Omaha landlord and his secretary want bribery case dismissed, say their actions were coerced
On a Friday in late February 2012, Reggie Johnson arrived at the north Omaha office of the landlord who dominates the city’s Section 8 housing program.
Johnson, then an employee of the Omaha Housing Authority, was to have lunch with Lafi Jafari, who owns 165 rental properties that provide a federally subsidized place to live for some of the city’s poorest residents.
Before Johnson could leave the landlord’s office, however, Jafari’s secretary stunned him with a question. MaryLou Gruttemeyer, who is known as “Ted,” asked if he was wearing a wire. Then she patted him down.
There was no wire. But later when he spoke with Gruttemeyer he would be using one, under the direction of federal law enforcement agents. Recordings of those conversations would become the underpinning of a bribery conspiracy indictment returned against Jafari and Gruttemeyer in U.S. District Court.
The bribery case unfolding in the federal courthouse in downtown Omaha involves a strikingly small amount of money, $2,098 in alleged bribes over three years. During roughly that same time period, from 2012 to 2014, Jafari received substantial federal rent payments of about $2.1 million.
The U.S. Department of Housing and Urban Development and the FBI spent about four years investigating Jafari and Gruttemeyer, and a grand jury returned an indictment in November 2016. Initially the probe was done without telling others at OHA, as agents explored whether the alleged corruption had spread further. No one at the agency has been indicted.
Details of the case have emerged publicly in recent weeks during court hearings as attorneys for Jafari and Gruttemeyer seek dismissal of the case. They argue that Johnson, at the behest of the government, cajoled and coerced their clients into the actions that landed them in court.
The case began with the February 2012 lunch at Tussey’s restaurant in the Florence area, a meeting that a HUD agent described in court testimony.
Johnson and Jafari chatted about the landlord’s relationships with mayors and OHA executive directors. At one point, the agent testified, Jafari leaned back, closed the blinds next to their table and put a half-inch-thick envelope on it. In it was $500. A good share of the cash was in two-dollar bills, a characteristic of at least three of the alleged payments.
Take your family out for a nice dinner, the landlord instructed. Jafari did not ask for anything in return.
Johnson would not use the money to go out to eat. Instead, he called an agent at HUD’s Office of Inspector General in Kansas City to report the meeting. At the time, Johnson was OHA’s first program integrity specialist. He had previously been an assistant inspector general for the Army at Fort Riley, Kansas.
HUD opened an investigation that led to Jafari and Gruttemeyer’s indictment on six counts each of paying a bribe to an agent of an organization receiving federal funds and one count each of conspiracy to defraud the United States. Jafari also was indicted on one count of making false statements to HUD agents. He is accused of telling them that he had never provided anything of value to an OHA employee and did not know Johnson. Jafari and Gruttemeyer have pleaded not guilty.
In seeking the case’s dismissal, the defendants’ attorneys, Jerry Hug and Brent Bloom, have argued that investigators’ actions constitute “outrageous government conduct,” a legal standard. That defense relies in part on an undisputed fact: Federal investigators twice directed Johnson to ask Gruttemeyer for money in exchange for performing favors for the rental company.
However, Assistant U.S. Attorney Jan Sharp noted that Johnson made the requests after receiving unsolicited money on three occasions.
U.S. Magistrate Judge Susan Bazis is expected to rule on the dismissal request in February. If the judge allows the case to proceed, Jafari and Gruttemeyer potentially face heavy fines and substantial prison time.
The indictment alleges Jafari or Gruttemeyer gave a total of about $2,100 to Johnson over five occasions. Four of those were arranged meetings, and three of those were recorded. In one instance, for example, Johnson carried a key fob that contained a camera. The FBI also instructed him how to record telephone conversations.
Gruttemeyer held broad responsibilities at Jafari’s company, including being present at inspections, collecting rent and going to court eviction proceedings. She also is in a relationship with Jafari, her attorney said.
Gruttemeyer handed Johnson envelopes of cash four times, the indictment alleges. Jafari is accused of providing an envelope on one occasion, at the February 2012 lunch meeting.
OHA provides housing to people with low to moderate incomes. In the Section 8 program, federal rent subsides are directed to private landlords. At 74, Jafari is the city’s largest Section 8 landlord and has been in the rental business for decades.
At the time of Jafari’s indictment a year ago, about 100 families lived in properties in north Omaha owned by either Jafari or his company, MM&L International Corp. A substantial share were in the Minne Lusa area, where Jafari lives.
Following the indictment, HUD suspended Jafari’s Section 8 eligibility in February, and OHA began suspending payments to him as leases expired, house by house. As of early November, 31 families remained in Jafari-connected properties, said Judith Carlin, OHA’s chief executive officer.
Jafari has challenged HUD’s order suspending his eligibility, and is suing OHA to resume rental payments.
