Robert Lees, a former senior executive at Universal Forest Products, Inc. (UFP), was sentenced to 50 months in prison in White Plains federal court for orchestrating a fraudulent kickback scheme that defrauded HUD and a private mortgage lender of nearly $865,000. U.S. District Judge Kenneth M. Karas handed down the sentence after a jury found Lees guilty on May 20, 2016, following a seven-day trial filled with damning evidence of conspiracy, mail fraud, money laundering, and false statements on a loan application.
The scheme began in 2009 when real-estate developer Michael Barnett hired JK Scanlan Company, Inc. (Scanlan) as the general contractor for Vineyard Commons, a senior housing project in Ulster County. Scanlan then entered into inflated contracts with Shawnlee Construction, LLC (Shawnlee), a UFP subsidiary under Lees’s oversight. The final bid from Shawnlee on January 19, 2009, was manipulated through backroom agreements among UFP, Shawnlee, and Scanlan to include $865,000 in excess charges — money never meant for construction, but for a secret kickback to Barnett.
Lees and his co-conspirators structured the fraud so that the private lender financing the HUD-insured project would unknowingly fund the kickback. Draw requests submitted to the lender were based on falsified costs, with each requisition certifying that the information was “true and accurate” — a lie repeated monthly from July 2009 to January 2012. HUD-insured funds flowed out as a result, while UFP stashed the illicit $865,000 in an account falsely labeled a “rebate accrual.”
Adding to the web of deceit, Barnett pledged the anticipated $865,000 kickback twice — first to Scanlan’s owner as collateral for a $1 million loan in early 2009, then again in June 2009 to UFP as collateral for a $650,000 letter of credit. The same phantom sum was used to secure two separate financial instruments, exposing the hollow foundation of the entire project’s funding.
On July 2, 2009, Barnett and associates submitted a fraudulent cost estimate to HUD, inflating Shawnlee’s labor and materials by exactly $865,000. Every subsequent draw request relied on that false baseline, ensuring HUD and the lender kept pouring money into a project built on corruption. Lees remained deeply involved, even arranging a $200,000 payment to Scanlan’s owner in January 2010, guaranteed by a portion of the same promised kickback.
Manhattan U.S. Attorney Preet Bharara stated: “Robert Lees, a senior executive at Universal Forest Products, defrauded both HUD and a mortgage lender, causing millions of dollars in losses. With the jury verdict earlier this year and today’s sentence, Lees has been held accountable for his crimes.” The case was investigated by the FBI and HUD’s Office of Inspector General, underscoring the federal crackdown on fraud targeting subsidized housing programs.
Related Federal Cases
Key Facts
- State: New York
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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