Financing Behind D.C. Slots Murky

Newell, who was born Nov. 1, 1960, received a bachelor's degree in business from the University of Idaho in 1982 and an MBA from the same school in 1984. He went to work in Spokane, joining Shearson Lehman Hutton in 1985.

Newell left that firm in 1988, according to his résumé, and went to work for Empire Securities, an investment adviser. In 1997, a series of complaints prompted Washington state regulators to investigate Empire Securities, numerous affiliates and their officers, including Newell. The investigation concluded that Empire preyed for years on unsophisticated investors who were often old and sick.

In 1998, Washington state accused Empire of securities fraud and "dishonest and unethical practices." Newell was not personally sanctioned, but the National Association of Securities Dealers censured him in 1999, concluding that he had "made unsuitable recommendations to public customers," according to records in Washington state.

Meanwhile, Newell moved to Claremont, Calif., where he and some Empire associates formed Claremont Management. The firm bought the town's biggest inn out of bankruptcy, promising to "turn it into a world-class hotel," said Scott Miller, economic development director for the city of Claremont. Two years later, the Claremont Inn was still "a total mess," Miller said. "The landscaping was horrible. The AC, electric and water were failing."

Claremont Management filed for bankruptcy, and the city discovered that the firm had taken out "some very suspicious third and fourth mortgages" on the property, Miller said. "It looked like people were pulling profits out rather than making investments."

The city sued, Miller said, demanding that Newell identify the mortgage holders, "which they would never reveal to us." The city dropped the suit in 2000 when the bankruptcy settled and Claremont Management lost control of the inn.

After that, Newell returned to Idaho offering lots for sale at Magic Lake Ranch, which is described on a Web site as a "lakeside retreat" near Sun Valley with "breathtaking mountain vistas."

According to neighbors and county and federal officials, the lots sit on Magic Reservoir in the treeless southern Idaho desert, 25 miles from the nearest mountain. The reservoir, they said, has been half-empty for years, leaving the lots high and dry and facing a lakebed full of gravel. Lonnie LeaVell, a cattleman who recently sold a nearby spread, said there's also no road and no electricity.

Newell's broker, Judy Cash, said the lots -- priced at up to $89,900 -- have not sold. In 2002, public records show Newell borrowed about $245,000 against the development, which has been in his family for years.

Newell's résumé shows that he also went to work for the Hard Money Funding Network, which solicits investors to fund private loans at very high interest rates. Hard Money is operated by Newell's brother Michael, 52, who has long ties to Scott and Baldwin, joining them in a failed South Carolina video poker operation that declared bankruptcy in 1999 .

LeaVell said Rob Newell once tried to talk him into becoming a Hard Money investor, promising an 18 percent return on his money. But "I wasn't really interested," LeaVell said. "I told him, if we did anything together, I wanted [to be] paid in advance."

Staff writer Serge F. Kovaleski and researcher Bobbye Pratt contributed to this report.