New Castle, DE – Real estate developer Joseph L. Capano, 75, of Middletown, Delaware, was sentenced to 21 months in federal prison followed by 12 months of home confinement on August 31, 2016, after pleading guilty to bank fraud and a Clean Water Act violation. The case stems from Capano’s development of the Riverbend at Old New Castle, a project riddled with financial deception and disregard for environmental regulations.
According to court documents, Capano secured a $1.5 million commercial line of credit from Cecil Bank, but allegedly diverted approximately $420,000 in loan proceeds for personal expenses and other business ventures instead of utilizing the funds for the Riverbend Development as agreed. The fraudulent activity included submitting false draw requests and fabricating contracts with prospective homebuyers – claiming nine homes were under contract when none were. This deception led to Cecil Bank sustaining significant financial losses and ultimately being forced to foreclose on the property.
Environmental Disregard
Beyond the financial crimes, Capano knowingly violated the Clean Water Act by directing the illegal filling of protected wetlands at the Riverbend Development site. Despite receiving a Cease and Desist letter from the Army Corps of Engineers, Capano continued to order the expansion of the entrance road and the installation of a water main pipe *through* the wetlands. He further compounded the issue by providing false statements, both verbally and in a sworn affidavit, regarding the timing of the illegal work. A foreman for Riverbend Community, LLC, Joseph M. Deramo, was also charged with a negligent violation of the Clean Water Act and sentenced to six months probation for discharging pollutants into the wetlands without a permit.
A Pattern of Deceit
Acting U.S. Attorney David C. Weiss characterized Capano’s behavior as a pattern of deceit, extending beyond the initial fraud and environmental violations. “During his work on the Riverbend Development project Joseph Capano lied to the Army Corps of Engineers, Cecil Bank and the few individuals who bought homes at Riverbend… He came to court today with the understanding that the rules don’t apply to him—that his actions have no consequences,” Weiss stated following the sentencing.
Federal Response & Penalties
The investigation was a collaborative effort between the Federal Bureau of Investigation (FBI), the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the U.S. Environmental Protection Agency’s (EPA) Criminal Investigation Division. Capano was ordered to pay $685,419.32 in restitution to Cecil Bank and a $50,000 fine for the environmental violation. Ted Stanich, Acting Director of the EPA’s Criminal Investigation Division, emphasized the importance of protecting wetlands, stating, “Wetlands are essential for fish and wildlife habitat, mitigating the impacts of floods and maintaining water quality.”
Key Facts
- Defendant: Joseph L. Capano
- State: Delaware
- Year: 2016
- Statutes Violated: 33 U.S.C. 1319(c)(2)(A), 18 U.S.C. 1343, 33 U.S.C 1319(c)(1)(A) – Clean Water Act and Title 18 U.S. Criminal Code (Bank Fraud)
- Sentence: 21 months imprisonment, 12 months home confinement
- Restitution: $685,419.32 to Cecil Bank
- Fine: $50,000 for environmental violation
- Co-Defendant: Joseph M. Deramo – sentenced to 6 months probation for related Clean Water Act violation.
The case highlights the EPA and Department of Justice’s commitment to prosecuting both financial crimes and environmental violations, particularly when the two are intertwined. The Riverbend Development project serves as a cautionary tale of the consequences of prioritizing profit over legal compliance and environmental stewardship.
Source: EPA ECHO Enforcement Case Database
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