Feds raid French’s office, developer goes off the radar

A local real estate developer already feuding with banks and investors has two new groups to worry about: the FBI and the IRS.

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.

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33 Comments on "Feds raid French’s office, developer goes off the radar"

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jah
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Finally!!!

Andrew
Guest

He had to of know he wasn’t just going to get by with the crap he was pulling.

Bruce Hobart
Guest

Welcome to the major leagues.

Daniel
Guest

Good. Riddance. Sorry to see it had to elevate to this level in order for Mr. French to stop screwing over his business partners, but this is one instance where I can say I’m happy with the way my tax dollars are being spent.

Ed Gooding
Guest

Let’s make that bare knuckles to a nuclear war…………..

This guy is trying to hit a 100 mph fast ball with a whiffle ball bat……….with predictable results.

Ted
Guest
People like this are always blaming everyone else for their circumstances. Narcissism eventually turns on the person it inhabits. Look at his background. Why would lenders lend to a guy who has been to federal prision? People like this get everyone around them to drink their cool-aid and some investors did, until now. Hopefully the outcome won’t be detrimental for others — only for the mysterious Mr. French. Also, it is interesting how people like him use the guise of community development and charity to make a mockery of all those that surround him. May he RIP in Federal Prison.
Ron
Guest

I do not know if Mr. French is quilty or innocent. I do know that in this country we are innocent until proven guilty. We need to remember that before we make judgements. It is so easy for us to forget this.

Andre'
Guest

I guess that’s why he moved most of his files weeks ago from the downtown office. The banks and other lenders are just as culpable, making loans well aboved the value of these properties.
Greed and corruption define urban renewal in this town.

commentator
Guest

Actually, Ron, only the judge and jury have to abide by the presumption of innocence until proven otherwise. The rest of can express whatever opinions we hold.

Tim
Guest

So Richmond…Another Clyde Pitchford.. Nothing new.. Same old money for nothing scheme.

Investor
Guest

The folks at Markel seemed to drink a lot of his kool aid, and now, unfortunately for them, they’re paying for it financially and in reputation.

Why they would do business with a convicted felon is beyond me.

anonymous
Guest

It will be interesting to compare to Salomonsky

Daniel
Guest

Investor, my guess is he lied about it. Looks like he lies about everything else.

Irony
Guest

I assume charges will be next. Fraud..maybe? Is selling the tax credits illegal or are there restrictions on how they were handled that got the attention of the IRS?

French B Lowes
Guest
Hi Irony, it is likely that the crime was in the way the tax credits were created vs. the selling of them. The way historic tax credits work is that you get a credit for every dollar of “qualified” expenses on the project. One guess would be that among other things, the Feds are looking into just how “qualified” the expenses were that were submitted by Mr. French. For example, if French submitted an expense from a non historic building as if it were spent on a historic building, and created a tax credit, he committed a crime. I join… Read more »
William Raleigh
Guest

What I don’t understand is how could these banks keep lending to this guy? According to Carol Hazard’s article, this guy was a convicted felon and he had filed for bankruptcy. Even after all of this, he got millions loaned to him? I certainly do not feel sorry for the banks on this if they were that stupid to lend to him.

dodo
Guest

Selling/syndicating the rehab tax credits is not illegal.

carmelita
Guest

Selling the rehab tax credits is legal.

On the sideline
Guest

You can move all the files and documents you want. That will get you conspiracy and obstruction charges.

Irony
Guest

@ French B Lowes – Thanks, that helps.

Some have mentioned that selling these tax credits is not illegal. If that’s the case then what has gotten the attention of investigators? Is it possible money has moved in the background that most are not aware of? I have to say this gets more interesting as the layers get peeled back.

