During the predawn hours of Aug. 13, embattled Richmond developer Justin G. French waited at Richmond International Airport with $11,000 in cash and a one-way airplane ticket in his pocket. Then the Virginia State Police swooped in.
Those two items -- the ticket and the cash -- are why French should be released on $150,000 bond only if he agrees not to leave the state, argued Assistant Attorney General Shannon Dion before General District Court Judge Phillip L. Hairston Aug. 16.
Lawyers did not reveal the destination of the ticket, but French's lawyers countered that he should be allowed to visit his wife and children who have been living in Miami.
A bond deal was struck, and French -- due to be released from City Jail -- is expected back in court Nov. 2 to answer four state charges of forgery, four state charges of knowingly presenting a false document and a ninth charge on an unspecified outstanding warrant. For his release on bond, he must stay in Virginia, report to his lawyers weekly and not renew or seek a new U.S. passport.
No new details of the state charges were available but it's possible that French, 39, also may face federal charges stemming from an Aug. 5 police raid on his Shockoe Slip office which included the Federal Bureau of Investigation, Internal Revenue Service and the Virginia State Police. The raid lasted at least seven hours, with police taking more than 80 boxes with paper files and computers.
The nature of the investigation is far-reaching, says Kathleen Kilpatrick, director of the state Department of Historic Resources, including French's business practices and finances. She says the tax-credit program has never faced the prospect of widespread fraud.
Under the microscope is French's use of that tax credit program, administered by the Department of Historic Resources. It allows developers to tap into 20 percent in state tax credits and 25 percent in federal tax credits to rehabilitate historic properties. Developers must go through a rigorous application process with the department to receive the credits.
Developers can use the tax credits to secure construction loans -- most commonly, by selling partnership stakes in projects to investors in exchange for use of the credits, as was the case with French's partnership with Henrico County-based Markel Corp. on several projects in Scott's Addition.
To receive historic tax credit allocations, investors or companies must have an official ownership stake in the development before the project is complete. In the weeks leading up to his arrest, French publicly lambasted Markel for withholding capital on some projects. The convicted felon's partnership with the giant specialty insurer, a conservative company, also has mystified some. French apparently enamored himself with the Markel family through his volunteer involvement with the Faison School, a local nonprofit that provides resources for families with autistic children, one of the Markels' pet causes.
The Department of Historic Resources contacted federal authorities more than a year ago during the final stage of the approval process for several of French's projects after the expenses he claimed -- and on which the tax credits are based -- came in much higher than would normally be expected for projects of similar size and scope, according to a source close to the investigation.
Richmond BizSense, an online news site, reported last week that French had received more than $18 million in tax credits on a variety of approved rehabilitation projects around Richmond, with some coming in at more than $300 a square foot.
That's unusually high, says a Richmond developer: “When we do a Taj Mahal, it might approach $200” a square foot. At $300 per square foot the project would immediately invite scrutiny from the Department of Historic Resources, says the developer, speaking on condition of anonymity.