Real Estate Developers Jailed for Laundering Construction Loan Proceeds

Allison Tussey —  May 20, 2015 — Leave a comment

Franklin Thad Harris, 59, and Merlin D. Unruh, 53, both of Grand Junction, Colorado, were sentenced by U.S. District Court Judge Christine M. Arguello to serve 36 months and 28 months in federal prison, respectively, for money laundering.

Following their prison sentences, Harris and Unruh were ordered to serve three years each on supervised release. They were also ordered by Judge Arguello to pay $1,844,846.49 in restitution joint and several to the victim bank.

Harris and Unruh were indicted by a federal grand jury on January 8, 2013, for charges of bank fraud and money laundering. The indictment remained under seal until their arrest on January 11, 2013. A superseding information was filed on April 14, 2014. Harris and Unruh plead guilty to one count of money laundering on July 17, 2014. They were sentenced on May 6, 2015.

According to information contained in court documents, including the stipulated facts contained in their plea agreements, Harris was in the business of constructing housing developments throughout the Grand Junction, Colorado, area. In the mid to late 2000s, Harris was involved in the purchase of several acres of land for various planned housing developments in Grand Junction.

Financing for the projects came in the form of secured loans from First National Bank of the Rockies (FNBR). Harris’s partner, Unruh, was in the construction business and was the general contractor on building projects with Harris. TDSM was a Colorado real estate development company incorporated in February 2003 and Harris and Unruh were sole members of the board of directors of TDSM. Harris was the President and Registered Agent of TDSM. Unruh was Secretary/Treasurer of TDSM. Unruh incorporated and was the registered agent for McGleeson, Inc., a construction company.

In 2010, several construction loans to Harris had become problem loans as they were in default with FNBR. The Special Assets Department of FNBR began to review the loans and identified potential fraud and requested an outside forensic audit which eventually lead to federal law enforcement agencies being notified.

Between October 2007 and December 2008, Harris and Unruh obtained loan disbursements totaling $3,718,351.83. They submitting false and fraudulent expense documentation, primarily false invoices, which represented various types of construction work completed at both sites. In fact, much of the work reflected in the invoices had not been performed at the Chatfield site, and no work was done on the Thunder Valley development.

An analysis of the flow of funds and found Harris and Unruh, on numerous occasions, conducted a series of financial transactions after the draw money was deposited into their construction business account. They diverted funds meant to pay subcontractor invoices to private bank accounts and retirement accounts owned/controlled by them and their spouses.

The United States Attorney’s Office, the Federal Bureau of Investigation and IRS Criminal Investigation announced.

This case was investigated by agents with Federal Bureau of Investigation (FBI) and IRS Criminal Investigation (IRS CI). The case was prosecuted by Assistant U.S. Attorney Michelle Heldmyer.

Allison Tussey

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