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Seth Levine, 52, told a U.S. District Court judge in Newark via teleconference that he and others pocketed cash they received by illegally refinancing 70 multi-family buildings containing nearly 2,500 apartments.
Levine said he lied on refinancing applications about the rents collected, the number of apartments leased, expenses and the true owners of the complex, Acting U.S. Attorney for New Jersey Rachael A. Honig said.
That wasn’t all: Levine also pulled a securities fraud scheme that soaked investors in the multi-family properties, she said.
Meanwhile, tenants suffered from a repeated lack of gas and other services, authorities said.
To support the bank fraud, Honig said, Levine and others gave the lenders:
- fake documents, including “falsified leases that created the appearance that vacant spaces were occupied and that overstated the rent paid by tenants”;
- bogus personal financial statements;
- phony expense documents;
- fake operating agreements that misrepresented ownership interests in the properties.
Levine “received cash payouts from the lenders, which [he] and others used for their own enrichment and to continue the fraud scheme,” the U.S. attorney said.
With the properties over-valued as a result, rents and other property income didn’t cover expenses, she said.
So Levine kept refinancing, which only deepened the hole, Honig said.
Many of the lenders ended up selling the mortgages to the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), she noted.
“The outstanding balance of the fraudulently obtained mortgages on the multifamily properties was more than $150 million, including 40 mortgages held by Freddie Mac with an outstanding loan balance of approximately $103 million,” she said.
In the end, the lenders lost at least $65 million, the U.S. attorney said.
While that scam was going, she said, Levine also solicited investors “based on materially false statements and promises about the condition of the properties and the use of investor funds.”
Although he told them “his conduct would be limited by an operating agreement,” Levine sold off ownership interest in the properties, brought in additional investors and refinanced without their consent, the U.S. attorney said.
He also co-mingled investor funds, some of which was funneled into other projects, she said Those victims, in the end, lost $15 million.
Rather than go to trial, Levine took a deal from the government in exchange for leniency.
He pleaded guilty to conspiracy to commit bank fraud, as well as securities fraud, in a video-conference hearing with U.S. District Judge Madeline Cox Arleo in Newark this week.
Arleo scheduled sentencing for July 26.
Honing credited special agents of the FBI and special agents of the Federal Housing Finance Agency’s Office of Inspector General with the investigation leading to the plea, secured by Assistant U.S. Attorney Heather Suchorsky of her Economic Crimes Unit and Special Assistant U.S. Attorney Charlie L. Divine of the Federal Housing Finance Agency’s Office of Inspector General.
She noted that the U.S. Securities and Exchange Commission has filed a civil complaint against Levine “based on allegations underlying the securities fraud charge” and asked that anyone with further information about the case call: 1-800-CALL-FBI (225-5324).
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ALSO SEE: Now that an executive of a Glen Rock property management company has admitted his role in a $91.5 million loan fraud, questions remain about an "unnamed co-conspirator."
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