Two prominent Miami affordable-housing developers knowingly inflated the cost of construction projects in a complicated scheme that netted $7.2 million in kickbacks generated from grants and other government-generated funds, authorities said on Thursday.
Federal prosecutors charged Gonzalo DeRamon, co-founder of the Biscayne Housing Group, with a handful of white collar crimes. Michael Cox, another Biscayne Housing executive, is also expected to be charged and has been cooperating with authorities. In addition, two contractors, Arturo Hevia and Rene Sierra, also were charged with helping Biscayne Housing line its pockets.
The arrests are the opening law-enforcement salvos in a wide-ranging probe into South Florida’s preeminent affordable housing development company, Carlisle Development Group, which partnered with Biscayne Housing to build six inner-city apartment complexes between 2006 and 2010.
First disclosed by the Miami Herald in May of 2013, Carlisle has been under federal investigation amid allegations that the affordable-housing developer — now the biggest in Florida — may have defrauded a U.S. tax-credit program that subsidizes low-income rental projects nationwide.
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In the coming weeks, according to law enforcement sources, prosecutors also are expected to charge Matthew Greer, Carlisle’s CEO and the scion of a prominent South Florida family, and Carlisle's co-founder, Lloyd Boggio. A federal grand jury is also looking at general contractor Michael Runyan, whose Fort Lauderdale company, BJ&K Construction Services, built some residential projects with Carlisle.
Greer's father is Bruce Greer, a prominent lawyer who founded Carlisle with Boggio more than a decade ago. Greer's mother Evelyn is a former Pinecrest mayor and Miami-Dade school board member.
DeRamon, 51, of Biscayne Housing, is charged with conspiracy to defraud the U.S. government, theft of government funds, money laundering and obstruction of justice. His attorney did not return a call seeking comment.
Cox’s attorney, Brett Tolman, said on Thursday: “Michael has been cooperating for some time and intends to continue to fully assist the government as they investigate these and other issues.”
Hevia and Sierra, the contractors, have also been cooperating with federal investigators. The investigation was spearheaded by the FBI, IRS and the U.S. Department of Housing and Urban Development’s Office of the Inspector General.
According to prosecutors, DeRamon and Cox and the contractors knowingly submitted inflated construction prices for the projects. The government then gave out over $10 million in excess grants and federal tax credits, which were sold to investors to help fund the projects.
The apartment buildings in Homestead, Overtown and Little Haiti were built but at their actual costs. The extra money was then funneled to a sham construction company, SSHH Construction. From there, prosecutors say millions in “kickback payments” were routed from the bogus company back to Biscayne Housing and Carlisle.
One example: a 72-unit apartment in Opa-locka named for renowned activist Georgia Ayers. In 2010, Hevia estimated it would cost $6.64 million to build the project – but he and DeRamon sent a contract for $7.54 million.
The Florida Housing Finance Corporation, which administered the federal program, issued over $1 million in “excess tax credits” in 2011. For the deal, Hevia then cut a check to SSHH for nearly $150,000 “for the benefit” of DeRamon and Cox, according to a complaint.
DeRamon is also accused of obstructing a federal investigation, according to criminal complaint filed by prosecutors Michael Sherwin and Michael Berger.
The feds allege that DeRamon – after reading a May 2013 Miami Herald article on the scheme – instructed contractor Sierra, 57, to destroy certain documents. DeRamon also met with Hevia, 63, at a Colombian restaurant in Doral in an attempt to get him to destroy incriminating documents.
Miami Herald staff writer Jay Weaver contributed to this report.