A revealing email spotlighted in a recent federal criminal complaint charging a Miami developer with stealing government money for affordable housing makes a strong case that prosecutors are aiming at bigger targets.
The May 2009 email shows how the alleged plot was hatched between two of the most prominent development companies in the business.
At first, the email shows Miami developer Michael Cox, president of Biscayne Housing Group, expressing anger that his partners in an Overtown apartment project would threaten him for refusing to inflate the construction cost by $2.8 million so they could all get richer off higher government subsidies.
Cox charged in the email that the venture’s partners “obviously falsified construction contracts” for the affordable housing project called Labre Place so they could qualify for more government funds.
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“We are angry and disappointed that the only response we have received about this issue is first an offer ... to ‘share the excess,’ and then, when we refused, a threat that if we keep raising this issue, [your company] will implicate BHG,” Cox wrote to the partners, identified only as unnamed co-conspirators in the May 30, 2009, email. Those unnamed suspects, according to law enforcement sources, are Matthew Greer and Lloyd Boggio, principals of the Carlisle Development Group — at the time, Florida’s largest developer of affordable housing.
“Implicate us in what?” wrote Cox, who copied Biscayne Housing’s co-founder, Gonzalo DeRamon, on the email. “Please, go ahead.”
But instead of sticking to their initial response, Cox and DeRamon would eventually go along with their partners’ alleged ploy to profit off the poor, according to federal prosecutors.
The potentially damaging email was disclosed last month when DeRamon was arrested on charges of conspiring with Cox, Greer, Boggio and others to bilk millions of dollars from a U.S. government program for affordable housing — through an alleged kickback scheme with construction companies that built their Miami-Dade projects.
The scheme, federal prosecutors say, was designed to rip off the very poor people that the for-profit developers were supposed to be helping in exchange for receiving affordable housing subsidies from the U.S. government.
A leading Miami homeless advocate said that, if the allegations prove true, he was deeply disturbed by the lack of accountability and the theft of millions from housing projects designed to help the homeless, disabled and poor.
Shed Boren, chief executive officer of Camillus House — a nonprofit organization that provides emergency shelter and social services for Miami-Dade County’s homeless — condemned the alleged misconduct because the developers and contractors apparently exploited the poor to enrich themselves.
“These people are incredibly broken,” Boren said. “It’s a very sad state of affairs when we’ve taken from the least fortunate.”
Camillus House was directly involved in the 90-unit Labre Place project, 350 NW Fourth St., where 50 apartments are allocated for former homeless people. The organization supplied the land for the nine-story apartment building near Lummus Park, and, since it opened in 2012, has provided social services for the tenants.
Boren said that with Camillus House’s limited resources, the nearly $2 million that was allegedly skimmed by the developers, BHG and Carlisle, could have been used to build another 20 apartments for low-income people at Labre Place or to offer emergency shelter to 200 homeless people for a year.
“We could have reduced the county’s homeless population by 20 percent or sheltered downtown Miami’s homeless population for more than 1-1/2 years with that money,” Boren said. He noted that the number of “chronic” homeless people living for more than one year on Miami-Dade’s streets is just over 1,000 and in downtown Miami is about 120.
KICKBACKS, SHELL COMPANIES
In the criminal complaint filed in late June, DeRamon was accused of receiving a share of $7.2 million in kickbacks funneled through a “shell” company by two contractors that built a half-dozen low-income projects for Biscayne Housing, including Labre Place in Overtown.
The other three developers — Cox, Greer and Boggio — are expected to be charged with the same conspiracy offense later this summer, according to law enforcement sources. Cox’s defense attorney said his client is cooperating with federal prosecutors in an investigation that has focused on the main targets, Greer and Boggio, for more than three years.
“Michael clearly believed that what they were doing was wrong, but he always hoped they would do things the right way,” said his defense lawyer, Brett Tolman, a former U.S. attorney in Utah. “However, he did not react early on to the warning signs as he should have.”
Prosecutors say that, ultimately, Cox and DeRamon agreed to join Greer and Boggio in their alleged scheme to inflate the construction cost of the Overtown project by $1.9 million — less than the originally proposed amount — as well as other affordable housing deals subsidized by the federal government.
Later in 2009, BHG's co-founders obtained control of the Labre Place joint partnership and “replicated the same ... inflation scheme that [Carlisle] previously employed” to skim fatter profits off other affordable housing deals, according to the criminal complaint filed against DeRamon last month.
Greer and Boggio are expected to be charged with illegally pocketing profits from other joint venture projects, according to sources familiar with the probe. Among the suspected projects: Villa Patricia, three towers with 339 apartments for low-income elderly residents, at Northeast Second Avenue and 79th Street in Little Haiti.
Defense attorneys Hy Shapiro and Roy Black declined to comment on behalf of their client, Greer. Attorney Scott Srebnick, representing Boggio, also declined. DeRamon’s lawyer, Jose Quinon, did not want to comment, either.
In late June, prosecutors charged DeRamon, the BHG co-founder, with conspiracy to defraud the U.S. government, theft of government funds, money laundering and obstruction of justice. They also charged two South Florida contractors, Arturo Hevia and Rene Sierra, with helping Biscayne Housing’s co-founders line their pockets with kickbacks. The contractors, who are cooperating with authorities, maintained “tick sheets,” reflecting the actual costs of projects, the inflated costs and kickback amounts.
A WIDENING PROBE
The arrests were the opening law-enforcement salvos in a complex probe into South Florida's preeminent affordable housing development company, Carlisle, which partnered with Biscayne Housing to build several inner-city apartment complexes between 2006 and 2010.
First disclosed by the Miami Herald in May 2013, Carlisle has been under federal investigation amid allegations that the affordable housing developer defrauded a U.S. tax-credit program that subsidizes low-income rental projects nationwide. FBI, IRS and the U.S. Department of Housing and Urban Development's Office of the Inspector General have led the investigation.
The grand jury has focused not only on Greer, Carlisle's CEO and the scion of a prominent South Florida family, but also on his predecessor at Carlisle, Boggio. Greer's father is Bruce Greer, a well-known lawyer who founded Carlisle with Boggio in 1997. Greer's mother, Evelyn, is a former Pinecrest mayor and Miami-Dade School Board member.
Another suspect in the cross-hairs: general contractor Michael Runyan, whose Fort Lauderdale company, BJ&K Construction Services, built affordable housing with Carlisle.
His family firm, BJ&K, is suspected of completing several apartment projects below the inflated costs that formed the basis for the tax credits obtained by Carlisle from a state agency, according to sources familiar with the federal probe. Carlisle and the contractor then split the resulting profits, the sources said.
In DeRamon’s criminal complaint, the BHG co-founder is accused of conspiring with Cox, the two contractors and Carlisle’s two principals to inflate the construction prices for their joint projects. The state agency then gave out over $10 million in excess federal grants and tax credits, which were sold to investors to help fund construction.
But the developers built the low-income rental projects in Overtown, Little Haiti and other poor areas at their actual costs. The extra government funds were illegally funneled to a sham construction company, SSHH Construction, according to prosecutors.
From there, they say millions in “kickback payments” were routed from the bogus company back to both Biscayne Housing and Carlisle for at least two projects: Labre Place in Overtown and Village Carver II, a 90-unit complex in Little Haiti for low-income elderly residents.
In the criminal complaint, prosecutors Michael Sherwin and Michael Berger accused the developers of sheer greed, highlighting that they were already guaranteed millions of dollars in profits for simply completing the affordable housing projects at their actual costs.
They said that “BHG received in excess of $1.3 million in developers’ fees that it should not have received as a result of the inflated contracts.”