Entries in Real estate investment fraud (17)


New York man indicted in $2.5 million real estate invesment fraud allegations

Adam C. Hochfelder, on charges of defrauding investors in two real estate deals, following an investigation by the Manhattan District Attorney’s Office. Today’s indictment charges Hochfelder with engaging in schemes to steal approximately $2.5 million from investors in his purported acquisition of the Sagamore Hotel on Lake George, and The Peaks Resort and Spa in Telluride, Colorado.

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New York man arrested over allegations of a foreclosed property investment scam

Elviston Ramasir, owner of Home Free Realty, Inc. of East Meadow, New York, has been arrested on a complaint that he obtained an investment of $2,048,850 from a victim investor on the pretense that he would use the money to purchase foreclosed real estate properties, and subsequently resell them at a profit. He allegedly falsely represented that these sales would yield a 40 percent profit.

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SEC charges promoter of real estate investment fund that targetted seniors

In the following press release the Securities and Exchange Commission (SEC) today charged an Oak Beach, N.Y.-based real estate funds promoter and the former president of a broker-dealer firm in Smithtown, N.Y. for orchestrating a multi-million dollar real estate investment scheme. The SEC also charged two brokers at the firm with selling unregistered securities by means of “free lunch” seminars they used to coax elderly investors into making the risky investments.

SEC Chairman Mary L. Schapiro announced the enforcement action during remarks she made today at a forum in Washington D.C. sponsored by AARP and the National Consumers League. When discussing senior fraud, Chairman Schapiro noted that the SEC has brought nearly 70 enforcement actions during the past three years against fraudsters targeting elderly investors.

According to the SEC’s complaint in this case, filed in federal court in Brooklyn, N.Y., the investment scheme collected nearly $12 million from approximately 90 investors while the promoter made numerous misrepresentations, including that the return was more than 50 percent on the sale of some properties in which they were investing. The SEC also alleges that the real estate funds promoter, Charles C. Slowey, Jr., misappropriated more than $1 million of investor funds in such ways as charging excessive management fees and taking out an interest-free personal loan to purchase his own home.

“We allege that these securities professionals handed out free lunches to senior investors to win their trust and sell them risky, unregistered securities that eventually lost most of their value,” said Chairman Schapiro.

George S. Canellos, Director of the SEC’s New York Regional Office, added, “Although advertised as educational workshops, so-called free lunch seminars are very often sales presentations in disguise. These men used these supposed educational seminars to entice retirees with misrepresentations and convince them to invest in risky real estate ventures. And while those ventures were losing money, Slowey helped himself to investor funds to buy real estate of his own.”

The SEC charged four entities involved in the scheme. Endeavor Partners LLC and Endeavor Capital Management Group LLC, both of which are controlled by Slowey, acted as the managing members of all four real estate investment funds involved. The broker-dealer firm Advanced Planning Securities, Inc. (APS) sold the Endeavor Funds through its agents. Oldham Harris, Inc. (OHI) is a Kenosha, Wisc.-based retirement advisory business through which two of the brokers provided their brokerage services to APS.

The three brokers at APS charged by the SEC are Edward D. Puttick, Sr., Gregory L. Oldham and Glenn R. Harris. Puttick was the firm’s former owner and president.

According to the SEC’s complaint, Oldham, Harris, and OHI solicited investors by means of invitations to free lunch or dinner “seminars” at restaurants. On several occasions, Slowey joined Oldham and Harris at the gatherings to help them make sales of Endeavor Securities to potential investors at the seminars or in meetings at the OHI office scheduled shortly afterwards. Many of the investors to whom Oldham, Harris, and OHI sold these investments were elderly and of limited means, and few had previously invested in private placement securities or securities based on distressed or subprime mortgages.

The SEC alleges that when the funds began to have increasing financial difficulties, Slowey continued to make false statements to investors. For example, he specifically told one senior investor in Florida that his investment was safe, when in fact the funds had little money left at that time. Slowey told another senior investor that the funds would recover by the following year, and he had no basis for making that statement. At other times, Slowey asked investors to reinvest their maturing interest in the Endeavor Funds even though he knew that the funds had lost substantial sums of money and owned only a handful of properties that were worth far less than the $10 million initially deposited by investors.

