Erik Osborn wanted to be a big-time developer - but he could land in the Big House
At his latest hearing in Denver District Court, Erik Osborn stood to address the judge, alone. That's a position in which the 41-year-old developer has increasingly found himself since late 2007, when a grand jury slapped him with an indictment on charges that he'd stolen money from his multimillion-dollar construction projects. If he's convicted, the two third-degree felony counts could bring a maximum of 24 years in prison — a very hard sell.
In December, Osborn's attorney, Jeffrey Pagliuca, had quit, citing a "non-adherence to the fee agreement" and "an inability to communicate caused by the client." Osborn then put in a request for representation by the public defender's office but was denied on the grounds that he didn't meet the "indigent" status required by the program. On February 20, Osborn was there to contest the denial.
Prosecutor Joe Morales, the Denver District Attorney's go-to guy on white-collar crime cases, viewed Osborn's sudden vow of poverty as simply an attempt to delay his trial, which was originally scheduled to begin February 2. A representative from the public defender's office showed Judge Sheila Rappaport a photo of Osborn's home at 7 Polo Club Lane. Osborn and his wife, local real-estate broker Angela Osborn, had bought the nearly 15,000-square-foot mega-mansion in the Polo Club for $6.5 million.
The judge decided to assign a collections investigator to examine the defendant's material condition, but included a specific warning to Osborn that he "provide truthful statements...regarding his indigency" and that anything to the contrary could be considered criminal.
Can a man who lives in an Italian-style villa with heated floors, a paneled library, a full gym, a home theater, a steam room, a humidor and a spa be too broke to afford a lawyer? Osborn insists that's the case, since the major deals that had made him the golden boy of downtown development in recent years — including One Lincoln Park, a 32-story luxury condo project — have become mired in lawsuits, liens and bitter fights between former partners. Disputes over Osborn's various projects have generated legal filings that take up entire shelves at the county court records department, over issues that tipped like dominoes across Osborn's burgeoning development empire.
Osborn insists he wouldn't need a public defender if his former associates in One Lincoln Park, local car salesman "Dealin' Doug" Moreland and talk-radio personality Tom "Lou from Littleton" Manoogian, would release what he says are millions of dollars in sales and commissions due to him and his wife. "They're trying to stretch us out, that's why they're not paying," he claims.
But where Osborn sees himself as the victim of a "witch hunt," others see him as a witch, the Bernie Madoff of Denver real estate. "Except with Madoff, at least some of the investors got paid," seethes Moreland. "Everything Erik Osborn touched turned to crap."
Erik Osborn is not a stereotypical asshole developer. He doesn't bark orders with an East Coast accent or strut around shouting, "You're fired!" He's personable and handsome, with youthful gray eyes and a construction worker's shoulders that could've allowed him to pass as a male model in his formative years. Associates describe their first impressions of him as "smooth as silk," "extremely charming" and "a really nice guy."
Growing up, Osborn split his time between Colorado and Arizona, where he was born. His father was an executive with the former Mountain Bell phone company. In his late twenties, he began working construction in the Denver area; in 1999 he started his own small construction outfit, Osborn Construction Enterprises. After several years of working residential jobs, doing framing, demolition, excavation and painting, Osborn got a chance at heading his own project in 2002, when he rehabbed a series of medium-sized office buildings in the Inverness area of Greenwood Village. For that deal, he says, he teamed up with investors ranging from his parents to former Denver Bronco Terrell Davis.
Osborn's charisma helped him woo the blond and beautiful Angela, a broker of high-end real estate for Coldwell Banker Devonshire, and they married in 2003. By July 2004, By July 2004, the Osborns were doing well enough that they bought a house for $2.3 million at 1991 East Alameda Avenue, and immediately began renovations to add a wing above the garage.
