STANTON — One of two Ada men charged with the misuse of grant funds awarded to their Greenville company has reached a plea agreement with Montcalm County prosecutors.
Gardner Klaasen, 46, pleaded guilty July 31 to false pretenses in an amount greater than $1,000 but less than $20,000, a possible five-year felony. As part of the deal, he must pay $155,000 in restitution, which is half of the $310,000 of grant money he and his partner were awarded, within three years.
“He’s responsible for half of that,” said Montcalm County Prosecutor Andrea Krause.
Sentencing will likely take place within six to eight weeks.
Klaasen and David Valdiserri, 48, were charged in June with false pretenses in an amount of $100,000, a possible 20-year felony.
Valdiserri has been bound over to 8th Judicial Circuit Court, but has yet to have to appear in court.
The two men had been under investigation by the Greenville Department of Public Safety since 2012 for the alleged misuse of more than $310,000 their company Zero1 was issued by the Michigan Economic Development Corporation (MEDC) for a Community Development Block Grant (CDBG) designed to help bring jobs to the area.
Police say that money instead went to the pockets of the two suspects and was used to pay other employees and lavish meals and hotel stays.
In their 2009 grant application, the two men — who were acting on behalf of their company Zero1, which claims to have been founded in 2001, but was registered with the Michigan Department of Licensing and Regulatory Affairs (LARA) in 2009 — asserted they would bring up to 95 manufacturing jobs to Greenville by moving a manufacturing facility from China to the city for a more hands-on supervision of production. The co-owners were quoted saying as much in a 2010 article by The Daily News that highlighted the MEDC grant being awarded.
The company at the time claimed to be headquartered in Grand Rapids. Zero1 is now listed on its website as a “global furniture design and development company” operating out of Ada, where both Klaasen and Valdiserri reside.
Prosecutors say the company portrayed itself as a legitimate business who produced office chairs overseas, but it was unclear to prosecutors how much, if any, production they actually had abroad.
According to Greenville Department of Public Safety Director Mark Reiss, Zero1 had an agreement with Clarion, another Greenville company, to produce plastic injected moldings used for the manufacturing of Zero1’s furniture line and would also rent space in Clarion’s facility as part of the move to the city. Reiss said Clarion is not suspected of any wrongdoing and appeared to have been a victim in the alleged ruse.
The city of Greenville, acting as grantee for Zero1, applied for and was awarded a $930,000 CDBG grant by the MEDC and in 2010 received the first payment, which was earmarked solely for the purchase of equipment for the production of office furniture.
Klaasen and Valdiserri were able to prompt the release of the first one-third ($310,000) of that money, which was required by the grant to be used exclusively for purchase of machinery and equipment used in the production of office chairs.
The money was deposited into Zero1’s corporate account, which had just recently been established, according to Reiss, who noted that amount was the sole deposit into that account.
According to the police report, the same day the money was deposited, checks were issued to Klaasen in the amount of approximately $22,000, and Valdiserri in the amount of approximately $20,000.
In the next four months, the $310,000 in state grant money was doled out to the two suspects; $93,000 to Klaasen and $35,000 to Valdiserri and other employees, and also approximately $56,000 toward goods and services such as airfare, hotels and high-end restaurants, according to the police report.
The money was completely spent in four months, investigators said.
Law enforcement was alerted to the alleged misuse of funds when Greenville city officials became suspicious of information provided by Zero1, which was required to provide project status updates and invoices of purchased equipment as part of the grant acceptance.
Because the city acted as the grantee for Zero1, the city and the company are equally responsible for the $310,000 of grant money lost, according to Reiss, but Klaasen’s plea agreement requires him to pay $155,000 in restitution.
Greenville City Manager George Bosanic declined to comment while the criminal cases against Klaasen and Valdiserri are ongoing.
Since the investigation was launched in 2012, Zero1 changed its name with LARA to Zahzi LLC in 2013, according to Reiss.
Klaasen also registered a new business under the name New IDYUS LLC, of which the name Zero1 is the assumed name, in 2013.
Valdiserri in 2013 also registered a new business, Modello USA, with LARA.
Warner, Norcross & Judd, LLP, the attorneys for the defendants, did not return messages seeking comment.