Cleveland real estate developer indicted for embezzlement of project funds
U.S. Attorney Justin Herdman announced today that a federal grand jury sitting in Toledo has returned a nine-count indictment charging Arthur Fayne, age 58, of Aurora, with wire fraud. The defendant is accused of orchestrating and executing two schemes to defraud separate businesses and embezzling the funds for personal use, including gambling at a casino, which resulted in the loss of over $1 million.
According to the indictment, the defendant was the owner of Business Development Concepts (BDC), an organization that provided training and business consultation services to start-ups and existing companies. In addition, BDC managed construction projects and the purchase of equipment, supplies and inventory.
The defendant also served as Vice President and a board member on a for-profit subsidiary (Subsidiary 1) of a nonprofit corporation (Nonprofit 1) that operated as a federally qualified health center network of community health centers and provided primary care medical services for adults and children in the Cleveland, Ohio area. In this capacity, the defendant had the authority to enter into contracts on behalf of Nonprofit 1.
In June of 2016, a construction management and general contracting company headquartered in Cleveland (Company 1) entered into a contract with Nonprofit 1 to serve as the construction manager and general contractor on a project to redevelop a vacant building in the city of Cleveland into a grocery store and community center with health care offices.
The defendant executed this contract on behalf of Nonprofit 1 and, under the terms of the contract, BDC and Subsidiary l would serve as Nonprofit l 's authorized representatives. In addition, Subsidiary 1 and Nonprofit 1 were to issue payments to BDC, which the defendant was to disburse to Company 1.
The indictment states that from December of 2016 through March of 2018, the defendant caused Nonprofit 1 and Subsidiary 1 to pay $2,629,740.38 to BDC to be disbursed to Company 1 as compensation for work on the project.
It is alleged that the defendant distributed only $1,870,634.46 to Company 1. Instead of distributing the remaining $759,105.92 to Company 1, the defendant is accused of diverting these funds to BDC for his personal use, which included gambling at a casino. To further the scheme, the defendant allegedly caused to be created and submitted falsified invoices to Subsidiary l and Nonprofit 1 for money owed to Company 1.
The indictment states that from 2016 to 2018, Nonprofit 1 separately made payments to BDC for services and expenses in overseeing the project and others. The defendant is accused of accessing some funds from BDC at a casino and losing approximately $1 million on separate occasions.
Additionally, the indictment states that the defendant devised a second scheme to defraud a subcontractor on the redevelopment project. On or about June 28, 2018, the defendant caused a subcontractor on the project to make a $125,923.86 wire transfer to a bank account owned by the defendant's wife. These funds were allegedly used for personal use, which included gambling at a casino.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
If convicted, the defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense, and the characteristics of the violation.
In all cases, the sentence will not exceed the statutory maximum, and in most cases, it will be less than the maximum.
This case was investigated by the Cleveland Division of the FBI. The U.S. Attorney’s Office for the Northern District of Ohio would like to acknowledge and thank the Cuyahoga County Prosecutor’s Office for its cooperation with this matter. This case is being prosecuted by Assistant U.S. Attorney Brian McDonough.