October 13, 2007 in City

Businessman accused of arson, fraud

By The Spokesman-Review
 
The Spokesman-Review photo

Pitts, in a 1995 file photo
(Full-size photo)

An arson fire at a Hillyard bar in 2000 and another that destroyed a restaurant-lounge in Davenport six years later are being linked to their owner by federal investigators who just arrested a Spokane man on a five-count indictment.

David Michael Pitts was arrested by agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives on the indictment that accuses him of starting the fires at the businesses he owned, then successfully collecting thousands of dollars in insurance coverage.

The 50-year-old Pitts also is accused of bankruptcy fraud for allegedly not fully listing his assets, including those insurance payments, when he filed for bankruptcy in 2004.

Pitts was briefly hospitalized for a medical condition that developed after his arrest Oct. 5, authorities said Friday. Still in custody, he is scheduled to appear at a detention hearing next week before U.S. Magistrate Judge Cynthia Imbrogno.

The businessman, who has lived at 1715 W. Kiernan, is charged with two counts of malicious use of fire to damage property used in interstate commerce.

He also is charged with single counts of bankruptcy fraud and mail fraud, and a fifth count of use of a fire to commit a federal felony.

The indictment accuses Pitts of starting the Dec. 3, 2000, fire at Ray and Sam’s Bar and Tavern, located at 3011 E. Diamond, in Hillyard.

“The defendant committed this arson as part of a scheme … to obtain money by false pretenses, representations and promises,” the indictment says.

Three months after the bar fire, Pitts submitted a damage claim totaling $132,000 to Westport Insurance Co., a claim that later was settled for $75,300, the indictment says.

“Specifically, by committing the arson, the defendant was able to have Westport Insurance Co. pay him approximately $39,993 and also pay the outstanding mortgage balance owed by (him) to the owners of the building,” it says.

Other portions of the insurance settlement were used to satisfy liens filed against his business by the Washington Departments of Revenue and Employment Security, the indictment says.

“At the time of this fire, Ray and Sam’s was undergoing repairs, and its liquor license had expired,” the charging document says.

The same bar had a previous “suspicious fire” on Oct. 1, 2000, but little damage was done, and Pitts did not file an insurance claim.

On March 18, 2004, Pitts filed a bankruptcy petition, listing only $8,600 in assets and $109,448 in liability.

In the bankruptcy petition, Pitts made “material misrepresentations” and omissions about his “true financial condition. Among other things, he is accused of failing to list his equity interest in 3 B’s Management Corp. and Happy Hooker Two Ltd., the indictment says.

On May 28, 2005, after he had taken over ownership of the Oasis Restaurant in Davenport, Pitts is accused of starting a fire that heavily damaged that business.

Five months later, he submitted a “proof of loss” totaling $769,217 to Unigard Insurance Co., the indictment says. As of Sept. 4, the insurance company had paid Pitts $244,474 on his claim.

“The defendant’s remaining claims for reconstruction of the building, business property replacement and claims for lost business income remain pending,” the indictment says.

By committing the arson, Pitts caused Unigard to pay the original building note holders approximately $29,063 and another $89,976 to another personal lender that held a secured interest in the property, it says.

The insurance company also paid $16,237 to a business that leases game-entertainment items to Pitts that were damaged in the arson fire.

“The defendant is making thousands of dollars in further insurance claims for the replacement of business personal property and reconstruction of the Oasis building,” the indictment says.

If convicted of the malicious use of fire to damage property used in interstate commerce, Pitts faces a mandatory term of fire years in prison. His potential prison term could be substantially longer than that if he’s also convicted of the three other companion charges.


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