MEMORANDUM
TO: Conrad Ashby, Partner, White Collar & Investigations
FROM: Daniel Obi, Associate, Banking & Finance
DATE: December 20, 2022
RE: Relevant Transactions Summary and Timeline — Jonathan R. Caldwell / Marcus W. Stavros Business Relationship (2014–2020)
MATTER: 1034-00001 — Caldwell Grand Jury Subpoena Response (Grand Jury No. 22-GJ-4481, S.D.N.Y.)
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
This memorandum has been prepared by counsel at the direction of and for the use of the client, Jonathan R. Caldwell, in anticipation of litigation and in connection with the provision of legal advice. It reflects the mental impressions, conclusions, opinions, and legal theories of counsel. This document is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. Any inadvertent disclosure of this memorandum does not constitute a waiver of any privilege or protection. If you have received this document in error, please notify the sender immediately and destroy all copies.
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I. Purpose and Scope
This memorandum provides a comprehensive chronological summary of every significant transaction, investment, distribution, and key communication between Jonathan R. Caldwell ("Caldwell") and Marcus W. Stavros ("Stavros"), and between Caldwell and any entity affiliated with Stavros, spanning the full duration of their business relationship—from their initial introduction at an industry conference in approximately 2014 through the final redemption of Caldwell's limited partnership interest in Aegean Realty Fund V LP in March 2020. The memorandum catalogues each material financial event, identifies the entities involved, sets forth the relevant dollar amounts, and notes the key documents associated with each transaction.
This memorandum has been prepared to serve as a reference tool for the following purposes:
(a) The ongoing document review and responsiveness/privilege coding being conducted by our engagement team in connection with the federal grand jury subpoena duces tecum issued on November 18, 2022 (Grand Jury No. 22-GJ-4481, United States District Court for the Southern District of New York, assigned AUSA Miriam T. Goldfarb). The subpoena calls for the production of documents relating to Caldwell's business dealings with Stavros and Aegean Realty entities, among other categories. This memorandum is intended to provide the document review team with the factual context necessary to make informed responsiveness, relevance, and privilege determinations.
(b) Potential future testimony preparation, should Caldwell's deferred testimony obligation under the informal arrangement with the U.S. Attorney's Office be activated. As discussed during the December 8, 2022 call between Ashby and AUSA Goldfarb, the government has reserved the right to call Caldwell before the grand jury at a future date. This memorandum will serve as the factual foundation for any preparation sessions.
(c) Cross-referencing against the fund flow analysis being prepared separately by our team in conjunction with Thornberg & Whitfield CPAs. The fund flow analysis, expected to be completed by January 10, 2023, will trace the movement of funds through the various Aegean Realty entities and identify the sources and ultimate disposition of distributions received by Caldwell.
The information set forth in this memorandum has been sourced from the following materials: (i) Caldwell's personal files maintained at his residence and at the offices of Caldwell Capital Advisors LLC; (ii) email records recovered from Caldwell's primary business email account (jrc@caldwellcap.com), including both currently available emails and those restored from backup by our firm's electronic discovery vendor; (iii) the Caldwell Capital Advisors LLC shared network drive, which contains internal investment memoranda, due diligence files, and financial records; (iv) records obtained from Thornberg & Whitfield CPAs (through Senior Partner Helen R. Thornberg) pursuant to the client's authorization, including personal tax returns, K-1 schedules, and certain CCA financial statements; and (v) client interviews conducted by the engagement team, including the initial intake interview with Caldwell on November 22, 2022, and follow-up sessions on December 2, 2022 and December 12, 2022.
This memorandum should be read in conjunction with the following previously prepared work product:
• Subpoena Analysis Memorandum, dated December 6, 2022, prepared by Ashby and Obi, which analyzes the scope and breadth of the grand jury subpoena, identifies each document category requested, and sets forth our team's recommended approach to responsiveness and privilege determinations.
• Memorandum on Caldwell's Potential Civil and Criminal Exposure, dated December 15, 2022, prepared by Ashby and Obi, which evaluates the range of potential theories under which the government could seek to implicate Caldwell in connection with the Stavros investigation and assesses the strength of potential defenses.
Where factual matters remain unresolved or where additional information is needed from outstanding record requests, these gaps are noted in the text. This memorandum will be updated on a rolling basis as additional documents are collected and reviewed.
II. Summary of Key Entities
The following section identifies and describes the principal entities relevant to the Caldwell-Stavros business relationship. This summary is intended to serve as a ready reference for the document review team and for use in connection with testimony preparation.
A. Caldwell Entities
Caldwell Capital Advisors LLC ("CCA")
Caldwell Capital Advisors LLC is a New York limited liability company. Its sole member and managing principal is Jonathan R. Caldwell. CCA maintains its principal office at 590 Madison Avenue, 22nd Floor, New York, New York 10022. Its Employer Identification Number is 83-2174056. CCA operates as a real estate-focused investment management firm and currently manages approximately $340 million in investment assets across three distinct fund vehicles. CCA served as the investment vehicle through which Caldwell made each of his limited partnership investments in Aegean Realty fund vehicles (Fund III, Fund IV, and Fund V). CCA's internal records, including investment committee memoranda and due diligence files, are among the materials subject to the grand jury subpoena and are currently undergoing document review.
