Hebets FBI Memo Sorchych – Part 1

Hebets & Associates, P.C.                     File Memo                  

File: Information for the FBI on Local Irregularities                             

Date Prepared: 4/6/01

Re: Sorchych and Spur Cross Ranch                             

Prepared by: Noel J. Hebets, Attorney

Spur Cross Ranch is a property of about 2,000 acres in size lying at the north edge of the Town of Cave Creek on the south border of the Tonto National Forest, and includes most of Elephant Butte, a local mountain with a profile like the upper part of an elephant.

It is important because Cave Creek itself goes through Spur Cross Ranch as it comes out of the national forest and heads south along the west side of town.  It is also important because Spur Cross Road goes through the property and on into the national forest on a roadbed that goes back into the 1980s as part of the roadway then used to get from Phoenix to Prescott.  In fact, the community of Cave Creek really got its start because this was the first reliable water stop for the military and others on the way from Phoenix to Prescott.  Today it is the only local roadway into the national forest for a several miles in either direction.

In the 1980s the property was given some pretty dense zoning while owned by John Norton.  He later lost the property to local businessman Herb Dreiszesun and the Great American Life Insurance Company in Cincinnati.

In the late ‘90s the developer of Estancia (on the north side of Pinnacle Peak) put Spur Cross under contract, and began working on a plan to develop it.  He soon ran into strong local opposition in an effort largely led by Gary Schmitt and Melissa Paxton of Cave Creek.

Sorchych and the Sonoran News took up the cause, and Schmitt worked closely with Sorchych to feed him the information for continual coverage of the issue.  This led to a forced annexation of Spur Cross into the Town of Cave Creek as part of about 3,000 acres of ground that then lay between the north boundary of town and the national forest.

This, in turn, led to the developer backing out, and Governor Hull working with the Town of Cave Creek and others to try to negotiate a purchase of the property.  She obtained legislative approval for $15 million worth of funding with a provision that she had to reduce that funding if other sources of money were found.

Sorchych’s suspicious role in the drama from that point forward is what needs to be closely researched.  Towards that end, I offer the following loose chronology as primarily provided me by Gary Schmitt.

Note:  As is not unusual, Sorchych later turned on Gary Schmitt despite Gary’s efforts in saving Spur Cross Ranch.  Gary will undoubtedly help in any effort to investigate local irregularities.

At some point in time, a wealthy Cincinnati insurance mogul named Lindner, who owns Great American Insurance Company (part owner of Spur Cross Ranch) sent Charles Keating out to Arizona, and helped set him up by loaning him $200 million to buy Lincoln Thrift.  He also sent out an attorney named Kielty (Sp?) who served as house counsel for Keating.

The story of Keating, Lincoln Thrift and American Continental, is legendary in Arizona and even nationwide, resulting in prison time for Keating, etc.  For a period of something like 2 years, Jerry Kammer, an investigative reporter for the Arizona Republic, worked on that story and nothing else, and later got to know Gary Schmitt because of the Spur Cross effort.

Jerry Kammer; Arizona Republic; (602) 444-8185

Kammer told Gary that:  During some of the worst of the wrongdoing, house counsel Kielty sat in a room with a bevy of paralegals and an outside attorney, Gary Birnbaum from a firm called Mariscal Weeks, and manufactured false transactions to shore up the books.  As a result, that law firm paid $5 million in settlement of the Keating aftermath.  [Kammer told Schmitt that he believes for this type of thing someone like Birnbaum later ends up owning a condo in Hawaii with no questions asked.]

In time, Kielty went back to Great American Insurance Company (owner of Spur Cross) in Cincinnati, while Birnbaum stayed at Mariscal Weeks, but they remained buddies.  [One knowledgeable commercial broker told me he knows them well and repeatedly said they are “joined at the hip.”]

Meanwhile, back to Spur Cross Ranch:

At some point in time, while he still has a good relation with Don Sorchych, Gary Schmitt said that maybe the community needed to look at something like a preservation tax to try to save Spur Cross.  Sorchych immediately chided him saying:  “Don’t you know I am a libertarian, and I would crucify you in the press for even suggesting such an idea.”

