Author’s note: Following is an excerpt from The Anointed Son, available September 20 on Kindle.
My former colleague Jon Ralston wrote a book almost twenty years ago in which he detailed the rise of a first-time candidate guided by the state’s most formidable political forces to Nevada’s most powerful position: governor.
The candidate—a handsome, affable man’s man named Kenny Guinn, worked his way from the Clark County School District to the boardrooms of some of the state’s largest corporations. With the help of the casino industry, political consultant Sig Rogich (who gave up his own gubernatorial aspirations to play kingmaker), and public relations executive Pete Ernaut (who would eventually become Guinn’s Chief of Staff), Guinn trounced his opposition and won two terms.
Governor Kenny Guinn, a political neophyte, found himself at the helm of the fastest growing state in the nation, overseeing the biggest growth spurt in Nevada history—a time when tourism flourished, real estate values ballooned by double digits, and consumption at all levels became more conspicuous almost by the minute.
The median price of a home in Las Vegas sailed to new heights during Guinn’s term, from about $140,000 when he took office in 1999 to $315,000 at its peak in June of 2006, Guinn’s final year as governor.
I’m no economist, but even a casual observer like me could see the writing on the wall. With incomes growing annually at maybe two to three percent and home prices skyrocketing by fifty percent, something had to give. Nevada was ripe for a long fall when the bubble inevitably burst, ultimately pierced by the collapse of the mortgage-backed securities market.
The residential market was not alone during the boom.
Applied Analysis, a Las Vegas business consultant, reports the price of off-Strip raw land peaked in 2007 at $939,357 an acre, up dramatically from pre-bubble values that fetched less than $40,000 an acre in undeveloped areas of the valley.
Within a few years, prices soared, thanks in part to brokerages such as Jeff Guinn’s Aspen Financial. Owned by the governor’s son, Aspen was willing to finance sums well above appraised value to valley homebuilders (and pocket the lucrative origination fees).
Many of those builders designated Jeff Guinn’s other company, Aspen Mortgage, as their preferred lender, and sent prospective buyers Guinn’s way.
In 2005, developer and Aspen borrower John Ritter’s Focus Property Group paid an unheard of $300,000 an acre for 1,700 acres in the northwest Las Vegas valley.
Then, as quickly as the bubble inflated, it burst.
Deafening silence replaced the raucous bidding that had become common at federal land auctions.
Properties throughout the Las Vegas valley rode the wave of artificially inflated values, only to plunge deeply underwater.
Homes that just months earlier reaped multiple sale offers above asking price now sat on the market for months. “For Sale” signs that lined residential streets were quickly replaced with “Foreclosure” signs.
Borrowers with adjustable-rate mortgages, who relied on lender promises of refinances, walked away or waited it out until the banks eventually caught up.
Eviction services replaced real estate as the growth industry.
Today, a decade later, Southern Nevada’s real estate recovery has lagged behind the rest of the nation. But it’s catching up.
Looking back, you’d think a guy like Kenny Guinn, a walking calculator and banking icon, would have seen the fall coming. Maybe he did. Maybe he sensed the bubble inflating dangerously beyond its means.
Maybe he imagined the precipice, the avalanche of homes about to tumble into the abyss, the years buried under water, and the lives ruined by all that greed.
Maybe in his mind’s eye, Nevada’s governor anticipated the neighborhoods in collapse.
Maybe Kenny Guinn knew that audits would soon reveal the state’s mortgage division was woefully inadequate, “regulating” what was about to become Ground Zero in a national lending crisis that precipitated the Great Recession.
Maybe he feared the bust would expose a variety of Ponzi-like schemes flourishing in Nevada.
Perhaps Kenny Guinn recognized that his own son’s empire, in which the governor had millions of dollars invested via a “blind trust,” was cutting corners and at risk of exposure if subjected to greater scrutiny and stricter regulation.
Aspen Financial Services stood on a foundation of trust deed-backed loans secured by “appraised-as-if-completed” properties, propped up by equity-eroding terms that earned Jeff Guinn a seemingly never-ending stream of lending fees. The hard money lender estimates brokering $300 to $400 million in loans a year from 2000 to 2006, while his father governed the state, with some years as high as $400 to $440 million.
But they weren’t always new loans. Jeff Guinn was engaged in serial refinancing of the same properties, churning deal after deal, creating one loan to make payments on another, and attaching ever-inflating appraisals.
Jeff Guinn, with the help of Governor Guinn’s substantial and undisclosed investment in an industry regulated by the state, was feeding an insatiable beast. It was a cycle of greed that would eventually be laid bare by the crash.
Whatever he knew about the impending crisis or the unsustainable increase in both residential and commercial real estate prices, Kenny Guinn—the respected numbers man—did nothing to head off the wave of defaults about to engulf his state and catapult Nevada to the top of the foreclosure heap.
In 2008, with the Silver State already leading the nation in foreclosures for eighteen months, Guinn’s successor, Jim Gibbons, a man Guinn held in low regard, held a pow-wow with the state’s biggest banks and mortgage lenders.
By then, the damage was done. Home values had plunged by as much as fifty percent from their 2006 peak. Commercial property was about to follow suit.
Governor Guinn’s son, who boasted to the media before the recession of never having filed a foreclosure, was about to suffer a reversal of fortune, taking down hundreds of investors in his wake, among them his parents—the Governor and First Lady.
Jeff Guinn was about to become not only the defendant in a spate of civil lawsuits, but also the target of a federal criminal probe.
This is the story of Jeff Guinn’s ambition and the lengths he went to achieve it, how his father gamed the trust vested in the governor by the people of Nevada, and how the two compromised the Guinn name in pursuit of a buck.
It’s a story of drugs, money, corruption, and family dysfunction.
My former colleague, Jon Ralston, titled his book about Kenny Guinn The Anointed One.
This is the rest of the story. The Anointed Son.
I always told Ralston there will be one big difference between our books. Mine will sell.