Pinnacle Housing Group’s Affiliate Charged in $4 Million Government Theft Involving Low-Income Housing Developments
Randy A. Hummel, Executive Assistant United States Attorney, U.S. Attorney’s Office for the Southern District of Florida; Nadine Gurley, Special Agent in Charge, U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); and Kelly R. Jackson, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), announced the filing of charges against DAXC, LLC (“DAXC”), an affiliated entity of Pinnacle Housing Group, Inc. (“PHG”), a low-income housing developer operating in Miami, Florida.
DAXC is charged by Criminal Information with theft of government money, in violation of Title 18, United States Code, Section 641. According to allegations contained in the Information, and statements made in Court, the DAXC theft scheme involved low-income housing developments built by PHG in Florida, specifically Vista Mar, an apartment complex in Miami; Pinnacle at Avery Glenn, an apartment complex in Sunrise; Orchid Grove, an apartment complex in Homestead; and Cypress Cove, an apartment complex in Winter Haven.
According to the Criminal Information, Florida Housing Finance Corporation (“FHFC”) issued federal tax credits and grant monies to developers for the construction of low-income housing in Florida. To obtain these federal funds, FHFC required developers to submit proposed development costs, including a construction contract signed by the developer and contractor.
2009 to 2011, PHG’s affiliated contractor solicited bids for concrete shell work for the housing developments. The affiliated contractor received a final bid for concrete shell work from Shell Subcontractor A. Instead of signing contracts with Shell Subcontractor A at its final bid price, the affiliated contractor signed contracts for concrete shell work with their affiliated subcontractor, DAXC, at prices inflated from $200,000 to $1.5 million higher than Shell Subcontractor A’s price. DAXC did not have the personnel or equipment to complete concrete shell work and in fact did not complete any shell work on these projects. Rather, DAXC subcontracted with Shell Subcontractor A to complete the concrete shell work at Shell Subcontractor A’s final bid price.
PHG then submitted the inflated construction contracts to FHFC’s representatives for the receipt of federal tax credits and grant monies for the housing developments. As a result of DAXC’s fraudulent inflation scheme, FHFC allocated approximately $4.2 million in excess federal funds. On or about November 8, 2011, among other wire transfers, the five principals of the affiliated contractor received payments totaling approximately $2.5 million from this contract inflation scheme from DAXC’s bank account.
The United States and DAXC entered into a deferred prosecution agreement filed today pursuant to which DAXC has paid $5.2 million in forfeiture and fines to the United States.
This is the third in a series of prosecutions by the United States Attorney’s Office for the Southern District of Florida involving theft of government funds relating to low-income housing developments. The Office previously charged the principals of Carlisle Development Group, Inc. for a $25 million contract inflation scheme as well as the principals of Biscayne Housing Group, Inc. for a $10 million contract inflation scheme.
A Criminal Information merely contains allegations and every defendant is presumed innocent unless and until proven guilty in a court of law.
Hummel commended the investigative efforts of HUD-OIG and IRS-CI. This case is being prosecuted by Assistant U.S. Attorneys Michael R. Sherwin, Michael N. Berger, and Evelyn B. Sheehan. As a result of a recusal by Acting U.S. Attorney Benjamin G. Greenberg, Hummel is the Attorney for the Government.
Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.