City Records Shed Light on Companies Caught Up in Corruption Probe

YOUNGSTOWN, Ohio – Invoices submitted by three companies stating they worked on the Erie Terminal project in mid-2011 match up with billing statements that investigators say were falsified so developer Dominic Marchionda could obtain city money for the project, according to documents obtained by The Business Journal.

Marchionda, former Youngstown Mayor Charles Sammarone, and former Youngstown finance firector David Bozanich were indicted Aug. 30 on 101 counts of public corruption. The 78-page indictment includes nine unnamed parties, or “John Does,” and six unidentified companies that are caught up in an ongoing criminal probe related to city development projects.

Documents released by the city late Thursday following a public records request by The Business Journal appear to unveil the identities of at least three of the unnamed companies in the indictment.

Documents show that MS Consultants Inc., B&B Contractors and Developers Inc., and Stephen R. Garea Attorney at Law, each submitted billing records that match exactly with those that investigators claim were fraudulent and used by Marchionda to draw money from the city’s float loan program.

According to the indictment, “Company 1, 2, and 3 all received Erie Terminal float loan money in contravention of the express or implied consent of the city of Youngstown.”

The indictment claims Marchionda persuaded an employee of a business named only as “Company 2” to create a false invoice in 2011 that billed the Erie Terminal project $105,000 when state investigators say the company performed less than $10,000 worth of work on the building.

Records obtained by The Business Journal show that on Aug. 5, 2011, MS Consultants Inc. billed Marchionda a lump sum of $105,000 for design services it says it rendered through July 30, 2011 related to the “Erie Terminal renovation.”

MS Consultants is a longtime architectural, design and engineering firm based in Youngstown. At the time of this posting, a call to the company seeking comment had not been returned.

The billing form submitted by Company 2 was “uttered to the city of Youngstown, who unwittingly paid the $105,000 for the first float loan draw on the Erie Terminal project,” the indictment says.

Marchionda owed Company 2 $170,000 for work it performed on an earlier project, The Flats At Wick, a student-housing complex just north of Youngstown State University, the indictment states.

According to investigators, there is no evidence that anyone in Company 2 – other than the employee who generated it — was aware that the Erie Terminal invoice was false.

In the indictment, the state names an individual identified as John Doe 6 as an employee of Company 2. The state alleges that John Doe 6 provided benefits to Bozanich, Sammarone, and Marchionda “without the knowledge or consent of anyone else at the company.”

As early as 2006, the indictment states, John Doe 6 began paying bribes to Bozanich related to an expansion at Exal Corp. in Youngstown. Court documents say that John Doe 6 paid the former finance director at least $100,000 until mid-2013 through a travel agency that Bozanich co-owned.

B&B Contractors and Developers Inc., then of Youngstown, served as a general contractors on three Exal expansions, states its website, and MS Consultants Inc. was the architect on the projects.

According to the indictment, John Doe 6, John Doe 1 – who sources confirm is former B&B President Philip Beshara – and John Doe 8 were partners in Exal Leasing LLC, a land company not owned by Exal Corp. but whose owners “worked in conjunction with David Bozanich, with at least one of the owners paying David Bozanich a $100,000 bribe or kick back for the economic development project.”

The state also says that John Doe 1, presumably Beshara, paid Bozanich a cash bribe of between $20,000 and $25,000 in order to obtain city support for The Flats at Wick project, on which B&B served as general contractor.

In addition, the state alleges that John Doe 6 provided benefits to Bozanich in the form of meals and golf outings “so Bozanich could assist the company he worked for, secure work in the city of Youngstown, with the city of Youngstown, or to promote projects in the city of Youngstown that would benefit the company he worked for.”

Investigators also allege that John Doe 6 paid Sammarone, while serving as mayor, cash “in return for steering city projects to the company John Doe 6 worked for.” According to investigators, Sammarone was paid $1,000 a month for 23 months.

Marchionda and his investors purchased the Erie Terminal building – now named Erie Terminal Place — from Cleveland developer Lou Frangos in 2011 and successfully redeveloped the building into student apartments.

The city awarded the project a float loan worth $2 million to assist the development effort, which was estimated at $8.8 million. The city also provided a $350,000 wastewater utility grant to support the project. Another $220,000 in wastewater grant money was awarded to the project later.

The state alleges another business, known in the indictment only as “Company 1,” whom sources confirm is B&B, submitted a false AIA application stating that it had performed $90,000 worth of demolition work on the Erie Terminal “when in fact none was done.”

Marchionda owed B&B $90,000 from previous work the company did at The Flats At Wick, the indictment says. The false application caused the city to unwittingly pay $90,000 from the float loan draw, according to court papers.

Samuel DeCaria, then the controller at B&B, signed the application, according to records obtained by The Business Journal, and is believed to be John Doe 3 in the state’s indictment. The application contains a line item of $90,000 for demolition state investigators allege was never done.

The indictment also identifies a “Company 3” that investigators say Marchionda had create an invoice “asserting that it was billing Marchionda/Erie Terminal Place for work it had done at the Erie Terminal in the amount of $35,500, when such was false.”

Instead, documents say that Company 3 performed less than $5,000 worth of work on the project.

Records obtained by The Business Journal show that Erie Terminal Place received an invoice from Stephen R. Garea Attorney At Law for $35,500 for services rendered through Aug. 31, 2011.

The invoice lists 177.5 billable hours at $200 per hour during which the attorney said he negotiated a draft purchase agreement for the building, met with city officials related to economic development and incentive packages, held meetings with Marchionda on state development packages and historical tax credits, and reviewed closing documents.

“In fact, Company 3 performed less than $5,000 work at the Erie Terminal project,” the indictment states.

Garea is widely believed to be John Doe 2 in the indictment. Garea acted as corporate counsel for B&B, Marchionda ,and waived what prosecutors say were $10,000 in legal fees owed to him by Bozanich in return for the city’s support of the Flats At Wick project.

A fourth invoice that the indictment says was tampered with by Marchionda was submitted by a business identified only as “Company 4.” According to the state, Marchionda owed Company 4 $30,000 for work it did at The Flats At Wick project.

Company 4 submitted an invoice of $30,125 to Marchionda, who forwarded it to the city asserting it was for work related to the Erie Terminal building, when it was not, the indictment states.

Records show that an invoice of $30,125 dated Aug. 31, 2011 was submitted to Marchionda from Donald J. Augenstein, CPA Inc. in Canfield.

However, the indictment emphasizes, “Marchionda simply lied to city officials about Company 4’s work. Company 4 was not involved in creating or sending any false invoices.”

Court papers also allege that Marchionda diverted at least $600,000 of public money intended for various development projects for his own personal use.

Pictured at top: Erie Terminal in downtown Youngstown, one of the development projects spearheaded by Dominic Marchionda.

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