SANTA FE (KRQE) - A New Mexico cabinet secretary lied twice about why a fraud investigation into a luxury homebuilder was dropped in 2011, then admitted he hadn’t reviewed all the evidence before re-opening the investigation earlier this month.
And New Mexico Regulation and Licensing Superintendent J. Dee Dennis, Jr., said he only re-opened the investigation after News 13’s Larry Barker began asking questions about it.
“I did not mislead you,” Dennis told Barker in an interview earlier this month. “I haven’t changed my position.”
But, as with many of Dennis’ statements related to the investigation into William “Kal” Kalinowski, that is debatable.
“A crime was committed – a serious crime,” said Kelly O’Donnell, Dennis’ predecessor at the Regulation and Licensing Department. “There was substantial evidence that fraud had been committed and consumers had been harmed.”
Up until 2008, Kalinowski was Santa Fe’s go-to guy for custom home-building, with an award-winning reputation for quality, style and luxury.
But that reputation now lies in ruins after Kalinowski started building 15 luxury homes in the Las Campanas development, located in the rolling hills west of Santa Fe, just as the economy began to turn sour a few years ago.
Santa Fe mortgage broker Stefan Lark lost $600,000 that had been invested with Kalinowski.
“Fraud, deceit, lies, misuse of funds, misappropriation of funds – it’s all there,” said Lark, who had to file for bankruptcy.
Michael D’Alfonso also went bankrupt over his investment with the Santa Fe contractor.
“(He’s) a master thief,” D’Alfonso said. “There’s millions missing.”
And it wasn’t just investors who lost money, he said.
“The cabinet person, the roofers, the plasterers, the plumbers, the electricians, the HVAC people, the concrete guy – they all got cheated,” D’Alfonso said.
John Rotman, an electrical contractor, said the ripple effect of Kalinowski’s actions on his business was extreme.
“We had to lay off people,” Rotman said. “(It) took us awhile so we could pay our suppliers. We had to sell some trucks and things like that.”
The state spent two years investigating the Kalinowski case, including executing search warrants, conducting interviews with dozens of victims and presenting grand jury testimony.
Wayne Dotson, who headed up the RLD investigation at the time, said the losses added up to $11 million.
“It’s the largest case we had ever handled at the Regulation and Licensing Department,” Dotson said.
But just as the case was about to move forward, Gov. Susana Martinez was elected, and the state decided to drop it, according to an e-mail sent Jan. 5, 2011 from a Regulation and Licensing Department attorney.
“… (P)lease immediately suspend all work on the … Kalinowski cases,” according to the e-mail from lawyer Kate Baca. Martinez took office Jan. 1, 2011.
But, in an interview with News 13, Dennis steadfastly blamed the administration of former Gov. Bill Richardson for shutting down the investigation.
“The previous administration closed this investigation at the end of 2010 before we came in,” Dennis said, repeating that statement three more times for emphasis.
Whatever the case, Dennis claimed there was no evidence of theft or fraud to support a criminal conviction, according to a prepared statement he sent to News 13. In that statement, he also said he didn’t believe Kalinowski benefited financially from the case.
And in an interview, Dennis said the case wasn’t about criminal activity, but instead about a tough economy.
“At the time … the bubble burst in the housing market and these failed homes were not being sold,” he said. “It was a failed investment. It was a bad investment. That is my assumption now.”
Former RLD Superintendent O’Donnell said that statement could only come from someone who wasn’t familiar with the evidence.
“The evidence that’s available, had it actually been inspected, would have been irrefutable in supporting the prosecutability of this case, and the fact that crimes had been committed” she said.
Dotson, the former RLD investigator, called Dennis’ explanation a joke.
“I have to laugh for somebody to say that, because they must not have looked at the evidence,” he said. “What a grave injustice. Who’s protecting the citizens of New Mexico?”
In fact, Dennis later admitted during his interview with News 13 that his written statement was made in ignorance.
“I had not reviewed all of the evidence” when that statement was issued, Dennis said.
During that interview, Dennis also tried to spin one more deception, claiming that the Kalinowski investigation was so bad, Attorney General Gary King refused on May 10, 2010 to prosecute it.
“They said they weren’t interested in pursuing the case,” said Dennis, who acknowledged that no documents exist to back up his claim.
King said that just isn’t true.
“We searched our records and cannot find any information that would indicate that we were asked to prosecute the case,” King said. “And, certainly, if we had been asked, we would have reviewed it and made a determination as to whether it was prosecutable or not.
“And if we had declined it, we would have notified them clearly that we had declined it.”
In his interview with Dennis, News 13’s Larry Barker asked the superintendent about the discrepancy.
“Somebody’s not telling the truth,” Barker said. “Who is it?”
“Larry, I don’t have any idea,” Dennis said. “I’m not going to sit here and call them a liar.”
Later, in the same interview, Dennis dropped his final, duplicitous bombshell, saying he was re-opening the Kalinowski investigation.
“You said in here there did not appear to be any theft or fraud involved and now you said maybe there is?” Barker asked.
“There may be,” Dennis said. “I don’t know until the investigation is done. Do I make any apologies? No sir, I don’t.”
After the housing debacle, Kalinowski closed his Santa Fe construction business, filed for bankruptcy and disappeared. News 13 tracked him down 1,900 miles away in the seaside village of Duxbury, located 30 miles south of Boston, Mass.
He is currently renting an estate overlooking Kingston Bay and works as a school teacher. He declined an on-camera interview, saying, “There’s nothing to be served by talking to you.”
But in a few brief comments, Kalinowski denied cheating anybody.
“I didn’t do anything wrong,” he said. “But dredging it up with my side and making people more upset, I don’t see any benefit to anybody. My whole life has been ruined by this. Ruined.”
At least one of the victims in the case has a hard time swallowing that.
“The money just disappeared,” said Doug Strasser, who lost a quarter of a million dollars, “And he’s never offered any explanation of where it went.
“I don’t think it was the economy. I think Kal took that money that was intended for, in my case, the house on my lot, and used it for some other purpose. We don’t know what that is, but I understand that’s fraud.”
Championship Edition Part 3: Player of the Week: Las Cruces running back J.J. Granados.; Spirit Stick Championship: Belen outpolls five rivals; Class 3A Title Preview: Silver Fighting Colts at Robertson Cardinals.
Championship Edition Part 4: Class 2A Title Preview: Hatch Valley Bears vs. Clayton Yellowjackets; Last Week's 2A Semi: Clayton stings Santa Rosa.
New Mexico is at the beginning of a deep freeze, and state officials are paying close attention.