Woman Admits Supplying Straw Buyers with Down Payments

admin —  May 21, 2013 — Leave a comment

Bonnie M. Gardner, 55, Apollo, Pennsylvania, pleaded guilty in federal court to a charge of mail and wire fraud conspiracy.

The defendant pleaded guilty to one count before United States District Judge Nora Barry Fischer.

In connection with the guilty plea, the court was advised that Gardner participated in a massive fraud scheme involving more than $15 million in losses to more than 100 victims. The investigation has subsequently determined that Gardner and Frank Guzik, Jr., through various investment and development groups, such as East Haven Investments, East Haven Development, East Haven Realty, etc., devised and implemented an elaborate Ponzi scheme through which they successfully solicited investors.

The purported business of East Haven was to purchase properties, make various improvements to the properties, and then to sell them. In order to secure the investments, Guzik and Gardner made a series of misrepresentations to the investors, including the interest rate, that the investments would be secured by mortgage, and various other misrepresentations. As collateral for the investments, Guzik and Garnder provided the investors mortgages on various properties. The investors believed that East Haven would be unable to sell the properties on which they held mortgages unless the mortgages were satisfied. Many of these mortgages were never filed, which the investors later learned.

The investigation has also revealed that the satisfaction pieces on some of the mortgages were forgeries. Guzik and Gardner also provided multiple investors with mortgages on the same properties. Thus, the purported value to the mortgagees was well in excess of the property’s value. The investors were, of course, unaware that other investors held mortgages on the same properties.

Some of the investors received, if requested, monthly interest payments on their investments. Others chose to roll their monthly interest over into the investment, having been erroneously told by Guzik and Gardner that no tax was due on the accrued interest if it was rolled over. The investment never really earned any interest, despite the investors statements indications to the contrary and despite the payment of interest payments. In other words, Guzik and Gardner used new investor funds to pay interest to individuals who had invested earlier, and also to support the lifestyles Guzik and Gardner were living.

Beginning in April of 2005, Guzik and Gardener needed to sell some of the properties to generate cash flow and to show investors that East Haven was profitable, but they could not sell the properties. Thus, Guzik and Gardner convinced a number of individuals to act as straw purchasers of the properties. The mortgage documents falsely reported that the purchasers made substantial down payments from their own funds to purchase the properties. In fact, Guzik and Gardner deposited investor funds into the straw purchasers’ bank accounts and then the straw purchasers would withdraw the money in the form of a certified check that they would bring to the closings as if they had made the down payment from their own funds. In addition, Guzik and Gardner paid the straw purchasers, using investor funds, the mortgage and utility payments for those properties. Guzik and Gardner then prepared a glossy pamphlet reporting the sales of the properties for use in inducing further investors.

Beginning around November 2007 and continuing until in or around March 2008, Guzik began withdrawing funds from the East Haven accounts by cash and check. By the end of March 2008, East Haven’s National City accounts, into which investor checks had been deposited and from which investor interest checks had been drawn, had minimal or zero balances. During the same time period, Guzik withdrew $200,000 to purchase untraceable gold coins from International Precious Metals in Texas. Guzik also received two short-term loans totaling $475,000 in early March 2008, promising to repay them at 20% interest by March 18, 2008.

On or about March 17, 2008, Guzik disappeared, and has not been heard from since. He did not repay the loans, stopped making interest payments on investments totaling approximately $15 million, and never accounted for the principle investments. His whereabouts are still unknown.

Judge Fischer scheduled sentencing for Oct. 18, 2013 The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the criminal history, if any, of the defendant.

United States Attorney David J. Hickton announced the guilty plea.

Assistant United States Attorneys Brendan T. Conway and Gregory Melucci are prosecuting this case on behalf of the government.

The United States Postal Inspection Service and the Criminal Investigation Division of the Internal Revenue Service, with assistance from the Monroeville Police Department, conducted the investigation that led to the prosecution of Gardner.


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