A yearslong legal battle over an alleged fraud scheme involving real estate deals for Amazon’s data centers may be one step closer to a conclusion.
The Department of Justice asked a judge this month to vacate guilty pleas from two men accused by Amazon of participating in a multimillion-dollar kickback scheme. The two are among at least six people Amazon accused in a 2020 civil lawsuit of participating in the elaborate scheme, starting as early as 2017.
Amazon says the scheme left it duped into signing overpriced real estate deals while former employees and others working with a real estate developer lined their own pockets with excess funds.
Last March, two men who had worked with the real estate developer pleaded guilty to charges related to those allegations. Earlier this month, though, the DOJ asked that the court throw out those pleas.
“Prosecution of these cases is not in the best interests of justice,” representatives for the U.S. Attorney’s Office wrote in a Jan. 10 court filing requesting that the guilty pleas be withdrawn. Prosecutors said in that filing they would not pursue charges against the other alleged co-conspirators “at this time.”
Three other people accused, including two former Amazon employees and the head of the real estate development firm, have denied wrongdoing and said Amazon has not been able to prove any financial harm from the real estate deals in question.
The DOJ’s decision to withdraw the guilty pleas doesn’t put an end to the civil case or eliminate the possibility of criminal charges — but it could move the needle further away from any criminal prosecution.
Amazon had pointed to those guilty pleas as a reason to continue its pursuit of civil claims, even after a judge dismissed most of the company’s claims in its civil lawsuit last spring.
Now, Amazon still plans to move forward with that lawsuit and maintains that former employees profited off the company’s real estate projects.
“These defendants orchestrated a sophisticated scheme to obtain millions of dollars in kickbacks,” Amazon spokesperson Rob Munoz said in a statement. “Given the egregious facts we’ve uncovered related to this misconduct, we really have no choice but to act to protect our interests and move forward with our civil case.”
But for those accused, the DOJ’s decision was “another indication that there is no merit to Amazon’s claims,” said J.D. Thomas, an attorney with Barnes and Thornburg representing one of the former employees Amazon accused of defrauding the company.
“We look forward to … finally closing this unfortunate chapter,” Thomas said.
Amy Nelson, a former Seattle entrepreneur whose husband, Carl Nelson, is among those accused by Amazon, took the DOJ’s decision as a sign her family was one step closer to returning to normalcy. Amy has become one of the most outspoken critics of Amazon and the DOJ, which she accuses of doing Amazon’s dirty work. In an interview with The Seattle Times last April, she said the accusations have upended her family’s life.
In 2020, when Amazon first accused Carl Nelson of lining his own pockets as he steered real estate deals for Amazon data centers in Northern Virginia, the FBI arrived at the Nelsons’ West Seattle home and later froze most of the family’s money. Unable to afford their Seattle house, the Nelsons moved several times and settled in Columbus, Ohio. Over the years, they had to fundraise to make ends meet and pay their substantial legal bills.
In the nearly four years since Amazon made the accusations, Carl Nelson has not been publicly charged with a crime.
“The trauma of it is very real,” Amy said in an interview this month, after the DOJ’s most recent decision. “Many of the things that we lost over the past four years, we can never get back. We can never get our home back. We can never get our jobs back. We can never get our reputation back.”
Alex Little, an attorney with Burr and Forman in Jacksonville, Fla., who is representing Carl Nelson in the civil matter, said he was glad to see his client “vindicated.”
Little accused Amazon of using the DOJ “for its own ends” and said the vacated guilty pleas show that effort has “failed.”
Though the FBI arrived at the Nelsons’ home in 2020, the legal saga began three years earlier, when Carl Nelson and another Amazon employee, Casey Kirschner, met Colorado developer Brian Watson.
Carl Nelson and Kirschner worked on real estate deals to acquire data centers for Amazon Web Services, the company’s cloud computing division. The two represented Amazon in at least 10 land deals with Watson and his company, Northstar Commercial Partners, according to court documents.
Amazon later accused Nelson and Kirschner of duping the company into doing business with Northstar, in exchange for kickbacks. Nelson, Kirschner and Watson, Amazon alleged, engaged in an elaborate scheme to defraud Amazon and co-opt its business for their own personal gain.
Last March, the DOJ obtained guilty pleas from two others involved in the alleged fraud scheme: Northstar employee Kyle Ramstetter and Christian Kirschner, Casey Kirschner’s brother who worked as a consultant for Northstar. Federal prosecutors charged both with conspiracy to commit wire fraud.
A month later, a federal judge threw out most of Amazon’s claims in the civil lawsuit the company had filed in 2020, marking a turning point in the case that was set to go to trial last year.
U.S. District Judge Rossie Alston Jr. ruled some of Amazon’s arguments had “fundamental” flaws, including that the company could not point to any financial harm as a result of the real estate deals. Nelson and Kirschner did not breach their contract with Amazon, Alston ruled, adding that a “reasonable reading” of that contract “undermines Amazon’s argument.”
Alston did not throw out all of Amazon’s claims, leaving the civil suit ongoing.
Amazon appealed the ruling in December and argued in a recent court document that it did suffer significant monetary harm.
In January, attorneys for the DOJ filed a motion in Virginia district court to dismiss the guilty pleas and charges against Ramstetter and Christian Kirschner. Attorneys for both men did not respond to requests for comment, but the counsel representing the other three men accused by Amazon of fraud celebrated the DOJ’s decision as an indication their clients would prevail in the ongoing civil lawsuit.
“It is satisfying that after four years of an intense investigation the Department of Justice has reached the same conclusion” as Judge Alston, said Stan Garnett, an attorney with Garnett Powell Maximon and Barlow who is representing Watson. “We look forward to wrapping up every aspect of this investigation.”
The DOJ declined to comment. Attorneys for Carl Nelson and Watson said both men are considering their next options.
Meanwhile, Carl Nelson sued Amazon in 2020 and accused the company of violating Washington’s ban on noncompete agreements. Nelson’s Washington state lawsuit is paused until the federal civil case in Virginia concludes.
Though the Nelsons will “never be back on the track we were on,” Amy Nelson said the family is moving forward.
Carl is working in commercial real estate. Amy’s company, The Riveter, originally a coworking space for women, has rebranded amid a shift to remote work. And, she is preparing to launch a second company, Cotton Candy and Dreams, that curates family experiences with her four daughters.
She doesn’t expect the family will return to Seattle, or that she would receive the same financial welcome she saw when she first launched The Riveter in 2017.
“We just fought a massive battle against pillars of Seattle society,” she said. “It was very personal.”