By then, Osborn had partnered with longtime residential developer Jeffrey Raymond in a company called Solen. Solen's first project, "Roslyn," was another small office-building rehab in the south suburbs, with Raymond the primary investor. The second was a seven-acre plot at 2801 East Cedar Avenue in Denver, just north of the Polo Club, where they planned to build high-end homes in an exclusive mini-neighborhood they dubbed "Montage." For legal purposes, though, the project was simply referred to as "Cedar." For investors in that project, Osborn pulled from a friendship he'd developed with Tom Manoogian after the two were introduced by a mutual acquaintance at the Greenwood Athletic and Tennis Club. Manoogian, a self-described "sports nut" for KOA as well as other radio stations, liked Osborn's investment idea so much that he called up another friend, a guy he'd known from his days selling used cars on South Broadway: Doug Moreland.
With his pompadour hair and penchant for large, gold rings, "Dealin' Doug" is a familiar sight to local television viewers, many of whom have grown up listening to the fast-talking Moreland loudly hawk ALPINE! BUICK! PONTIAC! GMC! cars and trucks for his many dealerships across the Front Range. The auto industry had made Moreland a millionaire several times over, but he liked the idea of breaking into the urban real-estate game. By September 2004, the parties had reached an agreement on the Cedar project: Moreland and Manoogian would put in $4.8 million to buy the property, Raymond would pay to build the project, and Osborn would manage the construction.
Where others saw obstructions or risk, Osborn saw opportunity. In the blocks surrounding Coors Field, for example, developers had been reluctant to build condos on the expensive property until they were absolutely confident the market would support it. Osborn worked a deal with the owners of the Breckenridge Brewery to move their brewing operations from the warehouse attached to their restaurant at 2220 Blake Street so that a mixed-use project could be built on the corner lot, with retail space on the bottom and 27 units on top. The prospect of changing the face of the Ballpark neighborhood convinced investors like Kerry Hicks, CEO of Golden-based hospital ratings company Health Grades, to kick in millions. The $14 million Diamond Lofts had its groundbreaking in August 2004. Osborn tapped his wife to handle all of the marketing and sales.
For a developer who'd completed his first project just a few years earlier, Osborn was moving up fast. And he already had his eyes on something much bigger.
The guy who brought it to me was a sub-contractor I had hired to do some excavation. He says, 'I've got this property you've got to see,'" Osborn remembers. "I'm like, 'Yeah, yeah, it's probably something not even worth it.' But then he takes me down there, and I couldn't believe it. This dirt-digging contractor had this amazing land right downtown."
The property, at 2001 Lincoln Street, was a parking lot, and not a very good parking lot at that. Situated awkwardly at a triangle where two city grids converge, the half-acre lot on the northeast edge of the business district was surrounded on all sides by four busy streets. The surrounding blocks were a no-man's-land of asphalt serving the Monday-through-Friday parking needs of downtown office workers. But there was a light-rail stop adjacent to the lot and, even in late 2004, Osborn could see that it had potential.
"Angela and I would go down there and park in the lot and just sit there for hours," he remembers. They looked up in the sky and imagined what could be there. Granite countertops. Jacuzzis. Spin classes. A residential tower hadn't been built downtown in over twenty years; they knew it would work if they went fancy and went tall. "I said, 'If we're going to do this, we've got to bet the ranch,'" says Osborn. "She said, 'Well, if we have to move back to an apartment, that's okay."
When it came time to sign on investors for his luxury-tower project, Osborn says he decided to leave out Raymond, his longtime business partner, and instead take the deal only to Moreland and Manoogian. By February 2005, the trio had formed a partnership whereby Moreland, as the primary equity partner, would buy the triangular lot for $1.9 million and provide funds to EO, LLC — the corporate entity that Osborn set up for this project — to build a sales center in an old building across the street and begin the process of securing entitlements, engineering and design. In all, Osborn received a $3.5 million promissory note for the project's preliminary stages.
Buchanan Yonushewski Group, the same architects hired for the Diamond Lofts, were signed on to do the design. What they came up with, explains Brad Buchanan, was a building that was tailor-made for the location. "We weren't looking to mimic another structure," he says. "It was really an outgrowth of the site." Osborn likened the design to buildings he had seen in cities with distinct high-rise cityscapes, such as Vancouver and Chicago.
