Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROBERT LEES, a former senior executive of Universal Forest Products, Inc. (“UFP”), was sentenced today by U.S. District Judge Kenneth M. Karas to 50 months in prison for conspiracy, mail fraud, money laundering, and making false statements in a loan application. LEES was found guilty by a jury on May 20, 2016, after a seven-day trial before Judge Karas.
Manhattan U.S. Attorney Preet Bharara said: “Robert Lees, a senior executive at Universal Forest Products, defrauded both HUD and a mortgage lender, causing millions of dollars in losses. With the jury verdict earlier this year and today’s sentence, Lees has been held accountable for his crimes.”
The evidence at trial proved that, in 2009, Michael Barnett, a real-estate developer, hired JK Scanlan Company, Inc. (“Scanlan”), to be the general contractor on Vineyard Commons, a senior housing community in Ulster County. In 2009, Scanlan entered into falsely inflated contracts with Shawnlee Construction, LLC (“Shawnlee”), a subsidiary of UFP for which LEES had responsibility, to be the subcontractor on Vineyard Commons responsible for framing and rough carpentry.
In 2009, a private lender (the “Mortgagor”), agreed to provide financing to Vineyard Commons, which financing would be insured by HUD. The Mortgagor and the borrower agreed that the proceeds would be disbursed incrementally after the borrower submitted draw requests based upon its completion of phases of the project.
On January 19, 2009, Shawnlee provided Scanlan a final bid to supply labor and materials for Vineyard Commons. In March and April 2009, representatives of UFP – including LEES – Shawnlee, and Scanlan entered into an agreement by which UFP and Shawnlee agreed to provide labor and materials in an amount approximately $865,000 greater than the final bid. LEES and others intended for the approximately $865,000 difference between the final bid and the inflated contract price to be returned to Barnett as a kickback, and further intended that the Mortgagor would unwittingly finance the kickback by disbursing HUD-insured funds on the basis of inflated draw requests.
In early 2009, Scanlan’s owner agreed to provide Barnett and Vineyard Commons with a million-dollar loan. In order to obtain this loan, Barnett informally pledged the anticipated $865,000 kickback to Scanlan’s owner as collateral.
In June 2009, Barnett needed additional funds in order to secure HUD-insured financing from the Mortgagor. UFP provided a $650,000 letter of credit to the Mortgagor. Barnett informally pledged the anticipated approximately $865,000 kickback to UFP as collateral, even though it was already pledged to Scanlan’s owner.
On July 2, 2009, Barnett and others provided HUD with a written estimate of the cost of Shawnlee’s work (the “Final Framing Price”) that exceeded Shawnlee and UFP’s actual price for labor and materials by approximately $865,000.
Beginning in July 2009, and continuing until January 2012, Barnett and Scanlan submitted contractor’s requisitions (the “Contractor Requisitions”) on forms provided by HUD to the Mortgagor, which the Mortgagor then sent to HUD. These Contractor Requisitions included a certification by a representative of Scanlan that “all the information stated herein, as well as any information provided in the accompaniment herewith, is true and accurate.” Each of these forms set forth the Final Framing Price as the actual cost of rough carpentry. Each month, the Mortgagor disbursed HUD-insured funds on the basis of the Contractor Requisitions. UFP set aside the “extra” from the Shawnlee/Scanlan contract in an accrual account falsely labeled as a rebate accrual.
In January 2010, LEES agreed with Barnett to pay Scanlan’s owner $200,000, which payment they understood would be guaranteed by part of Barnett’s interest in the approximately $865,000 difference between the contract price and the actual price for labor and materials provided by Shawnlee and UFP. Barnett sought this payment, and LEES agreed to make this payment, as a partial payment of Barnett’s obligation to Scanlan’s owner. LEES arranged for UFP to send a $200,000 check to a company controlled by Barnett that was not involved in the development of Vineyard Commons – which would then pass the money on to Scanlan’s owner. On January 15, 2010, UFP issued a check for $200,000 to Barnett’s company and mailed it from Michigan to Barnett in Dutchess County, New York.
On January 20, 2010, Barnett sent to Scanlan’s owner in Massachusetts a $200,000 check that he drew on the account into which Barnett had deposited the check he received from UFP.
Later in 2010, Barnett sought a $5 million loan from UFP. Among other incentives, Barnett offered to surrender the remainder of his kickback to UFP, allowing UFP to take that money into its own profit. With LEES’S encouragement, UFP issued the loan to Barnett.
The developer of Vineyard Commons defaulted on the loan after the project failed. HUD assumed the loan and sold the project, losing $28 million.
In addition to the prison sentence, LEES, 62, of Lititz, Pennsylvania, was sentenced to three years of supervised release. Judge Karas also ordered LEES to forfeit $865,000 in ill-gotten gains and to pay $865,000 in restitution.
LEES’s co-defendants have been convicted. Barnett pled guilty on January 19, 2016, to conspiracy, and was sentenced by Judge Karas on October 26, 2016, to 37 months in prison. DiCello pled guilty on April 20, 2016, to conspiracy, mail fraud, money laundering, and making false statements in a loan application, and is scheduled to be sentenced by Judge Karas on January 19, 2017.
Mr. Bharara praised the outstanding efforts of HUD-Office of Inspector General.
No comments:
Post a Comment