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Topic: Court orders reimbursements that never come
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untanglingwebs
El Supremo

Giacalone's Arguments

Giacalone argues there is no evidence in the record to support a finding that he did not intend to use the $295,000.00 fixed asset component of the loan to purchase fixed assets at the time he signed the contract on August 14, 2002, and therefore the City of Flint failed to prve any of the elements of fraud: a false representation known to be false, that was material and relating to a past or existing fact, made ith intent to deceive, ustifiable reliance, or proximate caue of loss. Giacalone specifically argue that in August 2000, he was told the loan would close on November 10, 2000, and when it did not close, he was forced to apply for extensions and, in February 2001, to borrow $100,0000.00 from a private bank. Giacalone maintains that after the loan finally closed on August 14,2002, only $820,000.00 of the $877,000.00 loan was distributed through May 2003. Giacalone argues these delays and shortfalls caused him to use all of hia operating capital to pay debts before going out of business in 2004, which was the proximate cause of the loan loss. Giacalone points to an FBI investigation finding no fraudulent intent, which Giacalone argues should have been controlling in the Bankruptcy proceedings. Giacalone continues that there was o justifiable relaince by Flint because no credit check was ever made, Flint Economic program manager Glenda Dunlap knew of his worsening financial condition, Acting Mayor Darnell Early told Giacalone the loan was likely to default unless restructured, and the City of Flint Treasurer stated that "nobody' ever repays HUD 108 loans. Giacalone further argues that a purchase of real property is a purchase of "fixed assets", and therefore he properly spent the subject $140,000.00 toward refurbishing a building in Flint.
Post Thu Jul 03, 2014 4:10 pm 
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untanglingwebs
El Supremo

Analysis

The Bankruptcy judge agreed with Giacalone that the City of flint could not rely on asserted misrepresentations made by Giacalone because Flint Economic program manager Glenda Dunlap knew the state of OK Industries when the lon closed on August 14,2002. The Bankruptcy judge nevertheles found that Giacalone misappropriated $140,000.00 of the loan's $295,000.00 fixed assets proceeds:

The City of Flint was lad to believe that Mr. Giacalone would take the $295,000.00 and purchase the equipment with that money. Ms. Dunlap's testimony was that she continually pressed Mr. Giacalone for details about this loan and the use of the proceeds, and that the necessary details were not as forthcoming as the details about the relocation and the hiring process.

In fact Ms. Dunlap was not shown what equipment had been purchased until much later in 2003. The court therefore concludes tat the City of Flint did rely on the statements that OK Industries would purchase $295,000.00 of equipment and that relaiance was not only justified, but cused a loss to the City of Flint.

By way of example, had OK Industries actually purchased $295,000.00 of equipment with these monies, that equipmnt would be available for liquidation......
Post Thu Jul 03, 2014 4:30 pm 
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untanglingwebs
El Supremo

February 6, 2007 Tr. at 17-18. The Bankruptcy Judge's finding of misappropriation was also based in part, on Paragraph 8 of a Stipulation of Facts that was expressly incorporated into the record:

8. The fixed asset portion of the loan was used primarily to pay trae and other creditors, not for the acquisition of equipment.

The Stipulation of Fact also reads in part:

4. The loan was divided into a$525,000.00 working capital loan and a $295,000.00 loan for the purchase of fixed assets.

10. In 2004, The City of Flint brought suit against OK Industries, Joseph Giacalone and Deanne Giacalone in the Genesee County Circuit Court alleging a default under the loan documents, case no. 04-78903.

11. On March 28, 2005. Judge Judith Fullerton granted the city of flint a judgement in the amount of $820,000.00 plus interest and taxable costs against OK Industries, Joseph Giacalone and DeAnne Giacalone, jointly and severally.

