Two Charged in Construction Loan Fraud Case

admin —  December 15, 2009 — 1 Comment

Uriah A. Kennedy, 34, Midvale, Utah and Gregory Lee Hansen, 55, West Jordan, Utah, who were involved in real estate development ventures including a proposed 80-unit condominium project on North Temple in Salt Lake City, are charged with wire fraud, conspiracy, and money laundering in a 24-count federal indictment returned by a grand jury late Wednesday afternoon.

The indictment, which follows an investigation by the FBI, alleges Hansen and Kennedy, with others, formed a real estate development venture to focus on the development of single-family housing projects under the name Tradewest Homes. Hansen and Kennedy transferred approximately 60 unfinished single-family home projects into this company with a plan to obtain financing and finish the projects, the indictment alleges. Subsequently, the indictment alleges, Hansen and Kennedy formed an entity called Spyglass Properties to develop and build an 80-unit condominium project at 644 West North Temple, Salt Lake City.

The indictment alleges the defendants applied for a construction loan of about $18 million from Arkansas National Bank, a national banking company which maintained an office in St. George, Utah, ostensibly to acquire the property and build the condominiums on the 1.7 acre parcel of property. This development became known as the Kennedy Town Center Project.

According to the indictment, Hansen and Kennedy assured ANB that the proceeds of the loan would be used solely for the purchase of the property and the construction and building of the 80-unit project. The loan was structured so it would be released in phases based on invoices and periodic engineering certifications to ANB that the previous phase of the construction had been properly completed. Hansen and Kennedy and their associates were required to furnish to ANB written invoices and draw requests which affirmatively represented to ANB how the loan proceeds would be put to use.

The indictment alleges that instead of using all of the proceeds of the ANB loan for purchase of the property and construction of the Kennedy Town Center as promised and terms of the loan required, the defendants diverted hundreds of thousands of dollars in ANB loan proceeds for unrelated personal purposes and for other residential construction projects, including the unfinished Tradewest Homes construction projects.

According to the indictment, these diversions from the ANB loan began to immediately threaten the viability of the Kennedy Town Center project and the ability to repay the ANB loan. In order to conceal the diversion of funds from the ANB loan to other projects, the indictment alleges the defendants created and submitted false and deceptive documents to support the release of the funds. After depleting almost $17 million of the available ANB loan funds, the indictment alleges the defendants abandoned the Kennedy Town Center project with little more visible above ground-level than a slab of cement, failed to make payments on the ANB loan, and left ANB with a loan secured by property worth far less than the outstanding loan balance.

The indictment includes 10 counts of wire fraud involving a financial institution and one count of conspiracy, which each carry a potential maximum penalty of 30 years in federal prison per count and a fine of up to $1 million. Additionally, the indictment alleges 13 counts of money laundering, which carry maximum penalties of 10 years per count and a fine of up to $250,000 or an alternative fine of not more than twice the amount of the criminally derived property. Defendants charged in indictments are presumed innocent unless or until proven guilty in court. Summons will be issued to Hansen and Kennedy for an initial appearance on the charges. A date has not been set.

Misiona Patane Jr., 45, West Valley City, referenced in the indictment as a project manager engaged in the business of monitoring construction project progress, controlling costs, and ensuring proper use and disbursement of project loan fund, was charged by Felony Information. He pleaded guilty to one count of wire fraud Monday and faces up to 30 years in prison when he is sentenced. A sentencing date has not been set.

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One response to Two Charged in Construction Loan Fraud Case

  1. What is the outcome with the Mortgage fraud charges against Uriah Kennedy in Salt Lake City?

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