The SEC’s complaint alleges that Puttick and APS failed to conduct sufficient due diligence into the private placement securities they were selling and failed to resolve numerous red flags concerning Slowey and the funds. As a result, they violated the implicit representation that all brokers make to their customers that there is an adequate basis for recommending an investment. Puttick and APS also failed to disclose to investors their lack of due diligence.

The SEC further alleges that the defendants violated the registration provisions of the securities laws by selling fund securities for which there was no registration statement in effect. Many of the customers were elderly, unsophisticated investors who could not have been expected to understand the risks associated with the funds’ investments in distressed mortgages and other real-estate plays.

The SEC’s complaint charges each of the defendants with violations of Sections 5(a) and 5(c) of the Securities Act of 1933. Further, the SEC’s complaint charges Slowey, Endeavor Partners and Endeavor Capital, Puttick and APS with violations of Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint seeks a final judgment permanently enjoining the defendants (except APS) from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest on a joint and several basis, and ordering them to pay financial penalties.

The SEC acknowledges the assistance and cooperation of the Wisconsin Department of Financial Institutions — Division of Securities, and the Florida Financial Services Commission’s Office of Financial Regulation.


Mound (MN) man indicted in "distressed borrower" investment fraud

In the following press release B. Todd Jones, United States Attorney for the District of Minnesota announced that a federal grand jury has returned an indictment against a 41-year-old Mound man for allegedly swindling 14 investors and their lenders out of more than $2.5 million through a real estate fraud scheme. Timothy Lynn Beliveau was charged with one count of conspiracy to commit mail fraud, two counts of mail fraud and nine counts of willful failure to account for and pay taxes.

Beliveau’s indictment alleges that between January 2004 and July 2007, he orchestrated a scheme to defraud vulnerable homeowners and induce investors to purchase distressed real estate from those homeowners at inflated prices. The scheme created a pool of funds Beliveau then used to buy boats, motorcycles, a Florida vacation home and other personal items.

Between 2004 and 2007, Beliveau was the owner of U.S. Housing & Financial Services, a company that assisted homeowners who were close to losing their homes to foreclosure. During that time, Beliveau also owned American Alliance Mortgage Group, a mortgage brokerage company with offices in Minnetonka, Plymouth, Roseville, Wayzata and Edina as well as in Hudson, Wisconsin.

The indictment alleges that Beliveau’s scheme victimized distressed homeowners, investors and lending institutions. Specifically, Beliveau used U.S. Housing to encourage homeowners in or near foreclosure to sell their homes to investors the company recruited. The equity in the homes was to be deposited into an escrow account, administered by Beliveau, for use, allegedly, in assisting the homeowners make monthly contract-for-deed payments to the investors. By doing so, the homeowners could buy back their homes after a period of time. In the meantime, they were allowed to live in them.

According to the indictment, investors were told the homeowners were carefully screened to ensure their financial problems were merely situational, and that they were, therefore, unlikely to default on their monthly contract-for-deed payments. Beliveau also represented the homeowners would receive financial counseling if they defaulted. Moreover, investors were assured, allegedly, homeowners who fell into default would be evicted, and the monthly contract-for-deed payments would then be covered by the funds held in the escrow account or otherwise paid by U.S. Housing.

Purportedly based on those assurances, investors applied for and obtained mortgages from various lending institutions, using documentation provided by Beliveau’s American Alliance Mortgage Group. That documentation, which was sent through the mail via the United States Postal Service, was fraudulent in that it reported artificially inflated values for the properties being purchased. Those inflated values resulted in additional money being made available to deposit into the escrow account at U.S. Housing. The funds in that account were then spent by Beliveau for his personal benefit.

Ultimately, most of the distressed homeowners were unable to make their monthly contract for-deed payments or otherwise buy back their homes. Many of the loans taken out by the investors to purchase the homes went into default because the money supposedly in the escrow account to pay the mortgages had been used by Beliveau.

In addition, the indictment indicates Beliveau failed to pay the employment taxes withheld from American Alliance Mortgage Group employees for nine quarters between 2003 and 2005. Beliveau allegedly collected but failed to account for or pay to the Internal Revenue Service approximately $900,000.

