Feb. 25--A developer who lost control of Block 37 was found guilty Wednesday of federal fraud charges related to a $105 million line of credit he received on properties in Chicago and the suburbs, according to prosecutors and court records.
A jury found Larry Freed, 53, guilty of bank fraud, mail fraud and making false statements to a financial institution, according to court reords and a news release from the U.S. attorney's office.
Freed's company, Joseph Freed Associates, LLC, gained control of the long-troubled Block 37 project in 2007, when a previous developer ran into financial trouble. But the primary lender on Block 37 foreclosed on the property in 2009.
While Freed fought the Block 37 lender in court, his real estate firm's financial troubles led Freed and Caroline Walters, of Palatine, the vice president of his firm, to lie to the city of Chicago and banks to get money, prosecutors had alleged.
Walters pled guilty this month to a charge of making a false statement to a financial institution, according to prosecutors.
Long before Block 37, Freed's firm redeveloped the former Goldblatt's department store in the Uptown neighborhood, using $6.7 million in tax-increment financing from the city for the project. The firm used notes guaranteeing payment of the TIF money to get a $15 million loan from Cole Taylor Bank, according to court documents.
Several years later, Freed's Uptown Goldblatts company used the same TIF notes as collateral to get a $105 million line of credit from a bank consortium led by Bank of America, without disclosing that the TIF money was already pledged to Cole Taylor, according to prosecutors. When Cole Taylor asked about the double pledge, Uptown Goldblatts fraudulently told the bank it would end it, but didn't tell the bank that the Bank of America group already had declared Freed's firm in default.
Trial evidence also showed that Freed signed false affidavits in 2009 and 2010 to get millions in TIF payments from the city, even though the money was owed to the two bank groups, according to the release.
Freed also fraudulently claimed that $7 million he withdrew from a partnership that controlled the Streets of Woodfield in Schaumburg were loans, according to prosecutors.
Freed could face up to 230 years in prison for his convictions. A sentencing date hasn't been set for him yet, with a status hearing in the case set for March 23.
Walters faces up to 30 years in prison. She's scheduled to be sentenced June 10 by U.S. District Judge Robert Dow, who also presided over Freed's trial.