JRC Realty Holdings LLC ("JRC Realty")
JRC Realty Holdings LLC is a New York limited liability company. Its sole owner is Jonathan R. Caldwell. JRC Realty is registered at the same address as CCA: 590 Madison Avenue, 22nd Floor, New York, New York 10022. Its Employer Identification Number is 81-4493217. JRC Realty functions as Caldwell's personal holding company for his direct real estate portfolio, which comprises approximately fourteen properties located throughout the New York tristate area with an aggregate assessed value of approximately $78 million. JRC Realty did not directly participate in any of the Stavros-related transactions described in this memorandum; however, certain financial records maintained by or through JRC Realty may be responsive to the subpoena to the extent they reflect fund flows or commingled accounts.
B. Stavros / Aegean Realty Entities
Aegean Realty Partners LLC ("Aegean Realty")
Aegean Realty Partners LLC is a Connecticut limited liability company formed on March 12, 2014. Its founder and principal is Marcus W. Stavros. Aegean Realty maintains its principal office at 280 Atlantic Street, Suite 510, Stamford, Connecticut 06901. Aegean Realty served as the general partner or managing member of multiple real estate syndication vehicles sponsored by Stavros. According to publicly available information and materials provided by Caldwell, Aegean Realty raised approximately $215 million across seven separate syndication offerings between 2016 and 2021. The federal government's investigation centers on allegations that Stavros, acting through Aegean Realty, diverted approximately $18,700,000 in investor capital from Fund IV and Fund V to personal accounts and to fund operating shortfalls in earlier fund vehicles, thereby creating what the government characterizes as a Ponzi-like structure.
Aegean Realty Fund III LP ("Fund III")
Aegean Realty Fund III LP is a Delaware limited partnership. Its general partner is Aegean Realty Partners LLC. Fund III was one of the earlier syndication vehicles in the Aegean Realty platform. Caldwell invested $2,500,000 in Fund III as a limited partner in June 2016, representing his first LP investment in an Aegean Realty vehicle.
Aegean Realty Fund IV LP ("Fund IV")
Aegean Realty Fund IV LP is a Delaware limited partnership. Its general partner is Aegean Realty Partners LLC. Fund IV is one of the two funds (along with Fund V) from which the government alleges Stavros diverted approximately $18,700,000. Caldwell invested $4,000,000 in Fund IV as a limited partner in March 2017. Harborview Trust Company served as the escrow agent for investor deposits into Fund IV.
Aegean Realty Fund V LP ("Fund V")
Aegean Realty Fund V LP is a Delaware limited partnership. Its general partner is Aegean Realty Partners LLC. Fund V is the second of the two funds from which the government alleges Stavros diverted investor capital. Caldwell invested $3,500,000 in Fund V as a limited partner in September 2018. This was Caldwell's final investment in any Aegean Realty vehicle. Harborview Trust Company served as the escrow agent for investor deposits into Fund V. Caldwell's Fund V LP interest was the last Stavros-related holding to be liquidated, with the redemption completed in March 2020.
C. Joint Venture Entities
710 Flatbush Holdings LLC ("Flatbush JV")
710 Flatbush Holdings LLC is a New York limited liability company formed for the purpose of acquiring and operating the property located at 710 Flatbush Avenue, Brooklyn, New York 11225. The Flatbush JV was owned 50% by Caldwell and 50% by Stavros. The property is a 42-unit mixed-use building. The Flatbush JV was Caldwell's first co-investment with Stavros and was acquired in April 2016. Caldwell's 50% membership interest was subsequently purchased by Stavros for $3,400,000 as part of the December 2019 separation agreement.
Stavros-Caldwell Industrial LLC ("Newark JV")
Stavros-Caldwell Industrial LLC is a New Jersey limited liability company formed for the purpose of acquiring and operating the property located at 1500 Commerce Boulevard, Newark, New Jersey 07114. The Newark JV was owned 60% by Stavros and 40% by Caldwell. The property is a 65,000 square-foot industrial warehouse. The Newark JV was acquired in October 2017. Caldwell's 40% membership interest was subsequently purchased by Stavros for $1,850,000 as part of the December 2019 separation agreement.
D. Financial Institutions and Third Parties
Westlake Fidelity Bank, N.A.
Westlake Fidelity Bank, N.A. is a national bank with offices at 600 Summer Street, Stamford, Connecticut 06901. Westlake Fidelity extended approximately $127 million in commercial real estate loans to various Aegean Realty vehicles during the period 2016 through 2020. Of this total, $10,940,000 was extended in connection with the two joint venture properties in which Caldwell held an interest: $5,600,000 for the Flatbush JV property and $5,340,000 for the Newark JV property. Westlake Fidelity is represented by the law firm Graystone & Falk LLP (Catherine A. Falk, Partner), located in Hartford, Connecticut. Westlake Fidelity's lending relationship with Aegean Realty is a significant area of government interest, particularly with respect to the bank's reliance on property appraisals provided by Pinnacle Appraisal Group LLC.
Harborview Trust Company
Harborview Trust Company is a Connecticut state-chartered trust company located at 88 Broad Street, Suite 200, Bridgeport, Connecticut 06604. Harborview Trust served as the escrow agent for investor deposits in both Fund IV and Fund V. In addition, Harborview Trust extended a $14.5 million mezzanine loan to one Aegean Realty entity (the specific entity to be confirmed through document review). Harborview Trust's dual role as escrow agent and lender may be an area of government inquiry, and Caldwell's communications with Harborview Trust regarding his escrow deposits for Fund IV and Fund V are among the documents being reviewed for responsiveness.
