East Lansing Real Estate Developer Scott Chappelle Indicted for Tax and Bank Fraud

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Alice Dreger for ELi

The blight downtown lasted years before Chappelle's company finally lost the properties to foreclosure. Today, new buildings rise in this location, and Chappelle has been indicted.

The Department of Justice announced today that East Lansing real estate developer Scott Chappelle has been indicted on “tax evasion, filing false documents with the Internal Revenue Service (IRS), making false statements to IRS Criminal Investigation (IRS-CI) agents, and mortgage fraud.”

Chappelle is known to many in East Lansing as the developer whose actions caused prolonged blight in East Lansing’s downtown at the northwest corner of Abbot Road and Grand River Avenue – an area now being redeveloped by a company which bought the properties Chappelle’s company lost to foreclosure.

For years, citizen watchdogs warned the City of East Lansing that Chappelle’s dealings were mired in failures and questionable practices. The most dogged of these was Eliot Singer, a folklorist by profession.

In 2014, as City staff, Council, and the DDA continued to make deals with Chappelle for the project first known as “City Center II” and then the “Park District Project,” Singer provided extensive material to ELi to help shine light on Chappelle’s track record.

Reached with today’s news, Singer told ELi, “About 7 or 8 years ago, I shared with the FBI numerous documents that looked like mortgage fraud to a layperson. Since nothing came of this, I assumed sophisticated legal tricks were at work and the transactions could not be prosecuted.”

In the City Center II/Park District saga, Chappelle’s maneuvers included making minor children co-owners of the Park District Investment Group (PDIG), claiming that further questions could not be asked by the public about ownership of that company because children were now involved.

In 2015, the downtown properties in East Lansing owned by Chappelle’s company went to a foreclosure auction. The current development company, DRW, bought the properties and proceeded to work out a deal with the City of East Lansing for redevelopment.

Then, Chappelle stepped in and effectively killed the deal in September 2017 with a claim he still had rights to tax credits related to the properties.

In 2018, DRW got around this through what has generally been presumed to be an unspecified pay-off of Chappelle, an action that angered many who were fed up with Chappelle, but that was appreciated by those who wanted redevelopment to finally happen.

Gary Caldwell for ELi

The Abbot (foreground) and the Graduate Hotel (clad in green), now under construction at the corner of Abbot Rd. and Grand River Ave.

Today, The Abbot and the Graduate Hotel are under construction. But thanks to Chappelle, the DDA is saddled with over $5 million in debt on properties along Evergreen Ave. that it purchased to support Chappelle’s project.

In an odd twist of history, the developer now pitching a deal for the Evergreen properties – River Caddis Development – is owned by Kevin McGraw, who was Chappelle’s development partner during part of the City Center II deal-making.

According to today’s press announcement on the indictment, Chappelle allegedly “evaded the payment of more than $830,000 in unpaid taxes by making false statements to the IRS about his and his companies’ assets and income, failing to disclose his vacation house on Lake Michigan, and purchasing real property in nominee names instead of his own.”

 Chappelle is also charged with “making false statements to IRS-CI agents during its criminal investigations” and with making false statements and submitting fraudulent documents to a bank when refinancing his lake house mortgage.

The press release “commended agents of IRS-CI, who investigated the case, and Trial Attorney Melissa S. Siskind of the Tax Division and Assistant U.S. Attorney Timothy P. VerHey, who are prosecuting the case.”

If convicted, Chappelle will face a maximum prison term of 5 years for tax evasion and making a false statement, 3 years for filing false information with the IRS, and 30 years for bank fraud.

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