2 Indicted for Illegal Flip

Allison Tussey —  September 29, 2010 — Leave a comment

Ayub Mohmed Badat, 68, a United States citizen, and Jam Niaz Ali, 43, a Pakistani national with permanent resident alien status, have been indicted for their alleged involvement in a mail and wire fraud scheme has been unsealed following the arrest of both men.The indictment alleges Badat and Ali were involved in a scheme to defraud the SBA and federally-insured lenders of more than $1 million through the purchase of a Days Inn Motel, Houston, Texas.

Ali has been arrested, while Badat surrendered to federal law enforcement. Both men face charges of conspiracy, wire fraud and mail fraud and a statutory maximum penalty, upon conviction, of 30 years in prison and up to $1 million in fines. Additionally, the indictment provides notice to the defendants of the intention of the United States to seek $2.6 million from Badat and Ali, which constitutes the total amount of the alleged fraudulently obtained loans.

According to allegations in the unsealed indictment, from April 2001 to June 2006, Badat and Ali conspired to defraud lenders in conjunction with Badat‘s purchase of a Days Inn Motel, Houston, Texas. Badat and Ali are alleged to have made multiple material misrepresentations to the lenders that financed the purchase of the motel and to the SBA, which partially guaranteed the financing.

As part of the scheme, the indictment alleges Ali was inserted into the transaction between Badat and the original seller of the Days Inn Motel. Ali purchased the motel from the original seller, then a day later, sold the motel to Badat at a much inflated price. Ali‘s participation in the deal was hidden from lenders. Thus, financing by the lenders to Badat was based on the second, artificially inflated, sales price. As a result, the lenders over-financed the purchase of the motel. When Badat ultimately defaulted on the loans, the SBA, which had partially guaranteed the financing, was required to pay in excess of $900,000 and a private lender lost more than $300,000.

United States Attorney José Angel Moreno announced the indictment along with FBI Special Agent-in-Charge Richard C. Powers and Small Business Administration-Office of Inspector General Special Agent-in-Charge Scott Dennis.

The investigation that led to this indictment and the arrests was conducted by the FBI and the SBA. Assistant United States Attorney Robert S. Johnson is prosecuting the case.

The indictment, returned under seal by a Houston, Texas grand jury on Aug. 25, 2010, was unsealed. Both men are expected to appear before United States Magistrate Judge Nancy Johnson, at which time the issue of bond is expected to be decided.

An indictment is a formal accusation of criminal conduct, not evidence.

A defendant is presumed innocent unless and until convicted through due process of law.


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Allison Tussey

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