Despite the FBI arrest and arraignment on eight counts of securities and investment fraud of Kiddar Capital’s principal Todd Hitt last week, the large-scale mixed-use project that Hitt was deeply involved with in downtown Falls Church will continue apace under the direction of the Insight Property Group, Insight’s Marty Stern said in a statement to the News-Press Monday.
“Insight Property Group remains fully committed to Broad and Washington and delivering an exceptional development that serves the growing residential, business and arts community. To that end, we have, and will continue to, pursue options and work with the City to redevelop Broad and Washington without Kiddar Capital as a tenant of the office building, ” Stern said.
Todd Hitt, CEO of Falls Church-based Kiddar Capital, shocked the regional development community and many in Falls Church when he surrendered to the FBI Friday on an outstanding arrest warrant in connection to securities fraud charges, according to the U.S. Department of Justice.
Hitt, whose company was located at the future site of the big 2.3-acre mixed-use project at Rt. 7 and 29 he was co-developing, is alleged to have falsely claimed Kiddar Capital managed $1.4 billion in assets and had offices in Houston, Palm Springs and London and failed to disclose extravagant spending, such as the leasing of private jets and the purchase of sports tickets and jewelry, according to the Washington Business Journal, which first broke the story last Friday upon Hitt’s appearance before the U.S. District Court in Alexandria.
At the Falls Church City Council meeting Tuesday night, Council member Ross Litkenhous called for a full accounting of all City dealings with Hitt and that a member of the Insight group come to a future meeting to clarify where things stand with the Broad at Washington project, which had been subject to exhaustive scrutiny and special exception approvals by the Council.
City Manager Wyatt Shields said he’d been in touch with Insight principals and they indicated they’re willing to appear at a City Council meeting. He confirmed that Insight was “the controlling partner from the beginning” in the project.
In his comments to the News-Press, Stern confirmed that Insight was always the majority partner involved in the project, and that SEC filings indicated that Hitt had sold his minority share in it at some earlier date.
Shields made a point of clarifying at the Council meeting Tuesday that Hitt and his Kiddar Capital are not to be confused with Hitt Construction, which is a wholly different entity run by a brother of Hitt, even though at times Todd Hitt appeared to claim an involvement with Hitt Construction.
Hitt Construction is involved in the renovation of the Falls Church City Hall currently underway, and was involved with Rushmark in the construction of the 301 West Broad building that includes the Harris Teeter, and with a bid, again with Rushmark, on the development of 10 acres on the high school campus site.
None of those involved Todd Hitt, Shields clarified, although he had an ownership stake in the property that currently houses the Stratford Motor Lodge in the 300 block of W. Broad.
The DOJ complaint alleges that Hitt raised over $16 million from investors by misrepresenting that he would invest $6 million in a planned $33 million purchase of a Herndon building near a future Metro stop.
In another complaint filed by the Securities and Exchange Commission (SEC), it is alleged that Hitt made misrepresentations about his own investments and misappropriated several million dollars of investor funds to support what the agency described as “his extravagant lifestyle while making Ponzi-like payments to prior investors.”
Regarding the Herndon project, an affidavit details how Hitt told investors he would contribute $6 million of his own money to the project but, instead, did not contribute anything. The affidavit alleges Hitt raised almost $11 million from investors, even though he only needed $8.85 million. When the deal closed, Hitt diverted the additional funds to other projects and expenses without notifying investors, the affidavit says.
The affidavit also alleges Hitt used $230,000 in funds to pay off a credit card bill with charges from “Bulgari,” “Cartier,” “NBA – Washington Wizards” and “Ultimate Jet Vacations.”
In mid-April this year, Hitt was the featured speaker at the monthly luncheon of the Falls Church Chamber of Commerce. Coming in the week following the City Council’s formal approval of the Broad and Washington project, the appearance by Hitt at the Chamber luncheon was the occasion for his formal announcement that Kiddar would occupy the majority of the 74,000 square feet of Class A office space in the building.
In his remarks there, he reiterated what court filings claimed was a lie that Kiddar manages $1.4 billion in assets and had offices in Houston, Palm Springs and London, England.
According to numerous news reports, the FBI was tipped off about Hitt’s activities by two employees in his downtown Falls Church office. According to a Jon Banister account published by Bisnow, FBI and SEC investigations were launched “after two Kiddar employees contacted the FBI with allegations that Hitt was misappropriating and commingling investor funds and soliciting new investments with documents that contained falsehoods.”
One of the employees, according to a DOJ affidavit, tried to account for all Kiddar assets and could come up with only $27 million.
Hitt reportedly told the 10 or so Kiddar employees here about three weeks ago to stop coming into work, that the company can no longer operate, and other actions indicated something was up, including instructions to back up computers and make copies of certain documents, it was reported in Bisnow.
The formal arrest by an FBI special agent came last Friday morning and Hitt appeared before U.S. Magistrate Judge John Anderson where it was revealed that the Department of Justice and the SEC filed concurrent claims alleging a four-year fraud scheme.
While Hitt reached a settlement with the SEC, the DOJ continues to pursue its case against him.
The government did not seek to detain Hitt, who is free with a set of conditions, including the surrender of his passport. He is also prohibited from opening a line of credit, leaving the D.C. area, or beginning new employment without the approval of Pre-Trial Services. He cannot contact any potential witnesses.
Meanwhile, the Kiddar office in Falls Church, located on the second floor of the old white, four-story Robertson Building currently at the northeast corner of Washington and Broad, including all Internet and phone service, is completely shut down.