The low-income housing developer who bought and the contractor who rehabilitated the two Candleridge apartment complexes in Perry have been charged with fraud and conspiracy in creating a fake pass-through company to inflate construction costs and defraud the U.S. Department of Agriculture (USDA) of $677,000.
Jeffrey Voorhees, 73, owner of Candleridge VII LLC, and contractor Brian L. Pittman, 39, are charged with five counts of wire fraud affecting a financial institution, according to an indictment filed Feb. 20, 2018, by U.S. Attorney Mark Krickbaum in U.S. District Court for the Southern District of Iowa.
The investigation leading to the indictment was conducted by the USDA Office of Inspector General.
The Candleridge development at 912 18th St. in Perry was built in 1991 and consists of six buildings with a total of 23 apartment units. The Candleridge property at 2620 McKinley Street, built in 1994, contains 24 apartment units.
Voorhees formed Candleridge VII LLC in 2012 to buy both Perry properties as well as five other Candleridge properties, one in Bondurant, one in Newton, one in Runnels and two in Waukee. Together the properties comprise 154 apartment units.
The purchase was made using a direct loan from the USDA, which also provided a guarantee for a private bank loan for the rehabilitation.
According to the court documents, Voorhees allegedly conspired with Pittman, the general contractor on the development, to artificially inflate construction costs and create a pass-through company, Rural Construction Services (RCS), which they used to obtain approximately $359,000 in artificially inflated loan proceeds.
Voorhees is also accused of artificially inflating other costs in the loan to obtain an additional approximately $318,000 in loan proceeds.
The loan proceeds were supposed to be repaid using USDA-subsidized tenant rents. The purpose of these USDA loan programs is to support the development of rental units for low- and moderate-income individuals and families in rural areas and towns.
As such, the USDA has rules for how the loan proceeds can be spent, and also imposes requirements on the borrowers to disclose any identity of interest relationships.
The indictment alleges Voorhees and Pittman obtained the inflated loan proceeds between November 2012 and January 2014 “by means of materially false and fraudulent representations, promises and concealment of material facts.”
Voorhees knew the strict USDA regulations for the use of loans but chose not to follow them in order to unlawfully profit from the USDA rural development program, the indictment claims. Voorhees and Pittman are each charged with five counts of wire fraud affecting a financial institution. Each charge carries a sentence of up to 30 years in prison.
Voorhees is also charged with three felony counts related to moving the profits of RCS into bank accounts in the name of his wife, Arlene Voorhees. Each count carries a 10-year prison sentence.
Voorhees and Pittman pleaded not guilty to all charges in a March 12 hearing in Des Moines before U.S. Chief Magistrate Judge Helen C. Adams.
*A criminal charge is merely an accusation, and the defendant is presumed innocent until and unless proven guilty.
