FBI arrests ex Fresno-area congressman TJ Cox, accuses him of multiple fraud allegations
Above: TJ Cox congressional photo | Wikimedia
By Tim Sheehan, The Fresno Bee
Former Congressman TJ Cox of Fresno surrendered to the FBI and was arrested Tuesday on federal charges of “multiple fraud schemes” in his financial dealings.
The allegations against Cox, 59, are outlined in a 28-count indictment unsealed Tuesday in federal court in Fresno.
Cox, a Democrat, served a two-year term representing the 21st Congressional District in 2019 and 2020. If ultimately convicted he could face prison time and substantial fines.
The indictment was announced by U.S. Attorney Phillip A. Talbert. Cox is charged with 15 counts of wire fraud, 11 counts of money laundering, one count of financial institution fraud, and one count of campaign contribution fraud.
Cox surrendered to FBI agents at about 8:30 a.m. Tuesday and was booked into the Fresno County Jail. Deb Ducket-Morris, a spokesperson for the U.S. Department of Justice, said Cox remained in custody midday Tuesday prior to his scheduled arraignment at 2 p.m. Tuesday in Fresno’s U.S. District Court.
Among the allegations are that Cox fraudulently obtained a $1.5 million construction loan to develop Granite Park, a long-troubled recreation complex in central Fresno.
Cox and an associate in Granite Park, Fresno developer Terance Frazier, were reportedly unable to qualify for a construction loan without a financially viable third party to guarantee the loan, according to federal officials.
“Cox falsely represented that one of his affiliated companies would guarantee the loan,” according to a statement from Talbert’s office, “and submitted a fabricated board resolution which falsely stated … that all company owners agreed to participate in the Granite Park loan.”
Among the allegations are that Cox fraudulently obtained a $1.5 million construction loan to develop Granite Park, a long-troubled recreation complex in central Fresno.
Federal officials said there was no board meeting and that other owners of the company did not agree to back the loan. That loan eventually ended up in default, creating a financial loss of almost $1.3 million to the lender.
If convicted, Cox, 59, faces potential penalties of up to 20 years in prison and a $250,000 fine for wire fraud and money laundering, and up to 30 years in prison and a $1 million fine for wire fraud affecting a financial institution. The charge of campaign contribution fraud carries a maximum penalty of five years in prison and a $250,000 fine.
The investigation is being conducted by the FBI and the Internal Revenue Service.
The 25-page indictment by a federal grand jury was filed with the U.S. District Court in Fresno on Aug. 4.
TAX CREDIT ALLEGATIONS
The indictment alleges Cox, as then-owner and managing member of a company that uses tax credits to provide incentives for investment in development projects in disadvantaged areas, defrauded both the company and its clients by diverting clients’ deposits, payments, fees and wire transfers not to the tax credit company’s legitimate bank account at Fresno’s United Security Bank, but to a different bank account that he established at California Bank & Trust, unknown to his business partners, and that he controlled.
Cox then falsely represented the California Bank & Trust account as belonging to the tax credit company, according to the indictment.
From that account, the indictment states, Cox “generally used the diverted money for personal expenses, to fund other Cox business ventures, and to pay other Cox personal and business debts.”
“As a result of the defendant’s conduct, Cox caused losses exceeding $1 million from borrowers and the tax credit company,” the indictment states.
The indictment also details six instances in 2018, prior to his election to Congress, in which Cox allegedly withdrew tens of thousands of dollars from the California Bank & Trust account and deposited them into his personal personal account at the bank.
ALMOND PROCESSING COMPANY
Seven additional counts in the indictment revolve around Cox’s involvement with an almond processing company from 2012 through at least 2020. According to the indictment, two founding members of the almond company brought Cox in as a partial owner to seek investments to expand operations.
That company already had two existing accounts at two different banks in Fresno. But in 2015, the indictment alleges, Cox opened a new bank account under the name of the almond company at a third bank, Wells Fargo Bank, without the knowledge or consent of his business partners and which was undisclosed to the almond company’s accountants.
Cox allegedly solicited two former investors in another of his businesses to lend money to the almond company. That money, given as checks made out to Cox, was allegedly deposited into his personal account at Wells Fargo. “Over four years, Cox made a handful of interest payments to (the investors) and did not return the principal as they requested,” the indictment states.
“More than $40,000 of (the investors’) loan was used for Cox’s personal expenses, including private school tuition, credit card payments, mortgage payments and a $7,000 payment to Cox’s private political consultant.”
In some instances, the indictment alleges that Cox used money that was put into the Wells Fargo account to pay expenses of the almond company, but claimed that it was his own personal funds to receive credit against loans he borrowed from the company.
In other instances, Cox sent money from his tax credit company into the Wells Fargo account and “falsely represented to the tax credit company that the money constituted loans … to the almond processing company,” the indictment states. “Cox would spend the money on personal expenses or on expenses for other Cox-affiliated entities other than the almond processing company.”
The almond company transactions allegedly caused financial losses of more than $750,000 to lenders, investors and to the almond company, the indictment states.
GRANITE PARK LOAN PROBLEMS
The long-troubled Granite Park recreation development in central Fresno figures into five additional counts in the indictment, stemming from a lease of land owned by the City of Fresno at Cedar and Dakota avenues to a sports nonprofit formed by Cox and a business partner who is not named in the indictment.
After signing the Granite Park lease in late 2015, Cox applied for a $1.5 million construction loan in 2016 from Clearinghouse CDFI, a development lender that had previously participated in tax credit projects through Cox and his tax credit company, according to the indictment.
But to satisfy the lender’s requirement for a loan guaranty from a financially viable third party, Cox submitted the tax credit company as the commercial guarantor of the loan.
“Because Cox was not the sole owner of the Tax Credit company, Clearinghouse required proof that all owners … agreed to guarantee the loan to the sports nonprofit,” the indictment states. Cox then “submitted a false and fabricated board resolution … that falsely indicated a board meeting took place and falsely represented that all three tax credit company owners agreed to guarantee the $1.5 million loan.”
In 2019, however, the sports nonprofit defaulted on the construction loan, and the Clearinghouse lender sought to enforce the fraudulent tax credit company’s guarantee of the loan. “After Cox’s departure from the tax credit company, the tax credit company purchased the sports non-profit’s debt due to Clearinghouse for the remaining loan balance,” the indictment states.
“Cox caused a loss exceeding $1.28 million in fraudulently obtained loan funds,” according to the indictment.
CAMPAIGN CONTRIBUTION FRAUD
The indictment alleges that Cox, in the run-up to the 2018 congressional election, “knowingly and willfully devised a scheme and plan whereby he used family members and business associates as prohibited conduits through which to funnel money in his personal possessions to his campaign under the guise of lawful campaign contributions.”
According to the indictment, a September 2017 withdrawal of $20,000 from Cox’s “off-the-books” account at Wells Fargo under the almond company’s name was deposited into the account of one of Cox’s family members, later funding three maximum individual campaign contributions from different family members to his congressional campaign.
Additional payments from Cox to business associates and family members in December 2017 ended up as contributions to his campaign as well, the indictment alleges.
In addition to the criminal penalties of possible imprisonment and fines, the indictment seeks that Cox, if convicted forfeit any real and personal property that can be traced to the alleged violations.
