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Originally published August 11, 2010 at 1:52 PM | Page modified August 11, 2010 at 7:44 PM

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'Street of Dreams' homebuilder pleads guilty to stealing sales tax

After pleading guilty to stealing sales tax, luxury homebuilder Grey T. Lundberg has been given roughly six months to begin repaying more than $600,000 or potentially face time in prison if he fails to make good on restitution, according to the state Department of Revenue.

Seattle Times staff reporter

After pleading guilty to stealing sales tax, luxury homebuilder Grey T. Lundberg has been given roughly six months to begin repaying more than $600,000 or potentially face time in prison if he fails to make good on restitution, according to the state Department of Revenue.

Lundberg, 48, of Bellevue, pleaded guilty Wednesday in King County Superior Court to 13 counts of first-degree theft for stealing $629,000 in sales tax he had collected on construction work, said department spokesman Mike Gowrylow. Instead of turning that money over to the state, Lundberg pocketed the cash, Gowrylow said.

"He charged sales tax, he collected sales tax and he just kept it," Gowrylow said of Lundberg, whose upscale homes have been featured in local "Street of Dreams" events.

On Wednesday, Superior Court Judge Ronald Kessler delayed Lundberg's sentencing until Feb. 16 to give him time to make restitution. The Department of Revenue is recommending that Lundberg spend five years behind bars, but that could change depending on how much money Lundberg repays, Gowrylow said.

"It's up to him to make a good-faith effort" to repay the tax money he stole — and if Lundberg repays a substantial amount by February, revenue officials may be willing to again delay sentencing "to allow him to continue making restitution," Gowrylow said.

Lundberg was charged with theft in March after state auditors determined he had failed to file state tax returns from the time he began his business, CMI Homes, in July 2006, through December 2007. Though Lundberg began filing returns in January 2008 after auditors began looking into his company, he still didn't send in sales-tax revenue he collected from clients.

The taxes he collected were on more than $8 million in gross revenue over two years, ending in December 2008.

One of Lundberg's projects, a nearly $2 million Street of Dreams "Best of Show" home named "Urban Lodge," was among three houses destroyed in an unsolved arson in March 2008 in the Maltby area of Snohomish County. A spray-painted banner left at the scene bore the initials "ELF," an apparent reference to the Earth Liberation Front, an underground group of militant environmentalists that has claimed responsibility for multiple destructive acts.

Gowrylow said that while more than 90 percent of Washington businesses comply with state tax laws, "it's more of a problem in the construction industry simply because there's a lot of money involved in big projects."

The Department of Revenue regularly audits businesses that supply materials to builders and checks invoices for things like drywall and concrete, Gowrylow said. If a builder is buying supplies but failing to report any business activity, that can be a red flag, he said.

Information from Seattle Times archives is included in this report.

Sara Jean Green: 206-515-5654 or sgreen@seattletimes.com

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