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Tuesday, September 27, 2005 Channing Phillips (202) 514-6933
 
  
President of Douglas Development Corporation and two high level employees
indicted by federal grand jury on conspiracy, bribery, fraud and tax evasion charges
 
Washington, D.C. - United States Attorney Kenneth L. Wainstein, Michael A. Mason, Assistant Director in Charge of the FBI's Washington Field Office, Inspector General for the District of Columbia Charles Willoughby, and Rick A. Raven, Special Agent in Charge, Internal Revenue Service, Criminal Investigation, announced that today a federal grand jury sitting in the District of Columbia returned an eight-count indictment against Douglas Jemal, 62, President of Douglas Development Corporation; his son, Norman Jemal, 36, a Douglas Development executive; and Blake Esherick, 42, Director of Leasing at Douglas Development. The indictment charges the three individuals with engaging in a conspiracy between January 2001 and April 2004 to pay bribes to a District of Columbia government official, Michael Lorusso, in order to influence him in performing official acts for Douglas Development in connection with various real estate matters.

Douglas Jemal is also charged with compensating Blake Esherick for his services by providing Esherick substantial income that Esherick failed to declare on his Federal income tax returns.

Finally, all three men are alleged to have engaged in a fraudulent scheme that included sending a false document to a lender in order to obtain funds from a construction loan "draw" for Douglas Jemal's and Norman Jemal's personal use and benefit.

The statutory penalty for bribery, upon conviction, is 15 years in prison. The remaining violations each carry up to five years in prison, upon conviction. An arraignment date has not yet been set by the Court.

Today's indictment is the latest action in the ongoing joint FBI, D.C. Inspector General's Office, Internal Revenue Service and United States Attorney's Office investigation into the activities of Michael Lorusso, the former Deputy Director of the District of Columbia's Office of Property Management, who pled guilty to bribery conspiracy charges in November 2004.

United States Attorney Wainstein stated, "The services of our public employees are not for sale. This prosecution demonstrates that we will bring the full force of the law against those government employees and contractors who corruptly pursue private gain at the expense of the public good."

Rick A. Raven, Special Agent in Charge, Internal Revenue Service, Criminal Investigation, stated "the prosecution of individuals who intentionally conceal income and evade taxes is a vital element in maintaining public confidence in our tax system. We should not expect the honest taxpayer to foot the bill for those who hide income from the IRS."

Bribery Conspiracy, Fraud and Honest Services Fraud

According to the indictment, Lorusso used his official position to benefit, and attempt to benefit, Douglas Jemal and Douglas Development by arranging for the leasing of properties from Douglas Development for the District of Columbia. This included:

Leasing property from Douglas Development for a vehicle impoundment lot at a cost of approximately $998,000 per year;
Attempting to purchase property from Douglas Development and companies related to Douglas Development for approximately $12.5 million;

Signing numerous leases and lease-related documents for a building owned by Douglas Development, resulting in commitments by the D.C. government to pay rent to Douglas Development of more than $100 million over the ten-year term of the leases; and

Having the D.C. government make numerous payments to Douglas Development in response to a variety of invoices, including invoices that were fraudulent, excessive, duplicate, irregular and otherwise unjustified. Some of these payments also are the basis for charges of Fraud in the First Degree, in violation of the D.C. Code, against Blake Esherick.

In return for this favorable treatment, as charged in the indictment, Douglas Jemal, Norman Jemal and Blake Esherick gave Lorusso items of value, including:

Cash bribes;

A Rolex wrist watch;

Repairs for Lorusso's personal vehicle at a Virginia auto repair shop;

A hotel room at the Bellagio Hotel in Las Vegas, Nevada, in May of 2001;

Airfare and hotel accommodations for another trip to Las Vegas in May 2002;

The offer of a trip to Florida and purchase of airline tickets for that trip; and

Other miscellaneous bribes, including expensive cowboy boots, limousine service for local transportation in the District of Columbia area,
and private box tickets for Washington Wizards and Washington Capitals games at the MCI Center.

Tax Evasion Conspiracy

Additionally, the indictment alleges that Douglas Jemal gave Esherick compensation that would not be reported to the Internal Revenue Service, in a manner that would be difficult to detect and otherwise leave little or no record in the books of Douglas Development and, if scrutinized, could be characterized as reflecting loans, innocent accounting decisions, or accounting mistakes of others. Jemal did so in order to compensate Esherick for his services, including Esherick's participation in the illegal bribery scheme.

This compensation made by Douglas Development and Douglas Jemal, which Esherick did not report on his taxes, included:

Payments made directly to Esherick's ex-wife for the purposes of paying his personal financial obligations to her;

Payments made directly to Esherick, apart from the typical Douglas Development payroll checks. On occasion these payments were noted on the books and records of Douglas Development as "loans" or "advances," but without any written loan agreements between Douglas Development and Esherick, repayments of principal, or interest charged to Esherick in the books of Douglas Development or paid by Esherick to Douglas Develoment;

Payments made for Esherick's personal vehicles;

Providing Esherick with rent-free accomodations of a house in Bethesda and paying for utilities and related repairs and expenses at this house;

Providing Esherick with rent-free accomodations of an $825,000 house in the District of Columbia in June of 2003, and making payments on the mortgage loan and incurring expenses for renovations and repairs for this house; and

Underreporting Esherick's true gross income in calendar years 2001, 2002 and 2003 to the Internal Revenue Service.

Fraud in a Mortgage Disbursement

Finally, Douglas Jemal, Norman Jemal and Blake Esherick are charged with engaging in a scheme to defraud a mortgage company, Mortgage Capital, Inc., by falsifying documents submitted to the mortgage company which resulted in the fraudulent release of $430,000 in loan proceeds directly to Douglas Jemal for his and Norman Jemal's personal use and benefit, rather than to a third party vendor as required by the mortgage.

In announcing today's indictment, United States Attorney Wainstein, FBI Assistant Director Mason, Inspector General Willoughby and IRS Special Agent in Charge Raven commended City Councilmember Jim Graham for uncovering evidence of possible favoritism by Lorusso toward certain contractors during City Council hearings held by the Councilmember in 2003. They also thanked the city government for the assistance and cooperation it provided throughout this investigation. Lastly, they praised the work of FBI Special Agents David McClelland and Thomas Chadwick; District of Columbia Inspector General Agent Larry Carr; Special Agents of the Internal Revenue Service, Criminal Investigation; legal assistant Lisa Robinson, and Assistant United States Attorney Mark H. Dubester, who will be prosecuting this matter.

An indictment is merely a formal charge that a defendant has committed a violation of criminal laws. Every defendant is presumed innocent until and unless found guilty.