Mark Melchiori, president of the Santa Barbara-based construction company that bears his family name, is the subject of a criminal probe by detectives looking into the now-defunct firm’s business operations, according to the Santa Barbara County Sheriff’s Department.
Sgt. Mark Williams confirmed Wednesday that detectives are investigating Melchiori and Melchiori Construction Co., which was founded by his father, the late Ugo Melchiori.
Williams would not elaborate on what detectives are looking into, but the company’s financial and legal troubles have been well-documented, and there has been persistent speculation in recent weeks about whether law enforcement would get involved.
News of the criminal probe comes after a chorus of detractors complained that Melchiori owes them money, alleging that he’s hiding assets via a divorce agreement processed earlier this year.
Former employees have said that the company stopped making payroll during the summer in the wake of stalled projects and lawsuits.
The company’s former executive vice president, Jean Mollenkopf, even filed a lawsuit against the troubled company, saying she hasn’t been paid back $50,000 she withdrew from her 401(k) account to help the firm make payroll.
Other employees have said Melchiori also borrowed from their retirement accounts to make ends meet.
The outcry from Melchiori’s sub-contractors provoked a string of complaints and lawsuits against the company, with many saying they’ve never been paid for work on now-finished projects.
Another lawsuit filed by Melchiori’s stepmother alleged that his divorce from his wife earlier this year was a scheme to hide assets from creditors to which his company owes money.
Mark Melchiori did not respond to a request for comment Wednesday.
The latest twist in the Melchiori saga came to light just days after a lengthy list of the company’s creditors was filed with the U.S. Bankruptcy Court.
The company filed for bankruptcy in October, and Mark Melchiori has also filed for Chapter 7 bankruptcy personally.
His paperwork, made public Monday, lists 170 creditors, among which are the Internal Revenue Service, the California State Franchise Tax Board, the City of Santa Barbara and many others.
A list of Melchiori Construction’s creditors also was filed this week, and is identical to Mark Melchiori’s personal list.
To view the whole list of Melchiori’s creditors, scroll to the bottom of this story.
Mark Melchiori reported liabilities between $10 million and $50 million, and assets between $1 million and $10 million.
The company filed for bankruptcy last month, just before a scheduled hearing before Santa Barbara Superior Court Judge Thomas Anderle, in a case involving a lawsuit filed by Santa Barbara Bank & Trust alleging that Melchiori defaulted on a $6.3 million line of credit given by the bank.
Anderle’s tentative ruling stated that the bank was entitled to appoint a receiver over the construction company.
One former creditor, listed on the bankruptcy filing, spoke with Noozhawk on the condition of anonymity Wednesday, and said he hadn’t talked to law enforcement, but had heard rumors Melchiori was behind on his tax obligations.
The creditor called it “unbelievable” that Melchiori Construction would divert money away from employees, clients and subcontractors “to pay for (Mark’s) lavish lifestyle.”
“How did he spend all of that money — over $10 million a year — or where did he hide it, are the questions I would like answered,” he said. “I truly hope that our justice system works.”
— Noozhawk staff writer Lara Cooper can be reached at lcooper@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.