TRENTON, NJ – December 10, 2010 – (RealEstateRama) — Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced that a father and son were arrested today on charges that they used the construction companies they own and operate to defraud clients and a bank in connection with a $2.1 million condominium project in Jersey City.
According to Director Taylor, David E. Garsia Sr., 70, of North Haledon, and his son, David J. Garsia Jr., 42, of Glen Rock, were arrested today on charges of conspiracy (1st degree), money laundering (1st degree), theft by deception (2nd degree), securities fraud (2nd degree), misapplication of entrusted property (2nd degree), and misconduct by corporate officials (2nd degree). The complaint filed against the Garsias also charges their companies: Metro North Construction Group LLC, Metro Design Construction Group LLC, Electrosys Systems Inc. (doing business as Electrosyst), 237 Group Inc., and Great Falls Industrial Park Inc.
The Garsias were arrested by state detectives as a result of an investigation by the Division of Criminal Justice Major Crimes Bureau. They are being held in the Morris County Jail. Superior Court Judge Philip Maenza set bail for each defendant at $500,000 and ordered them to surrender their U.S. passports.
From April 2006 through February 2008, Metro North was hired by Vincent Paragano, owner of 140 Grant Avenue Associates LLC and Raritan Bay Associates, to work on a project at 18-20 Park Street, Jersey City, involving the renovation of an existing building and construction of 19 condominium units. It is alleged that the defendants made misrepresentations to deceive Paragano into hiring them, and likewise deceived Unity Bank in Clinton, N.J., which provided draw-down construction financing for the project. The defendants allegedly performed substandard work on the project and failed to complete it. It is further alleged that the Garsias unlawfully diverted funding from the project and laundered it through their companies.
The defendants used Metro North and the other four companies named in the complaint, all of which have offices at 70 Spruce Street in Paterson, to create the illusion that subcontractors were not necessary because the companies could provide all construction services “in-house,” including architecture, engineering, electrical work, plumbing, masonry, carpentry, windows and roofing. It is alleged that to secure the contract, the Garsias supplied information to Paragano and his companies that falsified the assets, financial health, solvency, credentials, and experience of Metro North and its parent company Great Falls Industrial Park. The Garsias allegedly fraudulently represented that Garsia Jr. was a licensed engineer and architect.
At the construction mortgage closing on Nov. 29, 2006, Garsia Jr. allegedly signed and delivered documents representing himself as the engineer and licensed architect for Metro North, when he held no such licenses. Those representations induced Unity Bank, 140 Grant Avenue Associates, Raritan Bay Associates, and Paragano to fund the work on the project.
It is alleged that the defendants subsequently supplied false expenditure information and fraudulent work reports on their construction draw-down applications to Unity Bank. For example, Garsia Jr. and Metro North certified in several construction draws that building insulation, fire proofing, ventilation systems and sprinkler systems had been installed, when in fact they had not been installed. Additionally, the defendants allegedly certified that expenditures had been made for sewer lines and foundation underpinnings when they had not been made.
During the course of the project, the defendants allegedly received approximately $2 million from Unity Bank, 140 Grant Avenue Associates, Raritan Bay Associates and Paragano based on false representations that work was completed. The defendants allegedly failed to use the money for legitimate business expenses, such as payment of subcontractors and purchase of materials for the project. Instead, the defendants allegedly laundered over $500,000 by making cash and debit/ATM card withdrawals, making credit card payments, converting funds to other projects, and using money for personal expenses such as furs and jewelry.
It is alleged that Garsia Jr. repeatedly issued checks to subcontractors for amounts in excess of available funds, and in an alleged effort to defraud creditors, listed a debt of $800,000 payable to Great Falls Industrial Park, when no such debt existed. As creditors, including Paragano and 140 Grant Avenue Associates, sought relief and initiated civil litigation, the assets of Metro North were allegedly co-mingled and shifted into 237 Group Inc.
The Division of Criminal Justice has filed a civil forfeiture action to seize and restrain assets of all of the individual and corporate defendants, alleging the assets are proceeds and instrumentalities of criminal conduct.
Detective Abraham A. Aquino and Deputy Attorney General Francine S. Ehrenberg are assigned to the investigation for the Division of Criminal Justice Major Crimes Bureau. Deputy Attorney General Michael McCormick is handling the civil forfeiture action for the Major Crimes Bureau. They were assisted by Deputy Attorney General Michael Rappa, Lt. John Jespersen, Detective Cheryl Smith, volunteer attorney Derek Miller, and Christine M. Marshall, an intern for the Division of Criminal Justice.
First-degree crimes carry a maximum sentence of 20 years in state prison. The first-degree money laundering charge carries a criminal fine of up to $500,000. Second-degree crimes carry a maximum sentence of 10 years in state prison and a criminal fine of $150,000.
The charges are merely accusations and the defendants are presumed innocent until proven guilty. Because they are indictable offenses, the charges will be presented to a state grand jury for potential indictment.