September 17, 2009
By Steve Vittorioso
The Attorney General’s office is suing an Acton developer for allegedly forging profits on affordable housing projects, but the company’s attorney says her clients have not committed wrongdoings.
Attorney General Martha Coakley is accusing Crossroads Development LLC owners James Fenton and Michael Jeanson of violating the False Claims Act by fixing cost statements and profits on the Crossroads affordable housing project. The attorney general claims the developers submitted false cost certification to town officials for their 12-unit, 244 Main St. affordable housing complex.
According to the complaint, filed in Middlesex Superior Court, Crossroads allegedly included service costs not actually earned and inflated prices to receive additional revenue and avoid the 20-percent profit cap allowed under the state’s affordable housing law. The developers, however, claim they earned less than 20 percent.
Chapter 40B of Massachusetts General Laws enables developers to construct affordable housing with permits from zoning and local bylaws in return for commitments to earn limited profits.
The False Claims Act gives the attorney general the authority to recover on behalf of the state and municipalities triple damages and civil penalties from those who defraud the commonwealth or communities.
“I’m very pleased the attorney general is taking this action,” said state Sen. James Eldridge, D-Acton. “I’m very concerned when you have developers taking money that could have been put to building more affordable housing in any community.”
But Diane McGlynn, a lawyer representing the developers, who were featured last year on ABC’s “Extreme Home Makeover: Home Edition” reality TV show for a different project, says the men have not violated laws.
McGlynn said she could not comment much on the case, but believes the suit, which alleges $2.7 million in project costs and $540,413 in profits capped, stems from Inspector General Gregory Sullivan’s attempt to eliminate Chapter 40B housing.
“Crossroads complied with the requirements,” McGlynn said. “As far as I’m concerned, they have not engaged in any wrongdoing. They got caught in a political crossfire. We’ll just see it through and ultimately it will speak for itself when it’s completed.”
State investigators have said the developers have significantly inflated costs of labor and equipment rentals to help hide a portion of about $763,000 in excess profits. Under state law, developers should return additional revenues to municipalities after project competition.
Town officials last year then sued the company, attempting to recover any excess profits.
In 2002, the developers ran into legal troubles in Boxborough when the town sued them for $2.4 million, claiming they fixed costs when reporting profits on Boxborough Meadows, another 40B development. They settled for $1.2 million.
Town Manager Steve Ledoux referred media inquiries to Town Counsel Doug Wilkins, who was not immediately available for comment.