Samuel Carwell
Guest
I’ve followed this story for a while. It seems that everyone wants to pile on Mr. french. He deserves all that he is getting I’m sure. There are also other players involved in this situation that seem to be flying under the radar. Remember Enron? Mr. French could not have executed this without the assistance of other people who undoubtedly knew what they were engaging in. Who signed off on the bank papers stating how far along these projects were, Who’s the architect who is signing off on these fraudulent documents? Who is assisting in this fraud? If we are… Read more »
Harold
Guest
Samuel, If you go to Justin’s Linkedin page, you can see who all the players are. He is part owner in architect firms, construction companies, demolition and solar companies (there are more federal and state tax breaks involved with solar installations, something I am sure the Feds are looking into as well). Most of those companies were profiled on this site, in past articles. There are a lot of people who had to knowingly help to perpetuate a fraud at this level. I am sure it will all come out, but by owning part of the companies that do the… Read more »
Kevin Anderson
Guest
He might have lied about the projects but there’s no way he could lie about the fact that he’s a convicted drug dealer/gun trafficker and has previously filed for bankruptcy–all of that is public record. I have to agree with one of the above posters in that I feel no sorrow for these banks and/or Markel. Mr. French would not have been able to take things this far without widespread cooperation. I have no doubt this will spill over to many of his business partners all of whom rightfully deserve what they will get. That’s what happens when you do… Read more »
Harold
Guest

Great article in the RTD about his architect being sued. There will be more people to follow. It took Justin, the architect, and a contractor to sign off on all of this stuff.

http://www2.timesdispatch.com/business/news/2010/aug/07/just07-ar-416712/

Samuel Carwell
Guest

Well it seems that the architect Todd Dykshorn is being sued as well. There’s an old saying, “if you want to dance, you have to pay the band.”. This isn’t the first time I’ve heard this guy’s name either. He’s supposed to be a Harvard grad as well. The arrogance is astounding.

Samuel Carwell
Guest
The other name that keeps coming up in my searches is City&guilds. This is the contractor that is associated with this whole thing. There is going to be more coming out about all of these guys shortly I’m sure. They are all working together and they all know exactly what they are involved in together. I agree with some of the other posts as far as the bank’s responsibilties in all of this. The banks see big profits on the horizon, so they are willing to take chances. When it all fails is when Joe and Mary common person has… Read more »
william raleigh
Guest

It’s interesting, this guy was on the board of directors for The Faison School in Richmond:
http://www.frenchcc.com/about-justin-french.html
Isn’t this the same organization that was started by the owners of Markel? This guy also belonged to Kinkloch and The Country Club of Virginia? It will be interesting to see all of the people involved in this local drama.

Informed
Guest

Samuel, you’re on the right track. Every one of these guys are in bed with one another. Search David Gamino’ s biz sense story, November 30 2009 on this very site and read between the lines. He says everything you need to know. These guys are going to be their own worst enemy when the s&@# hits the fan.

Johnny Gibson
Guest

The more the layers are pulled back, the more we learn just how manipulated this situation has been. The architect, Todd Dykshorn is being sued. He’s just as responsible as French. The contractor on these projects is David Gamino of City&Guilds, he’s on every one of these projects. I’m sure he is a little worried right now as well. I’m not accusing anyone of anything, but I’m also not a fool. I think that if you put the pieces together, you’ll see a pretty clear picture of what has been going on.

George
Guest

Who is the contractor? Cityspace Construction? They were mentioed in a recent article for owing a vendor and also in a lawsuit? Justin French was owner of Cityspace Solar along with Blue Crump, who has renamed the company to Urbangrid Solar.

Thomas Lawrence
Guest

What is the name of the company that sells recycled lumber?

Samuel Carwell
Guest

Thomas, The company that you are asking about is one of Justin’s sub companies. Re Store is a storefront in shockoe slip that offers reclaimed wood that comes from some of the projects. Mathew Appelgate is his partner in that business.

Samuel Carwell
Guest

Informed, you’re right, the article about Gamino is exactly the outline of what his intentions are. It’s amazing sometimes. If you listen to someone, they will tell you everything you need to know. Mr. Gamino represents himself as the next Justin French. I wonder if he regrets that article now. The one thing that all of these guys have in common; their huge egos.

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