Update: Josh Romano found guilty of four counts of fraud, faces new bankruptcy lawsuit

Josh Romano, a once-prominent local pinball machine, was found guilty of four counts of fraud and embezzlement by a federal jury. (BizSense File Images)

A federal jury found once-prominent local house player Josh Romano guilty of four counts of fraud and embezzlement and not guilty of three other counts.

The verdict was delivered to senior U.S. District Court Judge Robert Payne late Thursday afternoon, after about seven hours of deliberation.

Romano was released on the terms of his previous bond and is expected to be sentenced on January 19. He has to wear an electronic monitoring device until then.

Josh Romano

The jury found Romano guilty of conspiracy to commit bank fraud and three of five counts of wire fraud. He was found not guilty of the other counts of wire fraud and not guilty of lying under oath in his bankruptcy proceedings. Two other counts were dismissed during the trial.

In comments after the verdict, Romano’s attorney, Vaughan Jones, described the jury’s findings as a “mixed bag” that does not fully condemn or exonerate Romano.

“He was originally charged with a nine-count indictment, and he was eventually acquitted on five of the counts, either by jury verdict or by government dismissal. I think ultimately it reflects that this case is not what everyone thinks it seemed at first glance,” Jones said.

“It is not a complete exoneration from Mr. Romano that nothing bad happened, nor a perfect example of this ill-intentioned pinball machine who committed these intentional frauds with the intention of hurting people. It’s really a mixed bag all around,” he said.

Jones said any decision on an appeal would come after Payne delivers his final judgment in January.

The verdict followed a three day trial who saw Romano, 40, speak up in one’s own defense. He faces maximum sentences of up to 20 years in prison on each of the four counts, although his sentence is expected to be lighter. Sentencing guidelines also call for a $250,000 fine, full restitution, forfeiture of property, and three-year supervised release.

Prosecutors alleged that Romano conspired with Lindsey Passmore, at the time a paralegal for the local real estate law firm S. Page Allen & Associates, to defraud Tuckahoe Funding, a so-called hard money lender owned by the homebuilder of the Rhett Starke region.

The indictment that a federal grand jury returned in March alleged that the scheme involved $1.2 million in funds that were disbursed from escrow accounts for six home rehabilitation projects without Starke’s authorization.

The law firm, headed by real estate attorney Page Allen, was responsible for authorizing construction draws in Romano with Starke’s approval, and the funds were supposed to be invested in the respective project for each account.

Prosecutors said the funds were instead earmarked for other projects and that Romano spent some of them on personal expenses, such as Richmond Country Club membership dues and private school tuition.

Passmore, 39, who first pleaded not guilty with Romano, reached a plea deal in August in which she agreed to plead guilty to the conspiracy count and testify in the case in hopes of a lighter sentence. His sentencing is scheduled for November 17.

Passmore testified that Romano was frustrated that he could not freely touch the escrow funds even though he was paying interest on the loans. She said it was her idea to move funds between accounts and documented the embezzlement, with the understanding that Romano would repay the money with profits from other projects he had done.

Funds were not repaid and were eventually lost, leaving some homeowners or buyers with incomplete homes. Some of the projects were completed by other builders after Starke bought them out through deeds in lieu of foreclosure.

Romano testified that he requested the prints but was unaware that they were from escrow accounts for different projects. He blamed the missing funds on Passmore and Allen, who he says stole the funds and misappropriated them without his knowledge.

Starke and Allen then negotiated a settlement in which Allen paid Starke $525,000 with funds borrowed from his life insurance and withdrawn from his retirement account. Prosecutors mentioned during the trial that Allen was being investigated by the Virginia State Bar, which had an investigator present at the courthouse this week.

Romano’s original seven-count indictment was expanded in August to include two additional counts alleging bankruptcy fraud and lying under oath in bankruptcy proceedings. The bankruptcy fraud charge was ultimately dismissed, as was one of the six wire fraud charges.

Highs and lows

A vandalized Cobblestone sign in front of one of the houses mentioned in the indictment.

At one point, renovating and selling nearly 30 homes in a year, Romano Paved Development Group hit a high point in 2017 when he was featured in an HGTV pilot called “Richmond Rehabbers” which was not picked up for a series.

Prosecutors said it was the same year the alleged scheme came to a head, with Romano and Starke each questioning Passmore and Allen about discrepancies with blocked funds.

