News

'Lies come easily to this defendant,' U.S. says

By Bill Moss, Published: June 25, 2015

ASHEVILLE — Keith Arthur VInson, officially declared "the hub of the wheel" of the massive fraud that cost Seven Falls investors, banks and home site buyers $23 milion and sank two banks, was sentenced in federal court today to 18 years in prison.

The damatic sentencing in a nearly empty courtroom came after Vinson, 57, made one last stand in his own defense. Standing at the defense table with his ankles shackled, wearing a brown county jail jumpsuit, his graying hair falling nearly to his shoulders, the developer who filed the biggest subdivision plan in Henderson County's history spoke for an hour and 13 minutes, telling U.S. District Court Judge Martin Reidinger why he was innocent of the charges against him.

A jury convicted Vinson in October 2013 on all 13 counts in an indictment that laid out a fraudulent scheme among bankers, private investors and a property appraiser to keep the struggling development afloat as the 2008 recession sank the real estate market, and he has been jailed at the Buncombe County Detention Center ever since.

Vinson referenced statements prosecutors made as they urged a long prison sentence, pointed out some testimony from trial and brandished a government exhibit of bad loans. He said he was responsible for nothing more than trying to make the development work, adding that he had taken out loans always on the advice of attorneys. He is expected to appeal his conviction and sentence.

Although Vinson "had spoken at length (to express his opinion) that the defendant has committed no crime," Judge Reidinger said, "I think the law is clear that I can't take into account the defendant's statements that he is innocent, contrary to the jury's finding, for purposes of sentencing."

Nor did he buy defense attorney Clark Fischer's request for a sentence in line with Vinson's codefendants — investors, two bankers and an appraiser — who received no more than four years active prison time. At its heart, Reidinger said, the case came down to Vinson's aim "to misrepresent the facts for the purposes of lifting other people's money." The criminal conduct cost bank shareholders, investors "and ultimately the taxpayers" millions.

In ordering Vinson to pay restitution, Reidinger uttered the elegantly precise number of $18,384,584.53. The victims that would get the money include banks and other lenders, the FDIC, which covered $6.5 million worth of losses at two banks; Queens Gap, a development in Rutherford and McDowell counties that lost $3.25 million to Vinson's theft; and Synovus Bank, the successor to the National Bank of South Carolina, which lost $2.7 million.

"The losses are huge," the judge said. "The losses for those who did not participate are huge." Vinson's codefendants, he added, suffered personal financial ruin trying to save the development even while they participated in the ongoing fraud. The losses caused Pisgah Community Bank and the Bank of Asheville to fail, forcing a bailout by the FDIC.

"Mr. Vinson was very much the hub of the wheel regarding the conspiracy," Reidinger said, "even though he did have others on the periphery who helped him. ... Clearly there was the intent to push the risk onto others who did not voluntarily accept it."

The co-conspirators cooperated with the U.S. prosecution, pleaded guilty to their charges and accepted responsibility, the judge said. In contrast, "This defendant does not accept responsbility for criminal wrongdoing. That's certainly his right. But it does affect his sentencing."

While the 18-year sentence quadrupled the term Vinson sought, it also "varied downward" from the maximum sentence guidelines prosecutors wanted."I believe this case was extremely complex — dare I say Byzantine," he said. "It's not your ordinary fraud as contemplated by the guidelines."

Before the sentencing, Reidinger ruled on three objections rising from the a presentencing report — in favor of the government on each. He agreed with the prosecution that for sentencing purposes Vinson would be declared the "leader, organizer and manager" of the conspiracy to defraud banks and investors and he agreed that loans indirectly related to Seven Falls were substantially "intertwined" with the development and its many financial tentacles.

In the most emotional moment of his argument, Fischer noted that his client had been held in a maximum security cell in Buncombe County for 20 months. When his daughter came into the courtroom briefly, "he could see her but they wouldn't let him to talk to her."

Vinson wrapped his hands around his face and wiped away tears. And in his own comments to the judge, the defendant asked the court to consider the time he has already spent in an isolated concrete jail cell without access to exercise, "sunshine or grass."

"This is not Bernie Madoff here," Fischer told the judge. "I think the right number is 36 months or something close to it."

