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Developer Victor Santos, 63, of Watchung, paid stand-in "straw" buyers $5,000 each to first purchase a dozen properties in Newark and then secure tenants to lease them, U.S. Attorney Philip R. Sellinger said.
A group of conspirators including him and attorney Fausto Simoes, 69, of Millington, covered the costs -- including fees and mortgage payments, the U.S. attorney said.
"Santos, Simoes, and others also caused the submission of fraudulent and false loan applications and documents to the mortgage lender," Sellinger said.
"Using the identity and credit of these straw buyers allowed Santos, Simoes, and their conspirators to conceal their identities from the lender as the actual purchasers of the properties," he said.
"Simoes conducted the closings of 10 of the fraudulent transactions," Sellinger said, adding that the attorney "helped perpetuate the fraud by falsely reporting that the straw buyers were providing the cash required at closing when, in fact, Simoes received those funds from a shell company controlled by Santos and another conspirator.
"For several transactions, Simoes also failed to disclose to the lender that the shell company controlled by Santos and another conspirator would receive a substantial payout from the loan proceeds," he added.
"Shortly after the properties were acquired, Santos and his conspirators broke their promises to pay the mortgages," Sellinger said. "The straw buyers, in whose names the mortgages were obtained and thus were responsible for the payments, did not have enough money to pay the fraudulently obtained mortgages and defaulted."
The lender, Fannie Mae, and insurers lost more than $3.5 million, he said.
Rather than risk the consequences of a trial, Santos and Simoes took deals from the government, as did two other conspirators, Sellinger said.
Each pleaded guilty by videoconference with U.S. District Judge Michael A. Shipp in Trenton to conspiracy to commit bank fraud. The judge scheduled sentencing for Santos for April 12, 2023, and for Simoes the next day. The other two unidentified confessed conspirators are awaiting sentencing.
Sellinger credited special agents of the Federal Housing Finance Agency's Office of Inspector General and the FBI with the investigation leading to the guilty pleas, secured by Special Assistant U.S. Attorneys Charlie Divine and Kevin DiGregory of the Federal Housing Finance Agency's Office of Inspector General, who were assigned to his Economic Crimes Unit in Newark.
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