Developer of abandoned apartment project carries lengthy record of fraud

MUNCIE, Ind. — Mayor Dan Ridenour stood in front of city council March 6 and spoke of the worthiness of Horizon Companies of Atlanta, aware that the general partner of the firm, Preston E. Byrd, had a past that included trouble with the law.

"He paid his debt to society, and is trying to live a better life," Ridenour said. "... I also want to point out that to this council and to the public that we are a 'second chance' city. And we've taken steps to make sure that that's the way we view people. I don't think there is one person in this room that can say that they are perfect."

More: Developer abandons $52 million apartment project after Star Press scrutiny

But it appears the second chance for Byrd happened some time back.

Horizon withdrew plans to build a 276-unit apartment complex on Muncie's south side March 24 after The Star Press questioned Byrd about the extensive record of fraud associated with him and his company.

Byrd has twice been sentenced to federal prison, both in connection with fraud.

The U.S. Attorney's office for the Western District of Tennessee announced in March 2016 that a federal jury convicted Byrd of three counts of wire fraud and three counts of money laundering, following a grand jury indictment.

Byrd had defrauded two loan companies of about $121,000, according to court records.

"Between March and May 2014, Byrd fraudulently applied for business loans with two loan companies, Rapid Advance and Windset Capital. He made false statements and submitted false documents to the two (loan) companies. Following receipt of the loan proceeds, Byrd engaged in multiple transactions with the fraudulently obtained money," according to the U.S. Attorney.

In a press release, the federal government noted the lengths Byrd went to fool his victims.

"When Rapid Advance and Windset Capital requested to visit and physically inspect the location of Byrd’s establishments, he had another individual obtain office space for him to use temporarily. Byrd falsely represented the rented space as the headquarters for his establishments," according to the U.S. Attorney.

Chief U.S. District Judge Jon P. McCalla sentenced Byrd to 42 months in federal prison. Byrd was also ordered to pay restitution in the amount of $96,237.14, and to forfeit $166,245.14. He was also sentenced to supervised release for a period of three years after his incarceration.

A year ago, in March 2022, McCalla found that Byrd had violated the terms of his supervised release, court records show, and again imposed supervised release for another 15 months.

"I have moved past those things," Byrd told The Star Press on March 24.

In a separate civil case alleging fraud, a federal court levied a judgment in 2011 of about $7 million against Byrd. A jury found Byrd had diverted for personal use proceeds of a public bond issue meant for construction of a Memphis apartment complex called Lamar Crossing. The apartments were multi-family low- and moderate-income housing, as was planned for Muncie.

"Byrd has admitted that he took project funds for his personal use, although he has failed to disclose the location of and/or reasons for taking these funds," the complaint said.

At the conclusion of the civil trial, a jury awarded compensatory damages of $4.71 million and punitive damages of $2.3 million against Byrd. Compensatory damages of $659,000 were also awarded to the Arvest Bank against Byrd's wife.

Arvest Bank was the primary lender and purchaser of bonds. Court records show that 11 years later, in 2022, the bank was still attempting to collect the judgment.

The Star Press asked Byrd why he hadn't paid the judgment.

"How do you know I haven't?" was his reply.

As of last week, federal court records do not show any record of the judgment being paid.

Federal court records also show Byrd was convicted of wire fraud in North Dakota in 2003. The court's case summary asserts Byrd used a telephone "to obtain money from Altru Health Systems, Grand Forks, N.D., by means of false & fraudulent representations, pretenses, and promises, well knowing at the time that the pretenses, representations, and promises were false when made."

Byrd was sentenced to five months of incarceration, three years of supervised release, 100 hours of community service and a fine of $3,000, and he was ordered to pay restitution in the amount of $130,787.

In 2021 a complaint was filed in Tennessee state court naming as defendants Horizon, Terry Spicer — the head of business development for Horizon and the person who represented the company at Muncie City Council meetings — as well as a company called Vista Development III, which has the same address as Horizon at 5415 Sugarloaf Parkway, Suite1108, Lawrenceville, Ga. The plaintiff was EquityMultiple, an investment firm that had partnered with Vista, to build a project called Kirby Pointe Apartments In Memphis.

The case was settled out of court. According to the complaint, EquityMultiple wired $1.9 million to a bank account in the name of Horizon. The investment firm then claims it discovered that Vista and Spicer had falsified documents used to induce EquityMultiple to finance the project.

The complaint claimed a false appraisal report was created for the land on which the apartments were to be built by taking an earlier report from 2015 and changing dates and other portions.

