Residential Property Development Company Owner Sentenced to Five Years in Prison for Defrauding Bank of Over $5 Million
|U.S. Attorney’s Office December 14, 2010|
CHICAGO—A Chicago-based residential property development company owner, Seth Harris, was sentenced today to 60 months in federal prison for defrauding the State Bank of Countryside in connection with loans for the development of property in the West Lincoln Park neighborhood in Chicago. Harris, 38, of Chicago, was ordered to pay restitution to the State Bank of Countryside, as well as to other victims, in an amount of approximately $5.6 million. Harris pled guilty in June to a single count information charging him with defrauding the State Bank of Countryside. Harris was the owner of SMH Development, LLC, of Chicago, a residential property development company which specialized in the construction of single-family homes, primarily in the Lincoln Park neighborhood of Chicago. He was sentenced today by U.S. District Judge David H. Coar and was ordered to surrender to begin serving his sentence in February 2011.
From approximately December 2007 to January 2009, Harris schemed to fraudulently obtain land and construction loans from the State Bank of Countryside, located in Countryside, Illinois. Harris sought and obtained loans totaling approximately $1,979,068 to acquire properties at 1701 and 1703 N. Dayton Street, Chicago, Illinois, in part by making misrepresentations concerning Harris’s and SMH Development’s equity in real properties and amount of debt. Specifically, Harris provided a personal financial statement to State Bank of Countryside in which he falsely represented that he and SMH Development held an ownership interest in a Deerfield, Illinois property and were beginning construction on the Deerfield property as well as at the Dayton properties. Harris further made false verbal representations to a representative of State Bank of Countryside concerning SMH Development’s ownership of the Deerfield property, as well as the amount of monthly rental income received from another property.
Harris later sought and obtained construction loans, totaling approximately $3,746,000, to build single-family residences on the Dayton properties. In order to obtain the construction loans, Harris falsely represented to the State Bank of Countryside that the residence to be built at 1703 N. Dayton was already under contract, forging a signature on a false contract purporting to memorialize the sale of that property. He provided the State Bank of Countryside with the forged contract and a copy of a $500,000 escrow check that falsely purported to show a deposit for the purchaser of the 1703 N. Dayton home. In order to draw funds from the construction loans, Harris submitted to the State Bank of Countryside forged waiver of lien forms, which contained false notarized subcontractors’ signatures and which falsely purported to show that he had already made payments to these subcontractors. Harris used proceeds of his scheme for his personal benefit. Harris caused a loss to State Bank of Countryside of approximately $2.1 million. Harris also acknowledged that his conduct caused losses to other victims, including other lenders and investors. The additional losses were approximately $3.5 million, for a total loss of approximately $5.6 million.
The sentence was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois and Robert D. Grant, Special Agent in Charge of the Federal Bureau of Investigation, Chicago Division. The government is being represented by Assistant United States Attorney Felicia Manno Alesia.