A Dutchess County housing developer and two lumber company executives from Pennsylvania face federal fraud and conspiracy charges in an alleged $865,000 kickback scheme at Vineyard Commons, a luxury apartment development in Ulster County for adults 55 and older.
U.S. Attorney Preet Bharara on Wednesday announced the charges against 46-year-old Michael Barnett, the owner of Hudson River Valley Properties in Hopewell Junction and developer of Vineyard Commons; Robert Lees, 61, of Lititz, Pa.; and Kevin DiCello, 43, of Pottsville, Pa.
Lees was division president and DiCello a vice president of operations at an unnamed building and lumber supply company that was a subcontractor six years ago on Barnett”™s  approximately $46 million construction project in Highland. The charges came in an indictment in U.S. Distinct Court in White Plains that superseded a January indictment in which Barnett alone was charged.
Bharara said the three men defrauded Barnett”™s unnamed construction lender by inflating the lumber company”™s winning bid for labor and materials by about $865,000 and drawing down that sum from the loan, which was federally guaranteed by the Department of Housing and Urban Development. The Business Journal in 2010 reported that JPMorgan Chase was the lender on Barnett”™s  HUD-backed loan.
The falsely claimed $865,000 was to be kicked back to Barnett by the lumber company in exchange for the Vineyard Commons contract and future business on other developments planned by the Hopewell Junction developer, according to Bharara.
Federal prosecutors charged the subcontractor made a $200,000 payment to Barnett in January 2010 that Lees and DiCello disguised on company books as a customer rebate payable to another Barnett company not involved with Vineyard Commons. Barnett then allegedly used the partial kickback to repay some of what he owed the project’s general contractor.
Prosecutors also alleged that Barnett solicited the lumber company and other subcontractors and vendors on the Highland project to provide labor and materials for a pool house built at his home. The developer allegedly submitted false invoices to his lender in order to draw down on the construction loan.
The case was investigated by HUD”™s Office of the Inspector General.
Barnett in the indictment was charged with 40 counts of conspiracy, wire and mail fraud, false statements and engaging in monetary transactions in property derived from unlawful activity.
Lees and DiCello each were charged with three counts of conspiracy, mail fraud, and making false statements in loan and credit applications.
Barnett and his wife and development partner, Denise, filed for bankruptcy in 2013, according to the Poughkeepsie Journal. Â HUD reportedly lost $27 million on the Vineyard Commons project.
