Operators of Lux Living and Big Sur Construction and Chief Accountant Indicted on Wire Fraud Charges Involving Apartment Developments

ST. LOUIS - Two operators of St. Louis area apartment complex construction and development companies, along with their companies' chief accountant, have been indicted and accused of conspiring to defraud the City of St. Louis Minority Business Enterprise and Women Owned Business Enterprise program to gain millions of dollars' worth of City tax incentives.

Sidarth "Sid" Chakraverty, Victor Alston and Shijing "Poppy" Cao were indicted in U.S. District Court in St. Louis September 18 on one count of conspiracy to commit wire fraud and 11 counts of wire fraud. The indictment was unsealed Friday morning.

Chakraverty and Alston operate Big Sur Construction LLC, a construction management and development company and LuxLiving LLC, which primarily handled the development, brokerage, daily management, marketing and leasing of apartment complexes built by Big Sur. They also operate the entities which developed the Chelsea multifamily apartment development in the Pershing-DeBaliviere neighborhood of St. Louis, and the SoHo multifamily apartment development in the Soulard neighborhood of St. Louis.

Cao was the chief in-house accountant for all the Big Sur-affiliated companies.

St. Louis' Minority Business Enterprise (MBE) and Women Owned Business Enterprise (WBE) programs include participation goals that seek to address historical social and economic disadvantages experienced by women and members of minority groups, and to reduce barriers to participation by those groups in construction projects. Available tax incentives include sales tax exemption on the purchase of construction materials and property tax abatement once the projects are completed. The St. Louis Development Corporation (SLDC) reviews proposals for redevelopment projects in St. Louis and makes recommendations to the Mayor and Board of Aldermen regarding requests for tax incentives. Once incentives are approved, the SLDC enforces compliance with the City's MBE and WBE participation goals.

The Chelsea Project

For the Chelsea project, which began in 2019 and was completed in 2021, the participation goals set out in the City ordinance granting a 10-year tax abatement were 25% for MBEs and 5% for WBEs. Big Sur was itself certified as a Subcontinent Asian American MBE, so its own reported labor and material supplies made up the majority of MBE participation on Chelsea. A WBE subcontractor was paid about $21,504 for cleaning services it provided on the project, but the indictment says the defendants falsely claimed an additional approximately $272,393 in materials and labor had been supplied by that WBE company. To conceal and carry out the fraud, Big Sur Construction LLC issued sham "joint checks" that were written to the WBE subcontractor and the non-WBE companies which had actually purchased and supplied materials and labor for the project, the indictment says. In emails, Chakraverty, Alston and Cao discussed which non-WBE companies would be willing to accept a joint check to facilitate the scheme, the indictment says. Big Sur submitted false "Utilization Reports" about MBE and WBE participation, which were required by SLDC throughout the construction phase, and a false final lien waiver and other documents claiming that the WBE had been paid $298,897. Big Sur also submitted a false "Good Faith Narrative" claiming that the company had made a good faith effort to meet the WBE participation goal, the indictment says. They did not disclose that of their claimed WBE participation on the Chelsea project, 93% of the total came from falsely attributing $272,393 in materials and labor costs to the WBE subcontractor, the indictment says.

The SoHo Project

The City ordinance approving a 10-year tax abatement for the SoHo project set a 21% participation goal by African American MBEs, an 11% participation goal for WBEs and a 0.5% participation goal for Native American MBEs. The same WBE cleaning company subcontractor that worked on Chelsea was paid approximately $60,780 for its actual labor and materials on SoHo, but defendants falsely attributed approximately $1.15 million in labor and materials supplied by non-WBE companies to that company in its reporting to SLDC, the indictment says. It also says Chakraverty met with the owner of an African American MBE and offered $10,000 to the owner to allow Big Sur to falsely represent that non-MBE work had been performed by that company. The owner refused. But the owner of another African American MBE company agreed to a 5% "markup" fee on an eventual total of $2.17 million in materials and labor supplied by non-MBE companies that were falsely attributed by defendants to that MBE company in reporting to SLDC, the indictment says. That included $1 million in appliances purchased from Home Depot by Big Sur, but falsely attributed to the African American MBE company, it says. Chakraverty met with the owner of a Native American MBE and struck a deal for the owner to receive a 6% markup fee for construction materials and labor supplied by another non-Native American MBE company, the indictment says. False information as to the materials and labor supplied by the non-Native American company, but attributed to the Native American MBE, was submitted to SLDC, the indictment says. The indictment says Big Sur also issued sham joint checks and sham purchase orders on the SoHo project and submitted false reports to the SLDC, similar to defendants' conduct on the Chelsea project.

After SLDC officials and employees developed suspicions about false reporting by Big Sur, Chakraverty, Alston and Cao repeatedly tried to get the cleaning company WBE to falsely verify the inflated payments in reporting to SLDC, the indictment says. When they failed, they sought another WBE to act as a front company, it says.

The indictment alleges that the fraudulent conduct on the Chelsea project resulted in at least $551,022 in sales tax exemptions and a property tax abatement worth about $1.75 million. Big Sur received more than $1 million in sales tax exemptions for the SoHo project but did not receive the anticipated property tax abatement due to SLDC's concerns about the legitimacy of their WBE claims, the indictment says. The defendants originally anticipated a tax abatement on the SoHo valued at approximately $7 million.

Charges set forth in an indictment are merely accusations and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.

The conspiracy charge carries a penalty of up to 20 years in prison, a $250,000 fine or both prison and a fine. The wire fraud charges each carry a penalty of up to 20 years in prison and a $250,000 fine.

The FBI investigated the case. Assistant U.S. Attorney Hal Goldsmith is prosecuting the case.