Ridpath part of larger probe

The decaying Ridpath Hotel complex, once a shining focal point of Spokane’s downtown skyline, has become linked to a broadening federal investigation into potentially fraudulent real estate practices, newly filed court documents show.

Two of the Ridpath’s owners, Spokane real estate investors Gregory and Kimberly Jeffreys, are under active FBI investigation, along with developer Steven “Brian” Main, for a series of what investigators describe as essentially sham investments designed to defraud other investors of millions of dollars.

Confirmation of the FBI probe is contained in U.S. District Court documents unsealed Friday in Spokane. No arrests have been made, but FBI agents searched the Jeffreys home in the 5300 block of North Vista Court on July 19 as part of the continuing investigation.

A message left on Greg Jeffreys’ cellphone was not immediately returned. Spokane attorney Mark Vovos said he has had discussions about representing Jeffreys but had not been retained as of Friday afternoon.

The Jeffreyses’ son, John Jeffreys, declined to comment.

The new court documents, which include an affidavit submitted by FBI Special Agent Lisa Jangaard in support of the search warrant, show investigators began questioning the Jeffreyses’ business practices as early as January 2010. In addition to the Halliday building, which is part of the Ridpath complex, property on the West Plains may also be involved, records show.

According to investigators, the Jeffreyses and Main lured investors and secured bank financing by relying on artificially inflated appraisals that were obtained by engineering “sham transactions” on neighboring and comparable properties. Some of the investors are working with the FBI.

“Under the scheme, investors and financial institutions were furnished with significantly inflated property appraisals that were relied upon by the relevant parties for investment and lending decisions,” Jangaard wrote.

To finance the schemes, the couple would give bank officials inflated estimates of net worth and list collateral that didn’t exist in order to obtain loans, Jangaard wrote.

“To date, both investors and financial institutions have reported losses totaling millions of dollars from the real estate and mortgage scheme described herein,” Jangaard wrote.

In one case, the FBI believes, the couple took a $1.8 million payment that should have gone to a local bank and instead paid off some debts, gave some of it to their children, and then spent thousands on gambling and entertainment at the Mandalay Bay Casino in Las Vegas.

“A review of casino tracking records … reveals that both Kimberly and Gregory Jeffreys stayed and gambled at the casino on a frequent basis during February and March 2011,” Jangaard wrote. The casino records show Greg Jeffreys spent “$100,000 in cash ‘buy-ins’ between Feb. 11, 2011, and March 31, 2011, alone.”

State records show the Jeffreyses operated several limited liability corporations under the names Sundevil Investments, Sundevil Development, Cougar Palouse, Medrock, RussellRock and Tech-Rock, among others, at their home on Vista Court and at a downtown condominium on West First Avenue.

The Ridpath has been shuttered as investors sort out a confusing web of ownership interests held in the complex, which was divided up during the height of the condo craze. Some are holding out hope that the complex can be refurbished once the conflicts are sorted out.