Capano gets prison in Riverbend development case
A federal prosecutor and Riverbend homeowner react to the prominent developers sentence. Jessica Masulli Reyes, The News Journal
Developer sentenced to 21 months in federal prison
Longtime developer Joseph L. Capano Sr. promised buyers that he would build hundreds of high-end homes in the Riverbend community in south New Castle. Instead, years later, the community sits nearly empty, with a dried-out pool, unfinished clubhouse and entrance road that appears to be sinking into the marshy wetlands.
The few homeowners still living in Riverbend found some solace Wednesday as Capano, 75, was sentenced in U.S. District Court in Wilmington to 21 months in federal prison, followed by a year of home confinement for crimes that contributed to the downfall of the development.
"I thought I would be there for the next 30 years, but now it looks really grim," said one homeowner, Calvin Mincey. "Because of that, he should have received more time."
Capano – a member of the prominent and notorious Delaware family of businessmen, developers and politicians – pleaded guilty in March to one count of bank fraud and one count of knowingly violating the Clean Water Act.
By doing so, he admitted to personally using at least $146,909.96 in loan proceeds from a line of credit that was earmarked for the construction of the Riverbend at Old New Castle and telling workers to expand an entranceway and place utilities for the development through protected wetlands off Del. 9.
Acting U.S. Attorney David C. Weiss said after the sentencing that the development community should take notice of Capano's punishment.
"The development community for good reason ... is a highly regulated industry, and it is important you comply with the environmental laws and certainly the banking laws," he said. "In this particular instance, Mr. Capano exhibited a disregard for these laws and the court sentence today sent a message to him and others that that cannot be tolerated and there will be a penalty and a price to be paid."
The sentencing was just the latest chapter of the Riverbend saga, which included a tangled bankruptcy fight and civil case.
The development was funded in 2007 by two loans from Cecil Bank. One was a $1.5 million commercial line of credit; the other was a $4.75 million acquisition loan to purchase the property.
Capano misused the money from the line of credit for personal expenses and other businesses, rather than improving Riverbend, according to court documents. He also lied to Cecil Bank about the health of the development in order to keep money flowing.
For example, Capano submitted a draw request seeking $300,000 for various Riverbend Development expenses on Dec. 21, 2007. Instead of using the funds for Riverbend Development expenses, Capano used some of the funds to pay for jewelry and other personal expenses, the court documents said.
Capano also admitted to directing employees and contractors of his company to expand an entrance road into the development and place a water main pipe through protected wetlands, even as the Army Corps of Engineers instructed him to stop doing so and issued a cease-and-desist letter, according to court documents.
On Thursday, Assistant U.S. Attorney Jennifer Welsh called this the "Joe Capano way" of doing business.
"This just appears to be plain old greed and arrogance," she told U.S. District Judge Sue L Robinson.
Welsh said Capano has continued to try to mislead authorities by not providing financial statements that would help the government determine how much restitution he can pay. The judge ordered him to pay approximately $685,000 in restitution and a $50,000 fine for the Clean Water Act violation.
"The defendant is a sophisticated businessman and knows exactly what he is being asked when asked about his assets," she said.
Capano's attorney, Eugene Maurer, said the government's characterization that Capano is trying to hide money is wrong. He attempted to provide the court with his most accurate financial documents, but found some details difficult because his accountant is ill and his wife, who owns their home, has been uncooperative, Maurer said.
"He is just an aged, broken person," Maurer said. He added that the Riverbend project appears to have been his "undoing."
Maurer asked the judge for limited prison time in light of Capano's age, recent heart attack, lack of criminal history and the fact that he accepted responsibility for his crimes. The government asked that he be sentenced within the guideline range of 37 to 46 months in prison.
The judge ultimately went slightly beneath the guideline range and ordered Capano to surrender to begin his sentence on Oct. 3.
"We are very grateful she went below the sentencing guidelines," Maurer said, adding that he and Capano's family hope the short prison time will not cause a relapse in his poor health.
A handful of homeowners at the sentencing Thursday said the prison sentence does little to make them whole again. Marvin Thomas said the outlook on his Riverbend home is not promising unless another developer finishes the project. If he tries to sell in the future, he could face substantial loss in terms of the value of his home.
"We are left with pretty much nothing," Mincey said. "I am not happy about that at all."
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