A little more than three years ago, the United States government invited John Steffen to the White House to receive a presidential award for his work revitalizing downtown St. Louis.
Friday, it called him a criminal.
The fall of the once high-flying developer hit a new low Friday morning when federal prosecutors announced they were charging Steffen with bank fraud for a tax credit scheme they say he pulled off as his Pyramid Construction neared collapse.
The indictment, filed in U.S. District Court in St. Louis, accuses Steffen of bilking the Business Bank of St. Louis out of about $827,000 in state brownfields tax credits in late 2007, a few months before his sprawling real estate empire shattered. It's a charge that could carry up to 30 years in prison and $1 million fine if he's found guilty.
When reached Friday, Steffen said he could not talk about it. Later in the day, he turned himself in to the FBI and appeared before a federal magistrate before being released on $25,000 bond.
Steffen got his start in the 1990s rehabbing single-family homes in south St. Louis. He rose to prominence with some big downtown jobs, mostly condo projects such as the Paul Brown Building on Olive Street and the Elder Shirt Lofts on North 13th Street. And by the middle of the 2000s, he controlled a slew of high-profile buildings in downtown and Grand Center, including the Jefferson Arms, the Arcade and the old St. Louis Centre mall, with plans to bring them back to life.
The charges filed Friday revolve around the long-empty Metropolitan, a century-old office building at 500 North Grand Boulevard, that Pyramid hoped to turn into condominiums.
In March 2007, the state of Missouri awarded $1.4 million in brownfields tax credits to a Steffen holding company to clean up asbestos and other pollutants in the building. Two months later, he used those credits as collateral for a $1.1 million loan from the Business Bank of St. Louis to actually pay for the work.
But in December 2007, as other projects began to stall and the economy weakened, prosecutors say that Steffen essentially double-dipped on the credits, selling $827,000 worth of them for cash to fund other needs.
In April 2008, just before Pyramid suddenly shut down, the Business Bank found out and filed a lawsuit, which eventually was settled for $775,000.
Prosecutors began investigating Steffen at the time but only filed the fraud charge a few weeks ago. It was unsealed Friday. Michael Reap, the assistant U.S. attorney handling the case, said he couldn't comment on why they waited.
"We were aware of this very early," he said. "There were other matters that were also taken into consideration on (filing charges) when we did it."
One factor may have been Pyramid's vast portfolio. It took two years to unwind, reaching deals with investors, partners and banks to find new owners for the buildings and get them started again. A federal criminal case could have slowed down that process.
While all the buildings are out of Pyramid's hands, and a few — such as St. Louis Centre — are back under construction, some are still dormant. The Metropolitan, for instance, is still owned by Centrue Bank, which foreclosed on its loan to Pyramid in 2008. City officials say the building is under contract to Dominium, a Minneapolis-based developer of apartment buildings, which has picked up several Pyramid buildings.
The city is watching closely, because it turns out it has a stake in the Metropolitan Building now, too.
Revealed in Friday's charges against Steffen is the fact that most of that $775,000 settlement with the Business Bank was paid by the city-run Land Clearance for Redevelopment Authority. It kicked in $500,000. Environmental Operations, which Pyramid had hired to clean up the building, paid $200,000. Steffen himself paid $50,000.
Barbara Geisman, St. Louis' deputy mayor for development, said the city paid to avoid a long, drawn-out lawsuit between the Business Bank and the state Department of Economic Development, which issues brownfields credits and other incentives that are key to the city's revitalization. The fear was that messy litigation could slow the flow of tax credits to other city developments.
"We needed those credits to move forward with a whole bunch of projects, including the ones Steffen left behind," she said.
A DED spokesman did not return calls seeking comment Friday. Geisman stressed that the $500,000 was a loan, and that LCRA will be paid back when the Metropolitan Building is sold, with hope by year's end.
Meanwhile, Steffen's future looks grim.
He lost his home on Kingsbury Place in the Central West End to foreclosure in 2008, and he has spent the last two years sorting out the mess left by Pyramid, said Steven Goldstein, an attorney who has been helping him. Steffen has earned no income in that time, Goldstein said, and likely can't afford a criminal attorney for his fraud case.
The developer will be back in court Wednesday.
Tim Bryant of the Post-Dispatch contributed to this report.
