David Saks: Richmond Man Sentenced to 16 Years for Orchestrating Multi-Million-Dollar Rehabilitation Tax Credit Scheme

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Richmond Man Sentenced to 16 Years for Orchestrating Multi-Million-Dollar Rehabilitation Tax Credit Scheme

Richmond Man Sentenced to 16 Years for Orchestrating Multi-Million-Dollar Rehabilitation Tax Credit Scheme

RICHMOND, VA-Justin Glynn French, 40, of Richmond, Va., was sentenced today to 196 months, followed by three years of supervised release, for stealing millions from federal and state tax credit programs intended to rehabilitate historic buildings.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Ken Cuccinelli, Attorney General of Virginia; Michael F.A. Morehart, Special Agent in Charge of the FBI's Richmond Field Office; Rebecca Sparkman, Special Agent in Charge of the Internal Revenue Service Criminal Investigation's Washington, D.C., Field Office; and Colonel W. Steven Flaherty, Superintendent of Virginia State Police, made the announcement after sentencing by United States District Judge John A. Gibney, Jr.

"Justin French lined his pockets with millions in stolen tax dollars and defrauded more than 100 investors," said U.S. Attorney MacBride. "Mr. French exploited the rich history of the commonwealth to cheat taxpayers and investors out more than $11 million intended to preserve historic homes in Virginia. While Mr. French spent lavishly on a beach house, a personal jet, and trips to Las Vegas, more than 100 investors lost their retirement funds, their medical care accounts, and their kids' college funds."

"Justin French violated the trust of investors and defrauded the state and federal governments out of millions of dollars," said Attorney General Cuccinelli. "Today's sentence sends a message not only to French that his tax-credit scheme was reprehensible, but also to anyone else attempting to cheat taxpayers out of their hard-earned money. Unfortunately, the repercussions of French's crimes will be felt for years to come by those who unwittingly invested in his tax-credits and by honest people who are currently rehabilitating properties in the commonwealth."

On Jan. 24, 2011, French pled guilty to wire fraud and engaging in unlawful monetary transactions through a criminal information for his role in orchestrating a multi-million-dollar rehabilitation tax credit scheme and defrauding more than 110 investors who purchased tax credits from French for their own use.

According to the statement of facts filed with the plea agreement, Justin French was the owner and operator of French Consulting Company, a Richmond-based real estate development company. He actively sought state and federal historic tax credits as his company worked to rehabilitate a number of historic properties throughout the Richmond area.

At the state level, the Virginia Department of Historic Resources (VDHR) administered the Virginia Historic Rehabilitation Tax Credit program. That program allowed the property owner to receive a state income tax credit equal to 25 percent of the amount spent on eligible rehabilitation expenses.

At the the federal level, the U.S. Department of the Interior National Park Service (DOI-NPS) administered the Federal Historic Preservation Tax Incentives program. This program encouraged private sector rehabilitation of historic buildings through tax credit equal to 20 percent of the amount spent on eligible rehabilitation expenses.

Through court documents, French admitted that since 2005, he has initiated the historic rehabilitation tax credit application process on at least 36 properties in Richmond; 14 were approved by state authorities and 20 were approved by federal authorities. Upon receiving the approved credits, and sometimes before receiving final approval, French would sell the credits to private investors who would use those credits on their own tax returns.

As an example of this fraud, French purchased a property on March 7, 2008, located at 1509 Belleville Street in Richmond. In correspondence with the bank that funded a loan for the project, French stated that he had purchased the property for $700,000 and expected the rehabilitation costs to be approximately $200,000.

In November 2008, French began the application process seeking federal and state rehabilitation tax credits for this property. On March 20, 2009, he submitted the final tax credit applications and required CPA cost certification for 1509 Belleville Street to the VDHR. In those applications, he represented the rehabilitation costs as $1,571,503. On March 26, 2009, the VDHR approved French's state application and awarded him $392,875.75 in state tax credits. On April 17, 2009, the DOI-NPS approved French's federal application authorizing him $314,300.60 in federal tax credits for this project.

