CINCINNATI - Kenwood Towne Place developer Matt Daniels was portrayed as a victim and a scapegoat in opening arguments of his long-awaited bank fraud trial in a Cincinnati federal courtroom Thursday.
“Mr. Daniels did not take a dime that he was not entitled to,” said defense attorney Ben Dusing, in what amounts to the developer’s first substantive response to four years of allegations flowing from the collapse of a retail and office project at Interstate 71 and Montgomery Road.
Dusing said Daniels is still owed $3 million for construction fees and that the project failed for a lot of reasons that were nobody's fault.
“Mr. Daniels absolutely takes responsibility for the failure of the Kenwood Towne Place project,” Dusing said. “He’s the guy at the top. He’s not looking to escape responsibility. (But) the evidence does not support, the logic doesn’t allow that there was intent to defraud.”
Kenwood Towne Place was announced as a $175 million project when ground was broken in 2007. By the end of 2008, unpaid contractors walked off the job and filed millions of dollars in liens against the real estate. Bank of America filed a foreclosure action in 2009, leading to the sale of the unfinished project in 2012. New owner Phillips Edison & Co. has since rebranded the project as a luxury retail center, The Kenwood Collection.
Daniels, a partner in Bear Creek Capital LLC, partnered with three other investors to build the project. Last November, he was indicted on one count of conspiracy to commit bank fraud, one count of bank fraud, seven counts of mail fraud, seven counts of wire fraud, eight counts of money laundering, and one count of obstruction. If convicted, he faces up to 10 years in prison on the money laundering counts, 20 years for obstruction and 30 years on all other counts.
Daniels appeared relaxed and confident when he walked into the courtroom of U.S. District Judge Michael Barrett. He smiled and greeted family members who showed up to support him.
“This case is about lies, greed and more lies,” said Assistant U.S. Attorney Jessica Knight. Her opening statement alleged Daniels lied to secure a $96 million loan for the project, directed proceeds of the first loan draw to be used to cover his personal expenses, then lied again to hide the misuse of funds.
Knight said Daniels employed a “silo approach” to manage Bear Creek development projects. He’d meet with employees one on one and “expected them to carry out his decisions,” she said. Among those employees was Chief Financial Officer Tina Schmidt, who reached a plea agreement with prosecutors and is expected to testify against Daniels.
“She is in the best position to tell you how this criminal conspiracy operated,” Knight told jurors. “It will be corroborated with the testimony of others and physical evidence.”
Attorney David Kern told WCPO recently that Schmidt’s testimony will be critical to proving the case against Daniels because the developer’s name doesn’t appear on documents in which false statements were made to the Bank of America.
Dusing hammered that point home in his opening argument, even as he attacked Schmidt’s credibility.
“For the first two years, after the failure of this project, Schmidt told everybody everything was fine. Then one day she signs a plea agreement,” Dusing said. Now, her statement is "not only that did she do something wrong. She was directed to do something wrong.”
Dusing said Daniels wasn’t aware of false statements made by Schmidt on loan draw applications to the bank. Neither was he aware that the project’s construction manager was failing to update accounting records with change orders to the project. He blamed bank employees for failing to properly administer loan documents. And he blamed tenants, whose aggressive timetables forced the project to start construction before plans were final and loans in place.
But most of all, Dusing blamed Daniels’ former business partner Tim Baird, who he said repeatedly went to the Federal Bureau of Investigations to request a criminal inquiry.
“When Kenwood Towne Place blew up (Baird) uniquely seized upon the failure of that project to exert leverage on Mr. Daniels,” Dusing said. “He set in motion a nice little plan that ultimately brings us here today…it was a calculated plan to set Mr. Daniels up.”