12. Nothing has been paid to the City of Flint against this balance by OK Industries or the Giacalones.
Post Thu Jul 03, 2014 4:45 pm 
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untanglingwebs
El Supremo

Based on Giacalone's testimony that he spent $155,000.00 of the #295,000.000 on fixed assets that included two welding machines, the Bankruptcy Judge concluded that Giacalone misappropriated the difference, $149,999.00, February 6, 2007 Tr. at 16. Flint Economic Program Manager testified that this $295,000/00 fixed assets components of the loan was intended to be used for the purchase of machinery and equipment, and hat the proceeds of the $57,000 EDI component were never disbursed because the EDI proceeds are not eligible for distribution until a loan recipient begins making loan payments. December 12, 2006 T. at12-13. Dunlap testified tat neither Giacalone nor his partner Dan Robin were able to produce a complete list of the equipment OK Industries purchased with the loan, Id at 20.
Post Fri Jul 04, 2014 7:10 am 
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untanglingwebs
El Supremo

.......Giacalone has proffered no authority, and the Court is unaware of any authority, that bound the Bankruptcy Judge to accept an FBI investigation as conclusive on the issues of fund misappropriation and fraud. Giacalone's assertions that no credit check was ever made, that Dunlap knew of his worsening financial condition of OK Industries, that Mayor Early knew the loan would default unless restructured, and that the Flint Treasurer told him "nobody" ever repays HUD 108 loans, even if true, did not preclude the Bankruptcy Judge from finding that Giacalone acted with fraudulent intent after the loan was approved in misappropriating $140,000.00 of "fixed asset" loan proceeds to pay bills owing to trade and other general creditors.


Conclusion

This court is not left with a definite and firm conviction that a mistake has been made .....Upon de novo review. the Bankruptcy Courts' February 6,2007 ruling that $140,000.00 of a City of Flint loan Giacalone personally guaranteed is excepted from discharge under 11 U,S.C. 523(a)(2)(A).

George Cram Steeh
United States District Judge

February 4, 2008
Post Fri Jul 04, 2014 7:26 am 
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untanglingwebs
El Supremo

The FBI probably had difficulty determining who pushed this loan. It started under the Stanley administration and a lot was occurring at that time. Changes in the department placed Alexander Thomas at the helm of a department he stated he knew nothing about running.

There is no mention of Thomas testifying. Dunlap was new to the department and he was her superior. He would have been in charge of the loan process and the New York advisor Lowenstein would have had input.

There is also no mention of the "bridge loan" Thomas pushed though the Flint Area Investment Center (FAIF). He also pushed a loan through this agency for MAR development for the failed Kearsley Estates and tried to push one though for James Crowley, but Crowley had defaulted on a previous FAIF loan. There was a controversy on the OK Industries check because it as also made out to Joe Giacalone or OK Industries. I believe FAIF board member Charlotte Edwards signed the check. Neither loan was repaid.

This was an issue as there was little or no information shared between the City and the FAIF. The loan money came through the federal government (HHS) to the State of Michigan and then to Flint. When Flint fell into receivership, Nancy Jurkiewicz-Rich asked EM Kurtz for assistance in gaining access to the loan documents for monitoring purposes. She got no assistance until Williamson became Mayor.

There was enough malfeasance to be spread around. The State did not monitor for over three years and Community Capital Development Corporation (CCDC) who was being paid to manage the fund was nearly three years behind in their audits. When Jurkiewicz-Rich finally got to review the documents, there were many irregularities.
Post Fri Jul 04, 2014 7:48 am 
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untanglingwebs
El Supremo

Each file had a list of documents that should be in the file. Many were missing and the review team kept a record of missing documents. It was no surprise that the FAIF blamed the review team for the missing documents.

Each client was required to have an insurance policy protecting the fund, but the majority was missing. At least one was found and was issued by the partner-son of a CCDC Board member.

Many loans were questionable and the default rate was over 60 %. To the review group, it was incomprehensible that some loans were ever made. Loans were given to family members of the FAIF Board and one to the son of a CCDC member. At least one loan was given to an employee (Campbell) for a bookkeeping business. A loan for Hinky Dinky Market had a missing $15,000 check. A forensic audit revealed the check had a new name typed on the check and it went to the fiancée of an employee. Many loans exceeded the $100,000.00 maximum loan limit

Despite the government's concept of developing legitimate business concerns in the designated economic development area, many loans went to car washes, party stores, and bars. The FAIF regularly took a second and even some third positions on properties held for security.

