Well-known developer Joseph L. Capano, 73, of Middletown, pleaded guilty to one count of bank fraud and one count of knowingly violating the Clean Water Act in connection with a residential development near New Castle.
Capano, part of a company that has built thousands of houses in Middletown and elsewhere in Delaware, faces up to 30 years of imprisonment and a $1 million fine for the bank fraud charge, and three years of imprisonment and a $250,000 fine for the Clean Water Act violation.
Delaware Online. The website also reported Both charges relate to Capano’s involvement with work on the Riverbend at Old New Castle development off of State Route 9, a release from the U.S. Attorney’s Office stated. The long-running case related to water violations resulted in a not guilty plea in 2014, according to Delaware OnLine.
In addition to the Clean Water Act, the federal government became involved in the loan issue, through the federal TARP program that invested in banks during the financial crisis several years ago.
The Riverbend Development was funded in part by a $1.5 million commercial line of credit from Cecil Bank, headquartered in Elkton, MD.In October 2007, Capano signed an agreement for a line of credit on behalf of his company Riverbend Community, LLC, claiming the line of credit was to fund construction and other costs associated with the Riverbend Development.
According to court documents, between October 2007 until August 2008, Capano signed and submitted funding requests, referred to as draw requests, to Cecil Bank which contained false representations and statements concerning the reasons for the requests.
Cecil Bank continued to lend Capano money. Capano used some of the funds released by Cecil Bank for his personal use and not for construction of the Riverbend Development.
DelawareBusinessDaily.com, predecessor to Delaware Business Now earlier reported that Cecil Bank has been under federal and state supervision, due to loan losses and a deficiency in required capital.
The government alleges that on December 21, 2007, Capano submitted a draw request seeking $300,000 for various Riverbend Development expenses. Instead of using those funds for Riverbend Development expenses, Capano used some of the funds for personal expenses, including approximately $63,000 to pay for a jewelry purchase.
As part of his guilty plea, Capano has admitted that he converted nearly $147,000 in loan proceeds to his personal use.
Delaware Online.com reported that Cecil Bank also commenced foreclosure proceedings involving Capano’s holdings in the gated community in the marshy area near New Castle.
In addition to his misrepresentations regarding bank loan funds, the information states that Capano knowingly discharged pollutants into wetlands without a permit during the Riverbend Development, according to the U.S. Attorney’s office
Capano directed employees and contractors of his company to perform earthmoving, construction and excavation activities in wetlands areas. Capano directed contractors and employees to expand the entrance road to the development, referred to as the causeway, into wetlands subject to federal jurisdiction. Capano also directed contractors and employees to place a main water pipe through the causeway wetlands area, even after the Army Corps of Engineers instructed Capano to stop performing construction in wetland areas and issued Capano a cease letter.
“It is important to the integrity of the land use and development process that all developers operate under the same set of rules. Mr. Capano was determined to make his own rules, and to use whatever means necessary to get the Riverbend Development completed. In so doing, he lied to the bank about the use of project funds, and he ignored federal wetland regulations and the directives of the Army Corps of Engineers. Now he stands as a convicted felon.” said Acting U.S. Attorney Joseph Weiss.
“Capano committed fraud by using commercial loans from Cecil as a personal piggy bank,” said Christy Goldsmith Romero, special inspector general for TARP (SIGTARP). “As managing member of Riverbend Community LLC, he obtained commercial loans from Cecil and then illegally transferred the money to bank accounts of other affiliated companies so he could take the money for his personal use. Cecil received more than $11 million from the taxpayers during the financial crisis, and we will continue to aggressively investigate fraud committed at the expense of taxpayers’ TARP investments. SIGTARP commends Acting U.S. Attorney Weiss and our law enforcement partners for their work.”
Capano was no stranger to troubled projects. In the 1990s, he was listed as a developer of a Radisson Hotel in the New Castle area that ran into trouble with New Castle County and did not reopen for a number of years. The hotel later ended up, for a time, in the hands of a Florida bank that had loaned money for the project.
It now operates as a Sheraton Hotel.
The case is the result of a joint investigation conducted by the Federal Bureau of Investigation, the Office of the Special Inspector General for the Troubled Asset Relief Program, and the United States Environmental Protection Agency, Criminal Investigation Division Philadelphia Area Office. The prosecution is being handled by Assistant U.S. Attorney Jennifer K. Welsh.
