County prosecutors pass Douglass case to state

Sheriff’s detectives investigating forgery and theft allegations against a Spokane-area developer recommend that charges be filed, but the Spokane County prosecutor wants the state attorney general’s office to handle the case.

The investigation against Harley Douglass was referred on Wednesday to the attorney general’s criminal division, officials said on Thursday.

Douglass has been implicated because of false documents submitted in a civil lawsuit against Spokane County, which was settled out of court in early 2010.

Documents filed in Spokane County Superior Court showed that Douglass sought payment on claims against the county that included altered invoices for services not associated with the claim. The questionable claims totaled $68,000.

Spokane County paid $685,000 to settle the suit, which stemmed from an illegal delay in approving the final plat for the Hunter’s Pointe residential subdivision in Mead two years earlier.

The case was initially turned over to the Spokane County Sheriff’s Office, which completed its investigation last week and sent a report to Spokane County Prosecutor Steve Tucker.

That investigation included a recommendation to file charges, Sheriff Ozzie Knezovich told The Spokesman-Review this week.

Jack Driscoll, chief criminal deputy prosecutor, said Tucker sent the case to the attorney general’s criminal division because the Spokane prosecutor’s office has a conflict of interest in the case.

Two attorneys in the prosecutor’s civil division could be called as witnesses in any criminal proceedings, Driscoll said.

Scott Marlow, an assistant attorney general in Seattle, said he was assigned the case and was reviewing it Thursday.

Under state law, the attorney general’s office can bring charges in Spokane County Superior Court under the authority of the county prosecuting attorney, Marlow said.

Evidence of fraudulent invoices surfaced after Douglass sought to gain control of the full $685,000 settlement, which was made with Ace Investments LLC, the owner of the subdivision.

Ace Investments is jointly owned by Harley Douglass and his siblings Lanzce and Stacey Douglass. The three are children of developer Harlan Douglass.

Harley Douglass sued Ace in a separate civil suit, arguing that he was entitled to the full settlement because he had done the work on the plat and had paid expenses associated with the plat and the settlement.

Lanzce and Stacey Douglass filed a counterclaim seeking their share of the money and restitution.

He said the sheriff’s office told him investigators recommended that charges be filed against his brother.

During their investigation, they discovered invoices submitted by the subdivision’s civil engineer that turned out to be fraudulent, court documents said.

In a sworn declaration, Todd Whipple, the civil engineer, said he was asked by Harley Douglass to submit new invoices matching checks paid by Harley C. Douglass Inc. on a different project, court records show.

Those invoices and checks were submitted as part of the lawsuit against the county, making the county a potential victim of fraud, officials said.

The county had turned over its liability in the case to the Washington Counties Risk Pool, which worked out the negotiated settlement in conjunction with Spokane County.

The risk pool has declined to seek restitution despite the evidence of alleged fraud because that would entail reopening the larger claim, officials said.

The county paid a $500,000 deductible on the claim, and the risk pool paid the remaining $185,000.

“I am of the opinion that there were not public funds lost,” said Vyrle Hill, executive director of the risk pool.

The original claim was in excess of $2.3 million, making the settlement a good deal for the risk pool even now, he said last week.

Lanzce Douglass, who has been pushing county commissioners and the risk pool to seek restitution, said, “They are too embarrassed to step forward and say they were snookered out of the money.”