A former lumber company executive was sentenced to 50 months in prison on Dec. 15 in U.S. District Court, White Plains, for his involvement in a kickback scheme at a housing project in Ulster County.
A jury found Robert Lees, 62, of Lititz, Pennsylvania, guilty of conspiracy, mail fraud, money laundering and making false statements in a loan application, after a seven-day trial in May.
In 2009, real estate developer Michael Barnett hired JK Scanlan Co. as general contractor on the approximately $46 million Vineyard Commons senior housing project in Highland. Scanlan hired Shawnlee Construction LLC, a subsidiary of Universal Forest Products where Lees worked, as a subcontractor responsible for framing and rough carpentry.
Lees agreed to prepare a bid that included an extra $865,000 that would be returned to Barnett as a kickback. In essence, according to the government, the mortgage lender would unwittingly finance the kickback when it disbursed payments.
The inflated bid was also submitted to the U.S. Department of Housing and Urban Development to insure the financing.
Every month, from July 2009 to January 2012, the mortgage company disbursed HUD-insured funds to the contractor. Universal set aside the “extra” portion of its payments in a separate account, the government says, and in January 2010 the company made a partial kickback payment of $200,000 to Barnett.
Later that year Barnett asked Universal for a $5 million loan, the government said, and offered to surrender the remainder of his kickback to the company. With Lees’ encouragement, Universal issued the loan to Barnett.
The Vineyard Commons project eventually defaulted on the HUD-insured loan. HUD took over the loan, sold the project and lost $28 million.
The U.S. Attorney’s Office said in a sentencing memorandum that the court should sentence Lees to a “very significant imprisonment.” It recommended a term from 11 years and three months to 14 years.
That range reflects Lees’ role in a sophisticated fraud, the government said, and “his decision to take the stand and lie profusely about his criminal activities.”
Lees’ attorney, Eric Creizman, wrote to the judge that the government’s recommendation was draconian.
The government, he said, “seeks to make an example and inflict unduly harsh consequences on a 62-year-old, non-violent first offender who made no money from the scheme at issue (and) lost the career he built through honest and hard work for close to 40 years.”
U.S. District Court Judge Kenneth Karas sentenced Lees to four years and two months. He also ordered Lees to forfeit $865,000 in ill-gotten gains and pay $865,000 in restitution.
Barnett pleaded guilty in January to conspiracy, and in October Karas sentenced him to 37 months in prison. Kevin DiCello, another Universal executive, has pleaded guilty to several charges and will be sentenced on Jan. 19.