Trending
The state auditor is seeking nearly $7.87 million in findings for recovery from developer Dominic Marchionda, several of his companies, his wife, a business partner and former Youngstown Finance Director David Bozanich, and for the city's business development fund to pay $500,000 each to the water and wastewater funds.
It's all connected to the improper use of city money and the failure to pay back state loans on three Marchionda projects: Flats at Wick student-housing complex, and the Erie Terminal Place and Wick Towers, both of which are downtown housing buildings.
The Vindicator reported Aug. 22 on letters sent to the people and companies listed in today's special audit seeking $7,866,389 in findings.
"This type of corruption has a history of running rampant throughout the city of Youngstown and the citizens deserve better," Auditor Keith Faber said.
He added: "Laws and financial guidelines are in place to avoid fraud and abuse. However, when the wrong people are put in a position of public trust, their greed and duplicity gets the better of them. I am glad they are being held accountable and justice will be served."
Faber thanked city officials for cooperating "throughout this process and the current administration's efforts to move past these types of practices."
A criminal investigation into illegal activity at city hall with development projects led to guilty pleas Aug. 7, 2020, by Marchionda to four felony counts of tampering with records and by Bozanich to a felony count each of tampering with records and bribery as well as two misdemeanor counts of unlawful compensation of a public official.
Bozanich served 11 months in prison on the convictions, which included one directly related to the audit's findings for recovery. Marchionda was sentenced to five years of probation and 1,250 hours of community service for falsifying invoices for Erie Terminal.
The largest finding for recovery in today's audit is $6,576,378 against Marchionda; James Pantelidis, co-founder and principal at Pan Brothers Associates, his New York City-based partners;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 $6,576,378 was owed on the loan, increased because of interest and collection costs, as of July 9.
In addition to that, there is 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.
Also listed as responsible for the finding for recovery for the $161,326 unpaid balance owed are Youngstown Acquisition Holdings LLC and Legal Arts Properties LLC, both owned by Marchionda and Pantelidis.
Those listed on the $294,077 unpaid balance owed include Marchionda and his wife, Jacqueline, who are managing members and guarantors of U.S. Campus Suites LLC, which received the loan, as well as that company, Erie Terminal Place LLC, DJD&C Development Inc. and DJM Rental Properties LLC. Dominic Marchionda is the president and / or authorized member for each of the companies.
"As a result of the forensic audit and investigation, the loan agreements were found to be in default for evidence of fictitious invoices, use of loan proceeds to pay personal expenses, and, in the case of the energy loan, a failure by the developer to disclose his role in Rubino Construction, which received payments from loan proceeds in violation of the terms of the loan agreement," according to the audit.
The loans are in default and were turned over to the state attorney general "as bad debt for collections," the audit reads.
The audit states Dominic Marchionda provided false documentation to the city for a $600,000 grant for Erie Terminal Place claiming it had additional expenses in that amount. However, it required only $248,941 for unexpected water and wastewater costs and "false documentation" was used as support, according to the audit.
The city expected the developer to cover the first $380,000 in additional expenses so a $220,000 finding was issued for "public funds converted or misappropriated by the developer," according to the audit.
FIRE STATION ISSUE
A $200,000 finding was issued against Marchionda, Bozanich and U.S. Campus Suites LLC for a scheme that led to the disgraced former finance director's conviction on tampering with records.
At Bozanich's recommendation, city council gave $1.2 million -- half from the water fund and half from the wastewater fund -- to Marchionda on Nov. 19, 2009. In return, Marchionda 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 city isn't permitted to transfer money from the water and wastewater funds to the general fund. That's why Bozanich created a way to get money to prop up the ailing general fund.
"The remaining $200,000 was kept by the developer for his participation in the money laundering scheme perpetuated by" Bozanich, according to the audit.
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 -- it was actually worth $411,388 at the time of the purchase, the audit states.
There's a 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 would also 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, with half from water and half from wastewater, and the $1 million for the fire station is a finding for recovery against Marchionda, Bozanich and U.S. Campus Suites with $100,000 owed to each those two city funds.
The fire station property was used to secure the brownfield loan for Erie Terminal, according to state auditor documents.
Because the $1 million was improperly moved between accounts, the audit calls for a finding for adjustment against the city for that amount and ordered that the business development fund give $500,000 each to the water and wastewater funds.
dskolnick@vindy.com