CLEVELAND — An area real estate developer formerly tasked with revamping what became the New Eastside Market in Cleveland's Glenville neighborhood has been convicted of defrauding the nonprofit behind the project of more than $880,000.
On Friday in U.S. District Court, a jury found Arthur Fayne guilty of nine federal charges of wire fraud. Prosecutors say the money was supposed to help address food desert and health care concerns in Glenville, but instead, Fayne spent it on his own "extravagant lifestyle" and even gambled much of it away at various casinos.
According to court documents, Northeast Ohio Neighborhood Health Services (NEON) tasked Fayne's company Business Development Concepts in 2016 with helping redevelop the then vacant Eastside Market on St. Clair Avenue into a new grocery store and community center. The goal was to provide residents with not only better access to food, but also health services through a NEON clinic inside the facility.
"I see the Eastside Market as an example of a community that is supporting itself, a community that is helping residents to be able to eat healthy and live healthy and active lives," Fayne told 3News' "We The People" in August of 2019, six months after the market reopened.
Fayne, a 61-year-old Aurora native, was named the market's managing partner and tasked with paying vendors. But while the grocery store began operations four years ago and remains in business, the health center did not materialize, and federal authorities soon began probing Fayne's financial activities.
Officials eventually found that, between 2017 and 2018, Fayne sent false invoices seeking nearly $760,000 in funds from NEON meant for general contractor AMHigly, but instead embezzled the cash for his own benefit. He conducted a similar scheme with more than $125,000 which was supposed to go to digital vendor Crescent Digital, and rather diverted those funds into his wife's bank account. He wound up being arrested in December of 2020.
Where did this money go instead? Per prosecutors, Fayne lost a great deal of it gambling, often blowing tens of thousands of dollars a night at casinos including JACK in downtown Cleveland. He also used it to purchase merchandise from Louis Vuitton, have a spa day in New York City, and even take a fancy cruise out of Miami.
In an effort to get the health clinic up and running, Cleveland City Council approved more than $2 million in American Rescue Plan Act (ARPA) funds for NEON in late 2021, but ended up putting that money on hold due to concerns over the nonprofit's debts. WKYC previously reported that former Councilman Basheer Jones (a major driving force behind the Eastside Market redevelopment) was the subject of an FBI investigation at least partly related to NEON's practices, but no charges have been filed in that case.
3News reached out to one of Fayne's attorneys, Myron P. Watson from the law firm Watson Kuhlman. Watson professed his continued belief in Fayne's innocence and made clear their plans to appeal the ruling, claiming prosecutors focused too much on Fayne's personal expenditures despite all vendors still, in fact, being paid what they were owed.
"AMHigly was paid in full, and Crescent Digital was paid in full," Watson said. "They may not have been paid timely, but they were paid."
As for the issue of the NEON clinic that wasn't, Watson called any assertions of that being related to Fayne's alleged embezzlement a "misconception," instead referring to it as a "complicated issue" and citing cost overruns as one of the main reasons it hasn't been built yet. He also pointed to testimony from government witnesses who said they still "trusted" Fayne with potential projects, including some involving NEON that are still ongoing.
"He's a person who is very strong. He has a strong faith base, he has strong support from his family and friends," Watson added of his client. "Obviously, he's disappointed about the verdict, but he believes he will be exonerated."
Records show Fayne is expected to face sentencing on Feb. 8, 2024.