Agents raided the Shockoe Slip offices of embattled developer Justin French yesterday.
Around 11 a.m., authorities took multiple computers from the Cary Street office and put them into an SUV. By the afternoon, Feds had about 20 boxes stacked up inside the office near the door. One had an evidence sticker on it with “bank records” written on the label. By 5:30 p.m., all agents appeared to have cleared the scene.
The FBI would not say what they were investigating but said the search warrant was sealed. However, two sources close to the investigation said French might have violated the rules that allow developers to obtain historic tax credits from the state and federal governments.
French used tax credits to help fund more than a dozen historic renovations across Richmond, including converting former factories into apartments.
A source in the construction industry who spoke on condition of anonymity said the Virginia Department of Historic Resources, which oversees the state historic tax credit program, has been investigating the accuracy of French’s applications since fall 2009. DHR awards credits as a percentage of the amount spent rehabilitating buildings, and the source said DHR had reason to believe that French was inflating his reported costs to claim bigger credits.
DHR director Kathleen Kilpatrick was out of the office yesterday, as was the official who oversees the preservation program.
An IRS source confirmed that his agency was investigating potential fraud related to historic tax credits.
French was not at the office at the time of the raid. The FBI would not say whether French was being charged with any crimes or whether he was in custody or had been brought in for questioning.
Eyewitnesses told Richmond BizSense that federal agents wearing bulletproof vests entered the building a few minutes after a female employee opened the office about 8 a.m. The woman was allowed to leave soon thereafter.
The raid likely caught French by surprise. An RBS reporter met with French on Wednesday afternoon to discuss his overall business situation. He was calm and relaxed and gave no indication that anything was amiss. Since then, RBS has been unable to contact him.
This is not French’s first brush with federal authorities. In 1994, while a law student at George Mason University, French was arrested by undercover ATF agents after exchanging 25 semiautomatic pistols and shotguns in return for $2,550 and a pound of cocaine. French served about two years in federal prison, according to federal records.
French made waves recently when he told RBS about his plan to stick it to one of his investors, Markel Corp., by intentionally letting certain properties fall into foreclosure. Read more about the feud here.
The dispute took a highly unusual — you might say schoolyard — turn when the phrase “Markel Blows” was painted on the side of one of the historic properties in question. Read more and see photos of the graffiti here.
French’s strategic default plan met its first snag when Union First Market Bank, a lender on some of the projects, took French to court to have a judge appoint a receiver to collect rent on the properties. Read more about that case here.
RBS also discovered that bills on many of French’s projects have been piling up, forcing some contractors to file more than $500,000 in liens. Read more about that angle here.
Other local banks have lent French millions for his projects. He’s also involved in a handful of other businesses in town, including restaurants and a shop that sells reclaimed lumber.
Update: RBS reached French this morning and asked to hear his side of the story. You can read what he said here.
Stay with RBS for the latest in this developing story.
Michael Schwartz and Aaron Kremer contributed to this report.