A grand jury indicted the founders of a well-known Tucson development company, alleging they used thousands of dollars designated for a construction project to instead pay for personal expenses and other projects.
Gadsden Company founders Adam Weinstein and Gerald Dixon each face 20 charges: one count each of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering; and 17 counts of transactional money laundering, according to the indictment filed April 8. Weinstein is Gadsden’s president and CEO, while Dixon is the company’s owner and chairman.
The grand jury indictment comes after an arbitrator found that Weinstein and Dixon defrauded investor Allen Sands and his company AWS Opportunity Funds I LLC. Sands and his company invested millions of dollars in a 59-unit multifamily development in Menlo Park that was never built.
But the attorney representing the Gadsden Company maintains that his clients are innocent and should be acquitted.
“There is no evidence of fraud or money laundering or intent to defraud at all. It is an absurd allegation,” said Dennis Wilenchik in an email about the federal indictment. “This is a baseless charge ginned up by the plaintiff in the civil case and will only harm their client relationships and will fall flat on its face in front of a jury and is an example of poor judgment by the U.S. Attorney’s Office.”
Weinstein, Dixon already defendants in multiple civil suits
Weinstein and Dixon approached Sands in 2021 with a proposal for the project. AWS and Gadsden became members of a third company, Block F Investors, for the project. In February 2022, AWS wired roughly $3.37 million to Block F, which Gadsden managed. Gadsden agreed to contribute land with a value of $2.3 million as well as $1.06 million in cash.
But after months passed with little progress on the project, and following a court-ordered inspection of financial records, AWS found that all of the funds from the project had been diverted.
Arbitrator Richard Mahrle found Gadsden never made that cash contribution and used AWS money to pay for the land.
Mahrle also found that the developers used Sands’ money to pay off a lien on the land for the project, as well as cover the salaries of Weinstein and his wife, personal expenses made by Dixon and Weinstein, and Gadsden’s payroll. Funds were also transferred to Weinstein and other related companies under the “guise” of loans, according to the attorney for AWS in court records.
Sands’ company is suing the two developers in a civil lawsuit in Pima County Superior Court, a case that is currently pending.
The two developers are also being sued by Sands over similar allegations in a different project.
That case is still pending in Pima County Superior Court.
Indictment sheds light on how the alleged fraud took place
The grand jury said in its indictment that Weinstein and Dixon used the investors’ funds to pay a lien on the land despite saying the land was “free and clear.” Grand jury documents also allege the developers lied about the reasons for the project’s delay when, in reality, the funds had been diverted for personal expenditures.
From February through April 2022, the indictment alleges Weinstein diverted $200,000 of the investors’ funds to pay off his credit card on transactions for dozens of expenses. Some of those include:
- Luxury hotel stays in New York City.
- Meals at restaurants.
- Ski trips in Taos, New Mexico, and Telluride, Colorado.
- A rental agency in London, England.
- Home furnishings.
- Purchases at high-end department stores.
- Airline tickets to Paris, France, and other destinations.
- Gadsden payroll expenses.
Weinstein and Dixon have been developing Tucson’s Mercado District since 2008. Located in the historic Menlo Park neighborhood, west of downtown, the vibrant and pedestrian-friendly Mercado District is nestled at the base of Sentinel Peak, known as A Mountain. It boasts retail shops, fine dining, cafes, a Mexican bakery and more.
Some of the company’s projects include the popular MSA Annex, the Mercado San Agustin, and a $110 million mixed-use project to build the Bautista, which is still under construction.
From azcentral.com – Read the article here