The complaint said defendants misrepresented that the Tennessee Housing Development Agency had approved the tax credit application for the property by creating a fake letter from the agency, according to the plaintiff. An internal auditor at the state agency, Amy Newport, told plaintiffs THDA never sent any such letter.

Court documents also said Horizon and Vista provided a fraudulent auditor report about Horizon to the investment firm. "Plaintiff discovered that the purported auditor does not exist," according to the complaint.

"Defendants are callous and calculating fraudsters who intentionally sought to deceive and harm plaintiff," the complaint said. "Defendants have gone so far as to falsify and pass off as legitimate multiple documents, and implicate innocent third parties, in complete disregard for the law or the victims."

The complaint states that in June 2021 the entire Kirby Pointe Apartments project was a "farce."

"The lengths to which the defendants will go to deceive their victims has no bounds," the complaint said.

Prior to settlement, defendants had asked the judge to dismiss the complaint. Byrd told The Star Press that the allegations in the lawsuit were never proven in court and the settlement required the parties not to discuss the case going forward. He did say that EquityMultiple was looking for a way out of their partnership leading up to the lawsuit.

Kirby Pointe is under construction in Memphis, Byrd told the Star Press on March 24.

'Due diligence' trip to Louisville, Memphis

Muncie Mayor Ridenour traveled to Louisville and Memphis earlier this year to perform what he said was "due diligence" on Horizon and Byrd. The mayor said he was shown the Kirby Pointe site, where excavation work appeared to be underway. Ridenour witnessed equipment working the ground at the site nearly two years after EquityMultiple filed its lawsuit concerning the project.

One former associate of Byrd, Carl Mabry, president and executive director of Bluff City Community Development Corp. in Memphis, said he and Byrd worked together on a housing project in the past.

"I've known Preston Byrd since seventh grade," said Mabry, who also works in low-income housing development in the Memphis area. "He is very intelligent."

Ridenour said another property he saw was Harmony Woods Apartments, also in Memphis. But Mabry said he was developer of that property and that Byrd and Horizon had nothing to do with Harmony Woods. Mabry said the property is now owned by Promise Development Corp., a nonprofit based in Tennessee that manages Harmony Woods.

"He (Byrd) had zero involvement," said Mabry.

Mabry reportedly had sent emails to Ridenour that were critical of Byrd. An attorney for Horizon, Timothy C. Maples of Washington D.C., sent The Star Press an email regarding Mabry. The email discussed Ridenour's visit to Memphis. The email does not claim Byrd had any involvement with Harmony Woods whatsoever but only Harmony Woods was the sort of development planned for Muncie.

Mabry and Byrd were involved in a development project called Eagles Landing that gave rise to a dispute, which was settled out of court, the attorney said. The terms of the settlement agreement included a non-disparagement clause. On Dec. 12, 2022, Maples wrote that he sent a cease and desist demand letter to Mabry relating to alleged violations of the settlement agreement.

Maples claims that as a result of the letter, Mabry voluntarily removed what Maples alleges were defamatory comments he had posted publicly.

Maples also referred to a "recent missive" from Mabry being "his latest effort to interfere in the business prospects of Horizon and of Mr. Byrd."

However, The Star-Press had never received an email from Mabry and Mabry never initiated contact with The Star Press. The newspaper sought out Mabry as a source after an online search showed his company's involvement with Harmony Woods, one of the developments visited by Ridenour.

Maples described Ridenour's visit in his email to The Star-Press: "Several Horizon representatives, who were accompanied by representatives of Promise Development Corporation (“PDC”), recently met with the Mayor of Muncie ... In connection with the meeting, the parties toured various properties, including the Harmony Woods Apartments, the April Woods Apartments, and the Kirby Pointe Apartments development site, which is currently under construction. Mr. Bryd was traveling on business at the time of the Mayor’s visit and was not in attendance, but the meeting included Cornelius Sanders, the Executive Director of PDC, and included a walk-through of the above properties and various vacant units. The purpose of the site visits was to give the Mayor a sense of the type and style of the proposed Muncie development which is expected to replicate the design style of the Harmony Woods development.

"Horizon representatives advised the Mayor that it holds a controlling interest in the ongoing Kirby Ponte development.  With respect to Harmony Woods and April Woods, Horizon advised, in part, that it is currently working with PDC to refinance both properties, pursuant to which it seeks to gain a majority interest in such properties.  Unbeknownst to Mr. Mabry, Horizon and PDC initially established a business relationship in 2019 and the entities are currently working as development partners on multiple projects...."

