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August 25, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

Developer pleads guilty to fraud scheme that cost investors $69.6M

Real estate developer John DiMenna pleaded guilty on Monday before U.S. District Judge Victor A. Bolden in Bridgeport to two counts of wire fraud stemming from an extensive real estate investment and financing scheme involving hotel and apartment building projects in Fairfield County.

The 74-year-old DiMenna, a resident of Vero Beach, Florida, faces up to 50 years in prison.

According to U.S. Attorney for the District of Connecticut Deirdre M. Daly and court documents, DiMenna and his business partners operated through various entities, including Seaboard Realty LLC, Seaboard Stamford Investment Group and Seaboard Properties Group LLC.

DiMenna is accused of selling membership interests to outside investors in each LLC that owned or was to buy a designated commercial property. DiMenna also sold interests to investors in other LLCs that did not own specific properties but were to have some involvement in certain projects.

According to Daly, various financial institutions and other entities provided millions of dollars in financing to buy, renovate or construct DiMenna’s commercial real estate projects. DiMenna oversaw each project, including each entity’s profitability, its cash flow, operating cash needs and any additional funds needed for repairs or renovations.

Between approximately 2010 and March 2016, DiMenna “engaged in a scheme to defraud investors and financial institutions,” Daly said. “Knowing that certain of his properties were not cash-positive, and without disclosing this fact to investors and lenders, DiMenna used funds from separate cash-positive entities to support capital improvements, construction and operating expenditures in other LLCs that needed the cash.”

DiMenna also used funds from cash-positive entities to continue to make required interest and preferred returns to investors of any entity that he managed, regardless of the true available cash that an entity might have to fund such payments, she said.

The government contends that, through this scheme, victim investors lost approximately $28 million and victim lenders lost approximately $41 million, for a total combined loss of $69,617,685.38.

DiMenna is free on a $250,000 bond pending sentencing, a date for which has not yet been scheduled.