TRENTON
– Attorney General Anne Milgram announced
that a father and son were indicted with their
real estate firms for allegedly stealing approximately
$4.5 million from mortgage lenders by providing
false information in home loan applications.
According
to Criminal Justice Director Deborah L. Gramiccioni,
the state grand jury indictment charges Martin
Gendel, 64, of Montville, Seth Gendel, 35,
of Long Island, N.Y., and the real estate
firms they owned and operated, Casey Properties
LLC, Lee Alan LLP and Andrea Management LLC,
all based in Totowa. Each defendant is charged
with conspiracy, theft by deception and two
counts of money laundering, all in the second
degree. The charges stem from an investigation
by the Division of Criminal Justice Major
Crimes Bureau.
The
indictment was returned on Tuesday (Dec. 15)
but was sealed until today, when the Gendels
were arrested on the charges by Division of
Criminal Justice detectives, assisted by local
authorities. Martin Gendel was arrested at
home in Montville and is being held in the
Morris County Jail. Seth Gendel was arrested
at home on Long Island and is being held in
New York State pending extradition to New
Jersey.
Between
December 2005 and September 2007, the defendants
allegedly deceived seven mortgage lenders
into providing approximately $4.5 million
in loans for purchases of 14 homes. Six homes
were in Paterson, six in Newark and two in
East Orange.
“We
charge that these defendants falsified applications
so unqualified home buyers could obtain $4.5
million in loans,” said Attorney General
Milgram. “As detailed in a civil fraud
complaint we filed earlier this year, the
loans drove a scheme in which the defendants
recruited investors to buy overpriced urban
properties, then diverted loan funds for their
own enrichment, leaving behind run-down homes
and investors facing foreclosure.”
It
is alleged that the defendants submitted fabricated
information about employment and earnings
in loan applications and on HUD settlement
forms so that buyers could obtain loans for
which they were not qualified. In some instances,
they included false information about rental
agreements and income from the properties.
Nine buyers purchased the 14 homes.
In
addition, the defendants allegedly deceived
lenders by representing that expenses listed
on HUD forms and ultimately paid out were
legitimate expenses for home repairs when,
in fact, no repairs were authorized or made.
Some of the applications were checked off
as though the homes would be the primary residence
of the buyer, when the defendants knew they
were being purchased solely as rental investment
properties. Other false information submitted
with the applications included false savings
account balances and false occupancy letters.
Deputy
Attorney General Francine Ehrenberg presented
the case to the state grand jury. The investigation
was conducted and coordinated for the Division
of Criminal Justice Major Crimes Bureau by
Sgt. Robert Walker, Deputy Attorney General
Ehrenberg and Supervising Deputy Attorney
General Terrence Hull, who is Bureau Chief.
“The
Division of Criminal Justice has stepped up
its prosecutions of complex white collar crime
cases, including mortgage fraud and money
laundering cases,” said Director Gramiccioni.
“In these troubled economic times, we
must be vigilant to prevent dishonest operators
from defrauding lenders, investors and homeowners.”
Since
June 2008, the Attorney General’s Office
has filed a total of 11 civil mortgage fraud
lawsuits naming 102 individual and corporate
defendants whose actions have affected more
than 950 victims, as well as property worth
more than $29.1 million. The Attorney General
has obtained indictments or guilty pleas in
eight criminal mortgage fraud cases involving
a total of 15 defendants. These defendants
have been charged with victimizing more than
60 individuals and banks in connection with
loans worth more than $15 million. In addition,
the Attorney General has filed notices of
violation against nine New Jersey-based companies
for offering mortgage loan modification services
without a debt adjustment license. They were
assessed $45,000 in civil penalties ($5,000
each) and directed to pay consumer restitution.
Second-degree
crimes carry a maximum sentence of 10 years
in state prison and a $150,000 fine. The second-degree
money laundering charges carry an enhanced
fine of $500,000 and a potential anti-money
laundering penalty of $250,000. The indictment
is merely an accusation and the defendants
are presumed innocent until proven guilty.
The
indictment was handed up to Superior Court
Judge Linda R. Feinberg in Mercer County,
who assigned the case to Morris County, where
the defendants will be arraigned at a later
date on the charges.
The
civil complaint filed by the Attorney General’s
Office in March charges Martin Gendel, Seth
Gendel, Casey Properties and Lee Alan LLP
with violating New Jersey’s Civil Racketeer
Influenced and Corrupt Organizations (RICO)
statute. It charges the Gendels and six other
defendants with using deception – and
the credit information of their victims –
to obtain fraudulent mortgage loans for the
purchase of urban properties at grossly inflated
prices. They convinced victims to buy homes
in Newark, Paterson, Irvington and East Orange
that were the subject of bogus appraisals,
then profited by taking fees out at closing
from the inflated equity.
The
defendants told investors that Casey Properties
would take care of all aspects of the sale
and property management, including finding
tenants, collecting rents, paying the mortgages
and making needed repairs. However, Casey
Properties never did maintain the homes or
keep up the mortgage payments. In the end,
victims had their credit ruined and were left
responsible for dilapidated homes that had
been foreclosed on and abandoned.
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