Arguing for a 27-year sentence, Assistant U.S. Attorney Don Gast said Vinson was clearly the ringleader of the fraud and, unlike his codefendants, had no mitigating factors in his favor.

"He wasn't trying to save the bank," he said. "He wasn't trying to save his friends. He was trying to enrich himself. It was not his money that was invested. In addition to the long list of direct victims, there's a whole tide of people" who lost money in a non-criminal way, including dozens of contractors and vendors.

"Lies come easily to this defendant," he said.

Thirty-three years ago, Vinson was sent to prison in Florida for stealing a checkbook and writing a $7,800 check on a closed account. "The defendant not only continued the same type of crime, he went from a $7,800 check to a half-million dollar check," Gast said. "In terms of not having learned his lesson, I can't think of a better example than Mr. Vinson. It's the same type of conduct on a grander and grander and grander scale. Was Mr. Vinson uniquely responsible? No. He had help. But he was the hub of the wheel."

Even as the enterprise crumbled around him and investors plunged into ruin, Vinson lived lavishly in a large house and drove his girlfriend's car, Gast said. "Mr. Vinson was at the apex of this conspiracy," he said. "He invested little and gained greatly while others lost."

Although the fraud left hundreds of victims in its wake, the sentencing attracted only six spectators. One of them was a retiree, who said he had loaned Vinson money and never got any of it back.

"I lost $50,000 plus an IRS penalty and I've been struggling ever since," said the man, who did not want to give his name. "I'll struggle the rest of my life because I'm retired. ... I think the question somebody needs to ask is obviously he didn't learn his lesson in prison in Florida and unfortunately we didn't either."

"Keith Vinson was the central figure among a group of rogue bankers, CPA’s, appraisers, investors and others who together not only violated federal laws, but violated the trust of legitimate investors and potential home owners," Acting UU.S Attorney Jill Westmoreland Rose said in a statement. "The U.S. Attorney’s Office engaged our full resources to investigate and successfully prosecute this greedy group, but the greater message is to those who seek to engage in similar fraudulent activities: we are not finished. Western North Carolina is enticing to investors and developers because of the beauty of the landscape and continued growth; however, those who seek to conduct business in this area should prepare to do so fairly, legally and transparently because we are paying close attention to business transactions by investors, developers and would-be gate keepers."

Other figures previously convicted and sentenced were:

• George M. Gabler, 60, of Fletcher, was convicted of one count of willfully failing to report misconduct associated with two Seven Falls lot loans in March 2010. In court documents, Gabler admitted that he withheld documents from a federal grand jury knowing that they were related to fraudulent loans taken out on behalf of conspirator Keith Vinson. For this offense, Gabler, a former Certified Public Accountant, was sentenced to two years of probation, ordered to do 500 hours of community service and was fined $5,000.
• Buddy Greenwood was sentenced to 42 months in prison.
• Nicholas Dimitris was sentenced to 12 months plus one day in prison.
• Former Pisgah Community Bank Chief Credit Officer Robert Craig Gourlay was sentenced to 15 months in prison.
• David G. Smith, who worked as a loan officer for Pisgah Community Bank,  was sentenced to nine months in prison.
• Andrew Hager was sentenced to eight months in prison in connection with the Seven Falls scheme.

Announced with great fanfare in 2006, the Seven Falls Golf & River Club was to include 900 homes, an Arnold Palmer-designed golf course and a retail village on 1,400 acres along the French Broad River, potentially adding $1.25 billion to Henderson County’s tax base.
Prosecutors described the fraud in an April 2012 indictment of Vinson, real estate investor Avery Ted “Buck” Cashion III; his wife, Joan Lusk Cashion, a real estate agent; investor Raymond M. “Ray” Chapman; and Thomas E. “Ted” Durham, president of Pisgah Community Bank.
Three weeks ago Judge Reidinger sentenced “Buck” Cashion, 61, of Lake Luke, to three years in prison; Chapman, 68, of Brevard, to three years in prison; Durham, 60, of Fletcher, to 2½ years in prison; and real estate appraiser Aaron Ollis, 68, of Arden, to two years of probation and a year of home detention. Cashion, Chapman, Durham and Ollis each pleaded guilty to conspiracy to defraud the United States.

