Real Estate Developers Charged with Bank Fraud

Allison Tussey —  January 14, 2013 — Leave a comment

Franklin Thad Harris, 57, and Merlin D. Unruh, 51, both of Grand Junction, Colorado, were arrested in Grand Junction for a bank fraud scheme.

Harris and Unruh were indicted by a federal grand jury in Denver on January 8, 2013, for charges of bank fraud and money laundering. The indicted remained under seal until their arrest. There initial appearance took place in Grand Junction where they were advised of their rights. The two were released on bond, and are due back in court in Grand Junction on Tuesday, January 15th, 2013 at 3:00 p.m. for arraignment.

According to the indictment, on or about October 2007 through December 2008, Harris and Unruh executed a scheme to defraud First National Bank of the Rockies (FNBR) by using false and fraudulent representations and documentation, which were material to FNBR‘s decision to approve requests to withdraw funds for construction expenses. Harris engaged primarily in the business of constructing housing developments throughout the Grand Junction area. Unruh was also in the construction business and was utilized as a general contractor for projects with Harris.

Chatfield was a residential housing subdivision project developed by Harris and Unruh. Chatfield IV was a proposed fourth section of the Chatfield subdivision, to be constructed on 11.75 acres located at 3152 E Road, Grand Junction, Colorado. Harris had another project named Thunder Valley, a proposed residential subdivision with single-family detached units, to be constructed on 12.9 acres at 3079 F ½ Road, Grand Junction, Colorado. TDSM was a Colorado real estate Company owned and operated by Harris and Unruh.

On October 19, 2007, TDSM obtained a draw-down line of credit loan in the amount of $2,050,000.00, for the purpose of developing Chatfield IV. Over the course of the Chatfield IV loan, from October 2007 through July 2008, Harris and Unruh made five draw requests, resulting in a total disbursement by FNBR of $1,524,112.83. On or about April 4, 2008, TDSM obtained a draw-down line of credit loan in the amount of $2,625,000.00 for the purpose of developing Thunder Valley. Over the course of the Thunder Valley I Loan, from April 2006 through December 2008, Harris and Unruh made nine draw requests, resulting in a total disbursement by FNBR of $2,290,474.48.

For the purpose of executing and facilitating their fraud scheme, Harris, Unruh and others committed acts and made material misrepresentations and omissions to FNBR including submitting: false and fraudulent information, altered invoices, duplicate invoices and false information concerning costs incurred for work done. Harris and Unruh knowingly and fraudulently misrepresented to FNBR the nature of the work performed and progress made at the Chatfield and Thunder Valley development sites when in fact they diverted Chatfield IV and Thunder Valley I Loan proceeds for their personal use. Furthermore, they conducted financial transactions to conceal and disguise the use and control of the construction draw proceeds obtained; and when confronted by representatives of FNBR about their fraudulent draw requests, Harris and Unruh either knowingly provided false information or refused to provide any information or supporting documentation.

Harris and Unruh were each charged with thirty-five counts of bank fraud, six counts of money laundering and one count of conspiracy to commit money laundering. If convicted of bank fraud they face not more than 30 years in federal prison, and a fine of up to $1,000,000 per count. If convicted of money laundering they face not more than 10 years in federal prison, and a fine of up to $250,000 per count.

The United States Attorney’s Office, Federal Bureau of Investigation and IRS Criminal Investigation announced the charges.

This case was investigated by agents with Federal Bureau of Investigation (FBI) and IRS-Criminal Investigation. The case is being prosecuted by Assistant U.S. Attorney Michelle Heldmyer.

The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

“Individuals who defraud banks impose costs on all Americans who use our banking system, and will be held accountable,” said U.S. Attorney John Walsh. “In this case, the defendants lined their pockets claiming to access their line of credit to develop residential housing.”

“The FBI will continue to work in collaboration with our law enforcement partners to protect financial institutions against individuals who fraudulently exploit banking practices in furtherance of their criminal schemes,” said FBI Denver Special Agent in Charge James Yacone.

“IRS Criminal Investigation will work diligently with our law enforcement counterparts to insure bank fraud is vigorously investigated and brought to justice, said Stephen Boyd, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

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Allison Tussey

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