Beyond surreptitious audio and video recordings, HUD tracked mail sent to Jafari. For at least a month the U.S. Postal Service gave investigators copies of the outsides of envelopes mailed to Jafari, a practice known as a mail cover.
The investigation was kept from senior OHA officials.
“We did not know at that point where this could lead, whether … anyone else within the housing authority might be taking bribes from other people,” testified a now-retired HUD special agent, Karen Gleich.
HUD investigators’ suspicions were fueled by something they heard in an interview with the director of Section 8 in Omaha, testified HUD Special Agent Kris Kanakares. He said that the supervisor in the Omaha OHA office told him that one of her employees admitted to receiving referral fees from Jafari.
OHA ethics guidelines forbid employees from recommending a landlord to a tenant in exchange for money. That employee was either fired or resigned, Kanakares testified. Carlin, the OHA chief executive officer, said she had no knowledge of the alleged incident because the employee left before Carlin arrived at the agency.
Most of Johnson’s meetings with Jafari and Gruttemeyer were arranged. But there also was an unplanned encounter referred to by attorneys as “The Cracker Barrel Incident.”
Johnson and his wife, Linda, ran into Jafari and Gruttemeyer at the Council Bluffs restaurant after a weekend breakfast in the summer of 2013.
As the Johnsons were leaving, Gruttemeyer approached their vehicle and offered an envelope to Johnson’s wife through the passenger window. Linda Johnson, who had been ill for years and died of cancer in October 2016, accepted it. The envelope was filled with $200 in two-dollar bills.
It is not clear what ultimately happened with that money.
Kanakares testified that it appears that Johnson’s wife spent it, while Johnson said the couple turned it over to investigators.
Bloom, Gruttemeyer’s attorney, questioned what happened to it.
“That money was never recovered?” Bloom asked.
“No, it was not,” Kanakares said.
“ ’Cause Mrs. Johnson spent it, right?” Bloom asked.
“That’s my understanding. Yes,” Kanakares said.
At a hearing on Wednesday, Johnson said, “I recall me telling my wife ‘Baby, you can’t take that money.’ … I did not want my wife to know any of the stuff that was going on. I didn’t want her implicated in this thing.”
He testified that law enforcement agents came to the couple’s home to retrieve the money. He said he wasn’t certain, but he believes they came that same night.
An element of Jafari and Gruttemeyer’s defense is that they were disliked by some OHA employees.
In a motion, the defendants’ attorneys wrote that OHA employees, “without basis for their opinion” had described Jafari as “evil” or “shrewd” in interviews with federal investigators.
“The race and ethnic origin of Jafari and Gruttemeyer, as well as the relative success of Jafari in his business dealings made them an object of suspicion and derision for OHA employees and caused OHA employees to suspect Jafari, Gruttemeyer, and MM&L International,” the attorneys wrote.
Jafari, a Palestinian who spent his youth in Jordan, decorated his office with photographs from his younger days as a track athlete. Gruttemeyer is from the Philippines and has lived in the United States since 1985.
The defendants’ attorneys have argued that there was an “OHA whisper campaign” that was intended to impugn Jafari and Gruttemeyer’s characters to HUD investigators.
Another leg of the defense is that Johnson had a forceful physical presence that helped induce a reluctant Gruttemeyer to offer him money.
“He’s a big guy. A big man who works out,” Bloom said Wednesday of Johnson, who is about 5-foot-10 and at the time weighed about 210 pounds. “Mrs. Gruttemeyer is a very small, older woman.”
Gruttemeyer is 58, Johnson is 55.
The defense attorneys described the government investigative efforts as “hounding, bullying, pestering and coercive.”
Some of the alleged bribes were not accompanied with a specific request, and that, too, is among the central questions raised by defense attorneys.
However, a Creighton University School of Law professor said the law does not require a prosecutor to demonstrate a quid pro quo to prove conspiracy to commit bribery.
“The government just has to prove, by giving the money, the defendant intended to influence the housing authority,” Patrick Borchers said. “In general, the government doesn’t have to prove there was an agreement.”
In February 2015, Johnson asked Gruttemeyer for one last envelope of money. It was Johnson’s last day as an OHA employee — he would be taking the job he still holds, managing the Omaha police vehicle impound lot.
Johnson had discovered during an investigation that Jafari had received federal rent payments for a tenant who had moved out of a Crown Point Avenue rental, a HUD agent testified.
At HUD’s direction, Johnson told Gruttemeyer he could cover up the results of his investigation.
On the line was about $6,200 in rent overpayments that Jafari would have to pay back.
Johnson went to the MM&L office where it had started three years earlier. He walked up stairs to a patio, where Gruttemeyer stood.
Gruttemeyer remained suspicious of Johnson, he testified. She spoke in a low tone and held up a handwritten sign with three questions:
Can we do this out here?
Is $700 enough?
Can I trust you?