Dive Brief:
- Chicago real estate developer Laurance Freed, of Joseph Freed and Associates, has been convicted of three counts of bank fraud, one count of mail fraud and four counts of making a false statement to a financial institution in connection with the redevelopment of an area department store, the Chicago Sun Times reported. The charges carry a possible total prison sentence of 230 years.
- Prosecutors allege that Freed and another company executive, Caroline Walters, lied about paying property taxes and fraudulently obtained credit extensions and loans when the company was floundering financially.
- Walters pleaded guilty to one count of making a false statement to a financial institution and faces up to 30 years in prison. Their sentencing hearings will be held later this year.
Dive Insight:
Freed’s scheme, prosecutors allege, included using the same tax-increment financing notes from the city to obtain two different lines of credit totaling $7 million — in essence double-pledging the notes as collateral. Prosecutors said Freed’s company was having financial problems and turned to fraud.
Freed also withdrew more than $7 million from a mall project without telling his business partner, Kimco Realty Corp., and fraudulently recorded that money as loans, according to prosecutors.
Developer fraud has been an ongoing issue in the construction industry. In Los Angeles last month, a federal grand jury indicted real estate development executives and employees on charges they defrauded government agencies of more than $50 million in a low-income housing scheme in which they fraudulently tried to obtain loans for affordable housing projects. Prosecutors allege they submitted invoices that "significantly overstated" actual construction costs.
