Gammino responds to suit

3031 and 3122 Norfolk Street

The buildings at 3031 Norfolk St., left, and 3122 Norfolk St. have a new owner. (Photos by Michael Schwartz)

Facing a $14 million lawsuit from a Norfolk bank for his work on two Justin French projects, a local developer has argued the case should be thrown out.

David Gammino and his development company City & Guilds was sued in June by Bank of Hampton Roads for allegedly having a hand in defrauding the bank of more than $13 million on two of French’s construction projects in Scott’s Addition.

Gammino last week filed a demurrer, arguing that the bank’s claims of fraud and conspiracy don’t hold water and that the suit should be dismissed.

He argues in his response that the case fails to show he owed any duty to the bank. Gammino worked for French on the two historic tax credit rehab projects at 3031 and 3122 Norfolk St. He was not hired by the bank.

The bank claims that Gammino, City & Guilds, along with French signed off on certified claims for millions of dollars in cash construction draws for work that hadn’t been done. Gammino’s response points out that the bank hired local architect, Todd Dykshorn and his firm, Architecture Design Office, to inspect and verify the work and thereby justify the cash draws.

Bank of Hampton Roads sued Dykshorn for wrongful conduct for allegedly misrepresenting the progress of the rehabilitations. That case is pending in Richmond Circuit Court.

Gammino’s response also argues that the bank fails to show any damages beyond its “disappointed economic expectations arising out of the loan contracts” between French and the bank.

French borrowed $19.26 million on the two projects in 2007, $14.86 million of which was to be drawn on in monthly increments by French and paid, in part, to the contractor for work on the projects. Gammino has said his company received approximately $3 million to $4 million from French for work on the two sites. French eventually admitted to the bank that the money was commingled with other funds to go toward work on other projects.

Reached Monday by phone, Gammino declined to comment on the case.

His attorney, David Hopper of the firm Cook, Heyward, Lee, Hopper & Feehan, did not return a call by press time.

Gammino told BizSense in June that his crew performed the work he was paid for and that, like the bank, he is owed money by French.

Bank of Hampton Roads foreclosed on the two Norfolk Street properties and sold them at auction to local developer Louis Salomonsky, who plans 125 apartments.

Two other banks, Essex Bank and Lynchburg-based Select Bank, sued Bank of Hampton Roads in December 2010 for $11 million, claiming that the bank failed in its duties as lead lender by allowing the alleged fraud to take place. Essex and Select participated on the loan for the two properties. That suit is set for trial in September.

3031 and 3122 Norfolk Street

The buildings at 3031 Norfolk St., left, and 3122 Norfolk St. have a new owner. (Photos by Michael Schwartz)

Facing a $14 million lawsuit from a Norfolk bank for his work on two Justin French projects, a local developer has argued the case should be thrown out.

David Gammino and his development company City & Guilds was sued in June by Bank of Hampton Roads for allegedly having a hand in defrauding the bank of more than $13 million on two of French’s construction projects in Scott’s Addition.

Gammino last week filed a demurrer, arguing that the bank’s claims of fraud and conspiracy don’t hold water and that the suit should be dismissed.

He argues in his response that the case fails to show he owed any duty to the bank. Gammino worked for French on the two historic tax credit rehab projects at 3031 and 3122 Norfolk St. He was not hired by the bank.

The bank claims that Gammino, City & Guilds, along with French signed off on certified claims for millions of dollars in cash construction draws for work that hadn’t been done. Gammino’s response points out that the bank hired local architect, Todd Dykshorn and his firm, Architecture Design Office, to inspect and verify the work and thereby justify the cash draws.

Bank of Hampton Roads sued Dykshorn for wrongful conduct for allegedly misrepresenting the progress of the rehabilitations. That case is pending in Richmond Circuit Court.

Gammino’s response also argues that the bank fails to show any damages beyond its “disappointed economic expectations arising out of the loan contracts” between French and the bank.

French borrowed $19.26 million on the two projects in 2007, $14.86 million of which was to be drawn on in monthly increments by French and paid, in part, to the contractor for work on the projects. Gammino has said his company received approximately $3 million to $4 million from French for work on the two sites. French eventually admitted to the bank that the money was commingled with other funds to go toward work on other projects.

Reached Monday by phone, Gammino declined to comment on the case.

His attorney, David Hopper of the firm Cook, Heyward, Lee, Hopper & Feehan, did not return a call by press time.

Gammino told BizSense in June that his crew performed the work he was paid for and that, like the bank, he is owed money by French.

Bank of Hampton Roads foreclosed on the two Norfolk Street properties and sold them at auction to local developer Louis Salomonsky, who plans 125 apartments.

Two other banks, Essex Bank and Lynchburg-based Select Bank, sued Bank of Hampton Roads in December 2010 for $11 million, claiming that the bank failed in its duties as lead lender by allowing the alleged fraud to take place. Essex and Select participated on the loan for the two properties. That suit is set for trial in September.