The audit revealed that CCDC most likely used computers and office equipment recovered from a failed business for their personal use. Cars and other property were recovered and not revealed. When question regarding one vehicle, the Executive Director of CCDC& FAIF sold the car on a weekend. When HUD came to audit, the Executive Director left out the back door as they entered the front door.

When City officials were notified that numerous files were in the dumpster, they planned to retrieve them. However, they were picked up before that could happen.
Post Fri Jul 04, 2014 8:09 am 
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untanglingwebs
El Supremo

CLOSED DMO CASE REGISTER OF ACTIONS 07/04/14 PAGE 1
99-066466-CK JUDGE FARAH FILE 10/18/99 ADJ DT 09/10/03 CLOSE 09/10/03
GENESEE COUNTY JDF SCAO:SEC C LINE 06

P 001 DAVENPORT,CHRIS,G VS D 001 STANLEY,WOODROW,
ATY:PABST,TOM R., ATY:FLETCHER,LOYST,
P-27872 810-732-6792 P-29799 810-238-4410
DISPOSITION 09/10/03 DMO
SERVICE/ANS 01/12/01 ANS

D 002 TURK,ROBERT,P
ATY:RABIN,JONATHON
P-57145 248-740-7505
DISPOSITION 05/16/03 DIS MAJ
SERVICE/ANS 01/05/01 ANS

D 003 CITY OF FLINT,,
ATY:RABIN,JONATHON
P-57145 248-740-7505
DISPOSITION 09/10/03 DMO
SERVICE/ANS 08/23/00 ANS

D 004 FLINT AREA ENTERPRISE COMM,,
C/O-JURKIEWICZ,NANCY,
805 W WELCH BLVD
FLINT MI 48504
ATY:FIGURA,RICHARD 06/07/01
P-13412 231-326-2072
DISPOSITION 09/10/03 DMO
SERVICE/ANS 10/24/01 ANS

IP001 PARKER,EDWARD,L
ATY:PARKER,EDWARD L 09/18/00
P-23220 810-394-4251
Post Fri Jul 04, 2014 8:19 am 
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untanglingwebs
El Supremo

The allegations in this case revolve around Davenport being a "whistleblower". Davenport knew his HUD rules and stopped a loan he felt was improper. He also complained about appointments being made that were only political. The case dragged on until September of 2003. Davenport filed for bankruptcy, against his attorney's advise and the case was settled.

The loan allegedly involved a friend of then Mayor Stanley.
Post Fri Jul 04, 2014 8:24 am 
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untanglingwebs
El Supremo

GCSD Press Releases - Home | GFN
gfn.org/sheriff/press27.htm Cached
Pickell questioned why the city would have loaned ... questioned nearly $1.3 million taken from a fund and given to Giacalone, Sheriff's Capt. Chris Swanson told ...
Joseph Giacalone and Daniel Robin ordered to pay $1.3 million ...
www.mlive.com/.../10/joseph_giacalone_and_daniel_ro.html Cached
Giacalone in 2001 said the plant would employ 100 people, ... Genesee County Sheriff Robert J. Pickell initiated the investigation. Daniel Robin
Post Sat Jul 05, 2014 12:55 pm 
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untanglingwebs
El Supremo

Businessman in jail in case involving city loan


FLINT
THE FLINT JOURNAL FIRST EDITION

Thursday, May 19, 2005

By Ken Palmer and Paul Janczewski
kpalmer@flintjournal.com= 810.766-6313


A businessman who vowed to bring a vinyl manufacturing plant and more than 100 jobs into economically ravaged Flint two years ago was jailed Wednesday on charges that he diverted $1.2 million in business loans from the city.

Joseph Giacalone and business associate Daniel Robin "sucked what little blood was left in the city" by diverting the money to their own use, Genesee County Sheriff Robert J. Pickell said.

