Corporate Executive Pleads Guilty to Kickback Scheme

(Alexandria, VA) - Michael P. Schroll, age 39, of Temecula, California, pleaded guilty to one count of conspiracy in connection with a scheme to defraud AvalonBay Communities, Inc., an equity Real Estate Investment Trust primarily engaged in acquiring, developing, and managing apartment communities within the United States. AvalonBay Communities maintains its corporate offices in Alexandria, Virginia. Chuck Rosenberg, United States Attorney for the Eastern District of Virginia and Joseph Persichini, Jr., Assistant Director in Charge of the FBI Washington Field Office, made the announcement following Schroll’s guilty plea yesterday before United States District Judge T.S. Ellis, III. The maximum potential penalty for conspiracy is five years incarceration and a fine of $250,000. The Court set sentencing for January 23, 2009.

Schroll was the owner and chief executive officer of San Jose Water Conservation Corporation, a company that either installed or retrofitted toilets with a low flow technology that enabled the toilets to conserve water. From the late 1990s until November 2004, in connection with the installation of low flow toilets on AvalonBay properties, Schroll paid kickbacks in the amount of at least $312,000 to an AvalonBay vice-president, referred to in court papers as “PK.”

Court documents also state that, from mid 2004 until November 2006, the same AvalonBay vice president arranged for AvalonBay to pay Schroll’s company, either directly or through a prime contractor, $5.5 million to serve as a mere conduit for mold removal or maintenance work on AvalonBay properties. Schroll recognized that at least 15 percent of those funds were diverted to the AvalonBay vice-president as a kickback. In return for facilitating the scheme, the AvalonBay vice-president allowed Schroll’s company to retain $1.2 million of AvalonBay funds.

The investigation involving AvalonBay Communities and San Jose Water Conservation was conducted by the Federal Bureau of Investigation, Washington Field Office. The prosecution of the case is being handled by Assistant United States Attorney Stephen Learned.

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