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Mike View
Mike View
10 years ago

The more important story here is the historic tax credits program. It provided some, if not all, of the real incentive on these projects and not in a good way. These credits, state and federal, are abused and funds have been miss allocated on numerous occasions. Are these properties historic? Really? It’s actually a tax payer funded program to create work and its a fleecing of tax payer dollars. How is it possible that no one in the administration of these tax credit programs, some based locally in Richmond, didn’t notice that these projects and many others were funded but… Read more »

Mimi Sadler
Mimi Sadler
10 years ago
Reply to  Mike View

I beg to differ with the “out of control” claim. The Department of Historic Resources in fact identified the potential fraud and alerted the authorities. Justin French was convicted and is now serving time. The property will still be redeveloped, but by a different developer. Richmond’s historic districts include industrial, commercial and residential areas. DHR’s website http://www.dhr.virginia.gov allows the public to download and read all historic property nominations, so that any interested person can learn why the buildings in, say, Scotts Addition, are significant. The tax credit program results in preservation of the city’s past, the revitalization of blighted historic… Read more »

Jay
Jay
10 years ago
Reply to  Mike View

I don’t think the issue with the historic rehabilitation tax credit programs is one of whether the projects are actually ‘historic’ vs just being historical (which is the case with the vast majority of these products [though I don’t necessarily think that’s a good or bad thing {I’m really good at using brackets}]). I wouldn’t even consider this a “fleecing of tax payers’ dollars” for the most part. Studies show that these programs work and have a benefitial economic impact on the community (higher tax assessments, new construction jobs, less blight) The problem with some of these projects seems to… Read more »

jack kay
jack kay
10 years ago

This as with most of the crap that hit the proverbial fan was all about individual greed. It is fraud…pure and simple by the parties. French knew exactly what he was doing…robbing Peter to pay Paul. thus keeping Paul happy. The architect hired to inspect and approve the draws is more guilty than any. The banks are also guiltyfor laziness and notr wanting to dirty their pretty wingtips and actually go to the jobs. not my job mentality..greed…laziness…blind trust. Remember good ole boy Bernie Madoff? Hmmmmm!!!!???

Mike View
Mike View
10 years ago

Mimi – I think you may have reinforced my point. Let’s just call it what it is, a taxpayer funded redevelopment work subsidy. The DHR does good work but was reactive not proactive in helping to indentify this type of fraud. Is this apartment / condo project not economically feasible without at tax credit? Its redevelopment should make economic sense on its own merits without taxpayer support under the ruse of a “historic” label. This type on Gov’t funded intervention causes inflated property valuations. When the Scott’s Addition project is finalized I’m sure that it will be a welcome improvement… Read more »

Brett
Brett
10 years ago

If his signature is on the paperwork claiming work was done, and it wasn’t, then he is as guilty as anyone else. Case closed. If he didn’t have any duty to the bank, then what was the point in signing them at all? Seems like there are some pieces of the story being left out.

Brett
Brett
10 years ago

Also, I’m not so sure that the banks are lazy, just incompetent. I have met many a banker who can’t even read an AIA progress bill.

Michael Dodson
Michael Dodson
10 years ago

This “subsidy” that some do not like have led to the extra MILLIONS in taxes that have helped the City of Richmond from seeing the cuts in services that other older cities have seen. These credits helped renovated all the old factories and warehouses from the Bottom to Scott’s Addition to Manchester and beyond. Done with the City’ abatement these empty shells are now multi-million dollar properties that generate higher real estate taxes. Oh and as for the fraud DHR found it almost 1-year before a criminal charge against French. They took time to work with law enforcement to ensure… Read more »

Mike View
Mike View
10 years ago

In response to Michael D –

I could not agree more with the following statement.

“PS The banks (and to some degree the Markel Corp) for backing Justin who was a convicted drug dealer and money launder from FL before he came to Virginia!!”

However, you missed my point.

I’m fine (to a certain point) on creating incentives for redevelopment. It just has nothing really to do with historic properties in most cases. It’s a subsidy. Call it what it is and let’s vote on it according.

Roxanne
Roxanne
10 years ago

Your taxpayer dollars at work Michael, that has beared little fruit in the way of revitalization and @ Brett, I agree with your siganture statement. Banks do require applications and personal financial statements, which typically do ask if you are a dependent in a lawsuit, etc., but if French was not at the time, he didn’t provide anything fradulent-just didn’t disclose. Guess the banks should add another line to the financial statement questionnaire – Have you ever been convicted of a crime – similar to a job application. Otherwise, until the proverbial S*** hit the fan, they were none the… Read more »

Roxanne
Roxanne
10 years ago
Reply to  Roxanne

defendent (sp)

Melissa Savenko
Melissa Savenko
10 years ago

@Mike View: You say tomato, I say to-MAH-to. I am not sure what your definition of “historic” is. It seems in your view for a property to qualify it must be sufficiently old – how old? – or have some major historical significance, like affiliation with a famous person – you mentioned Patrick Henry? That’s not what the duly promulgated regulations require. I, personally, am thrilled that midcentury architecture is now eligible under the historic tax credit program. And I think the renovation of Scotts Addition using tax credits is a win-win-win, for the neighborhood, for the City, and for… Read more »

Jason
Jason
10 years ago

So what if the government subsidies revitalization? The government subsidies a lot of things, like homeowner mortgages. Where are the comments on that? Apparently subsidizing that is ok.