When the plans were unveiled five months later, the price of One Lincoln Park was an estimated $140 million. But with Angela and co-broker Julie Gelfond handling sales, 80 percent of the units were reported to have been pre-sold. The date to begin construction was moved forward to fall 2006.
But while Lincoln Park was going well, the partnership had hit some rough patches at the Cedar project. Raymond began to notice expenses that he hadn't approved. Osborn doesn't deny that funds totaling $62,000 went his way, but he says Raymond was aware of that arrangement and had condoned it.
"I came up through the world of contracting," Osborn explains. "We did a bid, like every other project. If I'm able to structure the subcontractors in a way that comes way below cost, then that was to be my payment. I've never worked for free on a project, ever. Why would I start then?"
A similar disagreement over unauthorized withdrawals arose over One Lincoln Park. A new operating agreement had to be drafted with Moreland and Manoogian just before the March 26 groundbreaking. That ceremony was attended by Mayor John Hickenlooper, along with many members of the downtown development community. With prices from $300,000 to $3 million for a 6,000-square-foot penthouse, the project was clearly aiming for the wealthy. Amenities included a seventh-floor pool and park area, a 24-hour door attendant, valet service, an owners' club, gourmet kitchen and fitness center complete with a Pilates studio and steam rooms. The project was the first of several residential downtown tower projects announced that year, including the now-almost-completed Spire, the under-construction Four Seasons, the stalled W Hotel and the defunct 1400 Lawrence.
At the groundbreaking, Osborn met Robert Greenlee, a well-known investor and former mayor of Boulder. He introduced Osborn to Michelle Brokaw, a capital funds manager for the firm Fleisher Smyth Brokaw, which had a stake in the nearby 1800 Glenarm building. They begin talking about redeveloping the building as a luxury residential tower that would build off of One Lincoln Park's success. They saw a possibility for creating an entire new neighborhood of high-end high-rises called Lincoln Park.
By that July, Brokaw had created a proposal to revamp the drab offices at 1800 Glenarm into a condo development called Mondrian City Homes. She and Osborn began shopping around for investors.
Flush with construction projects, the Osborns decided to upgrade by buying the 7 Polo Club mansion for $6.5 million. The ostentatious home dwarfed its neighbors even in the upscale Polo Club, whose residents include Phil Anschutz and Walter Isenberg. Osborn seemed to be doing so well that One Lincoln Park investor Blair Richardson, a prominent Denver Republican and managing partner of Bow River Capital Partners, floated his name as a possible candidate for a state-cabinet level job recruiting and relocating companies to the state.
But even as the Osborns were hosting high-society charity events at their Polo Club home, the Diamond Loft project, too, was coming undone. It was now eight months over schedule, and contractors were starting to file liens and lawsuits for lack of payment. The Buchanan Yonushewski Group claimed it was owed over $300,000. Juan Perez of Valverde Stucco was awarded $12,000 in small claims court. Osborn attributes the problems to the project management company, which he says wasn't issuing payments.
Still, things soon went from bad to worse for Osborn. In August 2006, Raymond filed a civil suit alleging that Osborn had nabbed $704,910 in unauthorized draws from company accounts. And this was after an arbitration group had already awarded Raymond $144,000, after determining that Osborn had marked up invoices for subcontractor work on the Roslyn project and taken constructions funds for his personal use without the knowledge or approval of his partner or the bank that had loaned them the money.
The suit claimed that the general contractor on Roslyn, Oceanview LLC, was essentially a front created by Osborn and Steve Philipot, an Englewood-based construction manager, to inflate invoices and redirect money to pay for improvements on the home at 1991 East Alameda. Indeed, several building permits obtained by Westword show that at least $125,000 of the work done on the East Alameda home was listed as being billed to entities under the umbrella of Solen, LLC.
"Oceanview was only a conduit through which funds would pass, and it performed no work, or management, on the project," asserted one motion filed by Raymond's attorneys. "Rather, substantially all of the actual demolition and construction work was performed by subcontractors hired by the Osborn defendants."