Pinnacle Appraisal Group LLC
Pinnacle Appraisal Group LLC is a New York limited liability company with offices at 355 Lexington Avenue, 9th Floor, New York, New York 10017. Pinnacle provided real estate appraisals for several properties acquired by Aegean Realty entities. Pinnacle is currently under government scrutiny for potentially inflated property valuations that may have been used to obtain larger loans from Westlake Fidelity Bank and to overstate the value of assets held by Aegean Realty fund vehicles in investor reporting. Any involvement by Pinnacle in appraising the Flatbush JV or Newark JV properties is a matter of significant factual sensitivity, as discussed further in Section VI below.
Whitmore & Kessler LLP
Whitmore & Kessler LLP is a law firm located at 277 Park Avenue, 40th Floor, New York, New York 10172. Whitmore & Kessler served as Caldwell's commercial counsel in connection with the October 2019 management fee dispute with Stavros and the subsequent negotiation and drafting of the December 2019 separation agreement. The lead partner on the engagement was Patricia Sheldon. Communications between Caldwell and Whitmore & Kessler LLP are subject to the attorney-client privilege and have been withheld from the grand jury production. These communications are among the 214 privileged documents identified on the privilege log.
Thornberg & Whitfield CPAs
Thornberg & Whitfield CPAs is an accounting firm located at 521 Fifth Avenue, 17th Floor, New York, New York 10175. Thornberg & Whitfield has served as Caldwell's personal and business accounting firm. Senior Partner Helen R. Thornberg prepared Caldwell's personal tax returns and certain CCA financial statements. Records obtained from Thornberg & Whitfield are a primary source for the financial data set forth in this memorandum, including information regarding distributions received, K-1 schedules from the Aegean Realty fund vehicles, and tax reporting for the joint ventures. Certain communications with Thornberg & Whitfield rendered at the direction of counsel in connection with this engagement are subject to privilege.
III. Chronological Transaction Summary and Timeline
The following section sets forth, in chronological order, every significant transaction, investment, distribution, and key event in the Caldwell-Stavros business relationship from 2014 through March 2020. Each entry identifies the relevant date, entities, financial terms, and key documents, and provides contextual observations pertinent to the ongoing investigation.
A. 2014 — Introduction
Approximately 2014: Jonathan R. Caldwell (then approximately 50 years of age) met Marcus W. Stavros (then approximately 46 years of age) at the National Real Estate Investors Forum, an annual industry conference. Based on Caldwell's account during client interviews, the two were introduced by a mutual industry acquaintance whose identity Caldwell does not recall with specificity. The nature of the initial relationship was that of collegial industry acquaintances. During their initial conversations, Stavros described his newly formed real estate syndication platform, Aegean Realty Partners LLC, which had been organized as a Connecticut limited liability company on March 12, 2014.
No financial transactions occurred between Caldwell and Stavros in 2014. The introduction was purely social and professional in nature. Caldwell has stated during client interviews that his initial impression of Stavros was favorable, noting Stavros's background in commercial real estate development and his apparent knowledge of the tristate real estate market. No written communications from this period have been identified in the collected documents.
It is significant to note that this introduction predates Caldwell's first investment by approximately two years. During the intervening period, the relationship evolved gradually from casual industry acquaintanceship into a more substantive business partnership, as described in the following sections.
B. 2015 — Relationship Development
The year 2015 was characterized by continued professional contact between Caldwell and Stavros, including periodic meetings and telephone calls in which the two discussed potential co-investment opportunities in the New York metropolitan commercial real estate market. Based on Caldwell's recollection and a limited number of emails recovered from this period, Stavros began sharing information about the Aegean Realty syndication pipeline and Stavros's investment thesis, which focused on acquiring value-add multifamily and mixed-use properties in emerging neighborhoods in the New York City boroughs and northern New Jersey.
No formal financial transactions between Caldwell and Stavros or any Aegean Realty entity have been identified in the collected documents for 2015. The relationship during this period remained in the exploratory and relationship-building phase. Caldwell has stated that by late 2015, he had developed a sufficient level of trust in Stavros's market knowledge and deal-sourcing capabilities to begin considering co-investment opportunities in earnest.
C. April 2016 — Acquisition of 710 Flatbush Avenue, Brooklyn (Flatbush JV)
The first financial transaction between Caldwell and Stavros occurred in April 2016 with the joint acquisition of the property at 710 Flatbush Avenue, Brooklyn, New York 11225.
Entity: 710 Flatbush Holdings LLC, a New York limited liability company formed for the purpose of acquiring and holding the property.
Ownership Structure: 50% Jonathan R. Caldwell / 50% Marcus W. Stavros.
Property Description: 710 Flatbush Avenue, Brooklyn, New York 11225 — a 42-unit mixed-use building comprising residential apartments on the upper floors and ground-floor retail space, located in the Flatbush neighborhood of Brooklyn.
Acquisition Price: $11,200,000.
Financing:
• Total equity contributed: $5,600,000 (representing the acquisition price of $11,200,000 less the bank financing of $5,600,000).
• Caldwell equity contribution: $2,800,000 (representing 50% of the total equity requirement of $5,600,000).
• Stavros equity contribution: $2,800,000 (representing 50% of the total equity requirement of $5,600,000).
• Westlake Fidelity Bank, N.A. commercial real estate loan: $5,600,000 (representing a loan-to-value ratio of approximately 50% at the acquisition price).
Key Documents: The following documents have been identified in connection with this transaction and are subject to the ongoing document review: (i) 710 Flatbush Holdings LLC operating agreement; (ii) Westlake Fidelity Bank, N.A. loan agreement and related loan documents (promissory note, mortgage, security agreement, environmental indemnity); (iii) closing documents (deed, settlement statement, transfer tax filings); (iv) title insurance policy; and (v) property appraisal.
