Ten people were charged with a $40 million fraud relying on phony documents and straw buyers to bilk mortgage lenders for properties at the New Jersey Shore and resorts in South Carolina and Georgia, prosecutors said.
The 10 were accused today of using unqualified buyers to purchase 28 oceanfront condominiums from financially distressed developers in Wildwood Crest, New Jersey, according to an indictment in federal court in Camden, New Jersey. They used similar methods to buy 21 properties in Georgia and South Carolina, and eight properties in foreclosure in New Jersey.
Prosecutors said the scheme caused more than $40 million in losses to various lenders. Nine of the 10 charged were arrested, including Joseph Witkowski, 66, who helped to locate properties to buy; Isatu Tejan-Sie, 54, a loan representative at Citigroup Inc. (C:US); and Robert Serao, 46, a former loan officer at Wells Fargo & Co. (WFC:US), the government said.
After mortgage loans were approved, Witkowski and others “took proceeds from the fraudulent mortgage loans by having funds wired or checks deposited into various accounts they controlled,” according to the indictment.
Witkowski and others told straw buyers they “would maintain the properties, locate renters, collect rent and make mortgage payments,” according to the indictment.
“After the first or second monthly mortgage payments, there were no more payments on most of the properties, and on others, only nominal payments which then ceased,” Stephen Stigall, an assistant U.S. attorney, said in an interview.
Five people earlier pleaded guilty to their role in the scheme, according to a statement by U.S. Attorney Paul Fishman. The nine arrested today appeared in federal court in Camden, where a magistrate judge set bail for them, Stigall said. All 10 are charged with conspiracy to commit wire fraud. Witkowski also is charged with conspiracy to commit money laundering.
The scheme, which ran from September 2006 to September 2008, involved recruiting straw buyers with good credit scores who lacked the financial resources to quality for mortgage loans, according to the indictment. The conspirators created phony documents about the employment, income, and assets of the buyers and their intended use of the properties.
The Wildwood Crest properties were at the Silver Dollar, Ebb Tide, Stockton Beach House and Vista Mar condo developments, according to the indictment.
Mark Costiglio, a spokesman for Citigroup, declined to comment on the case.
Kim Fellenz, an attorney for Tejan-Sie; Robert A. Weir, an attorney for Serao; and Maggie Moy, an attorney for Witkowski, didn’t immediately return phone calls seeking comment.
Seroa left Wells Fargo a few years ago, a bank spokesman, Tom Goyda, said in an e-mail.
The case is U.S. v. Witkowski, 12-cr-522, U.S. District Court, District of New Jersey (Camden).
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