Johnston developer at center of fraud allegations remains free in North Liberty

By the time Johnston developer Daniel Pettit was locked up in January for contempt in connection with three civil court cases, a wide web of people in several states had accused the one-time millionaire of fraud.

Investors, lenders and attorneys monitoring the showy businessman’s three-year free fall assumed local, state or federal authorities would make haste in charging Pettit criminally before his release, which was scheduled to be this month.

Pettit, 44, already had gone on the run for a month instead of reporting to jail in November, and had been accused of lying to a judge, ignoring court orders and subpoenas for financial records, taking steps to hide money and assets from people he owed and trying to fraudulently give away valuable West Des Moines development land.

But on June 17, he was released early after serving just over five months of a six-month sentence, bewildering people who are knee-deep in costly lawsuits and missing large sums of money.

“There should be charges,” said Des Moines attorney Samuel Marks, who has represented Pettit’s ex-wife in a bankruptcy filing after she was named as a co-defendant in almost a dozen lawsuits tied to her husband's investment schemes.

“They should have arrested him the minute he walked out of jail. But they didn’t,” Marks said.

Since his release, Pettit has been living in a home assessed at $474,000, owned by a limited liability corporation called Ace of Diamonds. It's in a posh, newly built subdivision in North Liberty near Iowa City.

Under the terms of his early release by Polk County District Judge Jeanie Vaudt in connection with three civil cases, Pettit is supposed to be supervised 24 hours a day by Per Mar Security Services at the expense of those suing him, who wanted him out of jail so that he could “immediately begin assisting plaintiffs in recovering the funds he stole from their investors resulting in the multi-million judgment entered for plaintiffs and against defendant in this matter,” court records show.

“Under no circumstances shall the Polk County Jail release defendant on his own recognizance or to any other person or any entity other than" Per Mar, Vaudt said in her court order.

But on Thursday, there were no visible signs of guards at Pettit’s North Liberty home, where he appeared at the front door in the presence of one of his two grown sons. Pettit declined to be interviewed and said he had no comment on the more than $70 million in defaults, judgments and liens against him or allegations of fraud by many of his one-time business partners or investors, including a couple he allegedly swindled out of $60,000 after their son's death from a fentanyl overdose .

In the three civil cases for which he was jailed, Pettit was accused of raising millions from banks and investors for a West Des Moines housing and commercial development that was never built.

This Thursday, he’s scheduled to appear in a summary judgment hearing in a case involving a $10.25 million, 18-month loan arranged by a vice president at Lincoln Savings Bank in Waterloo for the development of apartments, townhomes and commercial space north of the Des Moines University campus on Booneville Road. The loan is now in default.

More than a dozen other lawsuits involving Pettit and corporations he created are still wending their way through the courts.

Alleged victims' frustration over lack of arrest met by silence

In the meantime, local, state and federal authorities — including Johnston police, the Iowa Insurance Division and the FBI — have declined repeatedly to discuss any criminal investigation with those who say they're owed large sums or were wronged by Pettit's actions.

Marks said that Rachael Pettit was contacted in the last month by the Securities and Exchange Commission looking for her ex-husband, but that no law enforcement agency has ever attempted to interview her.

He said he's seen no evidence law enforcement has progressed on any criminal case, though fraud allegations have been lodged against Pettit in civil court cases since at least 2021. The scope of those allegations and millions missing from banks and investors were first made public in a Watchdog probe seven months ago.

Pettit, who purported to have a deep Christian faith and founded a faith-based nonprofit called Trailhead International Builders, had successful developments before the COVID-19 pandemic hit. But by 2020, lenders had begun to foreclose on properties in which he was involved, court records show. He also took money from investors for projects that didn't materialize, and some of those investors knew nothing about others involved, court records and interviews showed.

Former Pettit business partners Matthew Jennings and Allen Stoye, who said they loaned him money for an entertainment district in Waukee, were among the first to accuse him of fraud, in 2021. Pettit later acknowledged in a court filing being in debt to Stoye and Jennings for $5.2 million. They sued Pettit in Dallas County when he failed to repay them.

Anderson Four LLC, managed by Anderson Properties CEO William Anderson of Urbandale, also loaned Pettit and two of his corporations $11.6 million for the Waukee development and later obtained a $5 million judgment for damages and attorney fees.

