Former ‘newbo evolve’ official convicted of bank fraud

CEDAR RAPIDS — A former finance director of the defunct GO Cedar Rapids tourism agency pleaded guilty Wednesday for his part in a scheme to defraud a local bank in acquiring loans used to help finance the “newbo evolve” financial debacle in 2018.

Douglas S. Hargrave, 55, now of Puyallup, Wash., pleaded guilty in U.S. District Court to one felony count of bank fraud. He waived his right to have a grand jury indictment and agreed to be charged by criminal information — a complaint.

Hargrave admitted to participating along with Aaron McCreight, 46, former president and chief executive officer of GO Cedar Rapids, to defrauding Bankers Trust. He said the tourism agency didn’t have enough money to pay headline singer Kelly Clarkson, who was to perform during the three-day music and cultural event.

During the plea, Hargrave admitted that, at the direction of McCreight, on July 16, 2018, sent a fraudulent budget to the bank in support of an increased loan. The budget falsely overstated evolve’s expected revenues, expenses and expected profit to be $65,654, according to court documents.

The email to the bank included false projected income items, expense and profits of: $475,000 in sponsorship income; over $1.7 million in concert sales income; $475,000 in production expense; and $65,654 in profit, a criminal complaint stated.

U.S. Magistrate Judge Mark Roberts asked if Bankers Trust approved the increase to an initial loan from $1.5 million to $1.75 million on July 19, 2018 — which Hargrave admitted was true. He also admitted that McCreight signed a promissory note for the loan and the agency later received the additional $250,000.

Roberts asked if Hargrave did so with the intent to defraud. Hargrave said he did. The plea agreement was filed under seal and not in public court documents.

Roberts said Hargrave faces up to 30 years in federal prison, $1 million fine and up to five years of supervised release following any prison term. Restitution in the case also will be ordered at sentencing, but the judge didn’t provide an amount.

Hargrave waived his rights to appeal. He was allowed pretrial release without posting bail, to which prosecutors didn’t object.

Stephen Swift, Hargrave’s lawyer, asked if Hargrave could delay surrendering his passport, which can be required after conviction, because he has travel plans. The prosecution didn’t resist. Hargrave said he would turn in his passport to the probation office in Washington state, where he now lives, by March 1.

Roberts also included some conditions for the pretrial release, including that Hargrave not have contact with anyone involved in this investigation; must work at least 30 hours per week; and must provide probation officers with his financial information.

McCreight — now the tourism director of Dothan, Ala. — is also charged with one count of bank fraud. His plea hearing is set for Thursday in federal court. McCreight is also accused of defrauding the bank by making misrepresentations about evolve’s ticket sales, projected revenue, projected expenses and the true amount of loss he and Hargrave expected the event to generate.

The event lost $2.3 million, according to city of Cedar Rapids officials. A three-day pass, which cost $375, were sold to only 602 people out of the planned 4,000. The organizers expected to sell 22,000 general admission concert tickets, but only 8,340 were actually sold, and another 3,804 complimentary tickets were handed out.

The event included Clarkson and Maroon 5, while fashion designers Carson Kressley and Christian Siriano, filmmaker John Waters, U.S. Olympian Adam Rippon and others would inspire and entertain in NewBo and downtown.

GO Cedar Rapids couldn’t repay a $1.5 million loan from Bankers Trust or $800,000 promised to vendors. Bankers Trust fired its local president in the aftermath of the failed event.

The tourism agency board fired McCreight and Community Events Director Scott Tallman, saying it had been misled. GO Cedar Rapids, which the city helped finance by directing public hotel-motel tax to it, went out of business.

Comments: (319) 398-8318; trish.mehaffey@thegazette.com