If convicted, Beliveau faces a potential maximum penalty of five years in prison for conspiracy to commit mail fraud, 20 years for each of the two counts of mail fraud, and five years for each of the 11 counts of willful failure to pay taxes. All sentences will be determined by a federal district court judge.

This case is the result of an investigation by the U.S. Postal Inspection Service and the IRS Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney David J. MacLaughlin.


PA man indicted in fake real estate investment fraud allegations

In the following press release Michael L. Levy, United States Attorney for the Eastern District of Pennsylvania today [7/17/2009] announced the filing of an information against Bryan Edward Enders, charging him with one count of wire fraud. According to the information, Enders induced an investor to turn money over to him, ostensibly to invest in a real estate partnership. The information charges that Enders did not start or maintain a real estate partnership; rather, he used the investor’s funds for his own personal use. In total, the victim lost over $400,000.

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If convicted the defendant faces a maximum possible sentence of 20 years imprisonment, 3 years supervised release, a $250,000 fine and a $100 special assessment, with an estimated advisory sentencing guidelines range of 27-33 months imprisonment.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Joan E. Burnes.


Laguna Beach man arrested in connection with real estate fraud in NorCal

In the following press release the El Dorado County District Attorney’s Office announced that Richard R. Betchley a former resident of El Dorado Hills, CA – was arrested today and charged with twenty-eight felony counts relating to various real estate fraud and securities fraud schemes over the past three years. The six month investigation involved members of the El Dorado County District Attorney’s Office, California Department of Corporations and Franchise Tax Board investigators. El Dorado County District Attorney’s Office, Franchise Tax Board Investigators and the Laguna Beach Police Department served search warrants on Betchley’s home in Laguna Beach this morning.

It is alleged that the defendant has engaged in ongoing fraudulent conduct, whereby over the last several years he unlawfully and fraudulently obtained over One Million Six Hundred Seventy-Five Thousand Dollars ($1,675,000), he committed multiple counts of felony grand theft and securities violations relating to real estate fraud, securities fraud, and bank fraud. Further, it is alleged that he committed multiple counts of tax evasion on behalf of himself and his corporations, and stole hundreds of thousands of dollars from at least sixteen known victims. The defendant is being held on Five Million Dollars ($5,000,000) bail.

The charges and allegations contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.


Ohio man sentenced to four years in scheme that defrauded 80 yr old victim

In the following press release Summit County Prosecutor Sherri Bevan Walsh announced that Emil Katrinak, 41, of North Ridgeville was sentenced yesterday to four years in prison by Judge Paul Gallagher after pleading guilty on September 2, 2008 to Theft from the Elderly and Grand Theft, both felonies of the third degree.

“This person scammed an 80 year old out of his life savings,” said Summit County Prosecutor Sherri Bevan Walsh. “He went to great lengths to impress the victims into believing his scam by flying them to St. Louis, picking them up in a helicopter he claimed was his own, putting them up in a posh hotel and claiming he was part owner of the St. Louis Rams and multiple properties in Cleveland, Los Angeles, Erie Pennsylvania and Tampa Florida. The victim in this case thought he was investing in properties that the defendant was building. In the end, he received nothing. It just proves how vulnerable the elderly are to becoming victims in scams like this.”

On February 1, 2007, Katrinak befriended the victim, Armand Thierfelder, 80, who is wheelchair-bound and uses oxygen, to convince him and family members to give him more than $140,000 paid in three separate payments. Katrinak told the victim that he was using the money to build premium real estate in Florida and invited them to “invest” in the property development. Thierfelder told the court that Katrinak took his life savings.


Three arrested in North Bay real estate ponzi scheme

In the following press release California Attorney General Edmund G. Brown Jr. last night filed 79 criminal charges against three men who “callously swindled” thousands of individuals, including many retirees who lost their life savings, in a $200 million Ponzi scheme. The defendants — James Stanley Koenig, 57, of Redding; Gary T. Armitage, 59, of Healdsburg; and Jeffery A. Guidi, 54, of Santa Rosa — were arrested late last night and are now in custody. Bail has been set at $5 million each.

