James Monahan, 42, New York, New York, the owner of a real estate investment company called Panam Management Group Inc., and Edward Adams, 69, New York, New York, an attorney, have been arrested on mail and wire fraud charges for allegedly operating a fraudulent real estate scheme. Monahan and Adams are alleged to have obtained approximately $4.7 million from investors for a real estate development project that Monahan claimed to be constructing in the Dominican Republic. The real estate project was never developed and investors lost all of their money. Monahan and Adams were arrested this morning and presented in Manhattan federal court before United States Magistrate Judge Theodore H. Katz.
Manhattan U.S. Attorney Preet Bharara stated, “As alleged, James Monahan and Edward Adams defrauded investors out of millions of dollars in a bogus real estate scheme that was little more than outright theft. And Monahan went a step further””he allegedly falsely assured his investors that their money was safe, when, in fact, it was being taken from them by the defendants.”
FBI Assistant Director in Charge Janice K. Fedarcyk stated, “The defendants’ alleged scheme was as effective as it was audacious. Preying on the confidence of the investors, the defendants sold them on a real estate deal that never became a reality. Then they simply pocketed the money and lied to cover it up.”
According to a complaint unsealed today in Manhattan federal court:
Beginning in early 2008, Monahan, a former sergeant in the New York City Police Department (NYPD), negotiated with another real estate investment company to solicit investors for a project he claimed to be constructing in the Dominican Republic. During the negotiations, Monahan repeatedly touted his prior service with the NYPD as proof of his trustworthiness and as a reason to invest in the project.
In connection with the project, Monahan and Adams executed agreements that required investor funds to be deposited into escrow accounts that were to be managed by Adams. The agreements required that the majority of the funds be deposited in an account to which the defendants would not have access. From October 2008 through February 2009, approximately $4.7 million in investor funds was deposited into the escrow accounts. Shortly after the deposits were made, the funds were improperly withdrawn from the account by Adams without disclosure to investors.
In an effort to hide the fact that the funds had been removed from the escrow account, in May 2009, Monahan mailed a forged letter on the stationery of a major bank to investors, claiming that their money was safely deposited with that bank. In fact, by June 2009, all of the investor funds had been taken from the escrow accounts. At that point, almost no work had been performed on the purported project in the Dominican Republic and no money was returned to investors.
Both defendants are charged with one count of conspiracy to commit mail fraud and wire fraud, one count of mail fraud, and one count of wire fraud, each of which carries a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney John T. Zach is in charge of the prosecution.
The charges contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced the arrests.
Mr. Bharara praised the investigative work of the FBI.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.