French tax credit records raise red flags

Last week, IRS and FBI agents raided the Shockoe Slip office of developer Justin French, removing computers and boxes of paperwork.

Both agencies were tight-lipped about the reason for the raid, but Richmond BizSense has learned that over three years, French received an unusually large amount of tax credits for renovating historic buildings compared with what local developers typically reap on similar projects.

From 2007 through 2009, French projects received $18.8 million in state tax credits, according to a review of documents from the state Department of Historic Resources obtained by BizSense.

Developers are allowed to sell the state tax credits, and they often do so to large companies looking to reduce their state tax bills. French most recently was working with Markel Corp. as his tax credit purchaser until a feud between the two parties erupted. (You can read the original RBS story here. )

The DHR data show expense claims that are higher than normal, according to local contractors and developers. Several contractors said that the rehab costs reported by French are close to double the typical range.

For example, French received $179,183 in tax credits for a duplex at 3012 and 3014 Q St., in a run-down section of Church Hill. That means he claimed total expenses of about $718,000 (or $366 per square foot) to rehab the structures, which are assessed at $210,000 for the entire building.

“Those numbers seem extremely high. Something is not right there at all,” said Bill Pangburn, a renovator of historic homes in Church Hill. “I don’t know how in the hell you could spend $700,000. If that’s the case, someone is taking advantage of the system.”

David Gammino, a principal of contracting firm City & Guilds, said the reported costs are not close to the amount of construction he performed as general contractor.

“That is the first time I had ever heard of the costs that were certified to DHR. That is not consistent with the costs that were invoiced and paid for by French Consulting to City & Guilds for those projects,” Gammino said by phone.

Gammino said that he did not review any documentation used in the cost certification process that would have been submitted by French to DHR and that he was never contacted by DHR to verify any construction costs.

The sale of tax credits was a key piece of financing for French’s projects. It is important to note that the purchaser of the tax credits must also have a stake in the property’s ownership entity.

(The story continues after the slideshow of properties)

If you assume the Q Street duplex obtained state and federal tax credits (BizSense reviewed documents relating to state tax credits, but projects can qualify for a 20 percent credit on federal taxes), those could be sold for – at the high end – about 80 cents on the dollar. That would yield more than $250,000 in cash. If you deduct that from the claimed expenses of $718,000, it leaves almost $460,000 that French would have spent out of pocket on the duplex.

If he rented each unit for $1,000 a month, that would generate $24,000 a year in rental income. Ignoring expenses and real estate taxes, it would take 19 years to break even, an investment few would find appealing.

French also received tax credits totaling $807,000 for rehabilitation work on two adjacent Shockoe Slip properties, 1312 and 1314 E. Cary St. One of those buildings is French’s office. The state tax credit program allows developers to claim up to 25 percent of qualifying development costs, which generally include construction and certain professional fees. That means French claimed he spent $2.4 million fixing up the two buildings.

For the two Cary Street properties, that figure was $262 per square foot, based on the DHR numbers. Exactly how French could have spent that much renovating those two buildings is unclear, unless there were unusual consulting fees. There is no record of any building, mechanical, plumbing or electrical permits being applied for on either of those properties since French bought them, which suggests he did few major renovations.

Despite the lack of permits, Kelly Justice, the owner of the Fountain Bookstore and tenant on the first floor of 1312 E. Cary St., said that when French took over the building, he rewired it and replaced the HVAC system. She said French also knocked out the walls on the second and third floors to connect the building to his office next door.

One aspect that complicates analysis of his projects and might have befuddled officials is that French is often a partner in the firms involved in the subcontracting work, such as consulting and construction. It’s not clear what is a reasonable fee or markup to charge for a subcontractor involved in historic rehab, how French might have benefited from those relationships or whether French was claiming expenses related to consulting work performed by his company, French Consulting.

French could not be reached for comment and was not at his office Wednesday.