"This was a scam from the very beginning," the sheriff said.

Giacalone, 65, of Flushing was arraigned Wednesday on two counts of larceny by conversion over $20,000, a maximum 10-year felony. He was lodged in the Genesee County Jail in lieu of a $100,000 bond set by Flint District Judge Nathaniel C. Perry III.

Also Wednesday, the city's former grants manager, Alexander J. Thomas Jr., was arraigned by Perry on a count of misconduct in office, a maximum 5-year felony.

Pickell and Genesee County Prosecutor David S. Leyton said Thomas failed to monitor the project by Giacalone's Lennon-based company, OK Industries.

Robin, 55, the company's chief financial officer, also faces two counts of larceny by conversion and was expected to surrender for arraignment this week.

Thomas' attorney, Philip H. Beauvais III, said officials are launching a "political witch hunt" against Thomas, who was the interim economic development director when the loan was approved.

Thomas was gone from the city before most of the money was paid to OK Industries, Beauvais said.

Leyton and Pickell said the alleged theft occurred partly because Thomas was asleep at the switch. There was no evidence that other city officials were involved, they said.

Pickell questioned why the city would have loaned so much money to an ex-convict who Pickell said had bad credit and a bad record with the Better Business Bureau.

The sheriff's department began investigating the OK Industries loan in late 2002 when Ed Kurtz, then Flint's emergency financial manager, questioned nearly $1.3 million taken from a fund and given to Giacalone, Sheriff's Capt. Chris Swanson told Perry while swearing out a warrant request on Tuesday.

Detectives found that the applications and collateral used by Giacalone to obtain the funds were "misrepresented and inflated."

The case dates to May 2001, when Giacalone vowed to locate a vinyl manufacturing plant at a site he owned on N. Saginaw Street. He said the plant would employ more than 100 people, most of them low- to moderate-income workers, officials said.

OK Industries received about $225,000 from the nonprofit Community Capital Development Corp. to buy equipment, authorities said. It also received $877,600 in grant money paid out in a half-dozen installments, they said.

But the company has done no work at the site and made none of its scheduled payments on the loans, Leyton said.

"Not one shovel of dirt has been turned ...," Leyton said.

Giacalone's lawyer, Thomas McCombs, acknowledged that Giacalone received more than $1 million from the city but said he used the money for his business, not personal expenses.

McCombs said the criminal case stems from a federal suit filed against the city by Giacalone in U.S. District Court. The suit claimed the city was to blame for the project's failure, in part because it didn't disburse the loan money in a timely manner.

"I believe he'll be exonerated," McCombs said of his client.

Giacalone is due in court Friday for a pre-trial hearing. Perry set a May 24 pre-trial for Thomas, who now lives in Caledonia.

In 1968, Giacalone was convicted along with two other men in the armed robbery of a jewelry store. He also pleaded guilty to a gambling charge in 1969.

Giacalone was sentenced to 50 to 75 years in prison in the robbery. But the conviction was later thrown out by the state Supreme Court, and he was released from prison in 1978 after entering a plea bargain.

Seventh Ward Councilman Matt Schlinker said the City Council approved the loan thinking it would create jobs on the city's north side.

The council has since learned to scrutinize loan applications more closely, he said.

"We thought we (had) been presented a pretty good case ...," he said. "(But) everybody involved should have been more leery and concerned about whatever was backing these loans."

***
Post Sat Jul 05, 2014 12:59 pm 
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untanglingwebs
El Supremo

Joseph Giacalone and Daniel Robin ordered to pay $1.3 million restitution to Flint
Print Kristin Longley | klongley1@mlive.com By Kristin Longley | klongley1@mlive.com
Follow on Twitter
on October 25, 2009 at 5:00 AM

FLINT, Michigan — In one of the largest theft cases of public money local officials have ever seen, the city of Flint could be in line to land $1.3 million in restitution.
Businessmen Joseph P. Giacalone and Daniel Robin were ordered last week to pay the huge sum after pleading no contest to pocketing $1.2 million in loans for a factory they never built.
It would be a huge windfall for the cash-strapped city of Flint — if the responsible parties ever pay up. Both men have filed for bankruptcy, and it’s unclear how much the city will ever bank.

