TRENTON, NJ – November 18, 2010 – (RealEstateRama) — Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced that a father and son pleaded guilty to theft charges today for stealing approximately $4.5 million from mortgage lenders by providing false information in home loan applications handled by their Totowa-based real estate firms, Casey Properties LLC, Lee Alan LLP and Andrea Management LLC.
According to Director Taylor, Martin Gendel, 65, of Montville, pleaded guilty to second-degree theft by deception before Superior Court Judge Philip J. Maenza in Morris County. He faces a sentence of five to 10 years in state prison.
Gendel’s son, Seth Gendel, 36, of Long Island, N.Y., pleaded guilty today to third-degree theft by deception before Judge Maenza. Under his plea agreement, the state will recommend that he be sentenced to a term of probation.
In addition, Martin and Seth Gendel will be ordered under their plea agreements to comply with any civil judgments or orders of restitution stemming from a civil mortgage fraud suit that was filed by the Attorney General’s Office in March 2009.
Judge Maenza scheduled sentencing for the Gendels for Feb. 11, 2011. Deputy Attorney General Francine Ehrenberg took the guilty pleas for the Division of Criminal Justice Major Crimes Bureau. The charges were contained in a Dec. 15, 2009 state grand jury indictment.
Between December 2005 and September 2007, the defendants 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.
“These defendants preyed on vulnerable investors, using them in a scheme to defraud mortgage lenders of $4.5 million,” said Attorney General Dow. “The results were defaulted loans, foreclosures, and communities blighted with dilapidated homes.”
An investigation by the Division of Criminal Justice revealed 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 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.
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 public needs to be wary of con artists who seek to exploit vulnerable investors in these tough economic times,” said Director Taylor. “We urge members of the public with information about financial fraud to contact our confidential tip line.”
A pending civil complaint filed by the Attorney General’s Office in March 2009 charged Martin Gendel, Seth Gendel, Casey Properties and Lee Alan LLP with violating New Jersey’s Civil Racketeer Influenced and Corrupt Organizations (RICO) statute. The lawsuit charged 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.
Director Taylor noted that the Division of Criminal Justice has established a toll-free tipline for the public to report corruption, financial fraud and other illegal activities: 1-866-TIPS-4CJ. Additionally, the public can log on to the Division of Criminal Justice Web site at www.njdcj.org to report suspected wrongdoing. All information received through the Division of Criminal Justice tipline or Web page will remain confidential.