Observations: The Westlake Fidelity loan for this property is part of the broader approximately $127 million in lending extended by the bank to Aegean Realty vehicles between 2016 and 2020. The property appraisal obtained in connection with the Westlake Fidelity loan may have been prepared by Pinnacle Appraisal Group LLC; this is to be confirmed through document review of the closing files. Given the government's focus on potentially inflated Pinnacle valuations in connection with properties financed by Westlake Fidelity, the identity of the appraiser for this property is a matter requiring prompt resolution. If Pinnacle was the appraiser, any communications between Caldwell and Pinnacle, or any evidence that Caldwell reviewed and relied upon a Pinnacle appraisal, will be of heightened relevance.
D. June 2016 — Caldwell's Investment in Aegean Realty Fund III LP
Approximately two months after the Flatbush JV acquisition, Caldwell made his first limited partnership investment in an Aegean Realty fund vehicle.
Vehicle: Aegean Realty Fund III LP, a Delaware limited partnership.
Caldwell's Role: Limited partner.
Investment Amount: $2,500,000.
Subscription Date: June 2016.
Source of Funds: Personal investment made through Caldwell Capital Advisors LLC.
Key Documents: (i) Aegean Realty Fund III LP limited partnership agreement; (ii) Caldwell/CCA subscription agreement; (iii) Fund III private placement memorandum ("PPM"); and (iv) wire transfer confirmation documenting the transfer of $2,500,000 from CCA's bank account to the Fund III account (or to the escrow agent, as applicable).
This was the first of three LP investments by Caldwell in Aegean Realty fund vehicles. The Fund III investment, together with the contemporaneous Flatbush JV acquisition, reflects the deepening of the Caldwell-Stavros business relationship during the first half of 2016. Caldwell has stated during client interviews that the Fund III investment was based in part on his positive experience working with Stavros on the Flatbush JV acquisition and in part on Stavros's representations regarding Fund III's investment strategy and projected returns as described in the PPM. CCA's internal due diligence files regarding the Fund III investment, if they exist, are among the records being searched on the CCA shared drive.
E. March 2017 — Caldwell's Investment in Aegean Realty Fund IV LP
Approximately nine months after the Fund III investment, Caldwell made his second LP investment in an Aegean Realty vehicle.
Vehicle: Aegean Realty Fund IV LP, a Delaware limited partnership.
Caldwell's Role: Limited partner.
Investment Amount: $4,000,000.
Subscription Date: March 2017.
Source of Funds: Personal investment made through Caldwell Capital Advisors LLC.
Key Documents: (i) Aegean Realty Fund IV LP limited partnership agreement; (ii) Caldwell/CCA subscription agreement; (iii) Fund IV private placement memorandum; and (iv) wire transfer confirmation documenting the transfer of $4,000,000 from CCA's bank account.
Critical Note Regarding Government Allegations: Fund IV is one of the two funds (along with Fund V) from which the government alleges that Stavros diverted approximately $18,700,000 in investor capital to personal accounts and to fund operating shortfalls in earlier fund vehicles, including Fund III. The Fund IV investment is Caldwell's single largest investment in any Aegean Realty vehicle and thus represents the area of greatest financial exposure. Any documents reflecting communications between Caldwell and Stavros at or around the time of the Fund IV subscription—including representations made by Stavros regarding Fund IV's financial condition, use of investor proceeds, and investment performance—are of particular importance to the document review and to the assessment of Caldwell's potential exposure.
Escrow Arrangements: Harborview Trust Company served as the escrow agent for investor deposits in Fund IV. The mechanics of the escrow arrangement, including the conditions for release of escrowed funds to Aegean Realty, are set forth in the Fund IV subscription agreement and the escrow agreement between Harborview Trust, Aegean Realty, and the Fund IV limited partners. Any communications between Caldwell and Harborview Trust regarding the disposition of his escrowed funds are responsive to the subpoena.
F. October 2017 — Acquisition of 1500 Commerce Boulevard, Newark (Newark JV)
Approximately seven months after the Fund IV investment, Caldwell and Stavros entered into their second joint venture for the acquisition of the property at 1500 Commerce Boulevard, Newark, New Jersey 07114.
Entity: Stavros-Caldwell Industrial LLC, a New Jersey limited liability company formed for the purpose of acquiring and holding the property.
Ownership Structure: 60% Marcus W. Stavros / 40% Jonathan R. Caldwell. Unlike the Flatbush JV, in which ownership was divided equally, the Newark JV reflected a majority interest held by Stavros.
Property Description: 1500 Commerce Boulevard, Newark, New Jersey 07114 — a 65,000 square-foot industrial warehouse facility.
Acquisition Price: $8,900,000.
Financing:
• Total equity contributed: $3,560,000 (representing the acquisition price of $8,900,000 less the bank financing of $5,340,000).
• Caldwell equity contribution: $1,424,000 (representing 40% of the total equity requirement of $3,560,000).
• Stavros equity contribution: $2,136,000 (representing 60% of the total equity requirement of $3,560,000).
• Westlake Fidelity Bank, N.A. commercial real estate loan: $5,340,000 (representing a loan-to-value ratio of approximately 60% at the acquisition price).
Key Documents: (i) Stavros-Caldwell Industrial LLC operating agreement; (ii) Westlake Fidelity Bank, N.A. loan agreement and related loan documents; (iii) closing documents; and (iv) property appraisal. As with the Flatbush JV, the identity of the appraiser for the Newark JV property is to be confirmed through document review, with particular attention to any involvement by Pinnacle Appraisal Group LLC.
