Developer Sentenced for Siphoning Millions at the Expense of Lender and Others

Allison Tussey —  February 3, 2014 — Leave a comment

Robert D. Falor, 48, Chicago, Illinois, the former manager of a defunct Chicago-based real estate company that acquired and managed hotels, was sentenced to more than six years in federal prison for evading more than $1.7 million in federal income taxes and siphoning millions of dollars from the Blake’s operations at the expense of a lender, city and state taxing authorities, union employees, and other creditors and vendors to support a lavish lifestyle that included multi-million dollar homes, luxury cars, boats, and planes.

Falor, formerly of River Woods and Glencoe, Illinois, was “a one-man financial crime wave,” U.S. District Judge Virginia Kendall said in sentencing him to 74 months in prison and ordering him to pay $1,752,948 in restitution to the Internal Revenue Service. Falor has remained in federal custody since he was arrested in 2011. He pleaded guilty in May 2013 to two counts of federal income tax evasion.

Falor was the chief operator and manager of The Falor Companies, Inc. (TFC), which involved his brother and their father and, before it ceased operating in 2006, acquired and managed hotel properties through a complex network of limited liability corporations. Through various ventures before and after 2006, Falor attempted to convert hotels to condo-hotels by selling individual guest rooms to investors as separately titled condominium units, and renting them through a related hotel management company to other guests when the owner was not in residence, with the owner receiving a percentage of the rental fee. The companies operated multiple condo-hotel ventures in the mid-2000s, including the Blake Hotel, located at 500 S. Dearborn St., Chicago, and the Tides Hotel, Ocean Drive, Miami Beach, Florida.

From 2006 through June 2008, the Blake generated hundreds of thousands of dollars per month in revenues. But instead of paying debts to the Blake’s creditors, Falor plundered approximately $5.7 million from the hotel and diverted the cash to himself. Falor also failed to pay state income taxes, as well as city and state hotel occupancy taxes, bringing the total tax loss he caused to more than $4.1 million.

In July 2008, Accelerated Assets, LLC, a Birmingham, Michigan, lender foreclosed on a mezzanine loan to renovate the Blake, ousted the Falors, took over management, and assumed its debts, which included occupancy taxes of more than $500,000 to the City of Chicago and more than $1.4 million to the State of Illinois.

Falor’s father, David R. Falor, 73, who was a principal in TFC, formerly of Chicago and Miami Beach, was extradited last year from Italy. He also pleaded guilty to tax evasion and was sentenced last month to two years in federal prison. David Falor converted $779,000 in payments that were recorded as loans from TFC, but which became taxable income when the companies went out of business and David Falor used the funds for personal expenses.

Robert Falor’s brother, Christopher Falor, a consultant to the condo-hotel projects, is scheduled to be sentenced on March 5 after pleading guilty to mail fraud and tax counts.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government is being represented by Assistant U.S. Attorneys Ryan S. Hedges and Barry Jonas.

Defendants convicted of tax offenses remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of up to 75 percent of the underpayment plus interest.

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