Fradella indicted!! I just came across this piece of good news from May.
Katrina recovery contractor who met secretly with Mayor Ray Nagin indicted on insider trading charges Published: Tuesday, May 31, 2011, 9:25 PM Updated: Tuesday, May 31, 2011, 9:27 PM
A man who repeatedly met in secret with former Mayor Ray Nagin and got millions in city rebuilding work after Hurricane Katrina has been indicted in federal court in Dallas on six counts of securities fraud.
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Frank Fradella of Covington, the former chief executive of Home Solutions of America, was charged last month with fabricating payments from other contractors to his company, falsely reporting the income to the U.S. Securities and Exchange Commission. That, in turn, drove up the publicly traded firm's stock price and allowed Fradella to cash in with insider trading, according to the grand jury indictment.
Fradella's defense attorney, Randy Smith, did not respond to several requests for comment Tuesday.
With his company soaring and raking in post-Katrina recovery work for the city of New Orleans, Fradella met at least nine times with Nagin in seven months of 2008. In responding to a public records request for Nagin's calendar, the mayor's office blacked out the meetings with Fradella, citing "executive privilege." But a judge forced them to produce the full, unedited record.
In 2009, Nagin's office said the mayor held the meetings with Fradella to discuss Fradella cleaning up the polluted Market Street power plant site, which the city wanted to see redeveloped. But Fradella never made a deal to work on the Market Street site.
Stock inflating alleged
The indictment charges that in March 2006, Fradella directed two Home Solutions subsidiaries, one in Louisiana and the other based in Florida, to bill an unnamed Texas company for "standby and mobilization services."
Both Fradella and the Texas company knew the bills were fake and would never be paid, but that's not what Fradella told shareholders. With the value of Home Solutions' stock price on the Nasdaq Exchange pushed over $10 per share on news of the unexpected revenue, Fradella sold 581,000 shares and made more than $5 million in profit off the deal, according to the indictment.
The indictment says Fradella followed that up with a similar scheme with an unnamed Louisiana firm.
A former employee of Fradella's who spoke on condition of anonymity identified that company as Associated Contractors II, a firm owned by Scott Sewell, a Republican political operative; Aaron Bennett and his father, Bill Bennett; and Bill Edwards. Sewell and Edwards later brought much of Fradella's financial dealings to light in a civil lawsuit.
According to Sewell and Edwards' lawsuit, Fradella knew he was about to buy Associated Contractors II, so he overstated the subcontract work Home Solutions was doing for Associated by more than $4 million. The federal indictment says Fradella got employees at Home Solutions to write up seven bogus invoices for work on various recovery projects in New Orleans.
Before Associated ever found out about the invoices, Fradella had purchased the company for $9 million in cash and $9 million in stock, and Fradella controlled both companies' books.
Sewell and Edwards alleged in their lawsuit that they got very little of the cash from the sale, and soon the stock was worthless as it fell below $1 a share and Home Solutions was delisted from the Nasdaq.
French Market work
In an interview in December, Aaron Bennett told The Times-Picayune that rather than joining Sewell and Edwards in a lawsuit, he settled with Fradella for $50,000 and other considerations. Shortly after that, Fradella transferred Home Solutions' work restoring and remodeling the city-owned French Market to Bennett's company Benetech, which received more than $2 million for projects added by change orders.
At about the same time, in early 2007, Bennett used a private plane leased by Home Solutions to fly Nagin, Nagin's wife, former city technology chief Greg Meffert and others to Chicago for the Saints-Bears NFC championship game.
Bennett said the mayor didn't know at the time that Benetech had just been made the technology office's prime contractor, the vehicle for paying Meffert's friend Mark St. Pierre to manage the office. Meffert and the man who was selected as tech chief during that trip, Anthony Jones, both pleaded guilty last year to taking bribes and kickbacks from St. Pierre, who was convicted on 53 felony counts in federal court last week.
Another connection between Home Solutions and Nagin centered on a company owned by the former mayor and his sons that installed granite countertops.
After Hurricane Katrina, Home Solutions expanded its contract with Home Depot for countertop installation services. Shortly after that, in April 2007, Nagin's own countertop installation company, Stone Age, got a contract at four New Orleans Home Depot stores. Meanwhile, Home Depot was negotiating with the Nagin administration to get tax breaks and other concessions to build a store near the Louisiana Superdome.
Nagin faces state ethics charges for doing personal business with Home Depot during the negotiations, with a hearing before an administrative law judge scheduled for later this month.
David Hammer can be reached at dhammer@timespicayune.com or 504.826.3322. |
