New Jersey authorities are trying to bust up a massive mortgage securities fraud ring accused of bilking more than 100 investors out of $42 million.
The money allegedly scammed from investors went to pay for the defendants’ lavish “personal expenses” that included more than $8.8 million for jewels, expensive clothes and a Florida condo, according to a lawsuit filed by New Jersey Attorney General Peter Harvey and Franklin Widmann, the state’s top securities regulator.
Joseph Greenblatt, several members of his family and 63 shell corporations used to carry out the scheme were named in the suit, according to a written statement from New Jersey authorities.
Greenblatt is accused of heading the scheme that enticed investors to put money into mortgage securities that turned out not to exist, authorities say.
“We will do everything in our power to obtain restitution for the investors who fell victim to the greed of these defendants,” Harvey said in the statement.
Also named in the complaint were Greenblatt’s wife, Alexandra Horvath; his father, Max Greenblatt; the estate of Joseph Greenblatt’s mother, Vera Greenblatt; and Maywood Capital Corp., the company used by Greenblatt to run the scheme, Harvey said.
Greenblatt, his father and two associates “engaged in a pattern of racketeering,” the complaint alleges.
According to Harvey, Greenblatt placed newspaper ads offering interest in “safe” first mortgages. Investors came from California, New York, Florida, Massachusetts, New Jersey and elsewhere.
The ads claimed the investments were ideal for retirement accounts and personal portfolios.
“The defendants claimed to offer investments in residential properties in New York City,” Harvey said. “Investors were promised 14 percent interest, plus additional profits when the buildings were renovated and resold.
“In fact, we allege the investments were largely unsecured and were used to pay defendants’ personal expenses,” he said.
Many of the properties controlled by Greenblatt were over-mortgaged and did not produce the unrealistic profits promised to investors, Harvey said.
“In may cases, investors’ mortgage interests were never recorded or were extinguished without their knowledge so that new investments could be secured by mortgages on the buildings in questions,” Harvey said. “In certain cases, the defendants did not even own the properties that they were mortgaged to investors.”
Greenblatt, his father and their associates allegedly received more than $9.4 million in “officer loans” from their investors’ money.
The complaint alleges that Greenblatt used the money to pay for expenses for him and his wife, including travel, the monthly payments on their Florida condo and clothes and jewelry from stores that included Saks Fifth Avenue, Neiman Marcus and Polo/Ralph Lauren.
Neither Greenblatt nor his lawyer could be reached to comment.
“Through our extensive investigation, we uncovered a huge network of corporations that the individual defendants allegedly used to defraud investors,” Widmann said in the statement. “We have asked the court to freeze the assets of the defendants and appoint a receiver to take charge of those assets on behalf of the investors.”
The complaints seeks restitution for investors and civil penalties.
According to Harvey, Greenblatt has been in trouble before.
In August of 2004 Greenblatt was indicted by a state grand jury in New Jersey on charges he wrote a bad $1.9 million check to an investor.
And in 1995 Greenblatt and his father pled guilty to securities-related criminal charges in Kings County, N.Y. New Jersey’s complaint alleges the Greenblatt’s used their latest scheme, in part, to pay for $5 million in restitution they were ordered to pay as part of the New York case, Harvey said.
