Iowa regulators acknowledge they're investigating Johnston developer accused of fraud

The Iowa Insurance Division says its investigators are "very interested" in talking to people able to provide information regarding alleged wrongdoing by Johnston developer Daniel Pettit, who numerous investors have accused of fraud.

The division acknowledged this week it was investigating Pettit, 43, after a Watchdog probe earlier this month. The owner of Encompass Holdings and numerous limited liability corporations allegedly owes about $70 million to banks, investors and former business partners with judgments against him, according to Iowa court documents.

"I highly encourage any investors with complaints concerning Mr. Pettit to file a complaint with our office," Chance McElhaney, a spokesperson for the department, said in a statement, citing the division's online filing portal at iid.iowa.gov/consumers/filing-complaints.

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"Further details related to this ongoing investigation are not being released at this time," McElhaney added.

As yet, Pettit has not been arrested, though there is a warrant for his arrest and he is under investigation by both the FBI and Johnston police. He could not be reached Wednesday for comment.

Bond lowered for man who developer says robbed him

On Wednesday afternoon, a Polk County judge in a related case lowered the $300,00 bond of a man accused of several felonies in connection with an alleged armed robbery at Pettit's home that Johnston police suspected might have been staged.

Pettit in September told police the man, Moustapha Moustapha of Los Angeles, barged into his mansion, brandished a gun, and, as two of Pettit's former business partners watched, demanded money that he said Pettit owed him. Pettit said Moustapha roughed him up and fled with Cartier jewelry, handguns, Rolex watches and a luxury Bentley automobile, a police report shows.

But the two former business partners of Pettit, Alan Stoye and Matt Jennings, told Watchdog this month they did not see Moustapha, a high-end car rental dealer, take all ― if any ― of the expensive items Pettit alleged were stolen.

The judge lowered Moustapha's already posted bond to $150,000, and he remains free. He is scheduled to be arraigned Jan. 30.

Iowa Insurance Division declines to release complaints against Pettit

In the meantime, some investors who allege they lost large sums of money in business deals with Pettit have complained to Watchdog that they reported Pettit a long time ago to local law enforcement, state authorities and the FBI. But this week the insurance division declined to release copies of any complaints, saying they are confidential under Iowa code.

"The Iowa Insurance Division has no comment on any investigation into Mr. Pettit by any other investigative agencies," McElhaney, the division spokesperson, said in his statement. "We encourage related questions about those agencies to be addressed directly with those agencies. Our office regularly works with other investigatory units at local, state and federal levels both in civil and criminal cases. The particulars of a case dictate the actual investigation approaches deployed between agencies."

Pettit, who was licensed until August 2023 as an insurance producer, enlisted investors in Iowa and around the country in developments and other businesses, including a legal cannabis operation in Las Vegas that remains involved in a court battle in Nevada, court documents show. But he was never licensed in Iowa as a broker agent or investment adviser, according to the insurance division.

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A one-time mayoral candidate in Waukee, Pettit announced plans for some of that city’s most ambitious projects before the pandemic hit ― from a massive 40-acre, $101 million entertainment district called The Quarter to an 88,000-square-foot event and office space nearby.

In 2021, he convinced West Des Moines leaders and lenders to back two major commercial-residential projects, The Village at Sugar Creek and Banks Landing, both north of Des Moines University’s new campus.

But Pettit also had an appetite for the high life, buying a mansion worth at least $2.4 million with a nine-hole golf course and a $1 million painting from pop artist Rob Prior in Miami. Among the things he tried to buy while his finances went south: a $275,000 Michael Jordan jersey and a Bugatti Chiron Super Sport, a rare sports car, court records show.

On Nov. 30, a Polk County judge sentenced Pettit to six months behind bars for repeatedly ignoring court orders and failing to respond to subpoenas, but he failed to voluntarily turn himself in, jail records show.

Among the willful conduct by Pettit that Judge Jeanie Vaudt noted in the sentencing: Pettit liquidated accounts this spring and summer and transferred around $100,000 from a personal account to a joint account with a woman in Nevada. In August, Pettit also applied for life insurance with a $10 million death benefit to be awarded to his own revocable trust, the judge found.

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"To put it plainly, it appears that defendant Daniel E. Pettit has consistently not been forthcoming to plaintiffs about his true financial condition and the kinds of results he could deliver to his investors," Vaudt's ruling said. "Many individuals and companies ― big, medium and small ― potentially have been economically damaged by (his) empty promises and lack of candor as to his true financial position. … It is reasonable to assume that some of the money funding that lavish lifestyle came from defendant Daniel E. Pettit's investors."

Once recognized as one of 10 Outstanding Young Americans by the Jaycees nationally, Pettit now finds himself at the center of multiple investigations, including one involving an alleged prostitution ring, search warrant records show.

His former wife, Rachael Pettit, divorced him this year. Many one-time friends and acquaintances have distanced themselves from the father of two, who ingratiated himself to many using his Christian faith.

Several investors, meanwhile, have declined to give interviews, hoping Pettit will somehow find the money to pay them back.

Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com, at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.

This article originally appeared on Des Moines Register: Iowa developer Daniel Pettit target of state fraud investigation