Later, Gary noticed that, first Governor Hull, and then the town of Cave Creek, hired Gary Birnbaum to negotiate opposite Kielty for Great American.

Gary told Jerry Kammer that the two were sitting on opposite sides of the table negotiating the government’s purchase of Spur Cross, and Kammer could not stop laughing for 30 seconds.

He also pointed out to Sorchych Birnbaum’s prior connection between Kielty and Birnbaum, but Sorchych, surprisingly, did nothing with the information.

We now know from the attached February 15-21 article done by Amy Silverman of the New Times that the Cave Creek Mayor Vince Francia, (clearly one of Sorchych’s puppets) said, and Sorchych confirmed, that Sorchych had connections at Great American Insurance, and used them to influence the purchase of Spur Cross as Birnbaum and Kielty negotiated what would be a $6+ million increase in the original $15 million price:

Then there’s one comment current Mayor Vince Francia made recently, in a conversation about Sorchych.

‘In the last two years, most of our conversations had to do with Spur Cross,’ Francia acknowledges – and then the conversation gets interesting.  ‘Many people do not know, but Mr. Sorchych played his part too, not only via his newspaper in supporting the citizenry in trying to preserve Spur Cross, but Mr. Sorchych had a contact in Cincinnati at the Great American Insurance Company, and it was very key as we proceeded through the negotiations to really have an understanding of what Cincinnati was thinking, because they are the ones that owned 70 percent of Spur Cross.  Mr. Sorchych made that information available to me so that we could plan.’

Available?  Like, by putting it in the paper?  Oh no, Francia says – this was often between the two of them.  (Sorchych confirms this.)

Francia says, “That information was very valuable to know.  Were they happy?  Were they getting impatient?  What were they really looking for?”

Another $6 million plus as it turned out.

[Note:  Once reputed to do meditation together, Sorchych seems to have an enormous power over Mayor Francia.]

In fact, contrary to the position he told Gary Schmitt that he had on a preservation tax, Sorchych and his paper also led the charge in support of a ballot issue to approve the sale of $6.5 million in bonds by the Town of Cave Creek to raise the money necessary to pay this increase in price.  And that issue was passed by the Cave Creek voters in November of 2000.

A few weeks later, on December 5, 2001, Sorchych received a deed from the well known Phoenix television news helicopter pilot personality, Jerry Foster, to a substantial residence and spectacular 10 acre property (Assessor’s Parcel No. 211-01-005H) located by itself high on the west bank of Cave Creek overlooking the town of Cave Creek in which Sorchych had been living for quite a while; (see that certain Warranty Deed recorded on 12/05/00 at Instrument No. 00-0930535 of the Official Records of Maricopa County, Arizona).

Notably, there is no deed of trust or mortgage recorded with the transaction, to indicate a new loan or a carryback; so it appears to be a “cash” transaction for a $575,000 price.  One then wonders where the cash for the purchase came from – Great American??

A deed of trust was recorded on 12/26/00 at Instrument No. 00-0984759A, but it is for Sorchych’s previous residence about ¼ mile to the east at 41451 North 54th Street, and that property is encumbered with three loans totaling $320,000 – not enough money to purchase the Jerry Foster property; (see enclosed listing information.)

Sorchych once told Gary Schmitt that he had been president and CEO of Microchip, and Mesa electronics company, and was terminated in a buy-out by the company as a way for it to resolve a serious sexual harassment claim against the company for Sorchych’s conduct.

[Local stories and rumors say Sorchych has a serious problem with sexual harassment of his own employees.  It is also notable that Amy Silverman does not report this top position at Microchip, indicating that he did not brag about it to her when she interviewed him for her “hit piece” article that he had been warned about well ahead of time.]

But, especially with the 3 mortgages on his previous residence, it is doubtful that this Microchip buyout would have produced the funds to buy the Foster home for cash.

Knowledgeable newspaper people claim that Sorchych is still not making significant money with his paper because he has sold his advertising so low to undercut competition, and his printing and distribution costs for his free paper are so high.

So the inference is that Sorchych helped Great American get another $6 million for Spur Cross Ranch through the sale by Cave Creek of preservation bonds, and, in return, received cash that helped him buy the spectacular Jerry Foster property.