United States Attorney
Eastern District of Virginia
Thursday, April 19, 2012
Virginia Businessman Indicted for Alleged $11 Million Historic Tax Credit Fraud Scheme
NORFOLK, Va. – George P. Hranowskyj, 48, of Chesapeake, Va., has been indicted by a federal grand jury for allegedly engaging in a six-year historic tax credit fraud scheme that cost the United States and the Commonwealth of Virginia more than $11 million and enriched him and others by approximately $8 million.
Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia; John Boles, Special Agent in Charge of the FBI’s Norfolk Field Office; Eric C. Hylton, Acting Special Agent in Charge of the Internal Revenue Service Criminal Investigation’s Washington, D.C., Field Office; Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG), made the announcement after the indictment was unsealed.
“George Hranowskyj is accused of cheating taxpayers and investors out of millions intended to preserve historic properties in Virginia,” said U.S. Attorney MacBride. “We’re grateful to our law enforcement partners who unraveled and continue to investigate this alleged long-term, complex fraud scheme that has affected so many in Tidewater.”
“The fraud alleged in the indictment represented a gross manipulation of the tax system which harmed the community, taxpayers and the government,” said FBI Special Agent in Charge Boles. “The FBI remains committed to working with our partners to investigate those who commit such crimes and bring them to justice.”
Hranowskyj was charged in a 14-count indictment that included one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison; seven counts of wire fraud, which each carry a maximum penalty of 20 years in prison; and six counts of unlawful monetary transactions, which each carry a maximum penalty of 10 years in prison, if convicted. Hranowskyj was arrested this morning and will make his initial appearance at 4 p.m. before U.S. Magistrate Judge Tommy E. Miller.
According to the indictment, from January 2006 through March 2012, Hranowskyj and his business partner, referenced as Conspirator A in the indictment, allegedly borrowed funds from financial institutions to purchase and renovate properties that could qualify for historic rehabilitation tax credits.
At the state level, the Virginia Department of Historic Resources (VDHR) administers the Virginia Historic Rehabilitation Tax Credit program. That program allows the property owner to receive a state income tax credit equal to 25 percent of the amount spent on eligible rehabilitation expenses. At the federal level, the U.S. Department of the Interior National Park Service (DOI-NPS) administers the Federal Historic Preservation Tax Incentives program. This program encourages private sector rehabilitation of historic buildings through tax credit equal to 20 percent of the amount spent on eligible rehabilitation expenses.
The indictment alleges that Hranowskyj and his business partner purchased and renovated properties located at 345 Granby Street and 742 West Princess Anne Road in Norfolk. During these two renovation projects, Hranowskyj and his partner allegedly applied for federal and state historic tax credits; they had no personal use for the tax credits, but they allegedly intended to sell them to investors in need of reducing their own tax liability.
Hranowskyj and his partner are accused of fraudulently increasing the federal and state historic tax credits for which they were eligible by inflating the amounts spent on renovating the properties, fabricating other necessary documents, and making other material misstatements. He and his business partner also allegedly sold these fraudulently obtained tax credits to corporate investors for millions of dollars by fabricating additional documents and representing that investor funds would be used to support the renovation projects.
In February 2010, VDHR awarded more than $5.6 million in state historic rehabilitation tax credits for the 345 Granby Street project. Corporate investors paid Hranowskyj and his partner approximately $7.9 million for the state tax credits and anticipated federal tax credits, which the partners allegedly used for their own personal purposes. The indictment alleges that corporate investors used the state tax credits to decrease their liability to the Commonwealth of Virginia, and one investor allegedly used approximately $4.5 million in federal historic rehabilitation tax credits to decrease its tax liability to the United States despite federal tax credits never being awarded for this project.
To date, no historic tax credits have been awarded for the 742 West Princess Anne Road project. However, the indictment alleges that a corporate investor paid Hranowskyj and his partner nearly $250,000 for the anticipated tax credits, which the partners used for their own personal purposes. A corporate investor also allegedly used nearly $1 million in federal historic rehabilitation tax credits to decrease its tax liability to the United States despite federal tax credits never being awarded.
This ongoing investigation is being conducted by the FBI’s Norfolk Field Office, IRS-CI, SIGTARP and the FDIC-OIG. Assistant U.S. Attorneys Melissa E. O’Boyle, Katherine L. Martin and Uzo Asonye are prosecuting the case on behalf of the United States.
Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.
The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.
President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For more information on the task force, visit www.StopFraud.gov.