Alaska developer Lee Baker, Jr., known in Anchorage as “The Condo King,” has been indicted by a federal grand jury on charges that he lied on loan applications to Denali Alaskan Federal Credit Union.
Baker, 55, is accused of misleading the credit union in a number of transactions in 2005, including a deal where he sought a loan to purchase and develop Lake View Estates in Wasilla.
Federal prosecutors allege that Baker created a series of land-sales transactions to obtain the loan under false pretenses, transferring Lake View Estates property from his company, Discovery Construction, to himself, then back to the company.
When he "sold" the land back to Discovery Construction, Baker told the credit union that a legitimate deal valued at $1.4 million, had taken place, and sought a loan to finance it, prosecutors said.
Instead, the indictment alleged, Baker used the money he obtained from the federally insured credit union to reduce his shareholder debt to Discovery Construction.
The indictment also accuses Baker of lying to the credit union when he drew down the proceeds of a $9.2 million construction loan for an 85-unit Bryn Mawr apartment project on Northern Lights Boulevard in East Anchorage.
Normally, contractors tap into a construction loan as they complete phases of a project and the bills come due. Baker claimed to have completed 12 separate work phases, and each time obtained a chunk of the loan. But in fact, prosecutors alleged, “very little work had been done, and the total amount completed in each request was false.”
Baker eventually defaulted on the loan, prosecutors said.
The developer was known for building “site condos,” controversial developments where cheap houses were squeezed onto the smallest possible piece of land – in some cases, using access roads the size of alleys in which fire trucks were unable to maneuver.
In March 2008, Denali Alaskan FCU joined contractors and other creditors, suing Baker and his company to recover $16 million in delinquent loans.
The credit union said the delinquent loans were the main reason it lost $2.8 million in 2007. In its lawsuit, the credit union accused Baker of fraud. Baker acknowledged that he defaulted on the loans but denied fraud had anything to do with it.
