A former Florida Realtor could be facing prison time over his alleged role in a mortgage fraud conspiracy at a 390-unit condo complex that prosecutors say cost mortgage lenders more than $15 million.
Joseph Pasquale, 38, a resident of Worcester, Massachusetts, is accused of helping developers convert a Tampa apartment complex into condominiums during the housing boom by enticing buyers with hefty cash payments that were concealed from mortgage lenders.
Pasquale faces one count of mortgage fraud conspiracy involving bank fraud and two counts of bank fraud, each carrying a maximum penalty of 30 years in prison.
At least seven people have previously entered guilty pleas in connection with condo sales at The Arbors at Carrollwood, including a mortgage broker who allegedly bought a jewelry store with $270,000 in kickbacks he and two partners received in return for purchasing three units in the complex.
The Arbors was one of many new condo developments and condo conversion projects around the country funded during the boom by Chicago-based Corus Bank, which took a $1.7 billion bite out of the FDIC’s insurance fund when it failed in 2009.
“Corus will go down as the great enabler of condo madness, and its travails are a harbinger of the pain yet to come in the troubled world of commercial real estate,” The New York Times’ Eric Dash wrote just days before regulators shut the bank down. “More than any other condo lender, Corus epitomized the easy lending and lax oversight of the go-go years — and the pain of the ensuing bust.”
In bankruptcy court four years later, the bank’s parent holding company, Corus Bankshares Inc., agreed to pay the FDIC most of its $267 million tax refund. CEO Robert Glickman — who reportedly insisted on approving each loan to condo developers himself — agreed to pay $2.2 million to settle accusations that he violated his fiduciary duty by continuing to pay dividends while the company was insolvent, Law360.com reported.
Ambitious plan for The Arbors
At The Arbors, prosecutors said, the saga began in 2005, when Corus financed the purchase of what was then an apartment complex by companies controlled by co-conspirators in the mortgage fraud scheme.
Corus, they said, imposed “strict conditions” on the timing of the condo conversion process, prohibiting the developers from filing a declaration of condominium or closing on any condominium unit they had sold the first 80 units.
Corus stipulated that once the first unit was sold, the other 79 had to close withing 45 days. Corus was to receive 100 percent of the net proceeds of the sale of the first 80 units, and everything had to happen within one year of the loan being taken out.
In the summer of 2006, the developers hired three Weston-based companies owned and operated by Oscar Torres — Realty Alliance LLC; a mortgage brokerage company called Synergy Lending Group; and a title agency called Title Executives of Broward Inc. — to sell units in the complex.
From June 2006 through April 2007, Torres and others involved in the scheme “offered unlawful cash payments to buyers, either before or after closing” that were concealed from lenders, prosecutors said in 2013, when Torres pleaded guilty to two mortgage fraud conspiracies.
To win approval for the mortgages, perpetrators of the scheme provided lenders with false and fraudulent statements that misled them about the actual purchase price of the properties, how buyers intended to use them, their employment and income, the source of down payments and closing costs, and the actual disbursements of loan proceeds at closing.
Details about how the kickbacks to buyers were made were outlined in a plea agreement prosecutors reached last summer with Brendan Bolger, whose company, Capital Management Guarantee LLC, helped sell condos at The Arbors.
According to the pleas agreement, Bolger created an addendum to the purchase contract that offered buyers incentives such as rental supplements, money to defray maintenance costs and a design credit to upgrade the unit’s amenities. When the buyers canceled the design credit within 10 days of signing the addendum, Bolger paid a kickback for the amount of the design credit to the buyer from Capital Management’s bank account, prosecutors said.
Bolger, who pleaded guilty to conspiracy to commit wire, mail and bank fraud, faces a maximum penalty of 30 years in federal prison when he is sentenced on June 22, 2015.
Bolger also agreed to forfeit $18.4 million, an amount that prosecutors said represents $4.3 million in fraud perpetrated on Corus Bank and $14.1 million in fraud perpetrated on mortgage lenders who financed purchases of individual units.
Prosecutors said they’re also seeking a monetary judgment against Pasquale.
Others who who have pleaded guilty in connection to the the case included:
- Mortgage agent Alexander Ende, of Boynton Beach, who pleaded guilty to conspiracy to commit bank fraud and mail fraud, and wire fraud affecting a financial institution.
- Attorney Rashmi Airan-Pace, of Miami, who prosecutors said as the escrow agent conducting closings on units being sold at The Arbors knew that kickbacks paid to the buyers were not disclosed to mortgage lenders.
- Gloria Arias, a Weston, Florida, resident who worked as a mortgage broker for Synergy Lending Group.
- David Vazquez, a resident of Puerto Rico employed as a mortgage broker by DVA & Associates LLC who pleaded guilty to making false statements to a financial institution in connection with misrepresentations made on loan applications for three properties that ended up in foreclosure.
- Alejandro Matos, a mortgage broker and loan processor who pleaded guilty to conspiracy to commit wire, mail and bank fraud in connection with misrepresentations made on loan applications to purchase two condos and The Arbors.
