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Apr 21st
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Home News Latest Contractor gets four year prison sentence for defrauding Middletown development investors

Contractor gets four year prison sentence for defrauding Middletown development investors

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LAKE COUNTY, Calif. – On Friday a Roseville building contractor was sentenced to federal prison for defrauding investors in a development near Middletown.

Leo Wheeler, 56, received four years and three months in prison, to be followed by three years of supervised release, from United States District Judge Garland E. Burrell Jr., according to United States Attorney Benjamin Wagner’s office.

Wheeler, who initially was indicted on 29 counts of mail fraud in late 2010, pleaded guilty last Aug. 26 to one count of mail fraud as part of a plea agreement reached with federal prosecutors.

He had operated a real estate investment scheme involving the Creekside Oaks Estates Subdivision, as Lake County News has reported.

Creekside Oaks Estates is a 30-lot subdivision located on 14 acres at 18765 Hartmann Road, Middletown.

The case against Wheeler resulted from an Internal Revenue Service criminal investigation.

The investigation found that Wheeler defrauded more than 10 investors of hundreds of thousands of dollars by submitting approximately 85 fraudulent invoices for work he falsely claimed he had performed on Creekside Oaks Estates.

According to county planning documents, the Creekside Oak Estates Subdivision initially was approved in July 2005.

The original indictment against Wheeler stated that from 2005 to 2007 he solicited investors to provide money for loans to be used for the subdivision, guaranteeing investors an 11-percent rate of return and six months of prepaid interest.

Wheeler used three fictitious companies – Kenneth Gutman Trucking, SNC Solutions and California Maintenance – to funnel funds to himself and to other projects he was trying to keep afloat after suffering heavy losses during the financial crisis of the last several years, according to court documents.

During an interview with an IRS special agent, Wheeler admitted he had falsified numerous invoices and wrongly diverted investor funds, court documents showed.

Wheeler – whose criminal record includes a single misdemeanor theft conviction – originally had been set for sentencing in the Creekside Oaks Estates case last November, but the proceeding was delayed several times, based on court filings.

On April 2, Wheeler’s defense attorneys filed a document with the court requesting no more than a 30-month sentence, and arguing that the loss to investors was $985,000 – not the $1.5 million figure reached by the government – which would have allowed the reduced prison sentence.

Then on Thursday, just a day before his sentencing, Wheeler’s federal defense attorneys filed a motion requesting that sentencing be delayed yet again, for four weeks.

Wheeler’s attorneys also filed supporting documents that explained Wheeler had paid $20,000 toward restitution, and stated that six of the victims who were contacted were willing to support delaying his incarceration if it meant they would be repaid all or part of their money.

Letters were submitted to the court by Wheeler’s business associates, who had hired him as a subcontractor to manage nonprofit housing programs, asking that his sentencing and imprisonment be delayed. He has reportedly been working on such programs with the nonprofit Homes That Change Lives.

The government opposed the motion to continue. Judge Burrell denied Wheeler’s request for a delay and sentencing went forward as scheduled.

During Wheeler’s Friday sentencing, Judge Burrell said he was troubled by Wheeler’s submission to the court of an 11-page letter that minimized his conduct and claimed he had never engaged in a scheme to defraud.

“Not a wise move to submit to the court a misleading document when you are going to be sentenced,” Judge Burrell said.

Burrell also granted the government’s motion to take Wheeler into custody rather than allowing him to self-surrender at a later date.

“I have serious, serious problems with his credibility,” Judge Burrell said in ordering Wheeler into custody.

According to Lake County Senior Planner Emily Minton, the tentative approval on the Creekside Oak Estates Subdivision map is still valid.

She said it originally was approved July 26, 2005, and was good for two years. In 2007 it was extended to 2009, and has received two additional automatic extensions bringing the current expiration date to this coming July 26.

Minton said the Subdivision Map Act provides for an additional time extension of up to one year – taking the plan’s expiration to July 26, 2013 – if an application is made to, and approved by, the Board of Supervisors.

Assistant United States Attorney Russell L. Carlberg prosecuted the case against Wheeler.

Email Elizabeth Larson at [email protected] .

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Comments (1)Add Comment
“Not a wise move to submit to the court a misleading document when you are going to be sentenced,” Judge Burrell said.
written by Greg_Cornish, April 14, 2012
I like this guy. Good to see consumer protection in action. To much contractor rip-offs going on.

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