Two Grand Junction men face sentencing after pleading guilty to money laundering in a scheme involving housing development in the area.
Franklin Thad Harris and Merlin D. Unruh, pled guilty before U.S. District Court Judge Christine M. Arguello in Denver.
Harris and Unruh each pled guilty to one count of money laundering, which carries a penalty of not more than 10 years in federal prison and a fine of up to $250,000 per count. Arguello is scheduled to sentence the two on Nov. 10.
Harris and Unruh were indicted by a federal grand jury in Denver on Jan. 8, 2013, for charges of bank fraud and money laundering.
According to information contained in court documents, including the stipulated facts contained in their plea agreements, the 58-year-old Harris was in the business of constructing housing developments throughout the Grand Junction area. In the mid to late 2000s, Harris was involved in the purchase of several acres of land for various planned housing developments in Grand Junction. Financing for the projects came in the form of secured loans from First National Bank of the Rockies (FNBR).
Harris’ partner, the 53-year-old Unruh, was in the construction business and was general contractor on building projects with Harris. TDSM was a Colorado real estate development company incorporated in February 2003, and Harris and Unruh were sole members of the board of directors of TDSM. Harris was the president and registered agent of TDSM. Unruh was secretary and treasurer. Unruh incorporated and was the registered agent for McGleeson, a construction company.
In 2010, several construction loans to Harris had become problem loans as they were in default with FNBR. The special assets department of FNBR began to review the loans and identified potential fraud and requested an outside forensic audit, which eventually lead to federal law enforcement agencies being notified.
Between October 2007 and December 2008, Harris and Unruh obtained loan disbursements totaling more than $3.7 million.
They submitting false and fraudulent expense documentation, primarily false invoices, which represented various types of construction work completed at both sites. In fact, much of the work reflected in the invoices had not been performed at the Chatfield site, and no work was done on the Thunder Valley development.
A special agent with the Internal Revenue Service conducted an analysis of the flow of funds and found Harris and Unruh, on numerous occasions, conducted a series of financial transactions after the draw money was deposited into their construction business account.
Harris and Unruh diverted funds meant to pay subcontractor invoices to private bank accounts and retirement accounts owned and controlled by them and their spouses.
This case also was investigated by agents with Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Michelle Heldmyer.