In a landmark case that highlights the far-reaching implications of financial fraud in the real estate market, three real estate investors have admitted to orchestrating a massive mortgage fraud scheme. Fredrick Schulman, 72, of New York; Chaim “Eli” Puretz, 29, of New Jersey; and Moshe “Mark” Silber, 34, of New York, have each admitted guilt to one count of conspiracy to commit wire fraud involving a financial institution. This fraudulent activity led to the illegal procurement of loans totaling $119 million and involved the deceitful acquisition of multifamily properties.
Key Players in the Mortgage Fraud Scheme
Fredrick Schulman and Moshe “Mark” Silber, as managing members of Rhodium Capital Advisors, played pivotal roles in the acquisition and management of the Williamsburg of Cincinnati, an apartment complex in Cincinnati, Ohio. Chaim “Eli” Puretz, one of the owners of the commercial property Troy Technology Park in Troy, Michigan, was also a key player in this elaborate mortgage fraud scheme. Together, between 2018 and 2020, these individuals engaged in a concerted effort to deceive financial institutions and Fannie Mae, a government-sponsored enterprise that finances mortgage loans.
Unraveling the Mortgage Fraud Scheme
Mortgage Fraud in Williamsburg, Cincinnati
In March 2019, the Williamsburg of Cincinnati was purchased for its actual value of $70 million. However, Silber, Schulman, and their co-conspirators concocted a plan to defraud lenders and Fannie Mae. They presented a fraudulent purchase and sale contract to the lender and Fannie Mae, inflating the property’s price to $95.85 million. Utilizing a stolen identity, they backed this fabricated contract with additional fraudulent documents. This deceitful maneuver led to the funding of a $74.25 million loan, significantly higher than the actual purchase price.
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Mortgage Fraud at Troy Technology Park
Similarly, in September 2020, Puretz and his associates acquired Troy Technology Park for $42.7 million. To justify an inflated purchase price of $70 million, Puretz submitted a fraudulent letter of intent indicating another party’s interest in purchasing the property for $68.8 million, along with other falsified documents.
This manipulation resulted in the lender approving a $45 million loan. To disguise the fraudulent nature of the transaction, Puretz and his co-conspirators obtained a short-term $30 million loan, which gave the false impression of having adequate funds to finalize the sale.
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Double Closings and Financial Deception in the Mortgage Fraud Scheme
Both properties underwent double closings to facilitate the mortgage fraud. One closing represented the true sales price, while the other was for the inflated price presented to the lenders. This sophisticated approach enabled the conspirators to pocket the difference between the actual and inflated property values, defrauding financial institutions of millions.
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Legal Proceedings and Sentencing for the Mortgage Fraud Scheme
Fredrick Schulman, Chaim “Eli” Puretz, and Moshe “Mark” Silber have pleaded guilty to their roles in this mortgage fraud conspiracy. Each of them faces a maximum sentence of five years in prison. Sentencing is scheduled for December 3, and a federal district court judge will determine their sentences after considering the U.S. Sentencing Guidelines and other statutory factors.
The Investigative and Prosecution Efforts Against Mortgage Fraud
The Office of Inspector General for the Federal Housing Finance Agency (FHFA-OIG) and the U.S. Postal Inspection Service’s (USPIS) Criminal Investigations Group have diligently investigated this case. The guilty pleas were announced by Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the DOJ’s Criminal Division, U.S. Attorney Philip R. Sellinger for the District of New Jersey, Inspector General Brian M. Tomney of the FHFA-OIG, and Postal Inspector in Charge Eric Shen of the USPIS. The case is being prosecuted by Trial Attorney Siji Moore of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Martha Nye for the District of New Jersey.
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Implications of the Mortgage Fraud Scheme
This case serves as a reminder of the vulnerabilities within the real estate and financial sectors. The fraudulent actions of Schulman, Puretz, and Silber not only resulted in significant financial losses but also undermined trust in the mortgage and real estate markets. The penalties and legal actions taken against them highlight the severe consequences of such fraudulent activities and serve as a deterrent to others who might consider engaging in similar schemes.
As the sentencing date approaches, this case continues to draw attention to the importance of vigilance and integrity in financial transactions, emphasizing the critical role of regulatory bodies and law enforcement agencies in maintaining the stability and fairness of the real estate market.
