.79 check was cut on June 29, 2013, to Wasatch Pacific, Inc., a Diehl development company, while Hughes was serving as UTA chairman. (Hughes disclosed his ownership of Urban Chase on his UTA conflict-of-interest form, but made no mention of any business dealings with Wasatch Pacific.) The money later was transferred to SVA.

Diehl was appointed to the UTA board in 2001 and Hughes in 2006, about three years after Hughes was elected to represent Draper in the state Legislature. They were friends and came to have a close collaboration in 2008 and beyond over the location of the Draper FrontRunner station.

State investigative records obtained by The Tribune show Hughes was deeply involved in UTA and Draper's selection of the train station site. He also helped drive the agreements and city ordinances needed to ensure it was approved as a transit-oriented development with residential and office spaces located close to the station and with a huge potential for profit for developers.

Hughes' name was mentioned by more than two dozen individuals — including former UTA board members and an ex-member of the Draper City Council — who were interviewed by a Utah attorney general's office investigator in 2011-2013 when the agency was investigating UTA after a damning 2010 audit.

Interview summaries detail Hughes' alleged involvement in shaping the plans for the UTA's Draper site, and his close relationships with board members, including Diehl and former Utah House Speaker Greg Curtis.

"Mr. Diehl, Mr. Hughes and Mr. Curtis were always texting each other during UTA meetings," Burtis Bills, an ex-board member told investigators.

The 2012 payment to Diehl from Hughes indicates that the pair had a substantial business relationship at least through the time the check was cut.

Messages left at the Urban Chase office and with Hughes' chief of staff were not returned.

And Hughes' attorney, Brett Parkinson, declined to answer questions about the payment, instead referring to an earlier statement on the Diehl indictment that said U.S. Attorney John Huber had told him Hughes was not a target of the investigation and that Hughes had voluntarily cooperated with investigators.

The U.S. attorney's office would not confirm Parkinson's assertion about whether Hughes is being investigated.

"To maintain the integrity of our investigation, we are not going to comment," agency spokeswoman Melodie Rydalch said.

The indictment also shows another $150,000 went to Diehl in three payments from Kevin Garn and The Thackeray Co., an entity owned by John Thackeray, Garn's business partner in the Thackeray Garn development firm.

Two checks, both for $50,000, were from Garn, who is identified in court papers by the initials "K.G." One was issued Dec. 23, 2012, and the second Feb. 28, 2013. 

Thackeray's company also cut a $50,000 check to SVA on the last day of February in 2013, court papers show.

Transit-oriented development • Between 2011 and 2012, Thackeray Garn was selected to develop seven of 12 transit-oriented development projects along the Wasatch Front, decisions that were approved by the UTA board. 

Diehl resigned from the UTA board in May 2011 under pressure after a state audit alleged he had used insider information about UTA rail station plans to benefit himself, but only after the board waived a one-year ban on ex-board members doing business with the agency — a waiver signed by Hughes. But Diehl would have been on the board during the planning and bidding process for four sites: North Temple Station, Ballpark Station, Farmington Station and Murray Central Station. 

All four projects were awarded to Thackeray Garn, although UTA later canceled those agreements, and two others, citing in part its discomfort with the company's ties to former UTA board members.

Diehl wasn't specifically mentioned in UTA's decision, but in 2015 the agency sent him a letter demanding he cut off all contact with UTA board members. The letter said Diehl was continuing to contact UTA board members and employees "in an attempt to influence certain UTA projects."

Multiple messages left for Garn and Thackeray at their company offices were not returned.

The indictment also shows Diehl received checks totaling $110,000 from Boulder Ventures Development Inc., a company owned by Vitek.

The first, for $80,000, was cut May 23, 2012. The second, on Dec. 6, 2012, was for $30,000. Again, the indictment offers no explanation or reasons for the payments.

UTA advanced $10 million to Vitek supposedly to construct a parking garage at the Draper train stop in 2009. Legislative auditors say Viteck never built the Draper garage, and the money amounted to a loan to the developer from UTA. Two months later, in February 2010, Vitek also won a second UTA project in West Jordan. Both projects were awarded after Vitek and Diehl, then on the UTA board, entered into a partnership to pursue development projects that could net them millions.

Vitek and Diehl formed Draper Holdings Associates, which, in 2009 and 2010, acquired land and development rights around the Draper station through a subsidiary; the land later sold for significant profit, according to a civil lawsuit filed against Vitek and other records. Diehl was essentially a secret partner in the transactions but the pair split the proceeds of the sale 50-50, court papers allege.

In an email, a spokeswoman for Vitek declined to comment on the payments or the relationship between the two men.

"Neither Mr. Vitek nor Boulder Ventures Development is a party to any of these proceedings," Jessica Lutenauer wrote, "and, as a result, it would be inappropriate for us to comment."

A seventh check listed in the indictment went to Diehl on Dec. 6, 2012. The $30,000 payment was made by a person or entity identified only by the initials D.B., whose identity is not spelled out.

jdobner@sltrib.com

tharvey@sltrib.com

@jenniferdobner

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