The U.S. Attorney's office has cleared Twin Cities real estate investor and developer Ned Abdul and business associate John Barlow after a lengthy investigation into possible money laundering, wire fraud and tax fraud.
First Assistant U.S. Attorney John Marti confirmed that no criminal charges will be filed and the case is over, but declined to discuss the investigation.
Abdul, one of the area's more enigmatic real estate players, has ownership stakes in a number of buildings in the Warehouse District of Minneapolis, as well as other commercial properties around the Twin Cities. He has a taste for renovating old buildings, converting the old Whitney Hotel in the Mill District into condos, for instance.
He and Barlow co-owned the now defunct Karma nightclub and the Epic event center, both in the Warehouse District.
Federal authorities raided the men's homes and the office of Abdul's Swervo Development Corp. near Target Field two years ago as part of an inquiry into possible fraud. Accusations that included skimming cash from the clubs and submitting fake invoices to the U.S. government and other tenants of Abdul's office buildings were contained in a 37-page search warrant affidavit filed in 2010.
Officials have since returned the cash they seized, as well as a truckload of documents.
The U.S. Postal Inspection Service and the Internal Revenue Service (IRS), the two leads on the investigation, declined to discuss the episode.
"There was probable cause to have a search warrant issued," said Vicki Petricka, an IRS Special Agent and public information officer for the St. Paul field office. "Sometimes, claims against subjects aren't always substantiated."
It's not usual for IRS investigations to end without prosecutions, IRS data show.
Abdul, 43, of Deephaven, has remained mum about the investigation, which burst into the public view in May 2010. He was not available for an interview. Barlow, 51, declined to comment.
Abdul's attorney, Bill Mauzy, has long maintained that the source of the accusations against Abdul and Barlow was Brett Thielen, who bought the Sexton Lofts building in Minneapolis from Abdul. There was bad blood, Mauzy said, over the purchase price.
At the time, Thielen was known to be cooperating with authorities on other investigations before his own sentencing. He's now serving a 27-month sentence, followed by three years of supervised release, for a $2.5 million mortgage fraud involving condo sales in the Sexton Lofts building.
Mauzy said Abdul "has been unfairly besmirched" by media coverage of the federal raids. He said the investigation was prompted by the "desperate attempt of a felon who had pleaded guilty and was seeking to reduce his prison sentence by making false allegations out of thin air."
Mauzy said he met with Marti about three weeks ago.
"He told me unequivocally that after an exhaustive investigation he had concluded the investigation should be terminated," Mauzy said. "He concluded there was no basis for any charge against Ned Abdul or Swervo, and there would be no charges."
An undisclosed amount of money seized during the raids was returned over a year ago, he said, and documents that were confiscated were returned by truck to one of Abdul's office buildings a few weeks ago, Mauzy said.
"The conclusion of this investigation is a perfect example of a federal investigation that starts with a bang, front page news coverage, and lead story on the evening news, but ends with a whimper," Mauzy said. "It never ends with an apology."
Mauzy said Abdul is not cooperating in any other investigation. He called his client "shrewd and tough" and said Abdul's business practices "have always been above board."
Earl Gray, Barlow's lawyer, said he was pleased.
"When you go to bed every night thinking you're going to be indicted in federal court, it isn't a fun time for a couple of years," Gray said.
Julie Bauch of Bauch Enterprises, which leases and manages a St. Paul office building Abdul co-owns, said the news surprised and confused her.
"I guess I never thought they pursued an investigation with such vigor without coming up with anything," she said. "They really caused a lot of damage and a lot of friction."
Abdul last year found himself tangled in another controversy in an unrelated matter. Karma was shut down last fall after run-ins with the city over a series of violent incidents. Then plans for a new venture in another spot called Pearl Nightclub were scrapped.
In another matter, a lawsuit against Abdul has been dismissed. Brian Lawton, a former NHL player who invested in two of Abdul's real estate deals, sued Abdul and Patrick Smith, a Coldwell Banker Burnet real estate agent, in 2010, accusing them of defrauding him when they allegedly flipped two commercial properties at inflated prices to him and other unsuspecting buyers.
Hennepin County District Judge William Howard dismissed the case by summary judgement in December.
Lawton wouldn't discuss it.
"Ned won," Mauzy said. "Trumpets flaring."
Jennifer Bjorhus • 612-673-4683
