[ Login ]   [ Register ]

Richmond developer pleads guilty to fraud

Burl Rolett December 20, 2013 0

An embattled Richmond developer and landlord admitted in federal court that he orchestrated a multimillion-dollar historic tax credit fraud.

Billy Gene Jefferson Jr. pleaded guilty Thursday to charges of defrauding the federal historic tax credit system of $3.45 million in a real estate redevelopment scheme that involved at least 10 Richmond properties.

Billy G. Jefferson Jr.

Billy G. Jefferson Jr.

He also agreed to pay more than $12.94 million in restitution and fines that could total up to $2.5 million.

Jefferson was charged Dec. 9 with major fraud against the United States and with engaging in unlawful monetary transaction. Each charge carries a maximum sentence of 10 years in prison. Jefferson was charged via the criminal information process, which does not require an arrest or a grand jury indictment. At Thursday’s hearing, he waived his right to have the case heard by a grand jury.

A sentencing hearing is set for April 8, and presiding Judge John A. Gibney said at Thursday’s hearing that the sentence is “very likely to include a term of imprisonment.” Jefferson has been released on bond to continue to work on earning money to pay restitution, although terms of his release dictate that he may not take out any new credit or extend any existing lines of credit.

“We’re allowing him to be free on bond to complete some transactions that will ultimately benefit everyone in this case,” Gibney said.

The plea agreement states that Jefferson will “liquidate a sufficient amount” of his holdings to cover restitution payments.

Jefferson pleaded guilty to inflating construction costs by a total of more than $19 million in applications submitted for historic tax credits on 10 rehabilitation projects. The properties include nine apartment buildings clustered in the Fan on North Boulevard and West Grace Street and the five-acre River City Court apartment complex at 305 N. Thompson St.

As a result, Jefferson, who heads Richmond real estate firm Historic Property Management, formerly known as River City Real Estate, fraudulently obtained about $7.78 million in historic tax credits. Of that, $3.45 million came from the federal historic tax credit program.

Read the federal charges [PDF]

Read the federal charges [PDF]

The federal case is being prosecuted by the U.S. Attorney’s Office. Assistant U.S. Attorney Michael Gill is handling the case.

Jefferson is represented in the case by Hunton & Williams attorney John Martin and Williams Mullen attorney Chuck James. Martin would not comment on the federal charges Thursday morning, and neither attorney returned phone messages after the hearing.

The federal historic tax credit program is designed to encourage the rehabilitation of old properties by allowing developers to recoup 20 percent of their construction costs on eligible projects. Those credits are typically used in conjunction with a similar state-run program through which developers can receive 25 percent in tax credits, allowing a developer to get back a total of 45 percent of qualified rehab expenses on a given project.

To apply for historic tax credits, developers must maintain records of their expenses throughout a property’s rehabilitation. Qualified expenses are eventually submitted in cost reports to both the Virginia Department of Historic Resources and the National Park Services.

It is common practice for a developer to bring on third party investors in need of tax credits who in turn typically put cash into a project up front with the promise of tax credits on the finished property. The third party can then use the tax credits toward its tax burden.

Jefferson arranged for a third party (named only as C.U.S.A. in court documents) to buy tax credits related to the rehab of River City Court, according to the federal case. He presented C.U.S.A. with inflated figures that grossly overstated the value of the tax credits the firm planned to buy.

Jefferson-plea-agreement

Read the plea agreement [PDF]

The full terms of the deal Jefferson struck with C.U.S.A. are not available, but the lawsuit alleges that C.U.S.A. paid River City Renaissance about $3.67 million on or about Nov. 16, 2010. From those funds, Jefferson transferred $2.38 million to a separate River City Real Estate account in January 2011. The case also charged that Jefferson transferred an additional $750,000 in criminally derived funds from his River City Real Estate account to a personal bank account, a wire transfer that traveled across state and international boundaries.

Entities tied to Jefferson held about 50 properties over 19 acres within the City of Richmond as of July of this year. His empire is assessed at almost $80 million, according to city records.

His scheme began unraveling this year when he was arrested April 17 and charged in state court with felony counts of forging and uttering public documents.

Most of those charges were dropped at a preliminary hearing in July. Jefferson was indicted in September on the two remaining counts: one felony charge each of forging and uttering public records. A trial on those counts was scheduled for Nov. 15 but was continued to Jan. 15.

Patrick Dorgan, chief of the special prosecutions and organized crime section of the attorney general’s office, said the state charges are still pending.

Following the state charges, Jefferson sold a home next to his personal mansion at Boulevard and Monument Avenue for slightly more than $1 million in September.

Jefferson isn’t the first local developer to try to profit from gaming the historic tax credit system. Justin French is serving a 16-year sentence in federal prison after his scheme, which also involved inflated expenses, collapsed in 2011.

Project Claimed expenses
2734 W. Grace St. $2,129,984
804 N. Boulevard $2,196,997
2730 W. Grace St. $2,153,317
705 N. Boulevard $1,367,807
711 N. Boulevard $1,334,534
2726 W. Grace St. $2,111,738
801-03 N. Boulevard $2,117,182
706-08 N. Boulevard $1,375,379
811 N. Boulevard $2,043,221
River City Court $12,006,183
Total $28,836,342

French and Jefferson worked together to rehab the Tobacco Factory, a 330,000-square-foot apartment building in Manchester.

The pair also worked together on the 95-unit Parachute Factory apartment building in Manchester. Now controlled by Jefferson’s Historic Property Management, the property had fallen behind on its $15.1 million loan, as of October.

Jefferson’s bond terms require that he stay within the bounds of the United States District Court for the Eastern District of Virginia. The developer asked for a pass to take a trip to West Virginia with his children and former wife over Christmas, but Gibney denied the request.

“This is a pretty significant offense, and you need to be working on business matters, getting your affairs taken care of and paying back any money that may have been taken in this case,” Gibney said.

Print Friendly and PDF

Editor's Picks

Leave A Response »

Please use your real, full name (first and last) and a valid email address to foster a more civil discussion. Comments without first and last name may not be approved.


We encourage active participation in our online community, but we reserve the right to remove any off topic or inappropriate comments.