Ronald J. O’Malley, 48, Upper Saddle River, New Jersey, the former Chairman and Commissioner of the Bergen County Improvement Authority (“BCIA“) and a principal in the Ridgewood, New Jersey, mortgage brokerage firm Diversified Financial Group, d/b/a Residential Mortgage Corporation (“Residential Mortgage“), and Laura-Jean Arvelo, a former Residential Mortgage employee, both pled guilty in connection with a mortgage fraud scheme at Residential Mortgage that falsely claimed BCIA employment for numerous mortgage borrowers.
O’Malley and Arvelo both entered guilty pleas this morning before U.S. District Judge Dennis M. Cavanaugh. Each pled guilty to Count One of the pending criminal Indictment, admitting that they conspired with each other; Residential Mortgage co-owner Edward Olimpio; two other Residential Mortgage employees, Daniel Gilmore and Rachell Fischbein; and others to commit wire fraud in connection with fraudulent mortgage and home equity loans brokered by Residential Mortgage between 2006 and 2009. Their sentencing hearings are scheduled for December 12, 2011.
Olimpio, Fischbein, and Gilmore previously entered guilty pleas before the Hon. Susan D. Wigenton, admitting to conspiring with O’Malley, Arvelo, each other, and others to commit wire fraud in connection with the scheme. Each is currently awaiting sentencing.
According to the Indictment and the admissions made in court by O’Malley and Arvelo, the participants in the mortgage fraud scheme falsely represented on mortgage loan applications and other documents that certain borrowers were employed by and received a salary from the BCIA when in fact those individuals did not work at the BCIA. In support of these false representations, O’Malley and his co-conspirators arranged for the BCIA staff to respond to telephone calls from banks and other mortgage lenders, who were calling to verify the claimed BCIA employment, by falsely stating that the borrowers were employed there. In addition, as detailed in the Indictment, O’Malley and his co-conspirators created and arranged for the creation of false and fraudulent BCIA paystubs and IRS Forms W-2, which were submitted to the lenders as well.
As set forth in the Indictment and based on the defendants’ admissions in court, the scope of the mortgage fraud scheme was not limited to false claims of employment at the BCIA. O’Malley and his co-conspirators also made false representations regarding borrowers’ employment at places other than the BCIA, and created similar false documentation in support of such claims. The co-conspirators also created false asset information for borrowers, including by taking O’Malley‘s own bank and brokerage account statements and “cut-and-pasting” a borrower’s name and address over his own, and prepared phony leases for borrowers purporting to show rental income to the borrowers that did not in fact exist.
Count One of the Indictment, to which both defendants pled guilty, charges them with conspiring to commit wire fraud. This offense carries a maximum penalty of 20 years of imprisonment and a $250,000 fine. In determining an actual sentence, Judge Cavanaugh will consult the advisory United States Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the offense, the defendants’ criminal history, if any, and other factors. The judge, however, is not bound by those guidelines in determining the sentence. Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all of that time.
U.S. Attorney Paul J. Fishman announced the guilty pleas.
The case is being prosecuted by Assistant U.S. Attorney Rachael A. Honig, Deputy Chief of the Criminal Division, and Assistant U.S. Attorney Christine I. Magdo.
Fishman credited Special Agents of the FBI, under the direction of Special Agent in Charge Michael Ward, the IRS Criminal Investigation Division, under the direction of Special Agent in Charge Victor Lessoff, and the Criminal Investigators of the U.S. Attorney’s Office for their work leading to today’s pleas.