Observations: The Newark JV represented the second and final direct co-investment between Caldwell and Stavros. Following this acquisition, Caldwell's direct joint venture equity exposure to Stavros-related investments totaled $4,224,000 ($2,800,000 in the Flatbush JV plus $1,424,000 in the Newark JV). Combined with his LP investments in Funds III and IV (totaling $6,500,000 at this point), Caldwell's aggregate financial commitment to Stavros-affiliated ventures as of October 2017 stood at $10,724,000.
G. September 2018 — Caldwell's Investment in Aegean Realty Fund V LP
Approximately eleven months after the Newark JV acquisition, Caldwell made his third and final LP investment in an Aegean Realty fund vehicle.
Vehicle: Aegean Realty Fund V LP, a Delaware limited partnership.
Caldwell's Role: Limited partner.
Investment Amount: $3,500,000.
Subscription Date: September 2018.
Source of Funds: Personal investment made through Caldwell Capital Advisors LLC.
Key Documents: (i) Aegean Realty Fund V LP limited partnership agreement; (ii) Caldwell/CCA subscription agreement; (iii) Fund V private placement memorandum; and (iv) wire transfer confirmation documenting the transfer of $3,500,000 from CCA's bank account.
Critical Note Regarding Government Allegations: Fund V is the second of the two funds from which the government alleges that Stavros diverted approximately $18,700,000. Combined with the Fund IV investment, Caldwell placed a total of $7,500,000 in the two funds at the center of the government's fraud allegations. This makes the Fund IV and Fund V subscription documents, PPMs, and related communications critically important to the assessment of what Caldwell knew (or should have known) about the financial condition and operations of the Aegean Realty platform at the time of each investment.
Escrow Arrangements: As with Fund IV, Harborview Trust Company served as the escrow agent for investor deposits in Fund V.
Significance: This was Caldwell's final investment in any Aegean Realty vehicle. After the Fund V subscription in September 2018, Caldwell made no further capital commitments to any Stavros or Aegean Realty entity. Caldwell's total invested capital across all Stavros-related investments peaked at $14,224,000 following this transaction.
H. 2016–2019 — Distributions Received by Caldwell
During the period 2016 through 2019, Caldwell received periodic distributions from his LP investments in the Aegean Realty fund vehicles and from his joint venture interests in the Flatbush JV and the Newark JV. The aggregate amounts are as follows:
LP Distributions (aggregate from Fund III, Fund IV, and Fund V): $1,870,000
A detailed breakout of LP distributions by fund and by quarter is in the process of being compiled from bank records (including wire transfer and deposit records from CCA's operating accounts) and from K-1 schedules received from the Aegean Realty fund administrators. This breakout will be included in the fund flow analysis memorandum expected to be completed by January 10, 2023. For present purposes, the aggregate figure of $1,870,000 is based on the information available from Thornberg & Whitfield's records and from Caldwell's personal bank statements.
JV Distributions (aggregate from Flatbush JV and Newark JV): $635,000
A detailed breakout of JV distributions by entity and by period is similarly in the process of being compiled from the operating account records of 710 Flatbush Holdings LLC and Stavros-Caldwell Industrial LLC. These operating account records are among the documents being collected in connection with the grand jury production.
Total Aggregate Distributions to Caldwell: $2,505,000 ($1,870,000 in LP distributions + $635,000 in JV distributions).
Area of Factual Sensitivity: The government alleges that Stavros diverted approximately $18,700,000 from Funds IV and V and used diverted funds in part to cover operating shortfalls in earlier fund vehicles, creating what the government characterizes as a Ponzi-like structure in which returns paid to existing investors were funded not by legitimate investment income but by capital contributions from subsequent investors. If this allegation is substantiated, some portion of the $2,505,000 in distributions received by Caldwell may have originated from diverted investor capital rather than from genuine investment returns. The implications of this possibility for Caldwell's potential exposure—including the risk of a government clawback demand or disgorgement action, as well as the evidentiary significance of Caldwell's receipt of tainted distributions—are addressed in detail in the Memorandum on Caldwell's Potential Civil and Criminal Exposure, dated December 15, 2022.
I. October 2019 — Business Dispute and Falling Out
In or around October 2019, a significant business dispute arose between Caldwell and Stavros that precipitated the complete severance of their business relationship.
Nature of Dispute: Caldwell discovered that Stavros had unilaterally charged approximately $340,000 in management fees to the 710 Flatbush Holdings LLC operating account without Caldwell's prior approval or consent. According to Caldwell's account, these fees were not authorized under the Flatbush JV operating agreement, had not been discussed with Caldwell before being charged, and were excessive in relation to the property management services purportedly rendered. Caldwell has stated during client interviews that he became aware of these charges when reviewing the Flatbush JV's quarterly financial statements for the third quarter of 2019.
Caldwell's Response: Upon discovering the unauthorized management fees, Caldwell confronted Stavros and demanded a full accounting of the fees charged and the services rendered. When Stavros's response was, in Caldwell's characterization, evasive and unsatisfactory, Caldwell retained outside counsel—specifically, Patricia Sheldon, Partner at Whitmore & Kessler LLP, located at 277 Park Avenue, 40th Floor, New York, New York 10172—to represent him in the dispute and to negotiate a complete separation of all business interests between Caldwell and Stavros.
Significance: This dispute precipitated the complete severance of all business ties between Caldwell and Stavros. The dispute was commercial in nature, arising from Stavros's unauthorized charging of management fees to a joint venture entity, and was unrelated to the federal investigation into Stavros's activities at Aegean Realty. Critically, the October 2019 dispute predated the commencement of the federal investigation by more than two years. From the perspective of Caldwell's defense posture, the October 2019 dispute is significant because it demonstrates that Caldwell took swift and decisive action to sever the business relationship upon discovering a comparatively modest financial impropriety by Stavros. This conduct is inconsistent with the profile of a knowing participant in a broader fraud scheme.
