One afternoon in February, Velma Ruth Flynn paid a visit to former StoryBuilt CEO Anthony Siela’s home. Flynn was there to serve Siela with a lawsuit from his former employer, which imploded last summer and entered receivership after running out of cash. Siela and two other StoryBuilt principals stand accused of “egregious mismanagement” and significant financial misdeeds, charges the other two principals have fully denied in court. But Siela has been a ghost.
When Flynn arrived at his home, nobody came to the door, and the driveway was empty. Men doing yard work confirmed it was Siela’s home, but Flynn couldn’t serve the papers. She left a card with her contact information on the door and left.
She returned two days later to find her card gone but nobody home. Flynn attached another card and left, but ran into the same issue both times she visited the following week. Each time, Flynn’s card was removed, but nobody answered the door when she arrived, so she couldn’t serve Siela the lawsuit.
When the lawsuit finally does reach Siela, there may be additional charges attached. StoryBuilt’s receivership has finally filed the preliminary results of its long-running forensic accounting of the company’s books, detailing new allegations of financial mismanagement. Some are severe enough that receiver Mike Bergthold wrote in filings that he anticipates the analysis would support additional legal claims.
According to the forensic accounting, StoryBuilt paid one project’s investors a 35 percent return, even though the development lost money. It allegedly paid them with funds raised for a different project. The former principals also violated operating agreements, filed incorrect tax returns and failed to create accurate, supportable financial statements, the receiver’s forensic accounting alleges.
The receivership’s lawsuit already accuses Siela, former CFO Ryan Diepenbrock and former COO Chad Shepler of blending project funds and failing to properly silo money raised for individual developments. Diepenbrock and Shepler denied those charges in filings with the court. An attorney representing the two did not return a request for comment on the new allegations. Siela, as Flynn learned, could not be reached for comment.
These are the new allegations revealed in the forensic accounting:
The receivership claims that StoryBuilt lost about $4.5 million on Winston, a townhome project at 6556 Ravenna Avenue in Seattle. At the same time, it paid limited partners a 35 percent return on their investment, according to financial records.
(A slide from the receiver’s forensic analysis report. Source: Stapleton Group, Travis County Courts)
At a separate project in Denver, StoryBuilt raised just over $6 million in the last two weeks of June 2022. In that same time span, the company paid out $4.3 million to limited partners on the Seattle deal, even though it had only sold $3.5 million worth of the townhomes at that point. The receiver claims StoryBuilt used the Denver project’s investor money to pay off the Seattle investors.
It gets even more contorted: Six Seattle project investors also put money into the Denver deal.
The Seattle development isn’t the only project where profits may have been artificially inflated. Without specifying which projects, the receiver claims StoryBuilt inflated real estate values to bring in more money and persuade investors to roll over their returns into new projects rather than receive the cash due to them.
Outside of StoryBuilt, Diepenbrock allegedly developed a condominium project in Austin’s Hyde Park neighborhood. But when significant construction defects cropped up, an entity called Cougar Equities bought the project and held it for repair and resale, according to the receiver. The entity owners were Diepenbrock and Anthony Siela, as well as some others “possibly related to” the principals. One balance sheet showed StoryBuilt holding an interest in Cougar, but tax returns show no such stake.
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When Cougar sold the condo project, it included builders’ warranties. When defects came up again, StoryBuilt entities allegedly spent “significant sums” to fix them. However, the receiver hasn’t been able to show that the entities actually owned any stake in the condos or received any proceeds from the sale. The receiver also has not found any record of a contractual obligation with Cougar to pay for the repair work.
As the receivership looks to finish its forensic accounting, it is also trying to sell off much of StoryBuilt’s portfolio. After initially claiming its pipeline was worth $2 billion, the receiver has since said initial estimates were overly optimistic. Some projects haven’t been worth saving from foreclosure, while others are finding buyers.