GARY — A father and son’s alleged tax sale scheme to defraud Lake County out of at least $100,000 in property taxes is linked to land targeted for the city's prized Hard Rock casino project, Lake Superior Court records allege.
One of the properties in question is 2800 Calhoun St. in Gary — smack dab in the middle of where Spectacle Entertainment will be constructing a $300 million casino starting this year at the corner of the Borman Expressway and Burr Street.
'That’s a crime?'
Sergio Gutierrez, a Gary property owner, instructed his son, Corey Gutierrez, to purchase several properties he risked losing to the 2018 county commissioner’s tax sale for failure to pay his taxes, according to July 25 court testimony.
“You’re aware under Indiana law that that’s … a crime?” Lake County Auditor attorney Randy Wyllie asked Sergio Gutierrez in court this summer.
“Right,” Gutierrez replied.
When a tax certificate is purchased off the commissioner’s tax sale, it can go for as low as the $500 minimum bid, and the back taxes are wiped clean.
He alleged during testimony he only advised his son that the purchases were good investments, and that it wasn’t to avoid paying taxes.
$900,000 sale agreement
The Gutierrez father and son duo reportedly carried out this tax fraud scheme since at least 2016, but hit a snag last year when someone else — Mike Flanagan, who owns property in Gary — bought 2800 Calhoun St. at the May 2018 tax sale, records show.
"As Attorney (Randy) Wyllie said, that’s the business model. To going from Corey’s name into your name, and we ran into a hiccup, because you forgot one, right? And 2800 Calhoun got sold to my client,” Flanagan’s attorney, Michael Kvachkoff, said during Sergio Gutierrez’s testimony this summer.
“I guess so,” Sergio Gutierrez replied.
Other properties are discussed during testimony, but later on, Kvachkoff brings the importance of 2800 Calhoun property back to Sergio Gutierrez’s attention, suggesting why his son gave it to him for free off the tax sale.
“... But you need that property under your name in order for this deal to work?” Kvachkoff asked.
“Yes, sir,” Gutierrez replied.
“This $900,000 deal?” Kvachkoff said.
“Yes,” Gutierrez replied.
Someone forgot to bid
Of the parcels that Sergio’s son Corey Gutierrez owns in the casino footprint, four others were purchased at the May 2018 tax sale by an Alex Petrovsky, who turned around and quit-claimed them back to Sergio Gutierrez.
A fifth lot — 2800 Calhoun — was purchased by Flanagan because Gutierrez or a proxy forgot to bid on it at the sale tax, records show.
All the while, Sergio Gutierrez took out a $500,000 mortgage on the properties and entered into a $900,000 contract for sale — even though the properties were not in his name, records show.
Kvachkoff told The Times that Sergio Gutierrez’s explanation for his property being sold to his son at the tax sale was that he simply advised his son on good land deals and that “they just so happened to be owned by him.”
He claimed he wasn’t doing this to avoid paying taxes, Kvachkoff said.
“But obviously when we presented all the evidence to the court, it was clear that it was just a scheme that he and his son put together dating back to at least 2016,” Kvachkoff said.
$900,000 casino deal
Sergio Gutierrez testified he and his son had, at one time, been working to clean up the property to make way for a trucking business.
However, during later testimony, a $900,000 purchase agreement with Windy City Acquisitions — a Spectacle Entertainment-related entity — for these five separate parcels is referenced.
“You have a deal right now for $900,000. For these five lots?” Kvachkoff said.
“Yes," Gutierrez replied.
“And you said you would not mess up that … deal over some property taxes?” Kvachkoff said.
“Yes," Gutierrez said.
“Right? Were they the same deal? Is that, is your deal for $900,000, is that for a trucking business?” Kvachkoff said.
“No," Gutierrez replied.
“So, when these properties were sold in March of 2018, you didn’t know about this $900,000 Windy City Acquisitions deal, did you? You didn’t know?” Kvachkoff said. "Well…” Gutierrez replied.
“You had other plans?”
Attorney bows out, citing conflict
Sergio Gutierrez’s testimony this summer was central to a tax certificate petition that Flanagan filed to obtain the deed for 2800 Calhoun — a step he must take to become the owner of record.
Flanagan, whose mailing address is listed as 2315 Ralston St. in Gary, petitioned the courts to issue the tax deed to him in October 2018, hiring then-attorney Rinzer Williams III.
Court records show Kvachkoff took over for Williams as Flanagan’s attorney after Williams withdrew as counsel in May citing a new conflict of interest in the matter — that he had previously carried out title work for Sergio Gutierrez’s company, Wilkerson’s Creek.
In June, Williams signed a separate conflict of interest disclosure agreement and presented it to the Gary City Council, notifying them that he was now working as a project consultant for Spectacle Entertainment.
Spectacle Entertainment has said Williams was hired to conduct the zoning work for the company.
On Dec. 6, 2018, Lake County Superior Court Judge Marissa McDermott ordered that the tax deed be issued to Flanagan.
Court filings show Sergio and Corey Gutierrez tried to take Flanagan out of the equation by filing a motion to vacate McDermott's order in March. They did not succeed.