Developer Admits Loan Fraud Charges

Allison Tussey —  June 22, 2010 — Leave a comment

Clayton Hargrave, St. Louis, Missouri, has pleaded guilty to fraud charges involving his Washington Avenue development. Hargrave pleaded guilty to one felony count of wire fraud before United States District Judge Charles A. Shaw. Sentencing has been set for July 29, 2010.

According to the court documents, Hargrave was a designer and developer associated with a property located at 1511 Washington Avenue, St. Louis, Missouri. His plan was to rehabilitate the seven-story building into a combination of commercial property (two stories) and residential condominiums (five stories).

In January 2006, Hargrave obtained a $10 million loan from Great Southern Bank to renovate and pay off original loans used to purchase the land and the building. Hargrave agreed with Great Southern Bank to disburse money through Commonwealth Land Title Insurance Company, as sub-contractors would submit bills to Hargrave for services to be provided for renovation. Approximately $4.7 million of the loan money went to pay original loans and reimburse Hargrave for initial construction expenses. Hargrave told the bank that the project was to be completed by the end of 2006.

From the beginning, Hargrave companies experienced difficulties in moving the project forward. In December 2006, a forebearance agreement was signed by Great Southern Bank and Hargrave. This is an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage, and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. At this time, the project was over budget. Hargrave obtained additional financing from a private investor and Great Southern Bank. Legacy Building Group, the general contractor, was terminated and replaced by Ashley Architecture, a company owned and operated by Hargrave.

In May 2007, the project was again over budget and Great Southern Bank refused to finance further loan proceeds. In July 2007, the project was placed in receivership by Great Southern, who found another general contractor who completed the project.

During this time, Hargrave engaged the services of SEJ Partnerships. An invoice for $66,000 was submitted on behalf of SEJ Partnerships to Commonwealth to purchase and install flooring at 1511 Washington. The money was drawn from Great Southern Bank and sent to Commonwealth Title, who received it and sent it to SEJ in Milwaukee, Wisconsin, on December 27, 2006. The next day, at the direction of Hargrave, SEJ Partnership wired the $66,000 to his sister in Minnesota. The money was then used to pay other creditors and not for the purposes intended, which was the renovation of 1511 Washington.

Wire fraud carries a maximum penalty of 20 years in prison and/or fines up to $250,000.

This case was investigated by the Federal Bureau of Investigation. First Assistant United States Attorney Michael W. Reap and Assistant United States Attorney Rob Livergood are handling the case for the U.S. Attorney’s Office.

 

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Allison Tussey

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