Realty Business Owner and Police Lieutenant Indicted for Loan and Tax Fraud

Allison Tussey —  November 25, 2013 — Leave a comment

Robert Michael, 62, Chicago, Illinois, an owner of Chicago realty business who formerly was also the chief executive of a failed Chicago bank was arrested on federal bank fraud charges involving an alleged scheme to illegally provide a $650,000 mortgage for the purchase of a south side apartment building. Erroll Davis, 52, Chicago, a police lieutenant who allegedly played a role in the scheme was charged in the same indictment with federal income tax fraud.

Michael, an owner of Michael Realty and a former shareholder, chief executive officer, and senior lender at the failed Citizens Bank, was arrested by agents with the Internal Revenue Service Criminal Investigation Division. He was charged with one count each of bank fraud, making false statements to a bank, and money laundering in an indictment that was returned by a federal grand jury on Nov. 14, 2013, and now unsealed following his arrest. The indictment also seeks forfeiture of at least $634,000 from Michael.

Michael pleaded not guilty before U.S. Magistrate Judge Daniel Martin and was released on a $10,000 personal recognizance bond.

Also indicted but not arrested was Davis, a Chicago police lieutenant who was charged with one count of filing a false federal income tax return. Davis will be arraigned at a later date in Federal Court. The tax charge is not directly related to Davis’ employment as a police officer.

According to the indictment, between March and November 2008, Michael schemed with Individual A, the owner and president of The Prime Time Group, Inc., and the Regal Theater LLC, to fraudulently obtain approximately $634,000 from Citizens Bank, knowing that the mortgage loan to fund Davis’ purchase of a 12-unit apartment building at 1665 East 79th St., Chicago, was the result of false statements to the bank.

In March 2008, Individual A, through her companies, purchased the New Regal Theater property, which included the theater, two adjacent parking lots, and the apartment building. Michael allegedly caused Citizens Bank to loan $2.1 million to Individual A and the Prime Time Group to purchase the theater property, but as the loan officer on the transaction, he excluded the apartment building from the collateral securing the loan to evade the bank’s legal lending limits.

By November 2008, Individual A and the Prime Time Group owed approximately $40,000 to Citizens Bank on past due mortgage payments for the theater property, and more than $240,000 to Michael’s company, 300 West Sibley, LLC, on the lease for a nightclub in Dolton. Because of its legal lending limit, the bank was unable to loan additional funds to Individual A.

To allow Individual A to obtain subsequent financing that would be secured by the apartment building, Michael allegedly caused Citizens Bank to loan approximately $650,000 to Davis, whom Individual A referred to Michael for Davis’ purchase of the apartment building. Michael allegedly knew that the purpose of this transaction was to generate cash for Individual A to use to pay rent owed to Michael’s company on the nightclub property and to pay past due mortgage payments and other expenses related to the theater property.

Michael and Individual A allegedly prepared a fraudulent real estate contract for the purchase of the apartment building, purporting that the purchase price was $900,000 and that Davis had paid $90,000 in earnest money. Michael, Individual A, and Davis allegedly made other false statements, including creating false apartment leases, to induce Citizens Bank to issue a mortgage to Davis. Ultimately, Michael approved a wire transfer of $639,000 to fund the apartment transaction, and caused the title company to issue a check for $634,046, representing proceeds of the transaction, the indictment alleges. The money laundering count charges that $200,000 in proceeds from the fraudulent loan were paid to Michael Realty.

Bank fraud and making false statements to a bank each carry a maximum penalty of 30 years in prison and a $1 million fine, while money laundering carries a maximum penalty of 10 years in prison and a $250,000 fine. The tax count against Davis carries a maximum penalty of three years in prison and a $250,000 fine. In addition to criminal penalties, including mandatory costs of prosecution, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.

The government is being represented by Assistant U.S. Attorneys Megan Church and Joel Hammerman.

Be Sociable, Share!

No Comments

Be the first to start the conversation.

Leave a Reply

*

Text formatting is available via select HTML.

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>