Privilege Note: Communications between Caldwell and Whitmore & Kessler LLP (including Patricia Sheldon and other attorneys at the firm) regarding the management fee dispute, the separation negotiation, and the drafting of the separation agreement are subject to the attorney-client privilege and have been withheld from the grand jury production. These communications are among the 214 privileged documents identified and logged on the privilege log being prepared in connection with the first rolling production.
J. December 15, 2019 — Separation Agreement Effective Date
Following approximately two months of negotiation, Caldwell and Stavros entered into a formal separation agreement effective December 15, 2019.
Agreement: The separation agreement was negotiated and drafted by Whitmore & Kessler LLP (Patricia Sheldon, lead partner) on behalf of Caldwell. Stavros was separately represented by independent counsel; the identity of Stavros's counsel in the separation negotiation is to be confirmed through document review of the executed separation agreement and related correspondence. The separation agreement effected a comprehensive unwinding of all business relationships between Caldwell and Stavros.
Key Terms:
(i) Flatbush JV Buyout: Stavros purchased Caldwell's 50% membership interest in 710 Flatbush Holdings LLC for a purchase price of $3,400,000, payable in cash at closing. The purchase price was negotiated at arm's length based on the appraised value of the property and the net asset value of the JV entity.
(ii) Newark JV Buyout: Stavros purchased Caldwell's 40% membership interest in Stavros-Caldwell Industrial LLC for a purchase price of $1,850,000, payable in cash at closing. As with the Flatbush JV buyout, the purchase price was negotiated at arm's length.
(iii) LP Redemptions: Caldwell simultaneously initiated the redemption of his limited partnership interests in all three Aegean Realty fund vehicles. The Fund III and Fund IV LP interests were redeemed at or around the time of the separation agreement; the specific redemption amounts for Fund III and Fund IV are to be confirmed from Thornberg & Whitfield CPAs records and bank statements. The Fund V LP interest was subject to a six-month redemption notice period under the terms of the Fund V limited partnership agreement, and accordingly could not be redeemed until approximately March 2020.
Buyout Payments:
• Flatbush JV (50% interest): $3,400,000
• Newark JV (40% interest): $1,850,000
• Total buyout proceeds to Caldwell: $5,250,000
Analysis of Arm's-Length Nature: The question of whether the buyout prices reflected fair market value and were negotiated at arm's length is a matter of potential significance, as the government may inquire into whether the buyout payments represented a premium designed to compensate Caldwell for his silence or cooperation, or conversely, whether they represented below-market prices reflective of coercive pressure by Stavros. This question is addressed in a separate Memorandum on the 2019 Separation Agreement and Buyout Terms, to be completed by January 5, 2023, by Obi. Based on preliminary analysis, the terms appear consistent with fair market value and were negotiated through independent counsel at arm's length, supporting the conclusion that the buyout was a legitimate commercial transaction.
Effect: Following the execution of the separation agreement and the completion of the buyout payments, Caldwell had no remaining ownership interest in either the Flatbush JV or the Newark JV. Caldwell's LP interests in Fund III and Fund IV were redeemed at or near this time (specific redemption amounts pending confirmation), leaving only the Fund V LP interest outstanding subject to the six-month redemption notice period.
K. March 2020 — Fund V LP Interest Redemption
The final financial transaction between Caldwell and any Stavros or Aegean Realty entity occurred in March 2020.
Vehicle: Aegean Realty Fund V LP.
Redemption Amount: $3,150,000.
Timing: The Fund V LP interest was redeemed in March 2020, following the expiration of the six-month redemption notice period that commenced in or around September or October 2019 at the time of the separation. The specific date of the redemption payment and the wire transfer confirmation are among the records being compiled from Caldwell's bank statements and Thornberg & Whitfield CPAs records.
Significance: This was Caldwell's final financial transaction involving any Stavros or Aegean Realty entity. Upon completion of this redemption, Caldwell had no remaining investments in, business connections to, or financial dealings with Stavros, Aegean Realty Partners LLC, or any entity affiliated with Stavros. The March 2020 redemption marked the complete and final severance of the Caldwell-Stavros business relationship. Caldwell's total exposure to Stavros-related investments, which had peaked at $14,224,000 in September 2018, was fully liquidated as of this date.
It bears noting that the March 2020 redemption occurred approximately one year and nine months before the issuance of the grand jury subpoena in November 2022, and well before any public indication of a federal investigation into Stavros or Aegean Realty.
IV. Aggregate Financial Summary
The following tables consolidate the financial data set forth in Section III to provide an at-a-glance summary of Caldwell's total investments, total returns, and Westlake Fidelity Bank lending exposure in connection with the Caldwell-Stavros business relationship.
A. Total Investments by Caldwell
B. Total Returns to Caldwell
Note on Aggregate Returns: Total confirmed outflows to Caldwell (distributions plus buyouts plus confirmed redemptions) equal at minimum $10,905,000, calculated as follows: $2,505,000 (aggregate distributions) + $3,400,000 (Flatbush JV buyout) + $1,850,000 (Newark JV buyout) + $3,150,000 (Fund V redemption). This minimum figure does not include the Fund III and Fund IV redemption amounts, which are pending confirmation from Thornberg & Whitfield CPAs records and bank statements. Against Caldwell's total invested capital of $14,224,000, the minimum confirmed returns of $10,905,000 suggest a net loss of at least $3,319,000, though this figure will be revised once the Fund III and Fund IV redemption amounts are confirmed. If the Fund III and Fund IV redemption amounts together approximate the invested capital for those vehicles ($2,500,000 and $4,000,000, respectively), Caldwell may have approximately broken even or sustained a modest loss on the overall relationship.
