Developer with local ties pleads guilty to fraud conspiracy

Article Courtesy of The Daytona Beach News-Journal

By Eileen Zaffiro-Kean

Published February 17, 2013

DAYTONA BEACH — Richard Zahn, an Orlando area developer who has been involved in local projects including a marina near the Seabreeze Bridge, pleaded guilty Friday in federal court in South Carolina to charges connected to a scheme involving kickbacks.

Federal prosecutors believe Zahn tried to pay off people in positions of power in South Carolina who could help him sell a roughly 120-acre property he owns there to South Carolina State University for $2.8 million.

Zahn agreed to pay about $30,000 in cash to the now former police chief of the university and buy him an all-terrain vehicle, according to the U.S. Attorney's Office in Columbia. Zahn's also accused of agreeing to buy the now former chairman for the school's Board of Trustees a Porsche Cayenne.

But before any money changed hands or gifts were given, the Federal Bureau of Investigation, the Internal Revenue Service and other federal and state agencies interrupted the scheme, according to officials involved with the case. The property was also never sold to the university.

The 44-year-old Zahn, who lives in Lake Mary, pleaded guilty to conspiring to commit honest service wire fraud by offering illegal bribes and kickbacks to public officials. The charge stems in part from Zahn's use of a cellphone in his dealings with the former board chairman.

He's free on $100,000 bail and was expected to be back in Florida by early Friday evening, according to his attorney, Andy Savage of Columbia. Zahn is permitted to travel throughout the United States for business purposes, Savage said.

Savage said he doesn't expect Zahn to be sentenced for about six months. Zahn could receive a maximum penalty of five years in prison and a $250,000 fine.

As part of the plea agreement, federal prosecutors are recommending Zahn be sentenced to three years' probation — a suggestion the U.S. District Court judge can reject. Among the strings attached to that recommendation of probation is a requirement for Zahn to testify against others accused in the probe if their cases go to trial, said Assistant U.S. Attorney Mark Moore.

Savage said Zahn has family connections in the area around South Carolina State University. He said Zahn got to know the former university police chief, Michael Bartley, when Zahn donated some money to law enforcement in the area.

As a favor, Bartley kept an eye on the rural property that Zahn later put up for sale, Savage said.

When Zahn was trying to sell the land, Bartley and the former Board of Trustees chairman, Jonathan Pinson, helped him, officials said. But Zahn found out in the summer of 2011 "there's a cost of doing business" when Bartley and Pinson asked to be compensated for their help, Savage said.

Zahn "didn't realize there was a culture of corruption," Savage said. "He wanted to help the college. ... He didn't go up there with the idea of bribing anyone."

Zahn's mistake was not saying no to the requests, Savage said.

Some people in Daytona Beach know of Zahn through his Longwood company's partial ownership of the Overlook apartments, two towers located on both sides of the Seabreeze Bridge on the eastern bank of the Halifax River. Zahn is the CEO of ZMG Construction, which announced a few years ago it wanted to refurbish the buildings, add new landscaping, create a 200-slip marina and build a park on a mostly vacant 5-acre peninsula under the bridge.

Despite vehement objections of people who live along the river and back in the neighborhood, in November city commissioners gave the green light for the project to move forward on a 4-3 vote.

ZMG Construction is still pursuing approvals from agencies such as the Florida Department of Environmental Protection, which could take years, said city spokeswoman Susan Cerbone. According to the planned development agreement, the company has three years to pull the necessary permits, Cerbone said. Once ZMG has the state permits, the company will need to submit a final site plan to the city for approval, she said.

City Attorney Marie Hartman said the city has been sued by the owner of a vacant piece of riverfront property that faces the marina area. That landowner is challenging the recent rezoning that makes the project possible and the city's approval of the marina being built, Hartman said.