Corning Business Owner Sentenced On Fraud Charges
CONTACT: Barbara Burns
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ROCHESTER, N.Y. - Acting U.S. Attorney James P. Kennedy, Jr. announced today that the former owner and CEO of Cornerstone Homes, David Fleet, 52, of Corning, NY, who was convicted of mail fraud, was sentenced to three years probation and 100 hours of community service by U.S. District Judge Elizabeth A. Wolford. The defendant was also ordered to pay approximately $88,000 in restitution to his victims.
Assistant U.S. Attorney John J. Field, who handled the case, stated that Fleet owned a real estate business from 1997 to 2014 that ultimately came to be known as Cornerstone Homes. Cornerstone’s business involved the purchase, renovation and resale or renting of distressed homes.
In order to acquire the distressed homes, Fleet sold debentures to private investors promising annual rates of return of 8%-10%. Fleet thereafter caused Cornerstone to borrow approximately $25,000,000 from various banks, and to pledge the houses that had been acquired with private investor money as security for the bank loans.
By March 2010, Fleet knew that Cornerstone’s operating income was insufficient to pay its debt service to the banks and the private investors. The defendant also lost more than $2,000,000 in risky options trades. However, Fleet continued to solicit additional private investments without disclosing Cornerstone’s true financial picture, including the fact that he had more than $2,000,000 of Cornerstone’s capital. In March 2010, Fleet raised approximately $88,000 from approximately 13 investors based upon statements and representations that were materially misleading.
The sentencing is the result of an investigation by Inspectors of the United States Postal Inspection Service, acting under the direction of Inspector-In-Charge, Boston Division, Shelly Binkowski, the Federal Bureau of Investigation, under the direction of Special Agent in Charge Adam S. Cohen, and the Internal Revenue Service, Criminal Investigations, under the direction of Acting Special Agent in Charge Kathy A. Enstrom, New York Field Office.