Not all expenses that qualify for tax credits would require building permits. Other qualifying expenses could have included renovation costs such as windows, custom cabinets and light fixtures, and included costs such as fees from architects and engineers.

However, local builders and developers said it’s unlikely that those fees would come close to the figures claimed by French.

That might have raised red flags with government officials. The DHR refused to grant a Freedom of Information Act request by BizSense for French’s tax credit applications, citing a section of the state code that refers to criminal investigations.

Kathleen Kilpatrick, director of DHR, declined to go into detail about why French is being scrutinized by federal authorities.

She did confirm that the department has been cooperating with federal authorities and that several of French’s pending applications are in limbo.

“From our point of view, any attempt to abuse the system would be taken very seriously,” Kilpatrick said.

“I am honestly grateful for the work that has been done by hundreds of excellent developers and investors. I don’t want to see their work, or that of their investors, tarnished by bad actors,” Kilpatrick said.

This story was updated at 11:45 AM. A previous version did not mention that tax credit investors must also be members of the property’s ownership entity.

Below is a list of state tax credits granted to French properties in 2007, 2008 and 2009.


1620 Altamont Ave. (apartment conversion)
Tax credit awarded: $1.79 million
Qualified expenses needed: $7.19 million
2010 assessment: $4 million

330 Oak Lane (private residence)
Tax credit awarded: $433,080.75
Qualified expenses needed: $1.7 million
2010 city assessment: $2 million

1312 E. Cary St. (commercial building)
Tax credit awarded: $362,381.25
Qualified expenses needed: $1.44 million
2010 city assessment: $340,000


2601 Floyd Ave. (commercial building)
Tax credit awarded: $439,758.75
Qualified expenses needed: $1.75 million
2010 city assessment: $690,000

3012-3014 Q St. (duplex)
Tax credit awarded: $179,570.75
Qualified expenses needed: $718,183
2010 city assessment: $210,000

3122 W. Clay St. (commercial building)
Tax credit awarded: $463,328.50
Qualified expenses needed: $1.85 million
2010 city assessment: $789,000

1509 Belleville St. (Commercial building)
Tax credit awarded: $392,875.75
Qualified expenses needed: $1.57 million
2010 city assessment: $674,000


1314 E. Cary St. (office of French Consulting LLC)
Tax credit awarded: $445,390
Qualified expenses needed: $1.78 million
2010 city assessment: $402,000

Al Harris is a BizSense reporter. Reporter Michael Schwartz and editor Aaron Kremer contributed to this report. Please send news tips to [email protected]

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30 Comments on "French tax credit records raise red flags"

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How could he get $434000 for Oak Lane when he bought that ALREADY RENOVATED!! This was a complete renovation done by the previous owner. I saw this house before he bought it – HOW DOES SOMETHING LIKE THIS HAPPEN??? Another “fleecing of America!”


Correct me if I’m wrong, but if I read this correctly French has been inflating the expenses involved with these projects, using his own companies, in order to inflate the tax credits he applies for on these projects. That has awaken the Feds from their slumber. So I assume then that if French had not intentionally began to default on his loans then it would have taken the state and federal offices longer to figure this out.


Rather than comment on any of the allegations, I’d just like to say this is some continued excellent investigative reporting. Keep up the good work.


Wow, what the hell were the banks thinking?! Did anyone ever even go LOOK at these properties? Most of them could have been eyeballed by anyone halfway knowledgeable about construction costs and it would have raised eyebrows immediately. The saddest thing about this whole mess, beyond the subcontractors that did work they won’t be paid for- is that this is going to make it that much more difficult for legitimate developers to bring real opportunities and commerce to the Richmond construction industry for years to come. Everyone loses.


So in the last few years companies have been suffering but this guy has been just sitting back and laughing like crazy while he made basically free money. Well I hope he goes to jail for a good bit along with a few other people.


I agree with 30yearold some good reporting here keep it up I have followed this since you first broke it long before the RTD ever even mentioned this thanks.

