Thursday, April 06, 2017

Miami Feds Bag Another Developer For Allegedly Using Controlled Dummy Company To Inflate Construction Contract Prices In Effort To Boost Receipt Of Low-Income Housing Tax Credit Dollars; Defendant Pays $5.2 Million In Forfeitures, Penalties In Exchange For Deferred Prosecution Deal To Dodge (Buy Out Of) Criminal Charges

From the Office of the U.S. Attorney (Miami, Florida):
  • [Federal law enforcement authorities recently] announced the filing of charges against DAXC, LLC (“DAXC”), an affiliated entity of Pinnacle Housing Group, Inc. (“PHG”), a low-income housing developer operating in Miami, Florida.

    DAXC is charged by Criminal Information with theft of government money, in violation of Title 18, United States Code, Section 641. According to allegations contained in the Information, and statements made in Court, the DAXC theft scheme involved low-income housing developments built by PHG in Florida, specifically Vista Mar, an apartment complex in Miami; Pinnacle at Avery Glenn, an apartment complex in Sunrise; Orchid Grove, an apartment complex in Homestead; and Cypress Cove, an apartment complex in Winter Haven.

    According to the Criminal Information, Florida Housing Finance Corporation (“FHFC”) issued federal tax credits and grant monies to developers for the construction of low-income housing in Florida. To obtain these federal funds, FHFC required developers to submit proposed development costs, including a construction contract signed by the developer and contractor.

    [From] 2009 to 2011, PHG’s affiliated contractor solicited bids for concrete shell work for the housing developments. The affiliated contractor received a final bid for concrete shell work from Shell Subcontractor A.

    Instead of signing contracts with Shell Subcontractor A at its final bid price, the affiliated contractor signed contracts for concrete shell work with their affiliated subcontractor, DAXC, at prices inflated from $200,000 to $1.5 million higher than Shell Subcontractor A’s price. DAXC did not have the personnel or equipment to complete concrete shell work and in fact did not complete any shell work on these projects. Rather, DAXC subcontracted with Shell Subcontractor A to complete the concrete shell work at Shell Subcontractor A’s final bid price.

    PHG then submitted the inflated construction contracts to FHFC’s representatives for the receipt of federal tax credits and grant monies for the housing developments. As a result of DAXC’s fraudulent inflation scheme, FHFC allocated approximately $4.2 million in excess federal funds. On or about November 8, 2011, among other wire transfers, the five principals of the affiliated contractor received payments totaling approximately $2.5 million from this contract inflation scheme from DAXC’s bank account.

    The United States and DAXC entered into a deferred prosecution agreement filed today [March 20] pursuant to which DAXC has paid $5.2 million in forfeiture and fines to the United States.(1)

    This is the third in a series of prosecutions by the United States Attorney’s Office for the Southern District of Florida involving theft of government funds relating to low-income housing developments. The Office previously charged the principals of Carlisle Development Group, Inc. for a $25 million contract inflation scheme as well as the principals of Biscayne Housing Group, Inc. for a $10 million contract inflation scheme.
Source: Pinnacle Housing Group’s Affiliate Charged in $4 Million Government Theft Involving Low-Income Housing Developments.
(1) See Miami Developer in Hot Seat Over Low-Income Housing Fraud (may need subscription; if no subscription, GO HERE, then click appropriate link):
  • In exchange, prosecutors agreed to dismiss the criminal information with prejudice after three months—a move that prevents new charges for the same behavior already prosecuted, unless DAXC breaches the agreement.

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