10282010 - News Article - Second subpoena delivered

Second subpoena delivered 

Post-Tribune (IN)
October 28, 2010 

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GARY -- A probe of money spent on Gary's downtown Dalton Arms building continued this week when a federal agent dropped off a subpoena at the Gary-East Chicago-Hammond Empowerment Zone, an official said. 

Scott Upshaw, the agency's director, said a Merrillville-based agent delivered the subpoena Monday. Upshaw said it seeks all records related to a $2.5 million loan from the Empowerment Zone to Gary Progress Development. 

That loan, Upshaw said, was granted in June 2008. 

"We're making sure that we give them everything," Upshaw said. 

Gary City Hall received a similar subpoena in late September, its city attorney has said. That request came from agents based in South Bend, who sought records related to a $2.9 million loan from the city's community development office to Gary Progress Development. 

City Attorney Carl Jones said Gary turned over documents dated between 2003 and 2007, when the transaction took place. 

The loan preceded the hiring of Jacquelyn Drago - Hunter , Gary's current director of community development. She accepted her job there in 2008 and now faces federal fraud charges in an unrelated case. 

Gary Progress Development's Shawn Loyden, who is based in Florida, said last week he didn't know about the subpoena at City Hall until he read about it in the newspaper. 

However, he and the Mishawaka-based Sterling Group of Companies said they are continuing their work to renovate the dilapidated high-rise. 

Sterling Group partnered with Gary Progress Development this summer under the name Dalton Apartments LLC. It was recruited by a state agency that is directing $9.4 million in tax credits to fund the project. 

Lance Swank, Sterling's chief operating officer, said his company is cooperating with the federal probe. 

"We've been assured that this has nothing to do with the current activities," Swank said. "There are no issues concerning future funding." 

Developers, including Loyden, have promised to fix up the building since the mid-1990s. The project languished until this summer's deal was struck by Loyden and Sterling Group. Now, crews have been working there on a regular basis.Plans call for a 57-unit apartment building with retail on the ground floor. The new agreement gives the developers until Sept. 30, 2011, to finish their work. 

Probe continues into Dalton Arms spending.

The Dalton Arms project has been on and off for years. -- andy lavalley/post-tribune file photo