Raymond declined to comment for this story, as did Philipot. But in a legal motion filed by his attorney, Philipot acknowledged that Osborn submitted fraudulent invoices and took "draws upon the project's construction financing for work and materials that were actually related to non-project endeavors, including his home." The motion asserted that this occurred without Philipot's knowledge. And two people involved in One Lincoln Park, broker Julie Gelfond and her husband, Larry Gelfond, an attorney, filed two separate lawsuits against the Osborns. The Gelfonds allege that they were not paid a total of $264,000 in lawyer and broker's commissions for the project. In another case, they claim that Osborn bilked them out of tens of thousands of dollars on a home remodel he was heading for them at 20 Cherry Hills Farm in Greenwood Village, money that was instead funneled to improvements on his East Alameda home.
The Denver District Attorney's Office soon opened an investigation into Osborn's practices. The probe started in early 2007, after "an allegation was brought to us by one of the victims," says DA spokeswoman Lynn Kimbrough. Prosecutor Morales declined to be interviewed for this story, but he led a grand jury considering the Osborn case.
After calling Osborn in 22 times to testify about his various projects, the grand jurors handed down an indictment on two counts of felony theft on December 12, 2007, claiming that Osborn had rigged the bidding process on Cedar and One Lincoln Park to pay for improvements on his East Alameda home.
The Mondrian project quickly disappeared as Brokaw and Greenlee voted to remove Osborn from his position as project manager after noticing that subcontracting work there had been marked up. Brokaw, who also has a lawsuit pending against Osborn, says the building has since been sold to another development group to be converted into office condos. Osborn was also bumped from his management position at One Lincoln Park and replaced by Ed Cerkovnik, owner of Breckenridge Brewery, who had invested heavily in Diamond Lofts. Osborn fired back at his accusers, filing countersuits against Raymond, Brokaw and Greenlee.
In September 2008, One Lincoln Park opened with 80 percent of the 180 units allegedly pre-sold, but the credit crisis caused loans for many of the buyers to evaporate. Currently only 58 units, or 32 percent of the project, have been sold, according to property records. Most of those sold have been in the $300,000-to-$600,000 range. A $1.2 million unit was bought by a Chicago investor in January, but the mega, $3 million, 6,000-square-foot penthouse has yet to be sold. Of the 122 remaining units, 33 of them are considered held by Osborn's former company EO, LLC.
Moreland acknowledges that Osborn will be due money once some more units sell — but that's a prospect made tougher by the current state of the economy, and also the tarnished image that Osborn's legal troubles have given One Lincoln Park. "It's a shame, because it is such a great building," Moreland asserts. "The construction is just superb. People love the location." In fact, he says he's planning on claiming a unit for himself and moving into the city once things settle down.
On January 22, Osborn filed a $3.9 million lien of his own against the unsold units, an act that threatened to grind all sales to a halt. Osborn lifted the lien a week later, he says, after he gained assurances from Cerkovnik of timely payment. (Cerkovnik did not return calls for comment.) But many of Osborn's alleged victims categorize this move as just another example of how he milks money out of investors and business partners before the projects have even come close to his promises of big dividends.
"Instead of doing one project and moving on, like a normal developer, Erik tried to do three and four at once," says Moreland, who believes that when money and resources came up short on one project, Osborn would shortchange his other projects to stay on top. "He had a chance to make seven million dollars out of this, at least," Moreland adds.
Instead, when the projects came crashing down, Osborn became a pariah in the development community. His disgruntled investors didn't stop at shunning him: This wealthy, powerful crew started complaining about his business practices to the DA's office. Although Osborn's indictment pre-dates the financial crisis that has exposed several massive Ponzi operations — in which money from new investors was used to pay returns to prior investors — the name of Bernie Madoff is frequently brought up by people who say they were taken in by Osborn.
"It's like a giant Ponzi scheme," says one of Osborn's former partners. "He brings you in, and he's very smooth. But this guy almost buried me financially. He can't decipher right from wrong."