C. Westlake Fidelity Bank Lending Exposure Related to Caldwell's Joint Ventures
The $10,940,000 in Westlake Fidelity loans associated with Caldwell's joint ventures represents approximately 8.6% of the approximately $127 million in total Westlake Fidelity lending to Aegean Realty vehicles during the 2016–2020 period. While Caldwell was not a borrower in his individual capacity on these loans (the borrowers were the respective JV entities), Caldwell may have executed personal guaranties or environmental indemnities in connection with the Westlake Fidelity loans. The status of any personal guaranty obligations is to be confirmed through document review of the closing files.
V. Key Communications of Note
The following categories of communications have been identified as most relevant to the grand jury subpoena and the ongoing document review. The document review team should prioritize the identification, collection, and coding of documents falling within these categories:
1. Direct Caldwell-Stavros Communications. This category encompasses all emails, text messages, instant messages, and other written communications between Caldwell and Stavros, including but not limited to communications regarding: (a) co-investment discussions and the evaluation of potential acquisition targets for the Flatbush JV and Newark JV; (b) the negotiation and execution of JV operating agreements and related governance matters; (c) fund subscription discussions, due diligence inquiries, and the execution of subscription documents for Funds III, IV, and V; (d) distribution reports, quarterly financial statements, and investor updates provided by Stavros or Aegean Realty to Caldwell in his capacity as a limited partner; and (e) the October 2019 management fee dispute, including Caldwell's initial discovery of the unauthorized fees and his subsequent confrontation of Stavros. This last subcategory is of particular significance, as it documents Caldwell's contemporaneous reaction to Stavros's financial impropriety.
2. Caldwell-Westlake Fidelity Bank Communications. This category encompasses all communications between Caldwell (or CCA, or either JV entity) and Westlake Fidelity Bank, N.A. in connection with the financing of the Flatbush JV and Newark JV properties. These communications include loan applications, term sheet negotiations, loan closings, covenant compliance correspondence, financial reporting submitted to the bank, and any communications regarding property appraisals. The government's interest in Westlake Fidelity's lending practices and its reliance on potentially inflated appraisals makes this category of communications highly sensitive.
3. Caldwell Communications Regarding Pinnacle Appraisal Group LLC. This category encompasses all communications between Caldwell and Pinnacle Appraisal Group LLC, as well as any communications in which Caldwell received, reviewed, commented upon, or forwarded a Pinnacle appraisal report. The government's scrutiny of Pinnacle for potentially inflated valuations means that any evidence of Caldwell's awareness of, involvement in, or acquiescence in the use of inflated appraisals is a critical area of inquiry.
4. Caldwell-Harborview Trust Company Communications. This category encompasses all communications between Caldwell and Harborview Trust Company regarding escrow deposits for Fund IV and Fund V, including escrow deposit instructions, escrow release notifications, and any inquiries by Caldwell regarding the status or disposition of escrowed funds.
5. Internal CCA Records. This category encompasses internal Caldwell Capital Advisors LLC records reflecting investment committee decisions, due diligence analyses, internal memoranda, risk assessments, or any other internal documentation regarding CCA's evaluation of and decision to invest in Aegean Realty fund vehicles. These records are significant because they may shed light on the extent and rigor of Caldwell's due diligence process and, by extension, on whether Caldwell knew or should have known of any irregularities in Aegean Realty's operations.
6. Caldwell-Stavros Communications Regarding the October 2019 Dispute. Although this subcategory overlaps with Category 1 above, it is called out separately because of its particular importance. Communications from this period—including any written demands by Caldwell, responses from Stavros, and any evidence of Caldwell's decision to retain counsel and seek a complete separation—are highly favorable to Caldwell's defense posture and should be identified and preserved with particular care.
Privilege Withholdings: Communications between Caldwell and Whitmore & Kessler LLP (Patricia Sheldon) regarding the separation negotiation, the drafting of the separation agreement, and legal advice rendered in connection with the October 2019 dispute are subject to attorney-client privilege and have been withheld from the grand jury production. Additionally, certain communications between Caldwell and Thornberg & Whitfield CPAs (Helen R. Thornberg) that were rendered at the direction of counsel in connection with this engagement are subject to privilege and have also been withheld. All privileged documents are being logged on the privilege log, which will accompany the first rolling production.
VI. Observations and Areas of Factual Sensitivity
Based on the chronological review set forth above and the analysis contained in the Memorandum on Caldwell's Potential Civil and Criminal Exposure, dated December 15, 2022, the following three areas of factual sensitivity have been identified as warranting particular attention in connection with the document review, the fund flow analysis, and any future testimony preparation:
1. Distributions from Potentially Tainted Sources. Caldwell received $2,505,000 in aggregate distributions from his LP interests in Funds III, IV, and V and from his JV interests in the Flatbush JV and Newark JV during the period 2016 through 2019. The government alleges that Stavros diverted approximately $18,700,000 from Funds IV and V to personal accounts and to cover operating shortfalls in earlier fund vehicles, creating a Ponzi-like structure. If this allegation is substantiated, some portion of the distributions received by Caldwell may have originated from funds diverted by Stavros rather than from legitimate investment income. The fund flow analysis being prepared by our team, in conjunction with Thornberg & Whitfield CPAs, will attempt to trace the sources of the distributions received by Caldwell and determine whether any can be definitively linked to diverted investor capital. The results of this analysis will be critical to assessing Caldwell's exposure to potential clawback claims, disgorgement actions, or allegations that Caldwell received proceeds of fraud.