AGA office - Courtesy Santa Rosa Press Democrat

“These three men callously swindled thousands of individuals out of $200 million to bankroll their extravagant lifestyles,” Brown said. “They took investors money and used it to pay for an 80-acre castle estate, a Lear jet, luxury homes and fancy cars. The Ponzi scheme ultimately collapsed under its own weight, causing hardship to thousands, many of whom were retirees who lost their life savings.”

Koenig - Shasta Sheriff’s Dept

The charges [Complaint], filed in Shasta County Superior Court, mark the culmination of a year-long investigation, which found that Koenig, Armitage and Guidi created a network of more than 55 business ventures over a period of 10 years to enrich themselves and keep their Ponzi scheme afloat.

Brown’s investigation revealed that in 1997, the three men began peddling construction and real estate projects across California. This included: “Quail Hollow,” a residential subdivision in Susanville; Lake College, a for-profit vocational school in Redding; Mountain House Golf Course near Tracy; a light industrial distribution center in Brentwood; and dozens of other so-called “investment opportunities.” Victims were promised that these were safe, secure, low risk investments with double digit returns, averaging 12 percent.

In recruiting their victims, Armitage organized “investment planning seminars,” many of which targeted retirees, in the Bay Area and throughout California. Based on advice from these seminars, Californians invested sums ranging from $50,000 to more than $1 million. Some turned over their entire retirement portfolios and savings accounts.

Many of the construction and real estate projects, however, were poorly managed and were not financially viable, resulting in huge losses. Some projects were left unfinished or ended up in foreclosure.

Rather than inform investors about the failures, Koenig, Armitage [Bankruptcy Filing] and Guidi sought to attract new investors, whose funds could be used to offset losses and pay returns to earlier investors. In doing so, the defendants withheld vital information that impacted investment decisions, including past business failures and Koenig’s 1986 federal fraud conviction.

With double-digit returns and no knowledge of the investment failures, most investors kept their money in place and many invested in new projects. This Ponzi scheme continued for more than 10 years.

Beginning in 2001, Koenig, Armitage and Guidi redirected investors’ millions into the purchase of more than 20 senior housing and residential care facilities. This included: Alterra Clare Ridge in Fresno; Sterling House in Bakersfield; Clare Bridge Cottage in Bakersfield; Seasons in Modesto, Northridge, and Vacaville; Oakdale Heights West in Redding; Oakdale Heights in Bakersfield, Fresno, San Leandro, Beverly Hills, Santa Clarita, Roseville, Laguna Beach, and La Mesa; Senior Oaks Senior Living in Redding; and other facilities in Pennsylvania, Oregon, Nevada, North Carolina, and Virginia.

Under this scheme, the defendants’ company would purchase an assisted living facility and sell it to one of their affiliate companies. The affiliate would then sell ownership shares in the property as an “investment opportunity” at an even higher price to new investors. Meanwhile, an additional affiliated company would manage the property to maximize revenue.

Revenues, however, were not reinvested into the facilities, but were pooled and used to pay interest to investors and keep investors at bay.

In April 2007, the Ponzi scheme began to collapse under a mountain of debt, and the defendants were unable to pay interest to investors. Nevertheless, they continued to solicit new investors in the vain hope that they could keep the operation alive, raising $23 million from 91 new investors. The defendant’s businesses finally went closed their doors in June 2008.

During the course of its investigation, Brown’s office identified more than 1,000 victims with losses totaling $200 million.

Over the 10 years, Koenig, Armitage and Guidi siphoned fees, revenues and profits from their business ventures for their personal benefit, using the funds to purchase an 80-acre castle estate, a Lear jet, luxury vehicles, lavish vacations and expensive wine and art.

Last night, the defendants were charged with selling securities by means of false statements or material omissions in violation of Corporations Code Section 25401/25540 and residential burglary in violation of Section 459 of the Penal Code:

- Koenig was charged with 40 counts of securities fraud and 37 counts of residential burglary.
- Armitage was charged with 42 counts of securities fraud and 37 counts of residential burglary.
- Guidi was charged with 39 counts of securities fraud and 33 counts of residential burglary.

If convicted on all counts, each could face more than 100 years in prison.

If you believe you have been a victim of this scheme, please contact the Attorney General’s office at 1-800-952-5225.

Copies of the arrest warrant and criminal complaint are available upon request.