Joseph L. Capano, Bank Fraud And Violating The Clean Water Act, Delaware 2016

NEW CASTLE, DE – Real estate developer Joseph L. Capano, 75, of Middletown, Delaware, was sentenced to 21 months in federal prison followed by a year of home confinement on August 31, 2016, after pleading guilty to charges of bank fraud and violating the Clean Water Act. The case, stemming from the Riverbend at Old New Castle development, reveals a pattern of deception involving falsified loan applications, misappropriated funds, and deliberate environmental damage.

According to court documents, Capano secured a $1.5 million commercial line of credit from Cecil Bank to fund the Riverbend Development. However, he allegedly diverted approximately $420,000 of those funds for personal expenses and other business ventures, including a $63,000 jewelry purchase. Furthermore, Capano falsely informed Cecil Bank that nine homeowners had contracts to purchase properties at Riverbend, a claim that proved untrue. This deception sustained the flow of funds until Capano defaulted on the loan, ultimately leading to foreclosure on the development and significant financial losses for the bank.

The fraud wasn’t Capano’s only transgression. Investigators discovered a blatant disregard for environmental regulations during the construction of Riverbend. Capano directed crews to expand the entrance road, knowingly encroaching upon protected wetlands. Despite receiving a Cease and Desist letter from the Army Corps of Engineers and explicit instructions to halt construction in the wetland area, Capano ordered the placement of a water main pipe through the wetlands and then lied to federal authorities, both verbally and in a sworn affidavit, about the timing of the illegal work.

Acting U.S. Attorney David C. Weiss condemned Capano’s actions, stating that the defendant operated under the assumption that rules didn’t apply to him. “He came to court today with the understanding that the rules don’t apply to him—that his actions have no consequences,” Weiss said. “After receiving a 21-month prison sentence, he left with a different understanding.” The Environmental Protection Agency (EPA) echoed the sentiment, emphasizing the importance of wetland protection for habitat, flood control, and water quality. Ted Stanich, Acting Director of the EPA’s Criminal Investigation Division, stated the agency and its partners “are committed to protecting these invaluable natural assets… and to do so, we will continue holding violators fully accountable.”

In a related case, Joseph M. Deramo, a foreman for Riverbend Community, LLC, was charged with a negligent violation of the Clean Water Act for illegally discharging pollutants into a wetland. Deramo received a sentence of six months probation on August 30, 2016. The investigation was a joint effort by the Federal Bureau of Investigation, the Office of the Special Inspector General for the Troubled Asset Relief Program, and the United States Environmental Protection Agency. Assistant U.S. Attorney Jennifer K. Welsh prosecuted the case.

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Key Facts

Defendant: Joseph L. Capano
Charges: Bank Fraud and Violation of the Clean Water Act
Sentence: 21 months imprisonment, 12 months home confinement, $685,419.32 restitution to Cecil Bank, $50,000 fine
Statutes Violated: 33 U.S.C. 1319(c)(2)(A), 18 U.S.C. 1343, 33 U.S.C 1319(c)(1)(A)
Fraud Amount: Approximately $420,000 in misappropriated loan proceeds.
Environmental Impact: Illegal filling of wetlands at the Riverbend Development without proper permits.

Capano’s case highlights the intersection of financial crime and environmental law, demonstrating that deliberate disregard for both financial and ecological regulations will result in serious legal repercussions.

Source: EPA ECHO Enforcement Case Database

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