Richard Coughlan

Add me to the list of readers who continues to be impressed with the work of the reporters and editors at BizSense. Well done.


The stories on French are very intriguing. I am wondering, though, if there isn’t all kinds of abuse going on with this program. What French allegedly did might be the norm! I would think that if you could get the numbers on French’s deals, you should be able to look into the deals done by others and see if this is widespread. If the state is asleep at the switch on French, then you have to believe lots of others have done this too.

Let’s see an investigation on that too!

Jason B.

Great reporting! I agree with the last comment by Steve. I wonder what other developers are out there right now that are tightening up / destroying there books on these past projects. Got to be a few more.


Excellent work Al.


Again, it might be helpful to compare the FBI’s past dealings with Salomonsky (and the subsequent Hedgepeth trial).

Historic tax credits can be great tools for neighborhood revitalization, but they can certainly be abused without vigilance.

I would love to see Goldman’s plans for getting the government to allow historic tax credits for school building renovation. Virginia, and Richmond in particluar, has some of the oldest school buildings in the country.

Other places allow not only only historic tax credits but also green building tax credits to renovate schools and create real jewel-like centerpieces for their historic neighborhoods.

Cynthia Oliver
First, I’d like to chime in about the good reporting and details. Next, let’s not assume since one developer is “getting away with this”, that many others must be, too. I have been totally shocked that this has even happened! In my experience w/DHR, I’ve had to rework properties to meet requirements, provide detailed data and additional pictures, submit additional accounting from my Accountant, had aspects of the project disallowed AND meet DHR representatives at the property. It has not been an easy process. Add to that the scrutiny from my lender at each phase of construction, and I just… Read more »

You might want to look into his use of “Green” tax credits also.

Interested on Altamont
Interested on Altamont

Assuming these hugely inflated tax credits are true it seems that French borrowed a page from Clyde Pitchford and Bernie Madoff’s playbook. If you’re going to commit fraud it looks like going big is the way to go. People and businesses (who are, after all, just people) love to jump on the bandwagon with someone who appears to have the golden touch without really checking them out.


This article listed several properties not mentioned in this piece, along with liens filed by affected contractors. I am curious to know whether there are tax credit applications pending on these other properties and if so who the purchasers were going to be. If the tax credits must be sold to entities with ownership stakes in the properties themselves, what obligation do these organizations have to see the liens satisfied and the renovations completed?


Well….great reporting!
This is really bad and very upsetting to see such curroption.

On the upside, I was walking today and noticed a large grassy area behind 2600 block of Parkwood Ave, and behind Robinson….and it said for rent please call. Well, it was French’s number…..and it’s a nice piece of land. Any advice on how to make it into a park area similar to other fan area parks (

He really was a slum land lord, and didn’t do anthing to his properties or at least the 5 that I walked by everyday.


I suppose the next article will read: ” So where is Justin French”
My guess is somewhere else.

Interested on Altamont
Interested on Altamont

I suppose the next article will read: ” So where is Justin French”
My guess is somewhere else.
Perhaps Florida? Can you say Homestead Exemption Law?

Casey Quinlan

The entire series of articles RichmondBizSense is putting out on l’affaire French is a superb example of investigative journalism and shoe-leather reporting. It’s become a daily must-read.

