First National Center owner Aaron Yashouafar, already awaiting sentencing for embezzlement in Las Vegas, is under federal investigation in connection with questioned reimbursement forms submitted to Oklahoma City officials for asbestos removal funds, sources have told The Oklahoman.
Yashouafar declined to comment Monday. A spokesman with the Oklahoma City FBI office could not confirm or deny the investigation.
Assistant City Attorney Wiley Williams, however, confirmed that the city contacted the U.S. attorney's office after the city received what were presented as copies of canceled checks written to asbestos removal subcontractors.
“We got some calls from a couple of the subcontractors who said they had not been paid,” Williams said. “We started snooping around into that and saw documentation they (Yashouafar's company, Milbank Real Estate) had produced to us that on the surface looked like they (the subcontractors) had been paid. We only reimbursed Milbank after they submitted copies of paid invoices and checks to the subcontractors.”
Williams said that after the documentation was examined by the city auditor's office, the auditors grew concerned that the check copies from 2009 were questionable.
“What we think they were doing was sending us a copy of the front of a check, and then sending us a copy of the back of another check,” he said.
Williams said he was not aware of whether the allegations, first submitted to the U.S. attorney's office in 2010, were still under investigation. But sources say the allegations are part of an ongoing federal investigation. Documents provided by the city to The Oklahoman show that during the inquiry, Yashouafar's office submitted new check copies and the subcontractors released their liens on the property.
Yashouafar led investment groups in buying First National Center in 2006 for $21 million. A foreclosure action by lender Capmark Bank was followed by a bankruptcy filing that ended with an agreement by both sides that Yashouafar would pay $12 million to close the $21 million mortgage.
That agreement came with a May 26 deadline that if not met would have resulted in the building going to a receiver who would dispose of the property. That deadline was extended three times with additional payments submitted by Yashouafar toward the $12 million. Sources have told The Oklahoman the latest deadline is this week.
Trouble with Paradise
Yashouafar, meanwhile, is at odds with the homeowners association at the Paradise Spa condominiums in Las Vegas. Homeowners association members told The Oklahoman they fear Yashouafar is trying to refinance the complex to raise money to retain control of First National Center.
Yashouafar pleaded guilty in July to a charge of embezzlement after he was accused of diverting insurance proceeds from fire-damaged units at Paradise Spa, where most residents are senior citizens.
Court records show Yashouafar must pay $1 million in restitution to the Paradise Spa residents before his sentencing on Nov. 14. The plea calls for a minimum of 30 days incarceration for Yashouafar, though the judge could impose a sentence of up to 10 years in prison.
In addition to the $1 million in restitution, the Paradise Spa homeowners' association has $1.8 million in liens on the complex against Yashouafar that they are insisting be paid before he attempts to refinance his $21 million mortgage of property. Bill O'Donnell, president of the Paradise Spa association, told The Oklahoman that Yashouafar is attempting to close on a loan with Los Angeles-based Preferred Bank that would net him $6.5 million.
O'Donnell fears that money will be paid to Capmark instead of to the Paradise residents Yashouafar admitted to victimizing with the diverted insurance proceeds.
More payment deadlines are coming up with the asbestos removal proceeds owed by Yashouafar to Oklahoma City. Williams said about $72,000 is now overdue, with an additional $300,000 payment required on the $1.48 million federal asbestos removal loan in February.
Historic OKC site
Oklahoma City Planning Director Russell Claus said city officials are closely watching the legal maneuverings, noting First National Center is among the city's most historic properties and is in need of extensive renovations.
Claus said prospects for a turnaround for the property, spanning more than 1 million square feet, are not good without public assistance from the city. The tower has restrooms located between floors, broken windows, an unfinished renovation of the ground floor retail arcade, and outdated infrastructure.
The property also is expected to lose half of its income stream when a lease with Devon Energy Corp. expires next summer.
“He (Yashouafar) has a track record that does not fill us with confidence,” Claus said. “It's not just based on what we've seen here, but around the country.”
Claus said Yashouafar would first have to make the city “whole” with current liabilities.
“I think we would have to proceed with extreme caution,” Claus said. “He has a really high threshold in proving to us we should even be interested in partnering with him.”