Still, officials say it’s a long overdue victory in the four-year-old case.
“This is one of the larger thefts of public money that I’ve ever seen,” said Genesee County Prosecutor David S. Leyton. “Most criminals are not ordered to pay that kind of money.”
Robin and Giacalone, an ex-convict who had spent time in prison for unarmed robbery and gambling convictions, pleaded no contest to larceny by conversion over $20,000 — a maximum 10-year felony.
Robin’s attorney, Glenn Cotton, said Robin has 42 days to decide whether he will file an appeal of the ruling from Genesee County Circuit Judge Judith A. Fullerton.
Neither Giacalone nor his attorney could be reached for comment.
The loans from the city were supposed to be used by Giacalone’s Lennon-based company, OK Industries, to build a vinyl manufacturing plant at a site he owned on North Saginaw Street. Giacalone in 2001 said the plant would employ 100 people, most of them low- to moderate-income people.
No work was done and none of the money was repaid, authorities said.
Knowing Giacalone’s criminal history, Genesee County Sheriff Robert J. Pickell initiated the investigation.

“These are con men,” he said. “White collar criminals tend to get away with stuff, but you can’t minimize crime.”
The case took several years to wind its way through the court system in art because the original larceny by conversion charges were thrown out. However, the prosecutor’s office appealed and the charges were later reinstated.
“In the end, despite the long hard road it took us to get here, we won,” Leyton said. “This is a good outcome. I’m certain the judge in the case will keep an eye on whether these individuals comply.”
Post Sat Jul 05, 2014 1:07 pm 
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untanglingwebs
El Supremo

Looks like the bottom line is that the City did not present a good case to the bankruptcy court. Con men can cash in and then overturn restitution in bankruptcy. Really needs prison time.

I remember discussions on how an appraiser inflated the cvalue of the properties used to secure the loan. Most parcels already had loans against them so the city took a second position.
Post Sat Jul 05, 2014 1:12 pm 
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untanglingwebs
El Supremo

quote:
untanglingwebs schreef:
.......Giacalone has proffered no authority, and the Court is unaware of any authority, that bound the Bankruptcy Judge to accept an FBI investigation as conclusive on the issues of fund misappropriation and fraud. Giacalone's assertions that no credit check was ever made, that Dunlap knew of his worsening financial condition of OK Industries, that Mayor Early knew the loan would default unless restructured, and that the Flint Treasurer told him "nobody" ever repays HUD 108 loans, even if true, did not preclude the Bankruptcy Judge from finding that Giacalone acted with fraudulent intent after the loan was approved in misappropriating $140,000.00 of "fixed asset" loan proceeds to pay bills owing to trade and other general creditors.


Conclusion

This court is not left with a definite and firm conviction that a mistake has been made .....Upon de novo review. the Bankruptcy Courts' February 6,2007 ruling that $140,000.00 of a City of Flint loan Giacalone personally guaranteed is excepted from discharge under 11 U,S.C. 523(a)(2)(A).

George Cram Steeh
United States District Judge

February 4, 2008

----------------------------------------------------------------------------------------------
Flint man who owes city in $1 million scam facing prostitution charges in Macomb

Gary Ridley | gridley@mlive.com By Gary Ridley | gridley@mlive.com

on July 29, 2014 at 5:00 PM, updated July 29, 2014 at 5:05 PM

FLINT, MI -- A man who owes Flint in excess of $130,000 after he was convicted of scamming the city out of more than $1 million is in legal trouble again after he was accused of running a massage parlor that allegedly operated as a front for prostitution.

Daniel Robin, 64, is charged in Macomb Circuit Court with keeping a house of ill fame and using a computer to commit a crime, felony charges that could land him up to seven years in prison.

