Representatives of a Florida business that promised to build a giant recycling factory in Clay County employing 1,400 people scammed a construction company out of $1.32 million in a deal that never materialized, a federal grand jury charged Thursday.
The grand jury charged David R. Bennett, Daniel R. Goodwin, Sidney A. Tarrant and Izhar H. Syed with conspiracy and five counts of mail fraud.
Assistant U.S. Attorney Adam C. Reeves requested warrants to have the four arrested and brought to Kentucky
The indictment is the latest chapter in a story that first inspired great hope in the struggling county but ended in disappointment.
Officials with a Destin, Fla., company called Waste Not Technologies told the Kentucky Economic Development Finance Authority in 2009 that the company planned to build an 800,000-square-foot factory in Manchester, at a cost of $150 million, to turn household garbage into products such as building materials.
Company officials said the facility would hire 1,411 people at an average wage of $15.45 an hour.
In June 2009, the state approved the company to keep up to $42 million in taxes it would otherwise owe if it created the required number of jobs.
News of the project was like a thunderclap in Clay County, which had lost most of its coal jobs and had a poverty rate three times the national level.
Carmen Webb Lewis, mayor of Manchester at the time, said some people who knew that the company was looking at Manchester had prayed the project would materialize.
"The community's so excited," Lewis said after the company confirmed it would build the factory.
The indictment returned Thursday, however, contended that assurances Bennett and others made about the project were part of a scam.
Bennett was a managing member of Waste Not Technologies and Global Green Holdings, a related company.
Tarrant and Syed, associates of Bennett, were trustees for a Nevada company called USA Global Holdings Business Trust, and Goodwin was an agent for The Goodwin Law Firm in Virginia, according to the indictment.
Bennett hired Elza Construction, a Laurel County company, to excavate the site for the planned factory. Bennett asked the owner of the company, Paul Elza, to wire USA Global Trust $1.32 million as an assurance his company could complete the job, instead of posting a performance bond, the indictment said. Bennett told Elza his company would be paid $44 million for the work.
Bennett signed a memorandum of understanding that said Elza would get back the $1.32 million within 105 days of paying the money, according to the indictment. In addition, Bennett and Goodwin signed a deal that said Goodwin would send the $1.32 million to USA Global Trust to leverage financing for the factory.
Elza wired the money to a trust account of Goodwin's firm in October 2009, but much of it didn't end up where it was supposed to, the indictment charged. Instead, Goodwin quickly transferred $270,000 to another company Tarrant operated, sent $140,000 to Syed, and withdrew about $41,000 himself, the indictment said. Goodwin sent $530,000 to USA Global Trust, according to the charges.
The project appeared real, for a time.
Manchester officials finalized a deal in October 2009 for the city to pay $900,000 for land for the factory at the site of a defunct coal-loading facility.
Lewis arranged for a company to do engineering work, and Elza moved heavy equipment to the site.
Bennett attended a groundbreaking ceremony for the factory in December 2009 and handed Elza a check for $3 million. The local newspaper ran a photo of the check, Lewis said. But the check bounced when Elza tried to cash it, the indictment said.
Questions about the project grew in early 2010 as work stalled, but Bennett attended an April 2010 city council meeting in Manchester to try to quell skepticism. He said that there had been a delay in financing for the factory, but that his company would finalize full funding within two weeks.
Bennett said the project was not a scam, as some residents had come to believe.
"This is not to come in and rip the city of Manchester off, or the county off," Bennett said. "We're standing firm in our commitment to not only accomplish but to complete what we have set out to do."
Current Manchester Mayor George Saylor said no more work was done on the factory site after that. But Bennett, Goodwin, Tarrant and Syed allegedly strung Elza along for several more months with lies about financing for the project being secure and assurances he would get paid, the indictment said.
The wire-fraud charges against the four are based on a phone call, an email and a fax to Elza in which the four made false assurances, and two wire transfers in which Elza sent them his money.
Elza Construction never recouped the $1.32 million. The company filed for bankruptcy in May 2011, listing a $1.9 million loan it got to finance its work on the Manchester factory site as one of its largest liabilities.
The mail-fraud counts against the four people charged in the case carry a top sentence of 20 years. The government also is seeking a judgment of $1.32 million against the four.
Lewis, who lost a bid for re-election in 2010, said Thursday that she had given information to the FBI as part of its investigation and was glad to hear of the charges. Bennett used religion to help sell his story to local residents, Lewis said, telling people the Lord had told him in a dream to build the factory.
"Everybody, I think, just fell into the whole big scheme," Lewis said. "Everybody was looking at jobs and making money, and you just got caught up in it."