CHARLESTON – A Charleston business developer is facing up to 20 years in federal prison for bankruptcy fraud.
John Wellford III pleaded guilty May 1 to falsification of bankruptcy records. Court documents show Wellford, 73, filed for bankruptcy on March 29, 2019, on behalf his real estate company called Corotoman Inc.
Despite being required to disclose all money transfers, Wellford admitted he did not disclose he had transferred more than $925,000 from Corotoman in 2018 to Marsh Fork Development, another of his companies. Just days before that, Wellford deposited nearly $2 million from American Electric Power into Corotoman’s account.
And, court documents show that of the nearly $1 million that went to Marsh Fork Development, Wellford transferred $680,000 to his attorney’s trust account. Those funds were transferred back into various Wellford business accounts over the next five months.
Wellford is scheduled to be sentenced August 7. He faces up to 20 years in prison, three years of supervised release and a $250,000 fine. He also owes more than $925,000 in restitution for the transfer he failed to report.
“The defendant sought to abuse the bankruptcy process and conceal the transfer of these substantial funds because he wanted to keep that money and did not want it to be available to his company’s creditors,” U.S. Attorney Will Thompson said of Wellford while commending the work of the Federal Bureau of Investigation (FBI), the West Virginia State Police, the West Virginia State Auditor’s Office (WVSAO) Public Integrity and Fraud Unit (PIFU) and the West Virginia Offices of the Insurance Commissioner-Special Investigations Division.
“Financial crimes undermine our foundation of economic stability. The message here is clear: our economy is not a marketplace for manipulation, theft, or criminal activity,” FBI Pittsburgh Special Agent in Charge Kevin Rojek said. “No one is above the law and the resolve to uphold it remains resolute for the FBI and our partners.
"Truth will always find its voice in the pursuit of justice.”
Meanwhile, Corotoman is at the heart of a lawsuit involving Yeager Airport being heard next week by the U.S. Fourth Circuit Court of Appeals in Richmond, Virginia.
Arguments are scheduled May 7 in that case in which Corotoman seeks more than $4 million in damages it says it is owed after U.S. District Judge Irene Berger awarded it nothing based on the “gross disproportionality” doctrine that allows a court to award the alternative measure of damages of diminution in value of the property at issue if the cost to complete the work is grossly disproportionate to that diminution in value.
When the Central West Virginia Regional Airport Authority sought to remove a hilltop on Corotoman’s adjacent property about 20 years ago, the parties agreed to a contract that allowed the airport to remove the hilltop in exchange for the airport “overblasting” the land and the exchange of certain parcels of land.
Overblasting means blasting below a specified elevation or a designated final grade and flattening the area. Corotoman says the airport failed to do so and never swapped the parcels of land, and it sued the airport authority. Berger ruled the airport breached the contract, but she awarded zero in damages based on the “gross disproportionality” doctrine.
That zero damages award is why Corotoman appealed the case to the Fourth Circuit, asking the court to enter a judgment for almost $4.4 million, which is the cost to complete the work as projected by the airport’s expert witness.
In its response brief, the airport authority says Berger correctly awarded no damages to Corotoman in the case. It also says Corotoman has received nearly $1 million from it over the last 10 years “but the airport authority has received absolutely nothing in return.”
Senior District Judge John T. Copenhaver Jr. is presided over the Wellford hearing, and Assistant U.S. Attorney Holly Wilson is prosecuting the case.
U.S. District Court for the Southern District of West Virginia case number 2:24-cr-00063 (Wellford) and U.S. Fourth Circuit Court of Appeals case number 23-1873 (Corotoman v. CWVRAA)