In connection with his plea hearing, French agreed that the requested tax credits for the 1509 Belleville Street, LLC project were grossly inflated. According to the United States, the actual authorized expenses for the purpose of obtaining state and federal historic rehabilitation tax credits should have been approximately $403,200 (including the 20 percent developer fee and an additional 20 percent allowance for allowable expenses), as opposed to the $1,571,503 represented to state and federal authorities. If the actual amounts consistent with the bank loan file had been submitted to the state and federal authorities, French would have received approximately $100,800 in Virginia tax credits (as opposed to $392,875.75 in Virginia tax credits) and $80,640 in federal tax credits (as opposed to $314,300.60 in federal tax credits). The combined total of federal and state tax credits French illegally obtained by inflating the rehabilitation expenses for 1509 Belleville Street was approximately $525,737.

French's subsequent transactions with a number of private investors who purchased these tax credits resulted in his pleading to engaging in unlawful monetary transactions. As part of the investment process, French caused the mailing of subscription agreements via United States mail to the individual investors. Those investors, in turn, executed the subscription agreements and returned those documents along with their investment funds to the defendant. In February 2009, those individual investors provided the defendant with approximately $228,800 in exchange for purchasing the state tax credits related to 1509 Belleville Street. These investor funds were deposited into a First Market Bank business checking account for the 1509 Belleville Street project. French subsequently transferred $218,000 of those funds to his personal money market savings account at First Market Bank.

Overall, French agreed in his plea agreement that the intended and actual tax credit losses connected to the 1509 Belleville Street and other rehabilitation projects was between $7 million and $20 million. The defendant also agreed to pay full restitution for the losses he caused in connection with the ongoing rehabilitation tax credit scheme, which will be determined as the victims and loss amounts are identified in the ongoing investigation. The final restitution amount will be determined at a restitution hearing to be scheduled at a later date, following the completion of the investigation.

To date, the total losses for the scheme have been calculated as $11,266,622.

French has agreed to an order of forfeiture imposing a monetary judgment of $7 million, representing the proceeds he received from the fraudulent scheme. At this time, he has agreed to forfeit the assets listed in the First Consent Order of Forfeiture entered at his plea hearing. The investigation to identify additional assets remains ongoing.

This case was investigated by the Federal Bureau of Investigation Richmond Office, the Internal Revenue Service Criminal Investigation Division, the U.S. Department of the Interior Office of Inspector General, the U.S. Department of Energy Office of Inspector General, the Virginia State Police, the Raleigh, North Carolina Police Department, and the National White Collar Crime Center. The Virginia Department of Historic Resources also assisted law enforcement in the investigation. Assistant United States Attorneys Michael Gill and Laura Marshall and Special Assistant Attorneys Patrick Dorgan and Shannon Dion are prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

Courtesy The Federal Bureau of investigation




David Saks



Time&Temp Memphis

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Comment balloon 4 commentsDavid Saks • May 03 2011 08:37PM

Comments

Hello David,

Thank you for the information. There is always some scumb bag out there defruading people - glad he was caught!

Hey - miss your piano music posts...   :-)

Posted by Karen Monsour, REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert! (Coldwell Banker Fort Lauderdale Beach) over 8 years ago

There really need to come down on these people.  These are the types that cause the banks to tighten upon their lending.  They are the cause of our wasted tax dollars. 

Posted by Larry Story, Total Care Realty, LLC, Greensboro, NC Real Estate (Total Care Realty) over 8 years ago

I'm glad, too, Karen.

They sure do, Larry.

Posted by David Saks ((retired)) over 8 years ago

That's amazing.  You wonder how successful some of the criminals might be if they would put as much time and effort into something legal. 

Posted by Chad McDowell, FHA and VA Mortgage Loans Snohomish County, WA (First Time Home Buyers, Pre-approvals, Fixed Rates) over 8 years ago

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