Developer with ties to Trader Joe’s pleads guilty to tax evasion

Scott Chappelle faces five years in prison on federal conviction

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(This story was updated at 2:58 p.m. to include additional information.)

TUESDAY, April 26 — East Lansing developer Scott Chappelle has pleaded guilty to tax evasion and could be sentenced to up to five years in prison on the conviction in August, according to a press release from the U.S. Attorney's Office for the Western District of Michigan.

Chappelle operates Terra Management, Terra Holdings and Strathmore Development to develop real estate and manage properties across East Lansing, but he did not pay employment taxes that was withheld from the wages of those companies’ employees, prosecutors contended.

Scott Chappelle
Scott Chappelle

“When the IRS sought to collect the unpaid taxes, Chappelle made false statements to the agency about his and his companies’ assets and income, concealed his vacation house on Lake Michigan and purchased property in nominee names instead of his own,” the release states. Chappelle also reportedly lied to IRS employees about not being able to afford his tax debts while he was also using his business bank accounts to pay for personal expenses — including mortgage payments on two homes and a condominium and college tuition for his kids.

“Chappelle also lied to IRS special agents who were investigating his misconduct,” the release states, noting that he also filed false unemployment tax returns for Terra Holdings in which he claimed the company had no employees and paid no wages despite actually having a staff.

He also admitted to making false statements on a loan application when he refinanced the mortgage on his Lake Michigan vacation house in Harbor Springs, according to the release.

Chappelle faces up to five years in prison for a tax evasion conviction at an Aug. 2 sentencing hearing. He could also face supervised release, restitution and monetary penalties.

Strathmore Real Estate Group is also orchestrating the construction of a new Trader Joe’s in Meridian Township, which is expected to open by early next year. In an email, Scott Chappelle said his conviction will have no bearing on those development plans. He directed City Pulse to his son, Jacob Chappelle, to comment on those plans last week.

"I am not involved in the Trader Joe's project," Scott Chappelle said. "My involvement with Strathmore has been passive and operating without my direct involvement for some time now. I will work through these tax issues and look forward to getting them behind me."

Strathmore’s real estate portfolio includes development projects in several states and Canada. Chappelle also filed a failed defamation lawsuit last year against local news website East Lansing Info and its publisher, Alice Dreger, over unproven claims that its coverage of his prior business deals was both “false and defamatory.” Although one of the defendants in that case issued a public apology to Chappelle, the lawsuit was ultimately dismissed last year.

Check back for continued coverage as more details become available.

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