Former Washougal City Councilman and Finance/Economic Development Director Jeffrey Bivens has pleaded guilty to making materially false statements to the Small Business Administration and Wachovia Bank.
Bivens, a tax attorney licensed in the State of Washington, represented Donald Chill, owner of Charles Prescott Restoration, Inc., a disaster restoration company specializing in rehabilitating real and personal property damaged by fire, flood, wind and vandalism.
Bivens assisted Chill in the sale of the company and a related loan. Chill has since pleaded guilty and been sentenced to prison for a variety of frauds surrounding the operation and sale of the business. Jeffrey Kraai, a commercial business broker involved in the sale, has also pleaded guilty and is awaiting sentencing.
Bivens, 34, will face up to five years in prison when he is sentenced by U.S. District Judge Benjamin H. Settle on May 23, 2011. After Bivens entered a guilty plea for fraud Wednesday, he was released pending the sentencing.
According to the plea agreement – in his capacity as attorney for Chill – Bivens represented to Wachovia Bank and the SBA that the sale price of the restoration company was $4 million. Based on that purchase price, Wachovia agreed to loan $2 million to the purchaser, which in turn was guaranteed by the SBA. That representation was false. The true price, $7.4 million, would have caused the loan to be denied if disclosed to the bank or SBA.
Bivens failed to reveal there was a secret promissory note between the buyer and seller which was not disclosed to the bank and SBA. Bivens also failed to disclose that a one-year employment agreement with Chill was for a much longer period of time than represented to the bank and SBA.
According to a press release issued by the U.S. Attorney’s Office for the Western District of Washington, Bivens helped engineer a secret “second closing” involving these agreements which he and others concealed from the bank. Email communications revealed that Bivens, Chill and Kraai fully understood the deal would not go through if the bank and SBA knew about the true terms of the sale.
Shortly after the sale of Charles Prescott Restoration, Inc., the purchaser learned the balance sheet had been based on fraudulent conduct by Chill. Beginning as early as 2004, Chill began inflating estimates and invoices submitted to an insurance company, Mutual of Enumclaw. Chill padded bills from sub-contractors, or submitted forged secondary estimates that appeared to be from competitors. In ten jobs scrutinized over five years, Chill overbilled by an estimated $3.2 million.
In March this year, Chill was sentenced to four years in prison and $4.9 million in restitution for mail fraud, bank fraud and money laundering. The bank fraud count related to Chill’s representations surrounding the sale of the business.
Kraai’s guilty plea to the crime of false statements arose from his participation in the sale of the business and the corresponding loan. Bivens’ guilty plea related to that same part of the transaction. Under the terms of the plea agreement – in addition to facing up to five years in prison – Bivens shares in a portion of the $1.7 million loss associated with the bank and SBA loan.
The case, which was investigated by the SBA Office of Inspector General and the Internal Revenue Service Criminal Investigations, was prosecuted by Assistant United States Attorney Kurt Hermanns.
In January, Bivens agreed to a settlement offer with the City of Washougal that included five months of pay. He was not able to obtain a fidelity bond of $2.5 million.
Bivens had been on paid administrative leave since Nov. 17 prior to his employment termination. When he was hired by the city, he was halfway done with an 18-month suspension from practicing law. The suspension, by order of the Washington State Supreme Court, occurred Aug. 21, 2008, based on conduct in two matters in 2004 and 2005 involving charging unreasonable fees, conflicts of interest, failure to preserve the identity of clients’ property and dishonest conduct.