John R. Steffen has been a visionary, risk-taking entrepreneur and charismatic player in local, state and national politics for years. A white kid from North City who started out as a construction grunt and became a major player in Downtown development with his Pyramid Construction, Inc., Steffen brought a lot of heart and vision to this city. Over a 15-year career in the construction industry, he made a strong and lasting positive impact on St. Louis that will survive for many years.
He also mixed better in black political and business circles than any other white player one could name. Steffen was genuinely at ease and engaged with the community, where many others mix for obvious self-gain. Eat your heart out, Vince Schoemehl and Kim Tucci. (And hey, Kim, watch out how you badmouth our first black president when trying to score points with your black Republican friends. You are showing your pasta gravy-red backside to your fellow Democrats.)
Since the economic crisis hit, Steffen’s developments stalled and his hyper-leveraged businesses began to crumble. Steffen then became the subject of much concerned speculation, as many in the community wondered if he made any questionable financial moves in an attempt to keep Pyramid standing during his abrupt decline, and if so if he would pay for it.
The bad news hit Friday, when Steffen was indicted for bank fraud in what amounts to an alleged case of robbing Peter to pay Paul, if Peter is a bank and what you are taking from Peter are tax credits you put up as collateral for a huge loan. Steffen faces up to 30 years in prison and/or fines up to $1 million for allegedly selling State tax credits he had used as collateral.
However, perhaps the most startling disclosure in the indictment announced on Friday was that the City of St. Louis had paid a whopping $500,000 to help Steffen settle a prior civil suit that the Business Bank of St. Louis had filed against him on the same matter.
Half a million in taxpayer’s bucks to bail out a private developer in a civil suit? More than one local developer interviewed on background said they wish they had known the City had that kind of money to back up their own toxic assets.
The indictment
Steffen’s alleged fraud stems from his sale of $827,415 in State-awarded Brownfield Remediation Tax Credits on December 21, 2007. The State of Missouri had awarded Steffen’s MB Lofts, LLC $1,424,818 in these tax credits in March 2007 for the rehabilitation of the Metropolitan Building, 500 North Grand Blvd.
The State of Missouri intends Brownfield Remediation Tax Credits as a financial incentive to clean up and redevelop commercial and industrial sites that are contaminated with hazardous substances, and have been abandoned or underutilized for at least three years.
However, Steffen transferred more than $703,000 in funds he received from the sale of these tax credits to a bank account he controls and used the money to pay for operating expenses on other projects, according to the indictment.
It is legal for the recipient of such tax credits to assign, sell or transfer them to a third party. Steffen’s fraud, according to the indictment, stems from the fact that he had put these tax credits up as collateral on a loan.
The indictment alleges that in May 2007, Steffen used the tax credits as collateral to obtain a loan of $1,115,633 from the Business Bank of St. Louis to MB Lofts, LLC. The purpose of the loan was for environmental cleanup and remediation of the Metropolitan Building – the stated purpose of the tax credits.
For this, Steffen was indicted by a federal grand jury on one felony count of bank fraud. The charges set forth in an indictment are merely accusations, of course, and the defendant is presumed innocent until and unless proven guilty.
The case was investigated by the Federal Bureau of Investigation and the U.S. Postal Inspection Service. Assistant United States Attorneys Michael Reap and Steve Muchnick are handling the case for the U.S. Attorney’s Office.
An attorney who had represented Steffen in the civil suit volunteered to the Post that he thought Steffen would require the services of a public defender. Steffen declined to comment to The American, though a close friend of his in the black business community has been circulating emails to raise money in Steffen’s defense, which is not a good sign.
$500K in City money for a civil suit?
Because of Steffen’s close political ties in the city, it startled many to learn from the indictment that the Land Clearance for Redevelopment Authority – a City agency under the control of Mayor Francis G. Slay – paid $500,000 to settle a prior civil suit that the Business Bank of St. Louis filed against Steffen in April 2008 for allegedly selling the tax credits he had put up as collateral on the bank loan.
Steffen himself paid only $50,000 in that settlement – only 10 percent of what the City paid for his alleged misdeed.
Barbara Geisman, Slay’s appointee as deputy director of development, told the Post-Dispatch that the City put up the money – half a million dollars in taxpayer money – so that the State would continue to provide tax credits for projects in the city.
John Fougere of the Missouri Department of Economic Development was asked if it is true that a civil suit between a bank and a developer would impact the future allocation of State tax credits in the city of St. Louis.
“Because this is a matter of litigation, we decline comment,” Fougere replied.
Geisman also told The Post the $500,000 was a loan that would be recouped when and if the Metropolitan Building is sold.
On Monday Geisman was submitted a Sunshine request by The American asking her to provide documents that describe the agreement between the City, the bank and the developer regarding the $500,000.
She also was asked for evidence that she knew the suit between the bank and Steffen would impact future State tax credits.
Geisman had not responded by press time concerning the tax credits, but the City’s legal department pledged a response within 15 days to the document request.
A veteran player in local development, speaking on background, said this is a bail-out tactic that has been used in crisis management before, and not only by the Slay administration.
That still leaves open to question whether Geisman is telling the truth when she says it was a loan, whether the handing of taxpayer money in cold cash to a private developer to settle a civil suit was legal – and whether the City’s willingness to show this abundant generosity to Steffen is a sign that Steffen knows some things about City government that the FBI and the U.S. Attorney’s Office will be eager to hear during plea agreement negotiations. Attended in court by a public defender on Wednesday, Steffen pleaded not-guilty and was given a court date for Sept. 9. Let the plea negotiation begin.