Robin pleaded no contest in 2009 in Genesee Circuit Court to larceny by conversion of more than $20,000 after he and another man, Joseph Giacalone, obtained more than $1 million in loans from the city to build a vinyl-manufacturing facility but never followed through with the plans nor repaid the loans to the city.

The loan funds originated from a federal block grant, which the city was forced to repay.

The men were ordered to pay more than $1 million in restitution, but a bankruptcy court amended Robin's restitution to $140,000.

Court records show Robin has only paid roughly $2,800 back to the city since he was sentenced in October 2009.

He was also sentenced to five years of probation.

Robin was charged earlier this year after authorities say Robin operated the Washington Wellness Clinic in Washington Township where female workers allegedly offered sexual services to undercover officers. Police say the spa recruited clients through a classifieds website.

"Mr. Robin denies the allegations made against him in their entirety and looks forward to his day in court," said Robin's attorney, Norbert Leonard.

Robin's arrest comes less than five years after he was sentenced to probation for his Flint crime. However, court records show he has not been charged with a probation violation for the new accusations.

Leonard declined to comment on his client's probation status. State records show Leonard's probation is scheduled to end Oct. 19.

Genesee County Prosecutor David Leyton declined to comment.

Officials with the Michigan Department of Correction, which oversees the probation department, could not be reached for comment.
Post Tue Jul 29, 2014 8:03 pm 
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untanglingwebs
El Supremo

Ex-Detroit mayor, frat brother to pay back $700,000

Tresas Baldas, Detroit Free Press 6:25 p.m. EDT August 1, 2014


DETROIT -- Former mayor Kwame Kilpatrick's crooked past just cost him more money.

A federal judge has ordered the imprisoned Kilpatrick and his former city treasurer and fraternity brother to pay the federal government nearly $700,000 for accepting lavish gifts from a businessman in exchange for preferential treatment in pension deals.

Whether the money ever gets paid is uncertain as Kilpatrick is serving 28 years in prison for public corruption and still owes the city $4.6 million in restitution for those crimes, and another $800,000-plus in restitution from a text-message scandal.

U.S. District Judge Victoria Roberts added to that tab on Thursday in ordering Kilpatrick to pay a $390,000 civil penalty for accepting gifts — including private jet travel, golf outings, massages and concert tickets — in exchange for approving million-dollar pension deals when he was mayor. Judge Roberts also ordered former Detroit Treasurer Jeffrey Beasley to pay $130,000 for his role in the pension scandal.

Roberts also ordered the two men to pay back the value of all the flights and perks, which amounted to $162,862.

The fines stem from a lawsuit filed by the U.S. Securities and Exchange Commission, which claimed that Kilpatrick and Beasley — both pension fund trustees — secretly accepted gifts from MayfieldGentry Realty Advisors, who had recommended the pension funds invest $117 million in a real estate investment. The deal went through, but the travel and other perks to Kilpatrick and Beasley were kept secret while MayfieldGentry raked in millions in management fees, the SEC said.

Chauncey Mayfield, CEO of MayfieldGentry, also was charged in the scandal. He pleaded guilty to bribery in February 2013, admitting he conspired with Beasley to pay bribes in exchange for new business from the pension funds. The bribes came in the forms of trips and private jet flights to Las Vegas, Florida and Bermuda.


Mayfield, 56, of Ft. Lauderdale, Fla., faces up to five years in prison and a maximum $250,000 fine. He has not yet been sentenced.

The SEC also sought to have Kilpatrick and Beasley permanently barred from having any future involvement with investments in securities by public pensions. But Roberts denied what she referred to as a "poorly briefed request" for a permanent injunction, concluding that the SEC did not "set forth facts" that warranted an injunction.

Beasley, meanwhile, is awaiting trial on separate criminal charges involving the pension scandal. Beasley goes to trial in October on charges he took bribes and kickbacks in a scheme that cost two pension funds $84 million in losses. He has repeatedly denied any wrongdoing.
Post Fri Aug 01, 2014 6:48 pm 
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