05/26/2010

News / Area Defendant Charged in $3.7 Million Bank Fraud Scheme

CHICAGO—The owner of a Chicago-based residential property development company was charged yesterday with defrauding the State Bank of Countryside of approximately $3.7 million in connection with loans for the development of property in the West Lincoln Park neighborhood in Chicago. Seth M. Harris, 38, of Chicago, was charged in a single-count information filed in U.S. District Court, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert Grant, Special Agent-in-Charge of the Federal Bureau of Investigation in Chicago, announced.

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.

According to the information, 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 allegedly 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 their 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.

According to the information, 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. Harris allegedly 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.

The information further alleges that, 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 Harris had already made payments to these subcontractors.

Harris allegedly used proceeds of the scheme for his personal benefit and caused the State Bank of Countryside to incur a loss of approximately $3,693,738.

Harris will be ordered to appear for arraignment at a later date in the United States District Court.

The government is being represented by Assistant United States Attorney Felicia Manno Alesia.

If convicted, a bank fraud conviction is a felony and carries maximum penalties of 30 years in prison and a fine of up to $1,000,000, or twice the gross gain or gross loss resulting from the offense. In addition, the information includes a forfeiture allegation to recover from Harris the proceeds of his scheme, estimated at $3,693,738. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

http://chicago.fbi.gov/dojpressrel/pressrel10/cg052510.htm

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