The lender on two of Justin French’s troubled properties has filed suit against the projects’ architect for allegedly misrepresenting the progress of the rehabilitations.
Todd Dykshorn, principal of Architecture Design Office, is accused by the Bank of Hampton Roads of wrongful conduct concerning the apartment conversion projects at 1700 Summit Ave. and 3031 Norfolk St.
The bank is asking for a $15 million judgment and trail by jury.
Dykshorn declined to comment when reached at his office Monday morning.
Paul Driscoll, associate general counsel for the bank, also declined to comment on the case.
“We don’t have any comment beyond what’s in the pleadings,” Driscoll said.
The complaint was filed by Rick Matthews of Pender & Coward in Chesapeake, who also said he could not comment on the case at this time.
The bank hired Dykshorn in 2007, the suit says. (You can read the entire lawsuit here).
At the time, he was also the architect for both projects, and the bank paid him to perform monthly inspections on each property after French made draw requests. He was responsible for checking that the money was used to pay for work as it was being done, according to the lawsuit.
In 2007, French obtained a construction loan totaling $7.8 million for the renovation of 1700 Summit Ave. and a loan of $9.3 million for the renovation of 3031 Norfolk St.
Between December 2007 and May 2010, 33 draws were made on the Summit loan, totaling almost $6.3 million. During that time, 34 draws were made on the Norfolk loan, totaling $8.7 million.
According to the lawsuit, which was first reported by the Times-Dispatch, Dykshorn reported to the bank that construction was being completed on a regular schedule and each of his reports represented that construction had been completed to certain percentage based on the amount of money that had been paid out.
The lawsuit does not say what happened to the millions of dollars if they weren’t spent on the renovation.
In April, Dykshorn reported that the Summit property was more than 85 percent complete and that the Norfolk property was 90 percent complete.
Shortly thereafter, French stopped making payments on the loans, along with several others on properties he developed, as part of a feud with the tax credit investor on several projects, Richmond-based specialty insurer Markel Corp. (You can read more about that in a BizSense story here.)
When the bank inspected the properties, it discovered that the work on Summit had barely even started and that the Norfolk Street property was nowhere close to its stated level of completion.
Last month the bank hired KBS, a construction company with offices in Richmond, to inspect the properties. KBS said it would cost $9 million to complete the work on both projects.
The Summit project had the most left to be done. According to the lawsuit, KBS found that mechanical and plumbing plans had not been submitted to the city, electrical design was incomplete and much of the demolition still remained unfinished.
According to the lawsuit, several apartment units in the Summit property had been framed, but much of it would have to be removed to complete the needed plumbing work.
From the suit:
“The framing contains no utility infrastructure and appears to have been haphazardly installed for the purpose of making it appear substantial work was being performed, where it just had not.”
The lawsuit also alleges that Dykshorn either negligently or intentionally misrepresented the amount of work performed by Richmond-based contractor City & Guilds.
David Gammino, owner of City & Guilds, said he has been in communication with the bank over the past three months, detailing the use of construction funds received by his company.
“All construction funds were distributed by the bank directly to French. It was French’s responsibility to distribute those funds to all vendors and subcontractors,” Gammino said.
Gammino said that City & Guilds received only a fraction of the total funds the bank disbursed to French over the course of the project.
City & Guilds filed a mechanics’ lien on the Norfolk property in July totaling $154,000 for unpaid labor and materials on work performed, including drywall, windows, roofing, plumbing, electrical and carpentry.
Gammino said that in late 2009 his lawyer notified the title and insurance company that City & Guilds was withdrawing as general contractor.
French did not respond to a request for comment on the recent lawsuit.
In an RBS story last month, French said that the Norfolk property had gone over budget because the National Park Service rejected designs that were approved by the Department of Historic Resources. French need approval from both to receive tax credits, which were being purchased by Markel.
“We had to redesign the project, with related delays and cost overruns,” French said at the time. “We had to tear down parts and rebuild.”
Al Harris is a BizSense reporter. Please send news tips to [email protected]
This really doesn’t surprise me this guy and French have just been lining their pockets for the last few years like many other developers. They ride the high of the good times and get to greedy.
I hope Mr Dykshorn was paid more than 15 million for his services.