Another former partner says that just reading headlines about Madoff brings back the experience with Osborn: "People that you thought were honest and trustworthy actually weren't."
"Erik is a hell of a salesman. He could sell you the Brooklyn Bridge," says Doug Greenspan, owner of Sureshock Electric. "I used to think Erik was aboveboard and was just in the wrong place at the wrong time." Not any more, though. The Boulder-based company first did work on the Roslyn project before Osborn convinced Sureshock to bid on the Diamond Lofts, which was already behind schedule and plagued by cost overruns. Now Greenspan holds the largest Diamond Lofts lien, for $700,000 worth of electrical work.
"I hate to use the word 'lie,' but does [Erik] embellish?" Greenspan says, then answers his own question with a huge laugh. "He's almost pathological in the way he talks about things: 'Don't worry, everything's been handled, yadda, yadda yadda.' Well, it's not true, but he believes it. With Erik, it's not a malicious thing, it's just a greed factor."
In Unit 305 of the Diamond Lofts, Osborn stands before a large kitchen table holding boxes of court documents and contracts. This 1,186-square-foot loft features high ceilings, expansive windows and a thoroughly modern kitchen that make it a great buy at $375,000 — if Osborn could just get the liens taken off it. He says the process has been hampered by the slow legal process of untangling the various claims — they total over $3 million — and bundling them into a single arbitration case. Last fall, Osborn took out another mortgage against his Polo Club home, this one for $220,000, to clear some of the disputes. But while he'll have periodic meetings with the building's new manager to discuss the details of completing the remaining units, about the only things that Osborn himself is constructing these days are legal motions on his own behalf.
One recent Osborn filing seeks to dismiss the award against him in the Cedar case on the grounds that Raymond had inflated the appraised value of one of their joint properties. Osborn sees many of his legal problems as stemming from his financial dispute with Raymond, where accusations of theft first surfaced. While the charges "are pretty damning," Osborn acknowledges, he insists they are all based on the false premise that his partners never knew about the money he was drawing from the projects.
"It's disingenuous to say it was some nefarious, secret plan," says Osborn. He produces contracts that show he was promised certain "construction fees" and meeting records that note how the project is using Oceanview and Red Zone as contractors. He opens a laptop and plays recordings of conversations he had with Moreland and Manoogian, when the investors acknowledge that the millions initially put into the One Lincoln Park project were technically a loan to the Osborns.
"For ten years, I operated my business the same way," Osborn says. "You look at these contracts from different projects and they all look the same. In no way did they ever expect me to do construction at cost."
He wonders why, when the financial arrangement was clearly stipulated, so many of his project partners got upset after the fact — and why the DA's office went after him for disputes that had already been resolved in the civil courts. He asserts that the grand-jury hearings that secured the indictments against him were based on false testimony. "That's how I learned to do business," he explains. "You structure the subcontractors to maximize the price so you can make a profit, so you can make a living,"
But it was Osborn's high standard of living that may not add up. The fancy cars, the frequent dinners at Del Frisco's and Elway's, the huge houses — how could a couple who'd never gotten a large payout from a major project afford such luxuries? And if they could afford them once, how could Osborn have fallen so far that he can't pay for his own lawyer today?
The developer has two weeks to convince the court collections investigator that he qualifies under the public defender's definition of "indigent" before his next hearing, slated for April 2. Even though Angela has dropped the price of the Polo Club home from $7.5 million to $6.5 million, there haven't been any takers. Court records show that last spring, the Osborns liquidated 62,000 shares of stock in Triton and paid $30,000 from their joint checking account to satisfy a longstanding writ of garnishment imposed by a mortgage company.
With all of his projects stuck in legal limbo and the word "indicted" hanging over his name, Osborn says his options have just about run out. "I just might have to strap on a tool belt again," he says.
His father died recently after a long illness. "One of the last things he said to me was, 'Erik, I want you to clear our name,'" Osborn recalls. And so Osborn keeps building — his defense, if nothing else. Even with a court-appointed attorney, he is confident that a jury will see it the way he does.
It will have to be his biggest sale ever.
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