Byrd said that Cornelius Sanders of Promise could vouch for him. The Star Press tried to reach Sanders by phone March 24 and also the previous week. We were unable to contact him.

Mabry also told The Star Press his development company eventually completed the Lamar Crossing project in Memphis, which was the project that led to the $7 million judgment against Byrd for fraud.

Mabry claimed to The Star Press, "He (Byrd) has not built anything on his own."

However, Horizon and Byrd appear to have resources. In December last year, The Commercial Appeal in Memphis reported Byrd had donated $250,000 to a charter school in the suburb of Raleigh, Tenn.

Five times more than the assessed value

In January, Delaware County records show, Michael's Place Development LLC — with Byrd listed as the contact for the company — paid $574,014 for 17 acres near Memorial Drive and Tillotson Avenue, the proposed site for Michael's Place Apartments. That is more than five times its assessed value of about $108,000.

When asked by The Star Press why he paid so much for the property, Byrd replied that he paid what the owner was asking for the land. He also said he knew the city had planned a park near the site and he thought that would be a good fit for the apartments.

At the March 6 Muncie City Council meeting, during which Ridenour described his due diligence trip to Louisville and Memphis, council members considered granting property tax abatement for Michael's Place. However, the council tabled the abatement, which would have been for five years and valued at about $1.6 million for Horizon.

Council member Aaron Clark moved to table the abatement request because he said he thought the abatement would fail.

More: Apartment complex abatement tabled until future council meeting

During the meeting, Clark asked Spicer about the company's financing, which involves soliciting investors, as posted on its website.

"With our investors’ initial equity in hand coupled with our experience, we are able to leverage our ability to negotiate enhanced and favorable financing that yield greater returns for you and for the developments," the Horizon website said.

Clark asked if Muncie was among the projects for which the company is seeking investors and if that process could delay groundbreaking.

"I don't foresee that being a delay. We have other things, that I'm not at liberty to say, where our funds are coming from," Spicer said. "If someone wants to invest we don't say no. But we do have some other mechanisms to keep us going. I can just say it's looking very promising."

The following week Ridenour went before the Muncie Redevelopment Commission and asked the MRC to pay Horizon $2.5 million in lieu of tax abatement approval from the city council.

"It doesn't appear to me, from communications I've received, that it's ever going to pass," Ridenour told the MRC about the abatement.

The mayor went on to say that the developer, Horizon, was frustrated over another month's delay, which meant possible interest rate changes, construction cost increases and more delays after having bought the property.

'We're out'

Ridenour told the redevelopment commission that Horizon almost balked at doing the Muncie project. The mayor recalled that at the council meeting, "they were saying, 'We're out. We're going to sell the property. We're out.'"

The mayor said the Horizon representative came back into council chambers to tell city officials his firm would abandon the Muncie project.

"We talked him off the ledge," Ridenour said. " ... I said, 'Please let me come up with a Plan B.'"

Plan B had the city making an economic development agreement with Horizon, providing Byrd's company $2.5 million in infrastructure development. Ridenour said it's the same amount the city would have provided with an additional $1.6 million to make up for the tax abatement council did not grant.

A statement from Ridenour on March 25 said the Redevelopment Commission plan would have provided initial funds to an "insured closing agent of the lender," not Horizon.

"If they were unable to secure a construction loan, there would be no incentive," he said.

Since there was no abatement, the completed property could have been producing full tax revenue as soon as it was built, Ridenour said. The property lies in a tax increment finance district and its property taxes flows to the MRC.

In introducing the plan to the MRC, Ridenour said the incentive was important.

"The two and a half million is what they (Horizon) felt like they needed in order to make this work on their end of the financials," the mayor said.

He said it was a good deal.

"I think it's worth it," Ridenour said. "The company passed everything I put them through."

The economic development agreement capped at $2.5 million, assuming abatement would not be granted by the council. There was no dissent.

During The Star Press discussion with Byrd on March 24, the general partner for Horizon said that he still intended to pursue the Michael's Place development. But a short time later, Spicer called back to say Horizon was withdrawing the project.

The mayor's office sent a statement: "The City of Muncie announces that Horizon Companies has pulled their 276-unit, Michael’s Place Apartments Development from our community. They still own the property but are undecided as to their next steps. As Mayor, I will continue to seek suitable, positive developments. Both for this 17-acre parcel on the southside and other locations in our community."

David Penticuff is a news reporter at The Star Press. Contact him at dpenticuff@gannett.com.

This article originally appeared on Muncie Star Press: Developer of abandoned apartment project carries record of fraud