Prolific developer Michael A. Zimmerman said that the federal indictment recently levied against him for bank fraud and money laundering was about making him a scapegoat for the now defunct Wilmington Trust Company's problems with bad real estate loans that led to its sale to M&T Bank in 2011.
Zimmerman, 55, of Dover, was indicted by a federal grand jury for allegedly committing conspiracy to commit bank fraud and for making false statements to a financial institution in connection to millions of dollars of loans he obtained from the now defunct Wilmington Trust for real estate projects in Kent and Sussex counties.
United States Attorney for the District of Delaware Charles M. Oberly III announced the previously sealed indictment on Tuesday, nearly a week after it was first handed down by the grand jury on Jan. 23.
"I am not guilty," Zimmerman told the Dover Post Wednesday. "The feds have not been able to get to the board of directors or the loan committee/loan officers so as [stuff] flows down hill, now it's [on] me."
Zimmerman was charged with one count of conspiracy to commit bank fraud and seven counts of making a false statement to a financial institution, each punishable by a maximum term of 30 years in prison and a fine of $1 million, the U.S. Attorney's Office said.
The indictment also charged Zimmerman with one count of money laundering in violation of federal law. This charge carries a maximum term of 10 years imprisonment and a fine of $250,000.
Zimmerman had obtained more than $37 million in financing from the Wilmington Trust Company in connection with three development projects in Kent and Sussex counties — namely Compass Pointe off Silver Lake and the Shoppes at Fieldstone in Dover and Salt Pond Plaza in Bethany Beach. Wilmington Trust sold the debt for these projects to a third party in March 2011 and incurred a loss of more than $26 million on these three projects, the indictment stated.
The indictment alleged that Zimmerman and still unnamed co-conspirators submitted false draw requests for payment from Wilmington Trust in connection with the Salt Pond Plaza, Compass Pointe, and Shoppes at Fieldstone projects, in 2007 and 2008, federal officials said. Federal investigators alleged that Zimmerman and the others did not use the money the way they told Wilmington Trust it would be used.
"In one instance, Zimmerman requested and received $150,000 in funds from Wilmington Trust that he represented to be for architectural and engineering costs, but instead used the money to finance acquisition of a personal interest in a development in the Bahamas," the press release from Oberly's office said.
Zimmerman said he signed for the draws, but they were produced by a former employee and friend.
"The funds went into a central account that I use for all my deposits and payments. They are trying to match amounts that went in to ones that later went out. I ran $250 million to $500 million through this account in those five years."
Page 2 of 2 - Zimmerman pointed out that his loans from Wilmington Trust were for income producing real estate, rather than problematic residential real estate notes.
"That's why they worked with me for two years prior to sale then discounted the value of my projects and sold my notes to clean up their books and raise cash prior to finalization of the sale of the bank," he said.
In addition, Zimmerman said he put up $200 million in other, non-Wilmington Trust assets as collateral for the loans mentioned by the U.S. attorney.
Zimmerman has owned and operated BBC Properties in Dover since 1996 and has developed properties primarily in Kent and Sussex counties. But, he has also acquired and developed several properties in upstate Delaware, Maryland, Pennsylvania and other parts of the East Coast. He has done several development projects with Food Lion, Harris Teeter, Redner's, CVS and Walgreens, among others. He is also known for such recent developments as the new Bayard Plaza in downtown Dover and the Redner's Market nearing completion in Camden.
Zimmerman said the indictment would not affect any of his current projects. However, it was causing major issues with his partners, he said.
The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, the special inspector general for the Troubled Asset Relief Program (SIGTARP), and the Office of Inspector General, Board of Governors of the Federal Reserve System. The TARP inspector general was involved because Wilmington Trust received money from the so-called federal stimulus package given to banks under then President Bush.
"Defrauding a TARP bank is the same as defrauding American taxpayers who funded the bailout, and SIGTARP and our law enforcement partners will bring to justice those responsible for crimes related to TARP," said Christy Romero, special inspector general for SIGTARP.
Oberly said the indictment reflected his office's commitment to holding accountable "those who criminally contributed to the failure of the Wilmington Trust Company."
"The shareholders and employees of the bank, as well as the community, have been harmed by this failure, and the government remains firmly committed to prosecuting those whose fraudulent acts compromised the soundness and viability of a Delaware institution," he said in a prepared statement. "The investigation continues."
The case is being prosecuted by Assistant United States Attorneys Robert F. Kravetz and Lesley F. Wolf.
Zimmerman, for his part, has retained attorney Dan Lyons, of Lyons Law Firm in Wilmington, as counsel to help him fight the charges.
"It's complicated but I will defend myself," he said. "They wanted me to roll over on the bank and government officials but there is nothing to say. I have done nothing wrong and if there is an accounting error I will correct it."