UPTOWN — Developers of the Uptown Goldblatt's building, site of the now-shuttered Borders bookstore, have been charged with defrauding the city and several banks of $3 million.
Laurance Freed, 51, of Chicago, and Caroline Walters, 53, of Palatine, top executives with Joseph Freed and Associates (JFA), a prominent city developer, were hit Thursday with a 14-count federal indictment charging bank fraud, mail fraud and making false statements to banks.
According to the complaint, the Freed firm made a deal to develop the building in 2002, receiving commitments from the city for $6.7 million in Tax Increment Finance funding, and mortgaged it to the Cole Taylor Bank for a loan originally set at $15 million and later lowered to $9 million. The deals specified that, if the firm defaulted, city payments would stop, and the bank would get the building.
The complaint charges that, later in the decade, the firm "was in the middle of a severe liquidity crisis that jeopardized its ability to pay operating expenses. Freed and Walters were aware of JFA's need for cash and the possibility that JFA's inability to make required payments threatened the company's future."
The complaint goes on to charge that, from March 2008 to "at least" February 2011, Freed and Walters defrauded banks and the city, in part by citing the Goldblatt's building as collateral with a consortium of other banks led by Bank of America in an attempt to open a $105 million line of credit that would provide the firm with instant liquidity. They were also charged with filing false affidavits to the city to collect $1.7 million in TIF funds to establish liquidity, money that, like the building, was technically committed to Cole Taylor Bank.
In response to the indictment, firm president Freed issued a statement saying: "I am deeply disappointed by today's events, in which I and another individual have been charged. My firm is a family real-estate development company. For nearly 50 years, we have worked hard to earn a place of respect in the community and the real-estate industry. We have successfully completed numerous building projects that were good for the company, the community and the City of Chicago. And, in this difficult economic climate, we are working hard towards resolving remaining financial issues with our lenders. We remain committed to doing good work in our city, to resolving our financial issues and to supporting our many loyal employees.
"We take the charges in this case extremely seriously," Freed added. "We will review them with our attorneys and intend to respond appropriately to them."
The firm has been credited with developing the Block 37 site and Louis Sullivan's Carson, Pirie, Scott building on State Street, now home to a Target and known as the Sullivan Center. Walters is vice president and treasurer of the firm.
The city, Cole Taylor Bank and the consortium of banks were listed as the main victims.
New U.S. Attorney Zachary Fardon announced the indictment Thursday, and the government will be represented in the case by Assistant U.S. Attorney Renato Mariotti.
Each count carries a maximum 30-year sentence and a $1 million fine, and restitution is mandatory. The indictment seeks $3 million in alleged fraud proceeds.