Begs the question what sway French held over all these people to get them to participate in such a massive fraud.
This sort of thing happens more often then people like to admit. You scratch mine I will scratch yours. I am willing to bet they had some other projects planned for something down the road. What surprises me more is that the bank never did any of its own inspections. They should of been sending a person not involved with the project every so often to check up on the progress. The only reason they did now is because of the trouble French is in and the fact he has default on the loans. It is still wrong but they… Read more »
It begs the question, how could someone as stupid as these two (and maybe others) to think they could get away with this be smart enough to bamboozle all these banks out of the millions that they did? If posters to this board, many of whom seem to be well-wired into the business community, knew that French was up to no good, why on earth didn’t it raise red flags with someone at the local banks when French came calling with his hand out? I realize its naive of me to ask these questions, but as an “outsider” who didn’t… Read more »
I have worked with Mr. Dykshorn in the past and still do. I have found his integrity and capabilities quite refreshing. I cannot speak specifically to all of the details of this project, but I am sure there are two sides to every story. I met a junior person from KBS while walking the site last month. He was very confused about the project design and layouts. I asked “have you actually talked to the Architect and or Contractor, City and Guilds? “ He said “no why bother”. I suspect that KBS was looking for another fat contract and the… Read more »
@ Larry Cluff – Since this appears to be a “he said/she said” problem maybe an outside architectural firm should be brought in. A group out of town with no ties to Richmond and would only investigate where the projects stand at this point.
@irony — I don’t think there is any “he said/she said” problem here. Frankly, your defense of French is a little quaint. One only needs to drive by many of the properties in question or know a bit of history — for instance, the 4 years it took for a single residential quad to be completed, and in a shoddy manner at that — to see what much of this is based on. The fraud involves many, many people, but there is no question that French is at the heart of it all.
@ interested party – Wait…What?? Defense of French is a little quaint? Maybe you should go back and read that a couple of times to make sure you read right, because nowhere in the previous statement did I go that far off topic. My inquiry is for Larry’s statement that about his relationship with Mr Dykeshorn and the fact that his firm is being sued. Now if my common sense questions make you uncomfortable let me know instead of attempting to insult my intelligence because in most cases you’ll just make yourself look foolish. It’s real easy just say: “Irony… Read more »
As for why people weren’t aware of what he was doing, that has a lot to do with a very well-greased PR apparatus. He was extraordinarily good at only getting press for all the *great* things he was purported to do for foundations and historic rehabilitation. It was only off-the-record that you’d begin to hear about how shady his dealings really were. There were too many hands in the pot, if you will. The smokescreen finally started failing him in the past year or two, and potential “partners” began backing off. That leaves us where the story is now.
@ Paul – Instead of “..potential partners backing off.”, would “rats leaving a sinking ship” be a better statement? That’s the first thing that comes to mind as more information on this drama unfolds.
No, Irony. I know a few people French had approached with partnership deals, but they had the good sense to see that the “deal” they were being offered was too good to be true.
There have been many more people who have benefitted from French’s ill-gotten gains and who were all too happy to do so when it lined their pockets, furthered their interests, and put them in the spotlight. RBS has run plenty of stories about them (again when things were good, or should I say, before the fraud was exposed)
Re-reading these articles today casts these individuals in a much different light, doesn’t it?
It will be curious to see the case evolve. At the very least it’s a cautionary tale for small business owners everywhere.
RE: Dykshorn – Regardless of his design skills it is fairly obvious he did not execute the task that he was hired to perform; to protect the bank from this very type of fraud. It was either negligence or fraud, the courts will decide.
I also sense that some posters want to choose sides in all of this. The facts are simple Justin French has engaged in fraud. Todd Dykshorn has engaged in fraud. And quite frankly, I truly do not believe that you could convince me that David Gamino has not participated in the alleged fraud as well. This entire fiasco needs certain people in certain places in order to limit questions to how or why the work was either not being completed or where the money was actually going. Developer, architect, contractor. I have also spoken with some people outside of these… Read more »
While trying to fix one problem, such as plumbing, you may end up creating another one without realizing it. Sometimes, you may think that you have solved the problem, only to realize some months down the road that, it is broken again. It can be very frustrating, especially when you’ve wasted money on materials