PRESS RELEASE
CONTACT: James K. Vines
United States Attorney
Robert J. Washko
Assistant U.S. Attorney
NASHVILLE BUSINESSMAN SENTENCED IN
FRAUDULENT DOWNTOWN HOTEL DEVELOPMENT SCHEME
Nashville, TN – February 4, 2004 - Jim Vines, United States Attorney for the Middle District of Tennessee, announced that Charles V. Covington was sentenced before U.S. District Judge Todd J. Campbell to serve 30 months in prison followed by three years of supervised release. Covington was also ordered to pay $600,000 in restitution to Investment Holdings, Inc. and $140,278 in back taxes to the IRS as a condition of his supervised release.
Covington was indicted on July 10, 2002, and charged with one count of mail fraud, two money laundering counts and one count of failing to file a tax return for 1997. Covington pled guilty on September 5, 2003, to mail fraud and failing to file federal income tax return. According to the indictment, from June 1997 until at least January 1998, Covington devised a scheme to defraud persons who believed that they were investing their funds in a hotel project in downtown Nashville using his corporation, OCVOC Investment Holdings, Inc. Covington instead used these funds for his personal living expenses. Covington contacted individuals and corporations to raise needed capital to obtain additional majority funding from other corporations, such as General Motors Acceptance Corporation (GMAC) and the Marriott International, Inc.
IRS Criminal Investigation Special Agent Michael K. McElroy testified during Covington's plea hearing in September that Covington entered into a written agreement with Investment Holdings, Inc., a Tennessee subsidiary corporation headed by Anthony Cebrun, which was formed by Medical Care Management Company, Inc. Medical Care Management Company, Inc., was a Tennessee corporation formed by Cebrun to manage the business affairs of Access Health Systems, Inc., which provided medical care for TennCare recipients under the name of Access Med Plus. Covington agreed to transfer 50,000 shares of OCVOC Investment Holdings, Inc., in exchange for $600,000, which was to be placed in an escrow account until the finalization of the hotel project. According to Special Agent McElroy, Covington instead deposited the $600,000 check into his OCVOC corporate bank account, and immediately transferred the funds from his corporate bank account into his personal bank account.
According to court testimony, Covington used investor funds to put a $200,000 down payment on a $595,200 home located at 725 Princeton Hills Drive, Brentwood, Tennessee. He also used the funds to upgrade construction at the new house, purchase jewelry, furniture, a chandelier, and rugs for the new home, and paid private school tuition for his step-daughter.
In addition, Covington failed to file federal income tax returns for 1995, 1996 and 1997, even though he received substantial income requiring him to file a tax return each year. The government estimates the tax loss for all three years to be $140,278.
This investigation was conducted by U.S. Postal Inspection Service and IRS Criminal Investigation. Assistant U.S. Attorney Robert Washko prosecuted the case for the government.