Rexburg man sentenced to federal prison for defrauding construction partners out of more than $580,000

The following is a news release from the U.S. Attorney’s Office (Idaho).

POCATELLO – Kelly Ryan McCandless, 53, of Rexburg, was sentenced to 65 months in federal prison following his convictions for defrauding his partners out of more than $580,000, U.S. Attorney Josh Hurwit announced.

According to court records, in 2017, McCandless and two others formed a partnership to build a 96-bed student housing property in Rexburg, Idaho. McCandless’s contribution was to build the property, using a loan secured by the partnership, at cost. In exchange for his efforts, and upon completion of the project, he would be entitled to 24.5% of the building equity and future proceeds.

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Over the course of the next year, however, and beginning with the very first bank withdrawal, McCandless falsified subcontractor invoices and bank withdrawal requests. He unlawfully used subcontractors’ signatures to withdraw loan proceeds from the bank at a higher amount than what was invoiced to build the project. The bank relied on those documents and wired McCandless the proceeds from the loan.

McCandless continued this scheme for months and improperly took approximately $580,000, which he used to purchase personal items like a brand-new pickup truck, several snow mobiles, several dirt bikes, toy haulers, a Jeep, a Jeep Grand Cherokee, $5,000 in dental work, vacations, among other expenditures. His actions caused the project to come to a standstill, and but for one of the partners injecting more capital into the project, the student housing property would never have been completed.

After a six-day jury trial, McCandless was found guilty of four counts of wire fraud and four counts of aggravated identity theft on Nov. 29, 2023.

Chief U.S. District Judge David C. Nye also ordered McCandless to pay a $10,000 fine and to serve three years of supervised release following his prison sentence.

“The defendant defrauded partners who put their trust in him and spent the funds he stole on a lifestyle he could not legitimately afford,” said U.S. Attorney Hurwit. “We will not tolerate this illegal conduct, which truly harms victims and threatens our local economies. I’m grateful for the FBI’s hard work in this case, and we thank the jury for its service.”

“Like many fraudsters, McCandless was motivated by greed, lining his pockets with the embezzled money and spending it on expensive toys for himself,” said Shohini Sinha of the Salt Lake City FBI. “While he may have benefited in the short term, he will now be held accountable for betraying and defrauding his victims.”

U.S. Attorney Hurwit commended the work of the FBI, which led to the charges. Assistant U.S. Attorney David Morse and former Assistant U.S. Attorney John Shirts prosecuted this case.