Clayton Developer Guilty of Fraud in the Development of the East St. Louis Bowman Estates Project

A Clayton developer pled guilty in U.S. District Court on October 27, 2011, for his role in the failed Bowman Estates construction project, the United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today. Harold Rosen, age 80, was indicted by a federal grand jury on January 21, 2011, for attempting to obtain more than $1.9 million of public financing under false pretenses.

As part of his plea, Rosen admitted that he provided cash payments and a promise of future employment to Arthur M. Johnson, the director of the Community Development Department for the city of East St. Louis, to receive favorable treatment from the city as he attempted to develop the Bowman Estates project. Johnson pled guilty on May 20, 2011, to aiding and abetting a portion of Rosen’s wire fraud and to bribery charges for accepting improper benefits in connection with business conducted by his office. Johnson is set for sentencing on November 8, 2011.

Rosen was convicted of seven counts of wire fraud in connection with his contract with the city of East St. Louis to construct a $5.6 million low-income, affordable housing project to be known as “Bowman Estates.” To obtain the construction contract, Rosen lied about his background and experience, falsely portraying himself as a wealthy man with extensive experience as a developer. He supplied fictitious tax returns and bogus financial statements when he applied for bank loans, and he fabricated loan commitments and a financing contract to mislead the city and the East St. Louis Financial Advisory Authority (FAA) into believing that he had obtained more than $3.6 million of private financing required as a pre-condition to the start of his construction project. Having deceived the city as to his financial wherewithal and expertise as a developer, Rosen then attempted to pass off considerably cheaper prefab modular housing manufactured in the State of Indiana in lieu of the promised on-site construction in East St. Louis that would have provided job opportunities to local construction workers. Rosen also created phony invoices and lien waivers that were submitted to the city and the FAA in order to obtain reimbursement for expenses that he had not actually paid order to generate working capital for the project.

Rosen attempted to obtain more than $1.9 million of public financing under false pretenses and he was successful in actually obtaining more than $60,000 by fraud. The East St. Louis Financial Advisory Authority (“FAA”), a state agency that oversees East St. Louis city spending, is credited for saving the city from additional losses by successfully blocking the expenditure of public funds from August, 2008, through June, 2009. The FAA also blocked the payment of a fraudulent $40,000 invoice.

The crime of wire fraud is punishable by not more than 20 years’ imprisonment, a $250,000 fine, and not more than three years’ supervised release upon release from prison. However, the United States Sentencing Guidelines must be applied to the case and considered by the court during sentencing. Sentencing has been scheduled for February 1, 2012.

The investigation was conducted through the Metro East Public Corruption Task Force by agents from the Internal Revenue Service, The U.S. Department of Housing and Urban Development, and the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney Steven D. Weinhoeft.

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23 comments to Clayton Developer Guilty of Fraud in the Development of the East St. Louis Bowman Estates Project

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