Roxby Development President Jeffrey Morris Indicted on Federal Wire Fraud Charge
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WHEELING -- Roxby Development President Jeffrey James Morris was arrested Friday on a federal criminal charge of wire fraud for his alleged fraudulent solicitation and misuse of investments for several properties in Wheeling.
The U.S. Department of Justice announced Friday that Morris, 36, of Wheeling, had been charged in federal court earlier that afternoon. U.S. Attorney William Ihlenfeld said Morris had planned to travel outside of the United States next week, which necessitated action to arrest him and hand down the charge.
Ihlenfeld said the case had been investigated by the Federal Bureau of Investigation and the Internal Revenue Service's Criminal Investigation division.
Morris appeared in federal court Friday, when he surrendered his passport and was released under terms and conditions imposed by the court. The criminal complaint was signed by Magistrate Judge James P. Mazzone of the U.S. District Court for the Northern District of West Virginia.
According to the federal criminal complaint, Morris has been charged with fraudulently inducing an individual to provide him with funds to renovate the Scottish Rite Cathedral, a historic building located at the corner of 14th and Byron streets in East Wheeling. Morris allegedly caused an investor to provide him with $350,000 to rehabilitate the Scottish Rite Cathedral, but instead, used the funds for other purposes.
It's also been alleged that Morris misrepresented work performed on the Scottish Rite building, the status of the historic tax credits and the amount of rental income from a purported tenant.
"Jeffrey Morris made misrepresentations to people in Wheeling, West Virginia, and throughout the country in order to fund a fraudulent scheme," Ihlenfeld said Friday. "His arrest today brings an end to a ruse in which innocent investors were tricked into providing him with millions of dollars."
Additional charges will be filed at a later date, according to Ihlenfeld, who along with U.S. Attorney Jarod Douglas are prosecuting the case on behalf of the U.S. government.
The criminal charge leveled this week focused on the defendant's alleged bilking of one particular investor out of money that was supposed to be invested into the Scottish Rite Cathedral. This property was one of a number of Wheeling area landmarks that Roxby had acquired in an effort to renovate them and bring a new life to them to help spur economic development and revitalization in the Friendly City.
To achieve this, Roxby Development LLC's principal purpose was to acquire and develop real estate in the region, including the Scottish Rite Cathedral, the McClure House Hotel and the Mount Carmel Monastery in Wheeling, federal authorities noted. The Roxby companies received a total of $6.9 million dollars from approximately 20 different investors between October 2019 and July 2022.
FBI Special Agent Michael Torbic provided a sworn affidavit in support of the criminal complaint that was filed Friday. Torbic was a certified public accountant who worked as a financial analyst and auditor before joining the FBI in 2016. His training specializes in criminal law related to public corruption, fraud against the government, money laundering and financial crimes including investigations related to corruption of public officials, bribery, money laundering and major frauds against the United States.
Torbic noted that the investigation included reviews of bank records for companies operated by Morris, a review of emails returned to a search warrant to Google for the business email account used by Morris and several witness interviews, among other avenues related to the investigation.
"The Roxby companies were funded primarily through investment loans," Torbic noted in the affidavit, concluding that Morris attempted to execute a multifaceted "scheme and artifice to defraud," alleging that he "knowingly transmitted and caused to be transmitted by means of wire communications in interstate and foreign commerce" via several emails sent between Sept. 18 through Dec. 29 in 2020 to a person described only as "Investor 1" in the affidavit.
Torbic requested that the court issue a proposed warrant for Morris' arrest on Friday.
Roxby Development purchased the Scottish Rite Cathedral from the Ancient and Accepted Scottish Rite Bodies of Freemasonry on Sept. 15, 2020 to convert the property into an event and social center. The purchase price was $750,000, but it was not due and payable until Sept. 14, 2025, according to the filing, which indicated that the purchase price had also included an agreement for certain structural improvements.
With membership numbers shrinking over the decades, the Scottish Rite had been seeking an investor to take over the maintenance and operation of the facility, which was built in 1916 and had served as headquarters for area members in West Virginia who performed their masonic ceremonies and rituals there for more than a century.
Around June of this year, Roxby was found to be in default of its promissory note, and ownership of the building - pursuant to a foreclosure sale - was transferred back to the Scottish Rite.
According to the investigation into the misuse of investments, Torbic noted that Morris was able to obtain large sums of money from the undisclosed investor for work on the facility's boiler and exterior brick facade, along with other building maintenance projects. Morris also told the investor via email that he would receive historic tax credits for the Cathedral and sell them to the investor - a factor that the investor told investigators was material to his decision to invest in the property.
The tax credits were for a value that the investor "expected to be approximately $212,500," Torbic said.
Morris allegedly sent emails falsely stating that he had been approved for tax credits at the Monastery, although he had only passed one step of a several-step process needed to acquire these credits through the National Park Service, U.S. Department of the Interior.
Later that fall, Morris was able to convince the investor to provide another $100,000 for renovations to the building. "Prior to receipt of this wire, the balance of the account was $2.80," Torbic noted. The next day, Morris allegedly misused approximately $17,000 of this money to repay a loan to another investor.
About a week later, Morris acquired another $150,000 from the same investor for renovations to the Scottish Rite Building, the affidavit stated. The balance of that account reportedly was $79.76 before the transfer was made. In the following days, Morris represented in an email to the investor that certain work had been completed at the Cathedral when he knew this was not true, Torbic reported, noting that Morris also misrepresented progress on the historic tax credit submission.
Another $15,709 from the investor's funds was allegedly used in November by Morris to wire to someone who had invested in another property.
Torbic reported that this practice of sending false emails about progress in renovations and historic tax credit applications continued that fall, with an additional $100,000 allegedly being forwarded by the investor and additional $55,250 and $25,000 chunks of the investor's money being subsequently wired to people who had invested in another property.
Morris also told the investor that a certain company had agreed to lease part of the Scottish Rite Cathedral for a term of three years at a base rate of $3,350 per month, with a 3% annual rent increase and additional rent of $1,200 per month for the use of another part of the building.
"Morris attached to the email a lease agreement purporting to be signed by the principal of the company, when he knew he had not reached any such agreement with the company, and the principal of the company had not signed the lease agreement he attached to the email, according to what the principal of the company reported to me," Torbic stated.
The trustee for the deed of trust that had been filed during Roxby's acquisition of the McLure House Hotel was also successful in action earlier this year to foreclose on that property after the company had been found to be in default of that $6,245,000 seller-finance agreement. The McLure Hotel was returned to the control of the previous owner, FA Management Inc.
Morris had filed for Chapter 11 bankruptcy when creditors began lining up to take legal action against Roxby, but a U.S. Bankruptcy Court judge tossed the bankruptcy cases after it was argued that Morris had not obtained the required insurance coverage for the McLure Hotel and Scottish Rite Cathedral.
According to Roxby's own bankruptcy filing - the company was in debt to the tune of between $10 million and $50 million to a long list of creditors.
Morris was reached later on Friday, but stated that he could not comment on the pending matter.
Federal officials noted on Friday that Morris is presumed innocent unless and until proven guilty.