Thursday, January 30, 2003

Edison Man Pleads Guilty to Role in “Land Flipping” Conspiracy

An Edison, New Jersey man pleaded guilty today to committing fraud in more than 200 real estate transactions involving straw buyers who had no intention of owning the properties, U.S. Attorney Christopher J. Christie announced.

Lawrence Cuzzi, 41, pleaded guilty before U.S. District Judge John C. Lifland to an Information charging him with one count of conspiracy to commit wire fraud. Sentencing for Cuzzi is scheduled for June 9 at 9:30 a.m. He faces a maximum sentence of five years in prison, a $250,000 fine and an order for restitution, according to Assistant U.S. Attorney Alain Leibman.

According to the Information, Cuzzi engaged with others - including Gary Grieser, who is now awaiting trial on his own indictment - in fraudulent “land flips,” in which real property was purchased by a buyer at a relatively low price and then resold shortly thereafter at a significantly higher price. The higher resale price did not fairly represent the market value of the property, had it been sold in an arms-length transaction, but was an artificially high price, supported by an inflated and false appraisal, and the higher, fraudulent resale price was used to generate a mortgage loan.

The Information charges that Cuzzi and Grieser used as purchaser-borrowers individuals who had no genuine interest in owning, occupying, renting, or holding title to the particular properties but who acted merely as “straw” purchaser-borrowers. Generally, these were persons who, for a payment, allowed their names to be used as purchasers of record on contracts of sale and deeds and who allowed their credit histories to be used on mortgage loan applications to facilitate the approval of mortgage loans generated by fraudulent land flip transactions.

Cuzzi admitted to Judge Lifland that in 1996 and 1997 he engaged in more than 200 transactions in which he had solicited straw buyers to initially acquire title to residential properties and to make application for, and to receive, a mortgage loan for the inflated value of the property. The transactions involved properties in Asbury Park, Jersey City, and other locations in New Jersey. The Information charges that the straw buyers would be induced to convey a 60 percent interest in the property to Grieser‘s company, Capital Assets, in a joint venture arrangement which left the straw buyers holding a 40-percent interest and Capital Assets holding a controlling 60-percent interest.

Cuzzi admitted that he furthered the scheme by:

� failing to disclose that Grieser was failing to repair the properties acquired by Capital Assets, rendering units in those properties unable to be rented;

� knowing that Grieser was using mortgage proceeds for his personal benefit, failing to disclose the misappropriation;

� misleading straw buyers into believing that there was in place a plan for profitably managing the acquired properties, when he knew that none existed;

� aware that Grieser failed regularly to meet his financial and other commitments, misleading straw buyers into believing that Grieser and Capital Assets could be relied upon to meet their obligations with regard to the properties; and

� aware that, to the extent that Grieser properly applied any loan proceeds at all, the loan proceeds from recent straw buyer transactions were being used to fund obligations on earlier-acquired properties, failing to disclose that information to straw buyers.

The Information charges that, for a period of time, Grieser utilized a small portion of the rents collected on the joint venture properties to make some of the required mortgage payments and to perform some minimal maintenance on the properties, but then he ceased doing either; the mortgages went into default and the properties deteriorated. The balances on the mortgages became the legal responsibility of the straw buyers, whose names had remained on the mortgage documents for the properties, despite Grieser having led them to believe that they would no longer be responsible for the mortgage loans on the properties after the transfer of the sixty per cent interest to Capital Assets and that their names would be removed from the deeds altogether when the properties were resold within six months. Many of the mortgage loans generated by the fraudulent land flips went into default, and many of them face foreclosure, causing millions of dollars in losses.

mortgage fraud