At a bond hearing Wednesday for accused tax cheat George Hranowskyj, prosecutors and the FBI presented a disturbing picture of a man they say tried to hire a hit man to take out witnesses, talked about fleeing to Cuba, destroyed evidence in the case, tried to hide money, and forced an employee to perform a sex act at gunpoint.
But that’s not the worst of it, they said.
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Prosecutors submitted a photograph of a structure in Hranowskyj’s backyard: a thick, metal wire stretched high in the air between two trees with six ropes dangling from pulleys. Assistant U.S. Attorney Katherine Lee Martin described it as a gallows with the ropes possibly intended for each member of his family. It was installed, she said, last fall shortly after Hranowskyj learned he was under federal investigation.
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A family member became so concerned upon seeing it that he wrote a letter to the authorities alerting them to it.
“I shudder to think what he’s capable of,” Martin said.
But Hranowskyj’s attorney and a family friend who helped build it said it was simply a swing set. They just never got around to installing seats.
And the other evidence, said the attorney, Christian Connell, comes from disgruntled former employees and convicted felons.
Despite testimony from friends who described Hranowskyj as a dedicated, church-going family man, a magistrate judge, citing the government’s “incredibly overwhelming case,” ruled that Hranowskyj should remain in jail without bond pending trial.
Prosecutors say Hranowskyj and Eric Menden, his business partner of 20-plus years, bilked the state and federal historic tax credit program of around $8 million. They also say the pair were involved in a $41 million fraud that helped take down Bank of the Commonwealth.
Through interviews and court records, a clearer picture has emerged of who these two men are and how they became involved in what authorities describe as potentially the biggest bank fraud case the region has ever seen.
Menden and Hranowskyj met on the basketball court at the downtown Norfolk YMCA. They were fanatical players and would soon become close business partners.
They scooped up dilapidated real estate at cut-rate prices and renovated most into usable businesses, apartments and condos. Through a cozy relationship with executives at Bank of the Commonwealth, the two managed to obtain more than $40 million in loans.
As the economy began to tank about six years ago, their debts began to mount. Payments to creditors slowed, and federal authorities began investigating a connection between the eventual collapse of the bank and the historic tax credits the two received for some of the property rehabs.
Their relationship began to strain, according to those who know the two men. While they mainly worked out of offices in the Wainwright, under their company Norfolk Property Development, Hranowskyj set up his own office in the old James Madison Hotel on Granby Street, which they also own.
Hranowskyj has a reputation of being gruff and arrogant. Menden has been described as the nice guy who was always impeccably dressed. Other than having German roots, they came from completely different backgrounds but initially joined together to restore blighted properties. Authorities say greed took over.
Hranowskyj now faces federal criminal charges, and Menden has pleaded guilty to similar charges.
In court, prosecutors said Hranowskyj has been trying to hide his wealth. Authorities found $158,000 in cash during a search of his $600,000 Chesapeake home last week, and they also discovered that he recently transferred about $200,000 to his wife.
After graduating from Colonial Heights High School outside Petersburg, Hranowskyj attended Old Dominion University, obtaining a degree in criminal justice. A short-lived career as a Virginia Beach police officer ended before graduating from recruit.
A job as a nuclear plant security guard followed before Hranowskyj decided to obtain a license to deal securities. He worked at local brokerage houses before joining Gateway Bank & Trust in its brokerage division, according to news reports. He moved full-time to real estate development around 2005.
In the meantime, Menden had been running a successful construction business.
The Menden family has Norfolk roots dating back at least three generations, according to those who know them. Menden grew up on 37th Street.
A Maury graduate, Menden went right to work after high school to support his family, first taking an electrician’s apprenticeship at a local shipyard. He later found his calling in construction and opened his own general contracting business in the 1980s. He called it EHM Construction.
“At some point he got hooked up with George. I don’t know what twist of fate brought that on,” said Norfolk lawyer John McIntyre, who would eventually handle the bankruptcy proceeding of the Wainwright building.
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The Wainwright building was the first large commercial real estate purchase made by Menden and Hranowskyj. They paid $5.75 million for it in 2005, taking a loan from Bank of the Commonwealth. Their original plan called for converting the nine-story, 100,000-square-foot office building into condominiums.
Before that, they had purchased some 60 residential properties. In the years that followed, they would buy dozens more throughout the region and on the Outer Banks. Grandiose plans for some of them soon fizzled.
One plan in Suffolk called on them to spend $7 million to turn a row of ornate stone and painted-brick buildings on West Washington Street into a state-of-the-art downtown bowling center with a restaurant and rock-climbing wall. The work was never done.
Instead, Menden and Hranowskyj accumulated more than 3,000 property citations from the city totaling some $125,000. Several of the properties burned in what officials described as suspicious fires. They still owe the city $347,965 in back taxes, according to the city treasurer.
Lawyers who represent, or have represented, the two men say that the collapse of the real estate market is the root cause of their financial demise.
Federal prosecutors allege something different. They say that in 2006, Menden and Hranowskyj began a scheme to defraud the state and federal historic tax credit program while at the same time defrauding the Bank of the Commonwealth, which ultimately collapsed.
The tax credit program provides tax credits to developers who restore historic buildings. Menden and Hranowskyj, in turn, sold those credits to investors for millions of dollars.
Prosecutors allege that instead of performing all the work involved in rehabbing the old James Madison Hotel downtown and an apartment building in Ghent, they pocketed millions for their own purposes.
The old Madison Hotel on Granby Street is now called the Madison Office Building. More than half of it has been remodeled, with shiny new tile throughout the lobby, brass lighting fixtures and a grand piano perched near the front door.
But large sections of it remain cluttered with construction debris. The ninth-floor penthouse, with sweeping views of the city, remains unfinished. What happens to the building now will be up to the government and the bank that holds the mortgage on it.
Their dreams of turning the nearby Wainwright into a state-of-the-art office complex also ended badly. In October, Wainwright Building LLC, owned by Hranowskyj and Menden, filed for bankruptcy, citing $23 million in debt and $4.3 million in assets — essentially the value of the building.
Whatever the cause of their financial collapse, Hranowskyj and Menden have left a trail of debt and upset contractors and tenants across the region.
Steve Downs, a local architect who did four drawings for property renovations, said he’s still owned money for work he did on a building in Suffolk. Now that it’s become a criminal case, and the feds have seized most of the two men’s assets, Downs said he’s not hopeful of ever getting paid.
“I thought they were really hot clients,” he said.
Downs said federal agents approached him looking for evidence against Menden and Hranowskyj. They showed him copies of invoices and checks that they had taken from the two men. Downs said he noticed that the numbers had been changed.
Prosecutors said they have discovered many instances of changed invoices and falsified bank and tax records. Menden admitted to some of that when he pleaded guilty to three federal felonies. He will be sentenced in July.
Hranowskyj will return to court Wednesday, when a trial date will be set.
