Connecticut Real Estate Developer Admits to Defrauding Investors and Lenders out of (70)) Millions

[nitpicker]

https://www.justice.gov/usao-ct/pr/connecticut-real-estate-developer-admits-defrauding-investors-and-lenders-out-millions

Department of Justice
U.S. Attorney’s Office
District of Connecticut

FOR IMMEDIATE RELEASE
Monday, September 11, 2017

Connecticut Real Estate Developer Admits to Defrauding Investors and Lenders out of Millions

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that JOHN DiMENNA, 74, of Vero Beach, Florida, waived his right to be indicted and pleaded guilty today before U.S. District Judge Victor A. Bolden in Bridgeport to two counts of wire fraud stemming from an extensive real estate investment and financing scheme.

According to court documents and statements made in court, DiMENNA worked in the commercial real estate industry, arranging for the purchase and development of large commercial real estate projects in Fairfield County, including hotels or multi-tenant properties with hundreds of apartments. DiMENNA and his business partners operated through various entities including Seaboard Realty LLC, Seaboard Stamford Investment Group (SSIG), and Seaboard Properties Group LLC. To raise capital for real estate projects, DiMENNA and his partners sold membership interests to outside investors in each LLC that owned or was to purchase a designated commercial property. DiMENNA also sold interests to investors in other LLCs that did not own specific properties but were to have some involvement in certain projects. Various financial institutions and other entities provided millions of dollars in financing to purchase, renovate or construct DiMENNA’s commercial real estate projects. DiMENNA oversaw each project, including each entity’s profitability, its cash flow, operating cash needs and any additional funds needed for repairs or renovations.

Between approximately 2010 and March 2016, DiMENNA engaged in a scheme to defraud investors and financial institutions. Knowing that certain of his properties were not cash positive, and without disclosing this fact to investors and lenders, DiMENNA used funds from separate cash-positive entities to support capital improvements, construction, and operating expenditures in other LLCs that needed the cash. In addition, DiMENNA used funds from cash positive entities to continue to make required interest and preferred returns to investors of any entity that he managed, regardless of the true available cash that an entity might have to fund such payments.

As part of the scheme, DiMENNA prepared spreadsheets that inflated the projected cash flows of certain projects, and then shared the spreadsheets with his business partners knowing that they would be marketing the ventures to potential investors. DiMENNA also provided his business partners with false sales contracts, false lease commitments and other false documents concerning the status and prospect of the various real estate investments.

DiMENNA provided existing investors inaccurate financial information in order to induce investors not to withdraw an investment, and he provided prospective investors with false information about a project’s financial viability to induce them to invest. DiMENNA frequently received a template from his accounting manager that set forth actual financial figures relating to a property, and then changed the numbers to make the figures appear stronger. In certain instances, DiMENNA simply created his own template with his own false figures and then provided the summaries to current and potential investors. DiMENNA also sold investors equity in certain entities at a time when he knew the entities were fully subscribed and thus not eligible for receiving investment monies.
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The government contends that, through this scheme, victim investors lost approximately $28 million and victim lenders lost approximately $41 million, for a total combined loss of $69,617,685.38.
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