For Immediate Release - September 17, 2009

Attorney General Martha Coakley's Office Files Lawsuit Against Developers for Falsifying Profits on Affordable Housing Project in Acton

WOBURN - Attorney General Martha Coakley's Office has filed a lawsuit against Acton-based Crossroads Development LLC ("Crossroads"), its owners James Fenton and Michael Jeanson, as well as a related contractor, James Fenton & Son Contracting, Inc. (JF&S) for violating the False Claims Act (FCA) in connection with falsifying cost statements and profits on an affordable housing development in Acton.

In the complaint filed in Middlesex Superior Court, the Attorney General's Office alleges that the defendants submitted a false cost certification to the Town of Acton in connection with the development of the 12-unit affordable housing complex located on Main Street known as "Crossroads." As a result, the developers fraudulently concealed a large sum of money owed to Acton's Affordable Housing Fund.

Chapter 40B-the state's affordable housing law-encourages the development of affordable housing by granting developers waivers from zoning and other local ordinances and bylaws in return for a commitment to earn a limited development profit. Under Chapter 40B, those developers who benefit from the advantages of the law are limited to a reasonable profit on the affordable housing projects they develop. In this case, Crossroads had an agreement with the Town of Acton that capped its profits at 20 percent of the development costs and any profit above the allowable profit was to be paid to the town's affordable housing fund.

According to the complaint, Crossroads and its principals included costs in its report for services not actually incurred and inflated costs on the project in order to pocket profits and circumvent the 20 percent profit cap allowed under the state's affordable housing law. The defendants claimed they earned less than a 20 percent development profit, when actual profit was much higher. The complaint alleges costs for the project were estimated at approximately $2.7 million with the developers' profit capped at $540,413. However, Jeanson and Fenton exceeded that threshold by adding an additional 10 percent global surcharge to the site work through JF&S, the site work contractor owned by Fenton, charging impermissible amounts for development fees, charging for labor, equipment and fees that were never provided, and charging rates that far exceed costs that were actually paid. None of these excess charges were disclosed.

The complaint also alleges the defendants sold one of the condominiums to an entity they owned at a price lower than market value and then promptly resold the unit at market rate, making $50,000 on the resale. The developers fraudulently concealed this profit. Jeanson and Fenton also charged excessive overhead costs by adding on a baseless 10 percent surcharge to JF&S billing rates, which already included overhead and profit.

The Attorney General's Office began investigating this case last fall after a referral from the Inspector General's Office. The False Claims Act gives the Attorney General the authority to recover, on behalf of the Commonwealth and its political subdivisions, such as cities and towns, triple damages and civil penalties from those who defraud the state or its political subdivisions. The Attorney General's Office seeks to recover these sums for the Commonwealth and the Town of Acton, as well as seeking multiple damages and fines.

This case was developed through the cooperation and collaborative investigation of the Attorney General's Office and the Office of the Inspector General. It is being handled by Assistant Attorney General Matthew T. Connolly with assistance from Legal Analyst Jeffrey Walker of Attorney General Coakley's Consumer Protection Division.

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