A press release from the U.S. Attorney’s Office:

Real Estate Developer Sentenced to Three Years in Federal Prison for Defrauding Banks and the City of Chicago

CHICAGO — A federal judge today sentenced a Chicago real estate developer to three years in prison in connection with a fraud scheme related to a $105 million line of credit secured by city and suburban properties, including the Streets of Woodfield Mall in Schaumburg.

The fraud perpetrated by LAURANCE H. FREED, the president of Joseph Freed & Associates LLC, also involved the theft of millions of dollars from his business partner, Kimco Realty Corp.  Freed also fraudulently obtained more than $575,000 in publicly funded loans from the city of Chicago, and attempted to fraudulently obtain an additional $1 million from the city.

A federal jury last year convicted Freed, 54, of Chicago, on three counts of bank fraud, one count of mail fraud, and four counts of making a false statement to a financial institution.  In addition to the 36-month prison term, U.S. District Judge Robert M. Dow also fined Freed $250,000, and ordered him to pay $575,759 in restitution to a victim bank.

The sentence was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph M. Ferguson, Inspector General for the City of Chicago.

“These were serious offenses that merit serious punishment,”Assistant U.S. Attorney Matthew F. Madden argued in the government’s sentencing memorandum.  “The defendant was at the heart of this scheme to defraud and the lies told in furtherance of it.”

The investigation also resulted in the conviction of JFA’s vice president, CAROLINE WALTERS.  Walters, of Palatine, pleaded guilty last year to one count of making a false statement to a financial institution. Judge Dow previously sentenced Walters to six months in prison.

According to evidence at Freed’s trial, the city of Chicago in 2002 issued two Tax Increment Financing notes to Uptown Goldblatts Venture LLC, a company formed by JFA to redevelop the former Goldblatt’s store in the Chicago’s Uptown neighborhood.  The TIF notes had a combined principal of $6.7 million, and Freed pledged one of the notes to Cole Taylor Bank as collateral.

Four years later, JFA-affiliated entities entered into agreements with a bank consortium for a revolving line of credit worth up to $105 million.  Uptown Goldblatts became a borrower under the revolving loan agreement through a subsequent deal with LaSalle Bank, which was one of the banks in the consortium and had recently been acquired by Bank of America.  In the LaSalle deal, Uptown Goldblatts pledged the two TIF notes as collateral and also represented that the notes were owned free of other secured interests.  The deal did not mention that one of the notes had already been pledged to Cole Taylor.

Evidence at trial also revealed that in 2009 and 2010 Freed signed false affidavits seeking to obtain more than $1.5 million in TIF payments from the city, knowing that he was not entitled to the payments.

As Freed’s business experienced financial difficulties, he withdrew more than $7 million from the Streets of Woodfield partnership without the knowledge and consent of his business partner Kimco, which owned 45% of the venture.  Freed fraudulently recorded the money as “loans.”