Wednesday, August 09, 2017

NYC Feds Charge Duo In Short Sale Scam That Hid Non-Arm's Length Nature Of Transaction To Dupe Bank Into Taking $250K+ Haircut On Underwater Mortgage

From the Office of the U.S. Attorney (New York City):
  • Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the United States Department of Homeland Security’s Homeland Security Investigations, announced today [August 3] the unsealing of a criminal Complaint charging MICHAEL RIZZI and EDWARD MONAHAN with bank fraud and conspiracy to commit bank fraud, in connection with a scheme to submit false documentation to a bank to make RIZZI’s sale of property to his friend and business partner look like an “arm’s length” transaction.
    ***
    According to the allegations in the Complaint[1] unsealed [] in Manhattan federal court:

    RIZZI purchased a property (the “Rizzi Property”) in 2007 with the assistance of a mortgage (the “Mortgage”) The Mortgage was acquired by a bank (“Bank-1”) that same year. Over time, RIZZI stopped paying the Mortgage and, in 2009, the Mortgage fell delinquent. In 2015, RIZZI contacted Bank-1 and requested a short sale due to financial hardship (the “Short Sale”).

    Bank-1 advised RIZZI that the Short Sale was required to be an “arm’s length” transaction, meaning that the buyer could not have any personal, familial, or business connections with RIZZI.

    Later that year, MONAHAN agreed to buy the Rizzi Property from RIZZI. In connection with the sale and closing of the Rizzi Property, RIZZI and MONAHAN both executed various documents in which they affirmed that the buyer and the seller were engaged in an “arm’s length” transaction, and the seller and buyer of the Rizzi Property did not have a personal or business relationship. RIZZI and MONAHAN were, in fact, friends and business partners. Among other things, RIZZI and MONAHAN were partners in the ownership of Nitecap Megastore, a Staten Island adult sex and smoke shop. MONAHAN also has posted photos and videos on social media, which depict RIZZI and MONAHAN socializing with each other.

    As a result of this scheme, Bank-1 suffered more than $250,000 in losses.
Source: Acting Manhattan U.S. Attorney Announces Fraud Charges Against Former New York City Police Officer And Staten Island Man (Michael Rizzi and Edward Monahan Are Alleged to Have Made False Claims in Connection With the Sale of a Staten Island Property).

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