Delaware Real Estate Developer Sentenced To 21 Months For Bank Fraud and Environmental Violation
WILMINGTON, Del. - David C. Weiss, Acting United States Attorney for the District of Delaware, announced that Joseph L. Capano, age 75, of Middletown, Delaware, was sentenced today to 21 months of incarceration followed by 12 months of home confinement, after pleading guilty in March 2016 to one count of bank fraud and one count of knowingly violating the Clean Water Act. Capano was also ordered to pay restitution of $685,419.32 to Cecil Bank, and to pay a fine of $50,000.00 for the environmental violation.
According to the charging document and statements during the sentencing hearing, both charges relate to Capano’s conduct during construction of the Riverbend at Old New Castle development located off of State Route 9 in New Castle, Delaware (“Riverbend Development”). The Riverbend Development was funded in part by a $1.5 million commercial line of credit from Cecil Bank, headquartered in Elkton, Maryland. Capano submitted fraudulent draw requests in which he sought the release of loan funds from Cecil Bank, claiming that the money would be spent on the Riverbend Development. After Cecil Bank loaned the money to Capano, he then spent the proceeds on personal expenses or his other businesses rather than using the funds for the requested purposes. On one occasion, Capano used Cecil Bank’s money to pay for a $63,000 jewelry purchase. In total, Capano misused approximately $420,000 in loan proceeds.
Capano also sent a letter to Cecil Bank falsely claiming that nine homeowners were under contract for homes at the Riverbend Development, when in reality no such contracts existed. Cecil Bank continued to lend Capano money under the line of credit based on those false representations. Capano defaulted on the line of credit, leaving the bank with significant losses and forcing the bank to foreclose on the Riverbend Development.
In addition to his misrepresentations regarding bank loan funds, the Information states that Capano knowingly filled wetlands at the Riverbend Development without a permit. Capano directed employees and contractors of his company to expand the entrance road to the development, even though the entrance road contained wetlands. Capano also directed contractors and employees to place a water main pipe through the entrance road wetlands, even after the Army Corps of Engineers instructed Capano to stop performing construction in the wetlands and issued Capano a Cease and Desist letter to that effect. Capano then lied to the Army Corps of Engineers, verbally and in a sworn affidavit, about the timing of that illegal work in the wetlands.
“During his work on the Riverbend Development project Joseph Capano lied to the Army Corps of Engineers, Cecil Bank and the few individuals who bought homes at Riverbend. After state and federal authorities began investigating, Capano continued to mislead state environmental officials, the bankruptcy court and the United States Probation Office. This was the defendant’s modus operandi. He came to court today with the understanding that the rules don't apply to him—that his actions have no consequences. After receiving a 21-month prison sentence, he left with a different understanding.” said Acting U.S. Attorney Weiss.
“Wetlands are essential for fish and wildlife habitat, mitigating the impacts of floods and maintaining water quality, so it’s imperative they are protected,” said Ted Stanich, Acting Director of the United States Environmental Protection Agency’s Criminal Investigation Division. “EPA and its law enforcement partners are committed to protecting these invaluable natural assets as well as the communities around them, and to do so, we will continue holding violators fully accountable.”
This case is the result of a joint investigation conducted by the Federal Bureau of Investigation, the Office of the Special Inspector General for the Troubled Asset Relief Program, and the United States Environmental Protection Agency, Criminal Investigation Division Philadelphia Area Office. The prosecution was handled by Assistant United States Attorney Jennifer K. Welsh, District of Delaware.