The state auditor is asking for $7.87 million in potential findings for recovery against developer Dominic Marchionda and others. The largest amount, by far, is for Wick Towers in downtown Youngstown for the default on two state loans to construct the building.

YOUNGSTOWN — The state auditor could seek $7.87 million in findings for recovery from developer Dominic Marchionda, several of his companies, his wife, a business partner and ex-Youngstown Finance Director David Bozanich for improper use of city money and failure to pay back state loans on three projects.

Marchionda and the others recently received “notice of proposed findings” letters from Tiffany L. Ridenbaugh, chief forensic auditor for the state auditor’s special investigations unit.

The letters also were sent to various city officials.

Copies of the confidential letters were obtained by The Vindicator.

Allison Dumski, an auditor spokeswoman, said: “Our policy is to not discuss ongoing work until it’s completed.”

The letters are considered drafts until the audit is finalized and a report released, but the state is planning to seek $7,866,389 from Marchionda and the others — including James Pantelidis, co-founder and principal at Pan Brothers Associates, his New York City-based partners — for projects that also were the subjects of criminal investigations.

Those projects are the Flats at Wick student-housing complex as well as the Erie Terminal Place and Wick Towers, both of which are downtown housing buildings.

Marchionda said: “I’m in receipt of it, and I disagree with the findings and the basis of the findings. It has to be reviewed.”

David Rizzuto, director of management for Pan Brothers, said: “We’re in receipt of the notice, and we disagree with the findings and the basis of the findings and we are working on a timely response.”

Rizzuto added: “We don’t feel we owe this money.”

Asked to comment, Bozanich said: “Leave me alone” and hung up on a reporter.

Bozanich was released from state prison July 25 after serving about 11 months on four convictions including one directly related to the state audit’s potential findings.

City officials acknowledged they received letters, but declined to comment or disclose them as they’re not public documents under the state’s open records law.

THE DETAILS

The largest potential finding for recovery is $6,576,378 against Marchionda, Pantelidis and Wick Properties LLC — which has the two men as managing members — for an unpaid Ohio Development Services Agency energy loan from Sept. 25, 2013, to help fund the construction of Wick Towers.

An aggravated theft charge against Wick Properties LLC was dismissed Aug. 7, 2020, as part of a plea deal related to the initial $5,008,400 loan in order to make it easier to pay it back.

But in Ridenbaugh’s letter to Marchionda, she wrote $6,576,378 was owed on the loan — increased because of interest and collection costs — as of July 9.

That loan along with an ODSA brownfield loan for Wick with an unpaid balance of $161,326 as of July 9 and an ODSA brownfield loan for Erie Terminal Place with an unpaid balance of $294,077, also as of July 9, have been turned over to the state attorney general “as bad debt for collections. The loans were in default for technical reasons as proper documentation was not provided to DSA,” according to Ridenbaugh’s letter.

Also, the agreements for the brownfield loans were violated because of Marchionda’s indictment and subsequent convictions, the letter to the developer reads.

The first loan was signed by Marchionda and Pantelidis as managing members of Wick Properties LLC and secured by Youngstown Acquisition Holdings LLC and Legal Arts Properties LLC, also with both men as managing partners.

“We’re working to get the loan paid off,” Rizzuto said.

Marchionda said: “We’re working on the refinancing of the brownfield loans. We’re working diligently on getting refinancing.”

The Erie Terminal Place loan was initially for $800,000 and signed by U.S. Campus Suites LLC with Marchionda and his wife, Jacqueline, as managing members and guarantors of the loan, on Sept. 21, 2011. The loan was secured by mortgages held by Erie Terminal Place LLC, U.S. Campus Suites LLC, DJD&C Development Inc. and DJM Rental Properties LLC, with Dominic Marchionda as the president and / or authorized member for each company.

The Marchiondas and all of the companies were listed as having the finding against them.

YOUNGSTOWN SCHEME

The proposed findings also involve a scheme that led to Bozanich being found guilty of felony tampering with records. He also was convicted Aug. 7, 2020, of a felony county of bribery and two misdemeanor counts of unlawful compensation of a public official.

The tampering conviction was for giving $1.2 million from the city’s water and wastewater funds to Marchionda on Nov. 19, 2009, if the latter gave $1 million back to the city’s general fund to buy the former Madison Avenue fire station property. That illegal transaction allowed Bozanich to balance the city’s general fund that year.

“The remaining $200,000 was kept by the developer for his participation in the money laundering scheme,” Ridenbaugh wrote.

A charge against Marchionda related to the fire station issue was dropped when he pleaded guilty Aug. 7, 2020, to four felony counts of tampering with records after admitting he used false invoices to get money from the city for the Erie Terminal project to pay bills he owed for the Flats at Wick.

While the city sold the fire station for $1 million — and leased it from Marchionda’s company until closing it in December 2019 when the rental deal expired — Ridenbaugh’s letter states it actually was worth $411,388 at the time of the purchase.

There’s a proposed finding for that $411,388 to be paid to the city’s fire fund by Marchionda, Bozanich and U.S. Campus Suites and the two men and the company also would need to pay $3,220 to the city’s business development fund for the closing costs for the station sale.

Also, the $200,000 difference between the $1.2 million — half from water and half from wastewater — and the $1 million for the fire station is a potential finding for recovery against Marchionda, Bozanich and U.S. Campus Suites with $100,000 owed to each of those two city funds.

The fire station property was used to secure the brownfield loan for Erie Terminal, according to state auditor documents.

The other potential finding relates to a $220,000 grant Marchionda and Erie Terminal got from the city in additional water and wastewater funds on Jan. 3, 2013, for improvements.

The Ridenbaugh letter states Marchionda falsified documentation to the city claiming $600,000 in additional expenses when only $248,941 was required. The city agreed to give grants for a portion of those supposed additional expenses.

“Based on the fact that false documentation was provided as support and that the city was expecting the developer to cover the first $380,000 in additional expenses, a finding for recovery will be issued for the $220,000 provided by the city for public funds converted or misappropriated by” Marchionda. The finding is also against Erie Terminal Place LLC.

GAREA PROBE

Negotiations on a plea deal with attorney Stephen Garea, who was to be a key prosecution witness against Marchionda and Bozanich, and state prosecutors are ongoing.

During a January 2020 pretrial hearing, Garea testified that he asked Philip Beshara, a former president of B&B Contractors and Developers Inc., to talk to Bozanich about helping Marchionda get city funding for the Flats at Wick project. Beshara testified he gave $20,000 to Bozanich in an envelope in spring 2009. There were no convictions related to that.

But Garea testified he waived about $10,000 in legal fees he said Bozanich owed him from a neighborhood dispute Bozanich’s ex-wife had and he didn’t charge the ex-finance director as he expected Marchionda to use the $200,000 from the fire station deal to pay fees owed him by the developer.

One of Bozanich’s unlawful compensation convictions was for not paying the legal fees.

Garea also testified in January 2020 that he was involved in creating the false invoices with Marchionda for the Erie Terminal funding from the city.

In July 2017, investigators seized $66,700 in cash from Garea’s home during a search. Garea testified in January 2020 that most of the cash was money he saved with some coming from winning at golf and that it wasn’t illegally obtained.

During that testimony, Garea said about $55,000 had been returned to him.

Garea is the last person being investigated in the city hall corruption probe that resulted in convictions of Bozanich, Marchionda, former Mayor Charles Sammarone and Raymond Briya, a former MS Consultants Inc. chief financial officer.

Bozanich was the only one who served prison time.