WASHOUGAL, WASHINGTON TAX ATTORNEY PLEADS GUILTY TO FRAUD AGAINST BANK AND SBA
Attorney Failed to Disclose Side Deals Between Parties and Structured Closing of Business Sale to Conceal Critical Information
JEFFREY BIVENS, 34, of Washougal, Washington, pleaded guilty today in U.S. District Court in Tacoma to making materially false statements to the Small Business Administration and Wachovia Bank. BIVENS, a tax attorney licensed in the State of Washington, represented Donald Chill, the owner of Charles Prescott Restoration, Inc., a disaster restoration company specializing in rehabilitating real and personal property damaged by fire, flood, wind and vandalism. BIVENS assisted Chill in the sale of the company and a related loan. Donald Chill has since pleaded guilty and been sentenced to prison for a variety of frauds surrounding the operation and sale of the business. Jeffrey Kraai, a commercial business broker involved in the sale has also previously pleaded guilty and is awaiting sentencing. BIVENS faces up to five years in prison when sentenced by U.S. District Judge Benjamin H. Settle on May 23, 2011.
According to the plea agreement, in his capacity as attorney for Mr. Chill, BIVENS represented to Wachovia Bank and the Small Business Administration (SBA) that the sale price of Charles Prescott Restoration, Inc. was $4 million. Based on that purchase price Wachovia agreed to loan $2 million to the purchaser, which in turn was guaranteed by the Small Business Administration. That representation was false. The true price was $7.4 million and would have caused the loan to be denied if disclosed to the bank or SBA. BIVENS also failed to reveal that there was a secret promissory note between the buyer and seller which was not disclosed to the bank and SBA. BIVENS also failed to disclose that a one year employment agreement with Donald Chill was actually for a much longer period of time than represented to the bank and SBA. BIVENS further helped engineer a secret “second closing” involving these agreements which he and others concealed from the bank. Email communications revealed that BIVENS, Chill and Kraai fully understood that the deal would not go through if the bank and SBA knew about the true terms of the sale.
Shortly after the sale of Charles Prescott Restoration, Inc., the purchaser learned the balance sheet had been based on fraudulent conduct by Donald Chill. Beginning as early as 2004, Chill began inflating estimates and invoices submitted to an insurance company, Mutual of Enumclaw. Chill padded bills from sub-contractors, or submitted forged secondary estimates that appeared to be from competitors. In just ten jobs scrutinized over five years, Chill over billed by an estimated $3.2 million. In March 2010, Chill was sentenced to four years in prison and $4.9 million in restitution for Mail Fraud, Bank Fraud and Money Laundering. The bank fraud count related to Chill’s fraudulent representations surrounding the sale of the business. Kraai’s guilty plea to the crime of False Statements arose from his participation in the sale of the business and the corresponding loan. BIVENS guilty plea today related to that same part of the transaction.
Under the terms of the plea agreement, in addition to facing up to five years in prison, BIVENS shares in a portion of the $1.7 million loss associated with the bank and SBA loan.
The case was investigated by the Small Business Administration Office of Inspector General (SBA-OIG) and the Internal Revenue Service Criminal Investigations (IRS-CI). The case was prosecuted by Assistant United States Attorney Kurt Hermanns.
For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.Langlie@USDOJ.Gov.