Developer behind Mountain Shadows and Montelucia resorts charged in college bribery case

A real estate developer associated with several high-profile Arizona projects was charged Tuesday as part of the federal investigation into an alleged scheme where wealthy people used bribes to get their children accepted to elite colleges.

Robert Flaxman, founder and CEO of Crown Realty & Development, was charged by the Justice Department with conspiracy to commit mail fraud and honest services mail fraud.

Court documents say Flaxman participated in two schemes in 2016, allegedly paying $250,000 to get his son recruited as an athlete to the University of San Diego and $75,000 to help his daughter cheat on her ACT.

Flaxman sent to the money to a nonprofit group that ran the scheme and agreed to describe the payments as donations he made to help “underserved kids.”

His company was behind projects including the Mountain Shadows Resort in Paradise Valley and the Montelucia resort in Scottsdale. (Crown owned and tried to redevelop the Mountain Shadows site from 2007 until 2015, when it was sold to Westroc Hospitality and Woodbine Development Corp., which developed the resort as it is today.)

Crown Realty recently won a years-long legal battle to develop a 96.5-acre chunk of land for an area called City North in Desert Ridge in north Phoenix. The realty group paid $54 million for state-owned land that was valued at more than $120 million.

“Unlocking this parcel from years of litigation now provides the opportunity to develop a 21st-century urban community on the north side of Phoenix,” Flaxman said in January. “What Century City was to Los Angeles in the 1960s, the new City North project will be to Phoenix.”

The company’s website says it has headquarters in Costa Mesa, California, and also has offices in Beverly Hills, Burbank and Paradise Valley. Its projects are primarily in California, Arizona, Virginia, Idaho and North Carolina, the website says.

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Crown Realty and Development CEO Robert Flaxman walks to the demolition site of the Mountain Shadows resort in Paradise Valley, Feb. 5, 2014.

No one at the company’s office number in Costa Mesa answered the phone late Tuesday.

The bribery scheme entangled two Hollywood actors, Felicity Huffman and Lori Loughlin, and coaches at multiple selective universities.

In total, 50 people were charged in the case, 33 of whom were parents. In some instances, parents paid to have someone else take college entrance exams like the ACT and SAT in place of their children, or to replace their child’s answers with correct ones after they had taken the test, according to court documents.

In other instances, parents paid college coaches to accept their children as recruited athletes despite their lack of involvement in sports.

Flaxman is accused of paying for both schemes.

The Justice Department has described the indictment as its largest-ever college-admissions bribery case. The investigation was dubbed “Operation Varsity Blues.”

No Arizona universities were involved in the schemes, though Arizona State University did get a mention — as a place where Loughlin’s husband, fashion designer Mossimo Giannulli, did not want his daughter to go to college.

Wanted son admitted as fake athlete

Flaxman sought to have his son accepted to the University of San Diego as an athlete, authorities say. The court documents do not indicate a sport.

A cooperating witness communicated with Flaxman and connected him with a coach and an admissions representative at USD. In November 2015, an admissions counselor at the school emailed the coach a memorandum that approved signing Flaxman’s son to the team, court documents say.

Later that month, the witness sent Flaxman and his son an essay that was part of the son’s application to USD that referenced the son’s volunteer work with a youth athletic team. “Prior essay drafts contained no reference to that sport,” court documents say.

Flaxman’s son was admitted to the university in March 2016. In April, Flaxman was sent an invoice for $250,000 by Key Worldwide Foundation, a nonprofit organization. People who participated in the scheme paid bribes to Key Worldwide Foundation under the guise of charitable contributions, authorities allege.

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The cooperating witness in question is described in court documents as the founder of Key Worldwide Foundation. Documents say he has pleaded guilty to federal conspiracy charges and helped with the government’s investigation in hopes of leniency in sentencing.

William “Rick” Singer is also referred to as the group’s founder and pleaded guilty to charges in Boston Tuesday.

Flaxman allegedly wired two payments of $125,000 each to Key Worldwide Foundation in May and June 2016.

After Flaxman paid the nonprofit group, the group paid $100,000 to Martin Fox, a tennis academy coach who is accused of arranging some of the bribes. Fox then paid the University of San Diego coach.

Feds: Flaxman also helped daughter cheat

Separately, in April 2016, Flaxman’s daughter took the ACT and received a relatively low score of 20 out of 36. He contacted Singer, identified as “cooperating witness 1” in court documents.

In October of that year, Singer sent an email to Flaxman telling him he would put his daughter into the Houston Test Center, one of two testing sites the witness said he “controlled” and could use for the scheme.

Later that month, Singer told a Key Worldwide Foundation employee to send an invoice of $75,000 to Flaxman. Flaxman’s company wired $75,000 to the foundation. A foundation employee sent a letter to Flaxman falsely claiming “no goods or services were exchanged” for Flaxman’s payment.

After the payment, a second cooperating witness, who is described in court documents as the director of college exam preparation at a private prep school in Florida, flew to Houston to help Flaxman’s daughter and another child take the ACT.

The second witness said he helped the two students answer questions on the test and “instructed them to answer different questions incorrectly so that they did not have the same incorrect answers on their tests, and the ACT would therefore not suspect cheating,” court documents claim.

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Flaxman’s daughter’s score improved: a 28 out of 36.

Singer called Flaxman in late October “at the direction of law enforcement agents” and said Key Worldwide Foundation was being audited by the Internal Revenue Service. The call was “consensually recorded,” documents say.

During the call, Singer says his books show Flaxman paid $250,000 for his son’s “side door into USD,” to which Flaxman responded “yeah.” The witness said there was a $75,000 payment for his daughter’s testing, which Flaxman also affirmed.

The end of the exchange occurred as follows, court documents say:

Witness: “OK. So we’re both on the same page.”

Flaxman: “An-an-and the — the reason for the payments is what?”

Witness: “The reason for the payments were to, essentially — We won’t say that it went to pay for [your son] to get into USD. We’ll say that the payments were made to our foundation to help kids— underserved kids.”

Flaxman: “OK. That’s fine.”

USA TODAY contributed to this article.

Reach reporter Rachel Leingang by email at or by phone at 602-444-8157, or find her on Twitter and Facebook.

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