In a May 21 raid on his home, agents seized computers, maps, documents and $1,000

By Hasso Hering

Albany Democrat-Herald

Joe LaCoste says he welcomes the FBI investigation of his business affairs. It will prove, he says, that he didn't do anything wrong.

The Albany developer and former high school math teacher is at the center of lawsuits, public recriminations and a state and federal investigation into what happened to Willamette Development Services, a real estate development company based in Albany, and the money that investors and banks had lent the company for 10 projects in the mid-valley, on the coast and elsewhere.

This week LaCoste spent an hour and a half at the Democrat-Herald, speaking about the case.

With a search warrant signed by U.S. Magistrate Tom Coffin in Eugene, Special Agent Jason Cherry of the FBI's Eugene office and other agents searched the LaCoste family home at 3120 Crocker Lane N.W. on May 21 and carried away 57 items including computers, printers, maps, armfuls of documents, 10 $100 bills and even "trash," according to a receipt Cherry signed.

They also searched a storage unit at the Albany airport and the LaCoste family's two vehicles.

LaCoste said the computers have been returned to him, but the cash hasn't.

Now he's waiting for the FBI to take the next step, which he says is to conclude from all the documents that he didn't steal anything or defraud anyone.

"I didn't make 10 cents on any of this stuff," he declared.

LaCoste prepared a two-page statement on "the demise of Willamette Development Services," of which he was the chief executive officer. In it, he charged that in late 2007 and January 2008 he became aware of a number of problems he blamed on others in the firm, including that investors were misled and projects were delayed and mismanaged.

He recalled being informed on Jan. 24, 2008, that he had been voted out as manager and one of his partners was going to take over the company, which LaCoste said went against an operating agreement.

Later that night, he recalls the "coup broke into the building," at 110 Third Ave. S.E., "convinced the police that this was OK for them to do … and proceeded to change the locks and board up entrances, all this while the CEO was present and pleading with the police to stop them."

Albany police have a different account. They were called to respond to a burglar alarm at 8:44 p.m. on Jan. 25, 2008, and found people changing the locks and doing interior renovations. LaCoste also arrived, and eventually officers were told LaCoste had been let go "due to some concerns with possible fraud."

"At this point this is a civil mess," an officer wrote in his report.

LaCoste contends that the people taking over the company removed documents, fired the remaining employees, and failed to complete any of 18 houses with construction loans in place.

"They accused many of the WDS management and employees to be co-conspirators with the CEO to defraud investors ," LaCoste wrote.

"The reason the investors lost their money and WDS failed was because of an ill-conceived and illegal takeover of the company."

According to LaCoste and the search warrant affidavit, the company was formed in May 2006 and had raised about $17.8 million. Most of that was in bank loans, and the rest, about $5.3 million, was from 88 investors who were promised - and for a while were paid - interest at the rate of 13 percent per year.

A recent report in the Eugene Register-Guard said investigators were trying to find where the money went. LaCoste said it was spent on the costs of the 10 development projects - such as property acquisition, engineering, architects, materials and construction - and on company expenses.

"We had 20 employees," he said.

In 2007 the financial crisis put stress on the company, according to LaCoste.

"The executive team knew the company had problems," he wrote, "but everyone was focused and intent on completing the projects and protecting investors' money, and plans were being implemented to do just that."

But then, he said in the interview, "what killed it was the takeover."

Meanwhile, according to the FBI affidavit in support of the search warrant, Oregon state regulators were getting complaints in autumn 2007 about WDS from investors who claimed the company had failed to make interest payments and had not returned their investments.

This prompted a "preliminary criminal investigation" by the Oregon Division of Corporate Securities, the FBI and U.S. Treasury Department.

Once the FBI got involved, Agent Cherry wrote, he began investigating deception in selling securities, for which the top penalty is 10 years in prison and a $1 million fine, and mail and wire fraud.

One issue is whether funds were handled exactly as investors were promised. The affidavit says they weren't.

The affidavit says money from investors allegedly was "commingled" instead of kept separate in the accounts of each of the projects in which people had invested, and that this was LaCoste's doing.

LaCoste, though, produced copies of minutes of two meetings in July 2007, attended by him and others in the firm, at which moving cash through WDS corporate accounts was discussed and apparently approved.

In the interview, LaCoste said the board asked a lawyer about the handling of funds and got a green light as long as the books indicated to which project the money belonged.

One of the people listed as attending the meeting later told investigators he didn't know about the commingling issue, according to the affidavit.

LaCoste added a notation on his copy at that spot: "Crazy."