YOUNGSTOWN, Ohio – A pair of court actions, one a criminal complaint and the other a civil matter, could shed light on how investors’ money was used – and in some cases not used – for Youngstown’s Chill-Can project.
Two investors who say they’ve plowed more than $1.5 million into the would-be beverage can manufacturing complex look to recoup their money not just from their former broker under indictment in Erie County, Ohio, but also from project developer Mitchell Joseph and his companies.
Keith Riegelsberger of Avon and Kathy Conn of Avon Lake filed a complaint Aug. 25 in Lorain County Common Pleas Court that seeks damages “in excess of $1.5 million” from jailed securities dealer Garry Savage, his company Coast to Coast Chill, Inc., and M.J. Joseph Development Corp., the company that proposed and promised the Chill-Can venture.
The complaint also names Joseph, chairman and CEO of M.J. Joseph Development, and Joseph Company International, based in Irvine, Calif., as defendants.
Two now-defunct companies affiliated with Savage – Wall Street Strategies Inc. and Advanced Strategies Agency Inc. – are also named as defendants in the complaint, as is Jeffrey S. Ward, former vice president of Advanced Strategies.
The lawsuit comes as prosecutors pursue a criminal case against Savage, arrested in April in Florida and charged with 86 felony counts, 18 of them for securities fraud. Savage, 78, was extradited to Erie County in May, posted bond in June, but was rearrested in August after violating the terms of his release, according to records.
Prosecutors say Savage defrauded 13 residents of Ohio – including Riegelsberger – and diverted money intended for Chill-Can through his company, Coast to Coast Chill Inc. Instead, he allegedly used the funds to pay off other investors, himself, personal credit cards and other debts.
Some of this money ended up with the Joseph Co. as well, according to a bill of particulars filed in the Savage criminal case.
These civil and criminal filings provide more clarity as to how the Joseph Co. could have secured funding for its Chill-Can Youngstown venture, which after six years has failed to produce a single can or create jobs.
It’s a question city attorneys have asked for months as they seek answers in their own civil case against M.J. Joseph Development, a division of Joseph Company International.
“I’m sure our attorneys will want to appreciate the scope of all monies in and out of Mitchell Joseph’s companies for the Chill-Can property,” says Youngstown Law Director Jeff Limbian. “To my knowledge, there has not been sufficient information provided [to the city] by Mitchell Joseph.”
One potential investment source of money to Joseph is Coast to Coast, which Savage created and incorporated in Nevada to procure investors for the Chill-Can project, according to court documents.
Riegelsberger’s complaint says he invested $1,514,300 or so in Coast to Coast Chill with the understanding that it would be used to fund the estimated $18.8 million Youngstown project and not for other purposes. The complaint further alleges that $1,343,550 of that money ended up with the Joseph Co.
According to court documents filed in the criminal case, prosecutors cite 15 separate transactions between July 15, 2016, and Oct. 16, 2017, where Riegelsberger’s investments were funneled through Coast to Coast to the Joseph Company, just as the Youngstown project was in its infancy.
On July 15, Aug. 9, Aug. 15, and Oct. 17, 2016, for example, a total of $375,000 of Riegelsberger’s money went “all to Joseph Company,” court records show. The government lists subsequent transactions over the next year, the single largest occurring on March 23, 2017, when Joseph Company received a $300,000 infusion from Riegelsberger through Savage’s company.
Prosecutors also say that Joseph Company received investments from Savage’s other alleged victims. Larry and Roxanna Craft, for example, invested $375,000 with Savage on Nov. 29, 2016, according to documents.
“Savage told them they would receive 20% returns on their investment, which they would get back in no more than five years,” court records state. “Bank record analysis indicates that the majority of their funds were transferred to JCI [Joseph Company International].”
On Feb. 16, 2017, Karen Geiger invested $50,000 in Coast to Coast Chill through Savage, documents show. “Savage told her that her funds would be used to construct the Youngstown, Ohio, manufacturing plant and to advertise and acquire beverage companies who would use the cans for their products. Bank records indicate that Geiger’s money was transferred to JCI,” the government says.
Gloria and Carl Lee invested $125,000 with Coast to Coast on Aug. 28, 2017, of which $39,950 was transferred to the Joseph Co., court documents show.
According to a client letter from Savage obtained by The Business Journal dated June 29, 2021, Savage said he had secured “$10 million of a $12 million total equity raise” for the Youngstown project. Joseph has said Savage no longer has rights to the Youngstown Chill-Can.
Mitchell Joseph said April 2021 in a statement that his company had used $5 million of its own funds toward the Youngstown project. In August, however, the company’s attorney, Brian Kopp, said during a court hearing that M.J. Joseph incurred some $2.9 million in labor costs, materials and equipment for the Chill-Can campus.
No explanation has been given for the discrepancy in numbers.
While prosecutors have traced investors’ funds from Savage to the Joseph Co., it’s unclear whether Joseph used Coast to Coast money specifically on the Youngstown Chill-Can plant.
“This indictment in this case is NOT [emphasis the government’s] about whether or not the product was legitimate, it is not about what happened to any investor money once it was received by the Joseph Brothers,” state the bill of particulars.
The city hopes to have more answers on Sept. 30, when its attorneys begin taking depositions in its case.
Attorneys plan to depose an “authorized representative” of M.J. Joseph Development Corp., possibly Mitchell Joseph, who can attest to the facts under oath, Limbian says.
This would include providing information related to “all funds received from Garry Savage and/or any entity owned or controlled by Garry Savage,” according to the deposition notice. The scope of the examination would also include “all agreements, business relationships, communications with Garry Savage.”
The city sued M.J. Joseph Development Corp. in June 2021 over the stalled Chill-Can project and seeks more than $2.2 million in damages. The city says Joseph breached two development agreements signed in 2017 that awarded the project $1.5 million in development grant funds and a 75% tax abatement on new construction.
The city says the company has failed to complete the project and to create the 237 jobs it promised in legal agreements. The city seeks restitution on the $1.5 million grant, $414,948 it spent on the acquisition of property at the 21-acre site, and $318,532 in demolition and abatement costs.
M.J. Joseph’s attorney, Kopp, has argued that the pandemic prevented the project from moving forward.
Three empty buildings sit at the site and not a single can has been produced.
The city recently rejected a settlement offer from M.J. Joseph Development, Limbian says, and there have been no subsequent offers to settle.
“We’ll be going to trial,” Limbian says. The trial is set for Oct. 17.
Pictured at top: The Chill-Can saga transitions into civil and criminal cases filed in Lorain, Erie and Mahoning counties.