State suppressed $11 million fraud case

SANTA FE (KRQE) - (This article was originally published on March 21, 2013.)

A New Mexico cabinet secretary lied twice about why a fraud investigation into a luxury home builder was dropped in 2011, then admitted he hadn't reviewed all the evidence before re-opening the investigation earlier this month.

And New Mexico Regulation and Licensing Superintendent J. Dee Dennis, Jr., said he only re-opened the investigation after News 13's Larry Barker began asking questions about it.

"I did not mislead you," Dennis told Barker in an interview earlier this month. "I haven't changed my position."

But, as with many of Dennis' statements related to the investigation into William "Kal" Kalinowski, that is debatable.

"A crime was committed – a serious crime," said Kelly O'Donnell, Dennis' predecessor at the Regulation and Licensing Department. "There was substantial evidence that fraud had been committed and consumers had been harmed."

Up until 2008, Kalinowski was Santa Fe's go-to guy for custom home-building, with an award-winning reputation for quality, style and luxury.

But that reputation now lies in ruins after Kalinowski started building 15 luxury homes in the Las Campanas development, located in the rolling hills west of Santa Fe, just as the economy began to turn sour a few years ago.

Santa Fe mortgage broker Stefan Lark lost $600,000 that had been invested with Kalinowski.

"Fraud, deceit, lies, misuse of funds, misappropriation of funds – it's all there," said Lark, who had to file for bankruptcy.

Michael D'Alfonso also went bankrupt over his investment with the Santa Fe contractor.

"(He's) a master thief," D'Alfonso said. "There's millions missing."

And it wasn't just investors who lost money, he said.

"The cabinet person, the roofers, the plasterers, the plumbers, the electricians, the HVAC people, the concrete guy – they all got cheated," D'Alfonso said.

John Rotman, an electrical contractor, said the ripple effect of Kalinowski's actions on his business was extreme.

"We had to lay off people," Rotman said. "(It) took us awhile so we could pay our suppliers. We had to sell some trucks and things like that."

The state spent two years investigating the Kalinowski case, including executing search warrants, conducting interviews with dozens of victims and presenting grand jury testimony.

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