Man Admits Straw Buyer Scheme

Allison Tussey —  July 21, 2011 — Leave a comment

Charles Harvath, 33, Lodi, N.J., admitted to conspiring to participate in a scheme which caused lenders to release more than $40.8 million based on fraudulent mortgage loan applications and conspiring to launder the proceeds of the fraud.

Harvath pleaded guilty to an information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering.

He entered his guilty plea before U.S. District Judge Joseph E. Irenas in Camden federal court. According to documents filed in this case and statements made during Harvath‘s guilty plea proceeding:

Harvath and his co-conspirators located oceanfront condominiums overbuilt by financially distressed developers in Wildwood Crest, N.J.; premier real estate in vacation destinations in Georgia and South Carolina; and properties in New Jersey owned by financially distressed homeowners facing foreclosure. They then recruited straw buyers to purchase those properties who had good credit scores, but lacked the financial resources to qualify for mortgage loans.

Harvath and his co-conspirators created false documents including fake W-2 forms, income tax returns, investment statements, and rental agreements to make the straw buyers appear more creditworthy than they actually were in order to induce the lenders to make the loans. They also established numerous telephone lines for companies owned by some of the conspirators so that when a lender contacted the telephone number, the conspirators could falsely verify that a straw buyer was employed by the company listed on his or her fraudulent loan application.

Harvath also caused fraudulent mortgage loan applications in the name of the straw buyers and supporting documents to be submitted to mortgage lenders, which attributed to the straw buyers inflated income and assets. Once the loans were approved and the mortgage lenders sent the loan proceeds in connection with real estate closings on the properties, Harvath had some of the funds wired or checks deposited into various accounts that he and his co-conspirators controlled.

The wire fraud conspiracy charge to which Harvath pleaded guilty carries a maximum potential penalty of 30 years in prison and a $1 million fine. The money laundering conspiracy charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine. In addition, Harvath agreed to forfeit $2,412,898.80, representing the proceeds of the fraud. Sentencing is currently scheduled for October 25, 2011.

U.S. Attorney Fishman credited special agents of the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge Michael B. Ward in Newark; and IRS – Criminal Investigation in Mays Landing, under the direction of Special Agent in Charge Victor W. Lessoff, with the continuing investigation leading to the guilty plea.

U.S. Attorney Paul J. Fishman announced the guilty plea.

The government is represented by Assistant U.S. Attorney R. Stephen Stigall of the U.S. Attorney’s Office Criminal Division in Camden.

Allison Tussey

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