2. Awareness of Inflated Appraisals. The government's investigation includes scrutiny of Pinnacle Appraisal Group LLC for potentially inflated property valuations that were used to obtain larger loans from Westlake Fidelity Bank and to overstate the value of assets held by Aegean Realty fund vehicles in investor reporting. Caldwell may have received or reviewed Pinnacle appraisals in connection with the Flatbush JV and/or Newark JV acquisitions, either as part of the loan closing process with Westlake Fidelity or as part of his own due diligence. Any evidence that Caldwell was aware of, participated in, or acquiesced in the use of inflated valuations could be an area of government inquiry and could potentially expose Caldwell to allegations of aiding or abetting bank fraud, conspiracy, or related charges. The document review team should flag any documents reflecting Caldwell's receipt of, review of, or commentary on Pinnacle appraisals, as well as any communications in which Caldwell expressed skepticism about, or approval of, property valuations.
3. Management Fee Dispute as Evidence of Caldwell's Lack of Knowledge. The October 2019 dispute over approximately $340,000 in unauthorized management fees charged by Stavros to the Flatbush JV operating account is, from the perspective of Caldwell's defense posture, a highly significant piece of the factual record. The dispute demonstrates the following: (a) Caldwell was actively monitoring the financial statements of the JV entities and detected an unauthorized charge; (b) upon discovering the unauthorized charge, Caldwell promptly confronted Stavros and demanded an accounting; (c) when Stavros's response was unsatisfactory, Caldwell retained independent counsel and initiated a complete separation of all business interests; and (d) the amount at issue—approximately $340,000—was comparatively modest, suggesting that Caldwell was not aware of and would not have tolerated the far larger diversions (approximately $18,700,000) alleged by the government. Taken together, these facts support the conclusion that Caldwell was not complicit in Stavros's financial irregularities and, to the contrary, severed the relationship upon discovering a comparatively minor financial impropriety. This narrative should be developed and supported with specific documentary evidence during any testimony preparation.
Additional Observations:
The government's forensic accountant, Meridian Forensic Advisors LLC (Managing Director Nathan P. Solis), is conducting an independent fund flow tracing analysis through the various Aegean Realty entities. The government's tracing work is likely to be comprehensive and will map the movement of funds from investor subscriptions through Aegean Realty's operating accounts and ultimately to disbursements, including distributions to limited partners such as Caldwell. The fund flow analysis being prepared by our team (to be set forth in a separate memorandum expected January 10, 2023) will enable us to anticipate the government's lines of inquiry, identify any problematic fund flows involving Caldwell, and develop explanations or defenses as appropriate.
Stavros is represented by separate counsel in the federal investigation: Victor A. Reddick at Reddick, Sorrento & Hale LLP, located at 1 Liberty Plaza, 37th Floor, New York, New York 10006. No joint defense agreement is in place between Caldwell and Stavros, and none is contemplated. Given the nature of the government's allegations against Stavros and the adversarial posture of the Caldwell-Stavros relationship following the October 2019 dispute, a joint defense arrangement would be neither appropriate nor in Caldwell's interest. All communications with Stavros's counsel should be coordinated through Ashby.
Finally, this timeline should be kept current and updated on a rolling basis as additional documents are collected and reviewed, as the fund flow analysis is completed, and should the government issue further requests, supplemental subpoenas, or schedule Caldwell's testimony. Any material changes to the factual record set forth herein should be promptly communicated to the full engagement team.
VII. Appendices
Appendix A — Timeline Chart
The following table presents a condensed chronological summary of all key dates and events in the Caldwell-Stavros business relationship from 2014 through March 2020.
Appendix B — Entity Relationship Diagram
The following diagram describes the structural relationships among all key entities, with equity ownership percentages, loan amounts, and functional roles annotated.
[Diagram to be rendered graphically by the engagement team's litigation support group. The following textual description sets forth the relationships to be depicted.]
Jonathan R. Caldwell (Individual)
— Sole Member and Managing Principal → Caldwell Capital Advisors LLC ("CCA")
— CCA as investment vehicle for LP investments:
— Limited Partner (via CCA) → Aegean Realty Fund III LP — $2,500,000 investment
— Limited Partner (via CCA) → Aegean Realty Fund IV LP — $4,000,000 investment
— Limited Partner (via CCA) → Aegean Realty Fund V LP — $3,500,000 investment
— Sole Owner → JRC Realty Holdings LLC ("JRC Realty") (personal holding company; no direct involvement in Stavros transactions)
— 50% Member → 710 Flatbush Holdings LLC ("Flatbush JV") (other 50% held by Stavros)
— 40% Member → Stavros-Caldwell Industrial LLC ("Newark JV") (other 60% held by Stavros)
Marcus W. Stavros (Individual)
— Founder and Principal → Aegean Realty Partners LLC ("Aegean Realty")
— General Partner → Aegean Realty Fund III LP
— General Partner → Aegean Realty Fund IV LP
— General Partner → Aegean Realty Fund V LP
— 50% Member → 710 Flatbush Holdings LLC ("Flatbush JV")
— 60% Member → Stavros-Caldwell Industrial LLC ("Newark JV")
Westlake Fidelity Bank, N.A.
— Lender → 710 Flatbush Holdings LLC — $5,600,000 CRE loan