WASHINGTON -- Prosecutors say it was one of Sen. Ted Stevens' friends whose secret, interest-free loan allowed him to make a killing in a Florida condominium investment six years ago. But they only identify the friend as "Person C" in a court filing on Thursday, and that the person was a partner in the company that built the condos.
Who is Person C? The identify couldn't be determined for sure. But the developer of the project is the son of a lifelong Stevens friend. The late George Dewey Reycraft, who died in 2004, was Stevens' roomate when they attended Harvard Law School. Reycraft's obituary described Stevens as his "best friend."
Stevens, 84, was indicted last month on charges he failed to disclose more than $250,000 in gifts, mostly from the oil services company, Veco Corp. and its former CEO, Bill Allen. But court papers filed Thursday also show that prosecutors hope to introduce evidence at his Sept. 24 trial that Stevens hid a $31,000 loan from a friend and then parlayed it into $129,250 in real estate gains.
The information about the real estate deal doesn't represent a new charge against Stevens, who has been one of Alaska's U.S. senators since 1968. However, prosecutors said in their motionthat they hope to introduce information about the real estate deal, as well as several other new assertions not contained in the original charges. Among the reasons, the motion says, is that the new information "relates to conduct that is inextricably intertwined with the conduct charged in the indictment."
Stevens' involvement in the Florida condo deal dates to 1999, according to his Senate financial disclosure forms. The 1999 form lists a $1,000 to $15,000 investment with the commercial lender, Pointe Bank, in Aventura, Fla. The specific investment was in Harbor Manor Development Ltd., doing business as Carroll Walk Ltd., a condominium development, according to the disclosure form.
Several South Florida business publications paid special attention to the Carroll Walk proposal, because it was the first high-rise to be built in Bay Harbor Islands in 30 years. The town, on two islands straddling the Intracoastal Waterway north of Miami, had previously been a sleepy village of low-rise apartment buildings.
George C. Reycraft, the son of Stevens' old Harvard friend, was mentioned frequently as the developer of the condominium. (He also served briefly as a town councilman.) The younger Reycraft told the Miami Herald in 2000 that he was "replacing 1950s garden-style apartments with new units that are selling at a fairly high price. It will bring different kinds of people to Bay Harbor."
His father also was key in the project, according to his obituary in the New York Times. Reycraft, who died in 2004 at age 79, "was a principal in a fund focused on financial stocks and in a condominium development in Bay Harbor Islands, Fla." after his retirement as a corporate litigator.
The younger Reycraft did not return a phone message left on his cell phone Friday.
It's clear, though, that his father and Stevens shared a close bond. Aside from their time together at Harvard, both were World War II pilots. Both Reycraft and his son donated $1,000 each to Stevens' reelection campaign in 2001. Reycraft's obituary in the Miami Herald detailed the affection between the senator and his old friend.
"George loved the law, flying, boating and fishing, especially in the Florida Keys and Alaska with his best friend and former Harvard University Law School roommate, Senator Ted Stevens of Alaska," according to the obituary. Reycraft lived in Key Largo, Fla., south of Miami.
In an interview in Anchorage Friday, Stevens would neither confirm nor deny that Reycraft loaned him the money for the condo down payment, saying only "that's what lawyers are hired for" and "I cannot talk about the details of that."
"I will tell you this," Stevens said. "George Reycraft's dead. One of the closest friends I ever had in my life."
In 2000, Stevens' financial disclosures list an investment worth less than $1,000 in Pointe Bank of Florida. The next year, that same investment with Pointe Bank was valued at $100,000 to $250,000. In 2002, there was no evidence of the investment, but it resurfaced on Stevens' 2003 financial disclosure forms. There, it's listed as a $129,250 capital gain on a "contract to purchase Carroll Walk Condominium, Bay Harbor, Fla."
Prosecutors don't name Reycraft in their court filings and a Justice Department spokeswoman would not discuss the matter Friday.
In motions filed Thursday, however, they explained Stevens' investment in the Florida condo. On Feb. 4, 2001, Stevens and his wife, Catherine, signed a contract to buy a condo in a complex whose developers included a personal friend of the senator's. Under the terms of the contract, the Stevenses agreed to purchase a $360,000 unit in a yet-to-be constructed building. They were required to put down a 10 percent deposit of $36,000, according to government filings.
But Stevens paid only $5,000 at the time, prosecutors said. The remaining $31,000 was paid for instead by Stevens' friend, who prosecutors said wrote a check to an escrow company "under the name and for the benefit of Theodore and Catherine Stevens." The check was written April 9, 2001, according to the motion.
On Aug. 21, 2001, prosecutors said Stevens' friend wrote him a letter saying that the company had found a buyer for the "garden apartment" who was willing to pay $515,000. Stevens could expect to profit by $129,250 from it, his friend wrote.
It was only after they had an agreement to sell the condo that Stevens repaid the $31,000 deposit, prosecutors said. On Sept. 12, 2001, prosecutors wrote, Stevens asked someone on his Senate staff to send a $15,000 check drawn on his personal checking account to the development company. Stevens asked for a second check of $16,000 to be sent on Dec. 11, 2001, according to the government.
REQUIRED TO REPORT LOAN
Stevens' sweetheart Florida condo deal was similar to many that made millionaires of real estate speculators before the market peaked in 2004 and, eventually, crashed.
But there was one key difference. Unlike ordinary people who could quietly accept loans from friends or family to put together a down payment, Stevens had to report his loan on his Senate financial disclosure form. Federal prosecutors say that he did not do so.
"Although Stevens knowingly carried debt on a $31,000 interest-free loan from his personal friend for more than 10 months during 2001, Stevens did not list such a liability on his 2001 disclosure form," prosecutors wrote in a motion filed Thursday.
At the time of Stevens' investment in South Florida, speculators would often line up overnight for the opportunity to sign a contract for as-yet-unbuilt condominiums. Often, those who plunked down a deposit would turn around and sell their contracts before the condos were inhabitable. In many cases, they made hundreds of thousands of dollars without putting down anything more than a 10 percent deposit.
The process, known as "flipping," was driven by speculation in a real estate market with a steep upward trajectory, said Jack McCabe, a real state analyst based in Deerfield Beach, Fla.
"That was at the very start of the housing boom, and the Florida condominium market was really driven by speculative flippers (who) were placing pre-construction deposits and looking to flip these units for quick profits, in many cases even before the buildings were complete," McCabe said.
As many of 70 to 80 percent of the people who signed contracts for condos in the early days of the boom had no intention of living in the unit they were buying -- but they did intend to sell their contract at a profit. Most of the contracts had clauses that made it easy to assign them to a new buyer, McCabe said, often before construction was complete.
At the time, flipping offered the promise of easy money to investors who timed the market correctly. Talk of the practice dominated cocktail party chatter and backyard gatherings throughout South Florida, McCabe said, adding that Stevens got in -- and out -- of the market at the right time, McCabe said.
"There were a lot of people who got rich doing this," McCabe said. "Electricians and taxi-cab drivers and schoolteachers were making fortunes, in some cases becoming millionaires. But it was really a speculative market."
Daily News reporter Sean Cockerham in Anchorage contributed to this story.