A low-income housing developer in Iowa is facing charges that he conspired with a general contractor to create a fake pass-through company to inflate construction costs and defraud the Department of Agriculture.
According to the U.S. Attorney’s Office for the Southern District of Iowa, Jeffrey Voorhees and Brian Pittman are charged with five counts of wire fraud affecting a financial institution.
Per the indictment, Voorhees is a low-income housing developer, and through his own consulting company and a nonprofit entity, purchased and rehabilitated seven properties, which together formed a project called Candleridge VII.
The properties in question were purchased using a USDA direct loan, and were rehabilitated with a private bank loan that was guaranteed by USDA.
According to court documents, Voorhees worked with Pittman, the general on the development, to artificially inflate construction costs and create a pass-through company, Rural Construction Services, which they allegedly used to obtain approximately $359,000 in artificially inflated loan proceeds.
Voorhees is also accused of artificially inflating other costs in the loan to obtain an additional approximately $318,000 in loan proceeds.
According to the U.S. Attorney’s Office, the loan proceeds were supposed to be repaid using USDA-subsidized tenant rents.
The purpose of these USDA loan programs is to support the development of rental units for low- and moderate-income individuals and families in rural areas and towns.
As such, the USDA has rules for how the loan proceeds can be spent, and also imposes requirements on the borrowers to disclose any identity of interest relationships.
The indictment alleges that Voorhees was aware of these regulations but chose not to follow them to unlawfully profit from the USDA loan programs.
In addition to facing the five counts of wire fraud, each of which carries a maximum sentence of 30 years in prison, Voorhees is also facing three felony counts for allegedly moving the profits of Rural Construction Services into bank accounts in his wife’s name.
Each of those counts is punishable by up to 10 years in prison.