TRENTON, NJ – February 11, 2015 – (RealEstateRama) — Acting Attorney General John J. Hoffman announced that a mortgage broker who owned a property management company in Jersey City pleaded guilty today to laundering the proceeds of a criminal scheme in which he conspired to steal more than $1.2 million from lenders by filing fraudulent mortgage applications, diverting mortgage proceeds and falsifying settlement statements.
Brian Lyles, 43, of Jersey City, the owner of BKL Property Management, LLC, pleaded guilty today to first-degree money laundering before Superior Court Judge Stuart A. Minkowitz in Morris County. Under the plea agreement, the state will recommend that Lyles be sentenced to eight years in state prison, including three years and four months of parole ineligibility. His company, BKL, pleaded guilty through its attorney to second-degree theft by deception. BKL must pay $200,000 in restitution. Judge Minkowitz scheduled sentencing for Lyles and BKL for March 13.
In pleading guilty, Lyles admitted that he laundered the proceeds of a criminal scheme in which he conspired with others to falsify loan applications in order to cause banks to loan money to unqualified home buyers for the purchase of homes in Jersey City at inflated prices. He and his co-conspirators fraudulently obtained four loans totalling more than $1.2 million.
The scheme involved arranging two simultaneous sales of each property and diverting loan proceeds. Straw purchasers initially bought the homes through “short sales,” which are pre-foreclosure sales where the mortgage holder agrees to permit the home to be sold for less than the amount due on the loan. The straw purchasers in turn sold the homes at much higher prices to other purchasers who were the borrowers for the fraudulently obtained loans. Those purchasers were recruited with a pitch that they could obtain investment properties with no money down and receive rental income. The loan proceeds were used to make the initial discounted purchase in the short sale. After making certain other required payments, Lyles and his co-conspirators stole the remaining loan proceeds by diverting them at closing.
Deputy Attorneys General Thomas A. Clark and Naju Lathia took the guilty plea for the Division of Criminal Justice Financial & Computer Crimes Bureau. The Division of Criminal Justice investigated the case with assistance from the Office of Inspector General of the Federal Housing Finance Agency and the Office of Inspector General of the U.S. Department of Housing and Urban Development.
“Honest, hardworking homeowners ultimately pay the price for mortgage fraud, because it raises the cost of borrowing and results in foreclosures, which destabilize housing markets, said Acting Attorney General Hoffman. “By locking up con artists like Lyles, we are protecting average citizens as well as lenders.”
“Con artists will always be tempted to target mortgage loans and real estate closings because of the large sums of money on the table,” said Director Elie Honig of the Division of Criminal Justice. “However, with this plea, we are putting them on notice that we will catch them and aggressively prosecute them.”
Lyles admitted that he defrauded lenders in connection with four loans totaling approximately $1,219,860: (1) a $331,182 loan for a home on Virginia Avenue in Jersey City made by Wells Fargo Bank on June 26, 2008 (short sale price: $179,000), (2) a $276,810 loan for a home on Bidwell Avenue in Jersey City made by Wells Fargo Bank on July 23, 2008 (short sale price: $195,000), (3) a $298,187 loan for a home on Bayview Avenue in Jersey City made by Wells Fargo Bank on Sept. 9, 2008 (short sale price: $180,000), and (4) a $313,681 loan for a home on Claremont Avenue in Jersey City made by Bank of America on July 10, 2009 (short sale price: $145,000).
Lyles and his co-conspirators falsified information on the loan applications, including information on the bank account balances of the applicants, so that the applicants could obtain loans for which they were not qualified. They submitted false supporting documents, including fraudulent bank statements, and falsely stated that the home would be the primary residence of the borrower. The lenders were thereby induced to issue mortgages based on the inflated price of the property, while they were not told of the discounted purchase of the property in the short sale. In addition, Lyles conspired with settlement agents who would divert loan proceeds to him and other co-conspirators. They would file fraudulent HUD settlement statements indicating that the borrower made required payments at closing and that the loan proceeds were properly disbursed.
The case was presented to the state grand jury by former Deputy Attorney General Michael Rappa. The case was investigated and prosecuted for the Division of Criminal Justice Financial & Computer Crimes Bureau by former Detective Sgt. Louis Matirko, Detective Roxanna Ordonez-Fresse, Detective Mark Byrnes and Deputy Attorneys General Clark, Lathia, Rappa and Marysol Rosero.
Special Agent Robert Manchak investigated for the Office of Inspector General of the Federal Housing Finance Agency. Acting Attorney General Hoffman thanked the Office of Inspector General of the Federal Housing Finance Agency and the Office of Inspector General of the U.S. Department of Housing and Urban Development for their valuable assistance.