TRENTON, NJ – May 28, 2015 – (RealEstateRama) — Acting Attorney General John J. Hoffman announced that a mortgage broker from Jersey City was sentenced to state prison today for 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, was sentenced to eight years in state prison, including two years and eight months of parole ineligibility, by Superior Court Judge Stuart A. Minkowitz in Morris County. Lyles pleaded guilty on Feb. 11 to first-degree money laundering. Lyles’ company, BKL, pleaded guilty through its attorney to second-degree theft by deception. BKL must pay $200,000 in restitution as a result of the guilty plea.
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 and handled the sentencing 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, the Office of Inspector General of the U.S. Department of Housing and Urban Development, and the Hudson County Prosecutor’s Office.
“White collar criminals like Lyles are all the more culpable because they have the training and wherewithal to earn an honest and ample living, but instead choose to steal,” said Acting Attorney General Hoffman. “We are putting these con artists on notice that financial fraud is not the road to riches, it’s the road to prison.”
“Mortgage fraud doesn’t just harm banks – it harms average homeowners by increasing what they pay for loans and causing foreclosures that destabilize neighborhoods,” said Director Elie Honig of the Division of Criminal Justice. “Crooks like Lyles who turn a profit at the expense of honest New Jerseyans belong in prison.”
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, the Office of Inspector General of the U.S. Department of Housing and Urban Development, and the Hudson County Prosecutor’s Office for their valuable assistance.