Richmond Man Pleads Guilty and Admits to Stealing Millions Through a Rehabilitation Tax Credit Scheme
|U.S. Attorney’s Office December 19, 2013|
RICHMOND, VA—Billy Gene Jefferson, 52, of Richmond, Virginia, pleaded guilty today for his role in stealing more than $12 million from federal and state tax credit programs that are designed to promote the rehabilitation of historic buildings in the area.
Dana J. Boente, Acting United States Attorney for the Eastern District of Virginia; Kenneth T. Cuccinelli, II, Attorney General of Virginia; Thomas J. Kelly, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation’s Washington, D.C. Field Office; Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field Office; Gary Barksdale, Inspector in Charge of the United States Postal Inspection Service, Washington, D.C. Division; and Colonel W. Steven Flaherty, Superintendent of Virginia State Police, made the announcement after the plea was accepted by United States District Judge John A. Gibney, Jr.
Jefferson was charged in a criminal information with major fraud against the United States and engaging in unlawful monetary transactions. He faces a maximum penalty of 20 years in prison, restitution to the victims, a fine of up to $500,000, and three years of supervised release when he is sentenced on April 8, 2014.
According to a statement of facts filed with the plea agreement, Jefferson was the managing member of River City Renaissance LC and River City Renaissance III LC, both real estate development companies that specialized in urban renewal projects and the rehabilitation of historic buildings. The defendant also used another corporation, River City Real Estate Inc. (RCRE), as the general contractor for rehabilitation work on the properties. Using these entities, Jefferson applied for millions in state and federal historic tax credits in connection with his rehabilitation of a number of historic properties throughout the Richmond area.
At the state level, the Virginia Department of Historic Resources (VDHR) administered the Virginia Historic Rehabilitation Tax Credit program. That program allowed the property owner to receive a state income tax credit equal to 25 percent of the amount spent on eligible rehabilitation expenses. At the federal level, the U.S. Department of the Interior National Park Service (DOI-NPS) administered the Federal Historic Preservation Tax Incentives program, which encouraged private sector rehabilitation of historic buildings through tax credits equal to 20 percent of the amount spent on eligible rehabilitation expenses.
Jefferson admitted that from 2009 through 2011, he fraudulently participated in the state and federal historic rehabilitation tax credit programs through the rehabilitation of qualified properties. Specifically, he submitted applications for federal and state tax credits on the rehabilitation of a former tobacco manufacturing plant in the Manchester Industrial Historic District of Richmond, Virginia (referred to as the TABAC Project), which was followed by the rehabilitation of ten historic buildings located in the Fan District of Richmond, Virginia (referred to as the River City Renaissance Projects).
Among other steps in his fraudulent rehabilitation tax credit scheme, Jefferson executed and submitted false applications to the VDHR and DOI-NPS for the tax credit approval process, including the Part 3: Historic Preservation Certification Application-Request for Completed Work form that requires accurate certification of “costs attributed solely to rehabilitation of the historic structure.” Within the Part 3 Certifications, Jefferson falsely inflated the Qualified Rehabilitation Expenses (QREs), thereby increasing the tax credits claimed for specific projects. Jefferson agreed that if actual amounts had been submitted to federal and state authorities, he would have received less in Virginia and federal tax credits.
With respect to the River City Renaissance Projects, Jefferson admitted to initiating the historic rehabilitation tax credit application process on at least 10 different properties in Richmond, Virginia. Due to concerns with the accuracy of the defendant’s QRE submissions, VDHR required additional information to address the concerns on six of the properties. During the verification process for those expenses, Jefferson provided false information and concealed the actual QRE expenditures that he knew to be less than the amounts claimed on the original submissions to VDHR. In total, for the River City Renaissance Projects, Jefferson’s account records established that of the $28,836,342 in QRE expenses claimed, only $9,796,252.08 could have qualified as QREs for federal and state tax credits on the River City Renaissance Projects. As a result of those false submissions, Jefferson fraudulently received approximately $7,775,410.46 in actual tax credits on the River City Renaissance Projects.
Jefferson also admitted to submitting inflated QREs for the TABAC Project. His account records established that of the $57,064,858 in QRE expenses claimed, only $45,570,466.20 could have qualified as QREs for federal and state tax credits on the TABAC Project. As a result of those false submissions, Jefferson fraudulently obtained approximately $5,172,476.31 in tax credits on the TABAC Project.
Jefferson also admitted to using different business arrangements resulting in portions of the federal tax credits accruing to the benefit of corporation C.U.S.A. and portions of the state tax credits accruing to benefit of corporation F & Co. Through those arrangements, he received payments from those corporations in exchange for the tax credits. Jefferson admitted that as part of the ongoing scheme to defraud, he caused C.U.S.A. to wire transfer $3,674,277 from a Citibank bank account to the River City Renaissance LC Wachovia Bank account (ending in 9277) in Richmond, Virginia. Jefferson subsequently transferred those funds to different accounts under his control, including personal accounts he maintained at HSBC Bank International.
In connection with his guilty plea, Jefferson agreed that the loss amount relating to the federal tax credits is $5,754,616.34, and the loss amount relating to the state credits is $7,193,270.43, for a combined total of $12,947,886.77. He agreed to pay that full amount for restitution, as well as an additional $750,000 for criminal forfeiture.
This case was investigated by the Internal Revenue Service-Criminal Investigation Division, Federal Bureau of Investigation-Richmond Office, the United States Postal Inspection Service, and the Virginia State Police. The Virginia Department of Historic Resources also assisted law enforcement in the investigation. Assistant United States Attorneys Michael Gill and Wingate Grant and Special Assistant United States Attorney Patrick Dorgan are prosecuting the case on behalf of the United States.
This investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is composed of several federal and state agencies, including the Virginia Attorney General’s Office. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force (FFETF), an interagency national task force.
The FFETF was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.