Some government oversight…. and by that, I mean “sight” with eyes… not paperwork, should be included in these projects. It doesn’t take a financial analyst to look at a dump on Q street and figure out that spending $700,000 on it and selling it for $200k or renting it isn’t a good idea. In order to make 30% funding go 80% of the way, people like JF will inflate their costs. I don’t think this is a common theme, but like Reagan, I would like to “trust but verify.” Reasonable costs can be assumed to be correct, but $366 per… Read more »
I am really enjoying these articles and the discussions about them. That being said, I think that a lot of the people on here, commenting on the need for checks and balances, are missing key points. These tax credits require the signature, and hopefully the review, of numerous people before they get approved. In a normal situation, these people are all unrelated firms and have their own best and competing interests at heart. The owner, contractor, architect, and a CPA all have to review and document these projects. French, by having an ownership stake in all of these entities, was… Read more »
s anynomous
Many ask how did Justin get away with it, uttering. “Uttering is the act of offering a forged document to another when the offeror has knowledge that the document is forged.[1] Uttering does not require that the person who presented the document actually forged or altered the document. ” from Wikapedia. Having worked on historic tax credit projects with different architects, contractors and developers there is a TON of paperwork involved. However, that paper work could easily be forged. Getting Todd Dyskorn, the architect, to falsify documents could be done by simply holding out a carrot of ” I can’t… Read more »
One thing that I think has been under reported about this is his use of renewable energy tax credits. He put 100’s of thousands of dollars in solar power panels on the roofs of his buildings. There are state and federal tax credits for those too. If he is being investigated for the abuse of historic use credits, why has the solar tax credit avenue not been explored. He owns part of Cityspace, now Urban Grid. If he follows his pattern of abuse of the tax system, I am sure he was scamming that system as well. I would like… Read more »

The only way the Q St tax credits make sense are if they include ALL of the Q St properties he owns… 3012, 3014, 3016, 3018, 3020, 3022, 3024, and 3026 Q St. All owned and renovated by French according to the City’s Property Search.

Actually Harold, your statement … “The owner, contractor, architect, and a CPA all have to review and document these projects. French, by having an ownership stake in all of these entities, was able to skirt the normal checks that were in place to prevent fraud” is incorrect. The developer entity submits documentation, in the form of whatever it is his CPA requires to issue a document known as a cost certification. The documentation the developer chooses to include is not vetted by the contractor or the architect. It is a process controlled by the developer, and supposedly verified by the… Read more »
David, I will admit that my involvement in projects of this type are some what lopsided in terms of what side of the equation I was on. If I spoke from a position that is contrary to the current tax credit environment, I am sorry. As I understand it, the CPA would need documentation of expenditures to certify the costs on a project. The GC, being one of the largest “costs” on a rehab project, would have to have provided some accounting of billings or payments. What form these took and by what method they were verified would be open… Read more »
Sean, Looking at the building permits, the other Q street properties were not renovated until 2009. One would assume that the tax credits for those properties would not have been paid until 2010 and may be in the batch that has been held up by DHR, prompting the investigation. One can only imagine the total costs that were claimed for all of the properties. It also appears from the building permits that there were solar panels installed on those, prompting even more tax credit applications and possibly more fraud. It would be interesting to compare the values of the improvements… Read more »
Just as an example; for the 3012-3014 Q St. properties, totaling the building permits pulled by City and Guilds on those properties, you get $118,695.00. The tax credits received by French on the properties were for work totaling $718,695.00. Almost $600k difference. Someone isn’t telling the truth. All of this is public record. I am sure that with all of the additional stuff that we don’t know, it is a lot easier to prove fraud on the part of a wide range of participants. Also, I was wrong, Richmond doesn’t make you sign in. Its all right there for anyone… Read more »
@Harold, Very good fact-finding…I am impressed. As a layman with only basic understanding of how the tax credit program works, I am shocked that it appears that the costs claimed on the building permits and tax credit applications do not have to align in the slightest??? Can someone please explain how it’s possible to claim expenses that are so wildly different for the same property, to two separate government entities, with no oversight? And how is is possible that Mr. French was so far behind on paying taxes on these properties while still recieving tax CREDITS on these and others?… Read more »
I think a point that is being missed is that now that the Feds, IRS, and State have caught these that the tax credits will be lost by the investors (or French if he kept any to reduce his tax liability) and they will be required to pay the taxes they did or hoped to reduce. Just like if you mess up on your taxes and are caught by the IRS you still owe the money even if the year has past. Also, even though the investors generally enter into the partnership agreement prior to starting work on the building,… Read more »