St. LOUIS AREA DEVELOPER AND THE DIRECTOR OF COMMUNITY
DEVELOPMENT FOR THE CITY OF EAST ST. LOUIS INDICTED FOR
FRAUD AND BRIBERY OFFENSES
Stephen R. Wigginton, United States Attorney for the Southern District of Illinois, announced
today that HAROLD N. ROSEN, age 79, of St. Louis, Missouri, and ARTHUR M. JOHNSON, age
61, of East St. Louis, Illinois, were indicted on January 21, 2011, by the Grand Jury in US District Court
for the Southern District of Illinois, East St. Louis Division. ROSEN was indicted for nine (9) counts
of wire fraud. JOHNSON was indicted for three (3) counts, including: aiding and abetting two of
ROSEN’S wire fraud offenses, and also for accepting benefits in connection with business conducted
before the East St. Louis Community Development Office.
On January 24, 2011, JOHNSON surrendered and was arrested by federal agents.
JOHNSON was arraigned in US District Court and was admitted to bail pending trial.
The indictment alleges that HAROLD N. ROSEN committed fraud in connection with his
contract with the city of East St. Louis to construct a $5.6 million dollar low income, affordable housing
project to be known as “Bowman Estates.” To obtain the construction contract, ROSEN lied about his
background and experience, falsely portraying himself as a wealthy man with extensive experience as
a developer. He supplied fictitious tax returns and bogus financial statements when he applied for loans,
and he fabricated loan commitments and a financing contract to mislead the city and the East St. Louis
Financial Advisory Authority (FAA) into believing that he had obtained more than $3.6 million dollars
of private financing required as a pre-condition to the start of his construction project. Having deceived
the city as to his financial wherewithal and supposed expertise as a developer, ROSEN then attempted
to pass off considerably cheaper pre-fab modular housing manufactured in the State of Indiana in lieu
of the promised on-site construction in East St. Louis that would have provided job opportunities to local
construction workers. The indictment further alleges that ROSEN created phony invoices and lien
waivers that were submitted to the city and the FAA in order to obtain reimbursement for expenses that
he had not actually paid and was otherwise not entitled.
To improve his chances of successfully developing the Bowman Estates project, the
indictment alleges that ROSEN provided benefits to ARTHUR M. JOHNSON, the director of the
Community Development Department for the city of East St. Louis. JOHNSON acted corruptly by
accepting cash payments from a representative of Kully Construction, LLC while he was responsible for
overseeing a portion of the public financing for the project. Further, ARTHUR M. JOHNSON verified
and approved a fraudulent $40,000 reimbursement to Kully Construction, LLC knowing that Kully
Construction, LLC had not actually paid the $40,000 expenditure for which HAROLD N. ROSEN
sought reimbursement. JOHNSON approved the expense because he had been promised employment
with Kully Construction, LLC upon his upcoming retirement from the city.
The indictment alleges that ROSEN attempted to obtain more than $1.9 million dollars of
public financing under false pretenses and that he was successful in actually obtaining more than
$60,000 by fraud. The East St. Louis Financial Advisory Authority (“FAA”), a state agency that
oversees East St. Louis city spending, is credited for saving the city from additional losses by
successfully blocking the expenditure of public funds from August, 2008, through June, 2009, as well
as by blocking payment of a fraudulent $40,000 reimbursement.
The crime of wire fraud is punishable by not more than 20 years’ imprisonment, a $250,000
fine, and not more than 3 years’ supervised release upon release from prison. Corruptly Accepting
Anything of Value in Connection with Business Conducted Before the East St. Louis Community
Development Office is punishable by 10 years’ imprisonment, a $250,000 fine, and not more than 3
years’ supervised release. However, the United States Sentencing Guidelines must be applied to the case
and considered by the Court during sentencing.
The investigation was conducted through the Metro East Public Corruption Task Force by
agents from the Internal Revenue Service, The US Department of Housing and Urban Development, and
the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney
Steven D. Weinhoeft.
An indictment is a formal charge against a defendant. Under the law, that charge is merely
an accusation and the defendant is presumed innocent unless proven guilty.