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Federal investigators have accused Matt Daniels of diverting loan proceeds from the Kenwood project for his personal use, including a $500,000 down payment on a yacht, and lying to the bank to secure loan draws.
After four years of lawsuits, millions of documents, thousands of hours spent by investigators and in the end the Kenwood Towne Place fraud trial all boils down to a simple case of he said, she said.
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Kenwood Towne Place interior
CINCINNATI - After four years of lawsuits, millions of documents, thousands of hours spent by investigators, in the end the Kenwood Towne Place federal fraud trial all boils down to a simple case of he said, she said.
That’s the view of local attorneys who’ve been involved in the Kenwood controversy for years, attorneys who watched much of the bank fraud trail of Kenwood Towne Place developer Matt Daniels.
“Daniels’ testimony was completely contradictory with that of his own CFO, Tina Schmidt,” said David Kern, a Roetzel & Andress law firm partner who represented the Bank of America in a 2009 foreclosure case on the project. “The question the jury is now deciding is whether this ‘he said, she said’ is enough to create reasonable doubt.”
The case went to the jury Thursday afternoon after two days of testimony in which Daniels denied any direct involvement in the diversion of loan proceeds to himself and false communications to the Bank of America, which financed the construction of the $175 million mixed-use project. The project ground to a halt in late 2008. It was sold in foreclosure last summer and has since been rebranded as The Kenwood Collection.
Daniels is facing 23 counts of fraud and conspiracy, the government alleging that Daniels directed and participated in false statements to the bank.
“This case is about lies, greed and more lies,” Assistant U.S. Attorney Jessica Knight said in her opening statement. She said 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. U.S. District Judge Michael Barrett is presiding in the case.
Tina Schmidt was the first to be indicted in the Kenwood Towne Place case, but she struck a plea agreement with prosecutors and agreed to testify against Daniels. Government attorneys corroborated Schmidt's testimony with two accountants who worked for Daniels and Schmidt at Bear Creek Capital LLC. An IRS agent explained where the money went.
But former federal prosecutor Ralph Kohnen, now a partner with the Taft law firm downtown, said the case comes down to "how much credibility the jury gives the testimony of Tina Schmidt." Kohnen's clients include Daniels' former Kenwood partner Tim Baird.
“There’s no doubt that Tina Heink-Schmidt was their star witness,” said Patrick O’Neill, a litigator for Benjamin Yocum & Heather, which represented several contractors who completed work at Kenwood Towne Place but were not paid. “If they believe her, she did say enough (for Daniels to be convicted). The scope of her testimony was that Matt Daniels was fully informed and fully aware of the goings on of the Kenwood Towne Place project.”
The trial turned dramatic when Daniels took the stand earlier this week. He broke down while testifying when he recalled a 2010 settlement attempt that fell through at the last minute.
“People are stupid,” he told the jury , then walked away from the witness stand before regaining his composure and apologizing for his anger.
“I think it was probably the seminal moment of the trial,” O’Neill said. “I don’t know what the jury took away from it, but I’m sure they took something away from it.”
O’Neill spent months investigating Daniels and other Kenwood Towne Place partners and was shocked that the developer testified in his own defense. He also didn’t believe Daniels, but thinks jurors might.
“He was the most involved of any of the managing partners,” O’Neill said. “For him to get up on the stand and allege that he had no knowledge strains the bounds of credibility.”