Borrowed $25 million

According to prosecutors, Vinson borrowed $25 million in 2006 from National Bank of South Carolina to start Seven Falls. After buying land in Etowah along the river dotted with large and small waterfalls on streams and tributaries, Vinson “began an aggressive marketing campaign with extravagant marketing efforts, including a lavish ‘founder’s day’ party,” prosecutors said in the indictment. He promised that Seven Falls would have the 18-hole golf course, a nine-hole practice facility, tennis courts, a wellness center, amphitheater and a town village. The following year, he sold 70 lots for prices ranging from $250,000 to $650,000. By 2008, the development was already stalled and in danger of collapse and Vinson could not pay subcontractors.
To get badly needed cash, prosecutors said, Vinson conspired with Buck Cashion and Chapman to create the “Lot Loan Program,” which used straw borrowers, falsified documents and falsely inflated lot prices to orchestrate a series of loans to prop up the teetering development. “You buy the lot,” Vinson told the straw borrowers, “and I will pay for it.”
Vinson and the investors and real estate agents filed false HUD settlement statements that concealed “hidden agreements to pay kickbacks to one another” and to straw borrowers. In August 2008 Vinson conspired with two others to make a $1.7 million loan secured by property on Pleasant Grove Road known as the “plastics plant.” “Vinson was the true borrower,” prosecutors said.
A year later, in August 2009, Buck Cashion agreed to buy a $1 million home in Waterford Lakes financed by Pisgah Community Bank in order to prevent the loan from going on the bank’s watch list. The purchase was in exchange for an agreement by Durham, the bank president, to make more straw loans to Cashion and Chapman. “Durham approved the loans to straw borrowers — rather than in (Buck) Cashion or Chapman’s own names — in order to keep Cashion or Chapman from exceeding their loan limits” under bank regulations, prosecutors said. In the following weeks, Durham orchestrated a series of kickbacks to the straw borrowers and fought for their approval of the loans over the objections of the Pisgah Community Bank chairman. In November 2009, Durham approved a short sale of the Waterford Lakes home, forgiving $350,000 of the loan.

Check-kiting scheme

With regulators bearing down, Vinson the investors next created a check-kiting scheme. (“We are experiencing intense regulatory scrutiny and need immediate relief,” Durham wrote at the time.)
Enter Queens Gap, a struggling residential development in McDowell and Rutherford counties. Vinson agreed to complete the infrastructure and convinced Queens Gap’s owner to deposit $4 million in an account at the Bank of Asheville. Instead of building roads and utility lines, Vinson stole the money, prosecutors said, and used some of it to bail out the bad loans at Seven Falls. He also bought himself a 2009 Cadillac Escalade for $62,000. When the Queens Gap owner questioned him about the money, Vinson whipped out a pen and wrote him a check for $2,455,405.78. The account he wrote it on never had a balance higher than $7,489.

Bad economy

Tom Cooper, the construction company and one of the early investors who was at the “founders party,” said he is too busy with a bid this week to attend the Vinson sentencing.
“The process is a slow process,” he said. “I hate to see Keith have to spend a lot of years in prison but it looks like that’s what’s going to happen from what I understand. I think bad decisions were made and some wrong decisions. I think economic timing coerced a lot of that. I don’t know if those decisions would have been made if it had not been for the economy. I hope not. I guess he’s the last one as far as the ones who were doing the bad things.”
“I’m more concerned about the property getting fixed up and a lot of us that invested a lot of money with the hopes of getting a golf course getting some value out of it,” he said.
Cooper said he recalled the founders day event, when ground-floor investors drew names from a hat to determine who got to pick the prime lots first. At least two events were held at Biltmore. Vinson flew in a band from Australia and had county officials on hand for a kickoff event at the Seven Falls property.
County Attorney Russ Burrell, who won a state Supreme Court case to secure a $6 million surety bond on Seven Falls, said Tuesday that the county is waiting on a federal permit to begin roadwork and other site development.
“We are basically in the permit application process” at the U.S. Army Corps of Engineers, he said. “It’s been applied for and we’re waiting. Without a corps permit we can’t move forward in terms of building roads.”
Once the federal regulators issue a permit, the county will seek a judge’s blessing to solicit bids to complete as much the site development as the surety bond money will cover.