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In 2021, Pettit approached investors about developing the property near the Des Moines University campus. Among them were Drs. Bernard and Ava Feldman, who were partners in DB Booneville, a corporation that obtained a $10.3 million loan for the project from Lincoln Savings Bank in Waterloo.

Pettit and his ex-wife also signed a $5.5 million promissory note to a Delaware corporation managed by venture capitalist Lowell Kraff of Miami Beach, records from the Iowa Secretary of State's Office show. That loan, which was supposed to be used for the West Des Moines housing development, also went into default, court documents show.

Now that land, ready for development, sits in foreclosure and tied up in lawsuits. The city of West Des Moines filed a lawsuit against an insurance company seeking payment for promised infrastructure that never was built, and the insurance company sued the Feldmans and Kraff to get compensation for any losses.

The Feldmans, who have declined to comment publicly, have said in court that Pettit committed fraud before the foreclosure and that he should be responsible for any damages paid. But a federal judge said in June that the Feldmans were still responsible as indemnitors of the infrastructure bonds for that project.

A mediation related to the case has been scheduled for this week.

IRS among those seeking $3.5 million from Pettit's ex-wife

Among those still reeling from Pettit's deals gone bad are his 43-year-old ex-wife, who divorced him in 2022 amid a whirlwind of bizarre behavior, as well as investors in several states and several other banks and lenders.

A mother of four, Rachael Pettit once shared in her husband’s lavish lifestyle, which included a $4.3 million Johnston mansion with seven bedrooms, a nine-hole golf course, private beach and pool on 25 acres. She drove a $73,500 2022 Land Rover Range Rover.

She did not respond to a request to be interviewed for this story. But Marks told Watchdog in an interview that Rachael Pettit knew nothing of her husband’s business and investor dealings.

The couple's divorce was final last May, after many creditors had sued them both.

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Marks said Daniel Pettit was supposed to pay his ex-wife $30,000 a month in alimony and child support. Without that support, he said, she has downsized dramatically and now drives a vehicle belonging to one of her kids.

Marks said she’s making less than $40,000 a year.

“She’s a wonderful person, and she’s lost everything,” he said.

Her bankruptcy filing lists almost $3.5 million in known liabilities and a monthly income of $2,915. Among the debts she listed: $2.7 million to Green State Credit Union in North Liberty, $417,834.37 to the IRS and $35,695 to the Iowa Department of Revenue owed from the couple’s 2021 taxes.

Marks said he has until Aug. 19 to discharge all of the debts Rachael Pettit owes creditors.

“Nobody has objected to it being discharged,” he said. “Why would you come after her for any money? You’ll never be able to collect whatever you are owed.”

New court actions against Daniel Pettit emerge

As time ticks on, new court actions against Daniel Pettit continue to surface.

In Minnesota, a North Mankato bank has moved to seize a long list of trucks, trailers and farm and welding equipment because Pettit and two partners in a corporation called J&J Land allegedly failed to repay $523,000, court documents show.

Another financial institution, Portage Bank in the tiny southern Minnesota hamlet of Ceylon, just north of the Iowa state line, is seeking to take back truckloads of guns and ammunition after Pettit and partner Jason Henning of Estherville allegedly defaulted on a $600,000 loan there.

Henning did not respond to a phone call seeking comment.

Investors, meanwhile, continue to complain privately to Watchdog that they cannot get law enforcement to tell them who is taking a lead on any investigation or whether a criminal probe tied to Pettit's investment schemes even exists.

The Polk County Attorney’s Office has not filed any charges in connection with a reported burglary at Pettit’s home last September, even though witnesses told police and Watchdog it appeared to have been staged. Johnston police say only that the incident remains under investigation.

The one person who was arrested in that case, a California car dealer named Moustapha Moustapha who is now tangled in a federal drug case, talked to Pettit both before and after the alleged heist, police records show.

Moustapha, charged in Polk County with several felonies, including robbery, burglary, theft and going armed with intent in connection with that break-in, is scheduled to be arraigned in Polk County on Aug. 7.

Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com , at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog .

This article originally appeared on Des Moines Register: Johnston developer at center of fraud allegations remains free in North Liberty