The community development director in East St. Louis has been indicted on charges that he took bribes from a local real estate developer, in connection with a low-income affordable housing project known as Bowman Estates.
Arthur M. Johnson, 61, was arrested on Monday and charged with three criminal counts of accepting bribes using his position as the city’s community development director, in which he oversaw housing and other real estate operations in the community. He was also charged on two counts of aiding and abetting two of the developer’s criminal offenses.
Charged with nine counts of wire fraud was real estate developer Harold N. Rosen, 79, owner of Kully Construction, the firm that developed and was to build the project.
The indictments centered on the $5.6 million development, consisting of 56 apartment units in 14 four-family flats. Court documents claims that one of Johnson’s relatives prepared the business plan for the proposed development, and Johnson was paid by Rosen to secretly rewrite it so that it would be acceptable to the city council.
Rosen applied for $1.9 million in public financing from the city, having submitted bogus financial statements, loan documents and tax returns. When applying for the public funds, Rosen claimed to be a wealthy developer who would obtain $3.6 million in private financing for the project, as a condition of starting the project.
After the project was approved by the city in 2008, Rosen submitted bogus invoices for reimbursement of expenses that had not been incurred, and actually received more than $60,000 of payments.
Prosecutors in the U.S. Attorney’s office said that Johnson allegedly approved a phony $40,000 reimbursement request from the company, even though he knew it to be fraudulent. That reimbursement, and others, were flagged and blocked by the East St. Louis Financial Advisory Authority, a state agency that monitors city spending.
The agency said that discrepancies on paperwork led to their concern that Rosen might be defrauding the city. Conflicting information on six different letters of credit provided by Rosen, including home addresses that were purportedly of financial institutions, caused officials to alert federal investigators.
Authorities said that Rosen promised Johnson a job with his company after he retired from the city, in order to get his cooperation in the scam. Rosen also paid cash bribes to Johnson, according to the indictment.
The indictment also said that once the project moved forward, Rosen intended to purchase cheap pre-fab housing modules from an outfit in Indiana, thus depriving local residents from job opportunities for on-site construction.
“It was a development we were greatly looking forward to that was going to complement what already is a blossoming Emerson Park neighborhood,” said East St. Louis Mayor Alvin Parks. He added that another developer has been engaged on the project, and that the city still intends to see it built, although perhaps in a slightly different form.
Johnson had been working at the city since 2005, but “he will not be employed much longer,” according to Parks.