Starke, 64, who met Romano in 2015 through an introduction by Passmore, said he inquired about the funds after observing that work on several Romano projects was not progressing in mid-2017. He expressed concern about the interest accrued by Romano and floated the idea of ​​moving funds from one escrow account to another, but via a loan refinance and at his direction.

Passmore admitted that the balances she presented to Starke were fraudulent and fell far short of little to no funds remaining in the accounts. According to the federal indictment in the case, the reported account balances for the six projects were over $1 million, while the actual funds remaining were $676.

Other witnesses who took the stand said Romano continued to buy properties despite being financially under water on some homes, in one case having to bring $70,000 to the closing to close. a sale.

Kyle Benusa, a business consultant who advised Romano in 2016, said Romano’s business liabilities exceeded assets by $1 million and wondered if expenses such as an architect, project managers and d other consultants were needed.

Benusa also said he discovered that the escrow accounts for the six Starke projects involved were at or near zero, and when told, Romano did not react surprised and said the money had been stolen or moved without his knowledge.

Dan Allen, who oversaw Romano’s operations from 2016 to 2017, said he determined that interest payments on loans taken out by Romano were causing his projects to fall. He said he advised Romano to stop buying properties, but Romano maintained that the inventory could dry up and he wanted to make sure there were more projects going on.

Breese Romano, Josh’s wife at the time, testified that the publicity for the Richmond Rehabbers show put pressure on Josh to be successful with his business and keep working, describing the storyline as a cascading effect that left them made you wonder why they couldn’t have the funds to do more projects. She and Josh are now separated and are filing for divorce.

Josh Romano while filming the HGTV pilot ‘Richmond Rehabbers’.

Josh Romano liquidate Cobblestone in 2018 in a context of growing indebtedness and disputes with former clients. He filed for Chapter 7 bankruptcy later that year, and faced a lawsuit from Starke in those proceedings which he eventually won, with the bankruptcy judge on Romano’s side placing responsibility for the missing funds on S. Page Allen & Associates. Passmore did not testify in this case.

When he took the stand as the last witness in the trial, Romano maintained that his job “was bricks and sticks” and left bookkeeping and other financial work to others, including Passmore, who he had hired for a while to manage his finances. . He said he never asked Passmore to move funds as she suggested, and he said Starke said he was fine with the concept of moving funds between projects.

In his closing argument, Assistant U.S. Attorney Michael Moore argued that Romano was reframing past events in an effort to push Passmore “under the bus” and avoid blame for the embezzlement. Moore called Romano’s testimony gaslighting “to make it look like Mrs. Passmore did it all herself”.

In encouraging the jury to return a guilty verdict, Moore said Romano could be found guilty of conspiracy with Passmore even if there was no written agreement.

“You can infer an agreement with Lindsey Passmore paying out prints at the request of Joshua Romano even though they didn’t say so,” Moore said, adding that if a person is causing someone to do something criminal in her name, she is equally guilty. “Romano,” he said, “is just as guilty as she is because he made her do it.”

Bankruptcy complaints revived

As the federal lawsuit draws to a close, back in bankruptcy court, Romano faces a second attempt by Starke and his former client Melissa Bass to collect the funds owed to them.

Starke’s Tuckahoe Funding and Bass filed a lawsuit last month seeking to recover funds that U.S. Bankruptcy Judge Kevin Huennekens allowed to be released in connection with the Romano case.

Starke and Bass had filed separate motions in recent years to prevent the cancellation of the debt they were seeking to collect, seeking damages of at least $750,000 in Starke’s case and nearly $240,000 for Bass, whose complaint stemmed from a renovation to her residence that she says was not completed on time and required repairs to complete and correct the code violations.

Huennekens refused Bass’s request and ruled her sentence releasable, finding that she had failed to prove that Romano had committed fraud, as alleged, by not completing his renovation as promised. The following year, Huennekens dismissed Tuckahoe Funding’s lawsuitsiding with Romano in blaming S. Page Allen & Associates for the missing funds.

Those rulings were made before the federal case against Romano was filed in March. The Starke and Bass bankruptcy complaint alleges one count of perjury or other forms of fraud and refers to the federal indictment to seek revocation of the discharge and other relief.

Janet E. Fishburn