Fraudster Home Builder Pleads Guilty to Defrauding Investors of More Than $22 Million and to Evading More Than $1.4 Million in Tax Payments
|U.S. Attorney’s Office April 22, 2014|
BALTIMORE, MD—Patrick J. Belzner, a/k/a “Patrick McCloskey,” age 45, of Glen Arm, Maryland, pleaded guilty late yesterday to a wire fraud conspiracy, wire fraud, and tax evasion.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation; and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office.
“For over a decade, through a combination of lies and deceit, Patrick Belzner and his co-conspirators caused serious financial harm to their victims. These individuals were focused on their own personal gratification with no regard for the consequences of their actions,” said Thomas J. Kelly, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office. “Holding cheats such as Belzner accountable for their misdeeds is critically important to maintaining the integrity of our economy.”
According to Belzner’s plea agreement, from 2009 through August 2011, Belzner, a home builder, worked for a real estate development business known as the McCloskey Group LLC, owned by Brian McCloskey, who was also a home builder. During that time, Belzner conspired with McCloskey, Maryland attorney Kevin Sniffen, and others to defraud investors through a fraudulent investment scheme.
Specifically, Belzner and the conspirators advised wealthy individuals and investment advisers that in order for the McCloskey Group to obtain loans for commercial real estate projects, the loan broker required that large sums of money be deposited in an escrow bank account to show “liquidity.” They further falsely represented that the funds would be maintained under the control of Sniffen, a licensed attorney and escrow agent; would not be used for any other purpose; and that the money would be returned to the investor, either upon the funding of the loan or after a specified period of time. In return for this temporary use of the investor’s funds, Belzner and McCloskey promised to pay substantial fees or interest.
Instead, Belzner admitted that he directed McCloskey to remove the investors’ funds soon after they had been deposited into the escrow account. Belzner and McCloskey then used the stolen funds to pay for their personal and business expenses, as well as to make partial repayments to earlier lenders, to pay fees to some of the victim investors to keep them from demanding the return of their money, and to pay the loan broker for its supposed work and expenses in attempting to locate financing sources.
Belzner and his co-conspirators attempted to conceal the fraud by issuing false bank statements regarding the amount of escrowed funds; falsely representing in e-mails and by phone the balance of escrow funds and the date when the investors’ money would be returned; and returning part of the victim’s investment using funds fraudulently obtained from other investors. Belzner also wrote scripts for the conspirators to use in telephone conversations or in written communications to lull the victims and their representatives into believing that their escrow monies were safe and would be returned to them as promised in the escrow agreements, as well as to persuade victims not to pursue demands or legal action for the immediate return of their funds.
The government contends that Belzner and his conspirators’ fraudulent scheme caused losses in excess of $22 million to more than 10 victim investors.
Belzner also pleaded guilty to evasion of assessed tax payments. In 1995, 1996, and 1998, Belzner stole $1,111,304.78 from his employer at the time, and in 1998, he stole $186,146.71 from another employer, none of which he reported as income on his tax returns for those years. A subsequent IRS audit of those tax years resulted in the assessment of additional taxes, interest and penalties against Belzner of $1,150,935.25 for the 1995 and 1996 tax years and $246,424.50 for the 1998 and 1999 tax years.
To avoid paying those taxes, Belzner admitted that between January 2006 and June 2011, he intentionally concealed income and assets from the IRS and made no payments on his tax debt. For example, Belzner placed his residences, other real estate, and automobiles in the names of corporations that he formed. Belzner paid his personal expenses from bank accounts he opened in the names of the corporations, including his mortgage, ground rent for a vacation home, construction costs on a house that he built, car payments, Ravens season tickets, and private school tuition. Belzner used individuals to act as “straw purchasers” for property that he acquired and to conduct financial and other transactions on his behalf. At Belzner’s direction, McCloskey Group employees and others also cashed more than $175,870 in company checks made payable to them, returning the cash to Belzner or using the cash to pay Belzner’s creditors. Belzner also arranged for the McCloskey Group to pay many of his personal living expenses, rather than issuing him salary checks. For example, between January 2009 and June 2011, the McCloskey Group paid more than $1.5 million of Belzner’s personal expenses, including health and life insurance premiums, car, personal loan and mortgage payments, and utility and cable bills. In February 2006 and again in January 2009, Belzner submitted forms to the IRS falsely claiming that he did not have sufficient income to make any payments on the assessed back taxes, penalties, and interest. The total amount of assessed tax, interest, and penalties owed by Belzner as of August 2013 was $2,619,870.
Belzner faces a maximum sentence of 20 years in prison each for wire fraud and for conspiracy and a maximum of five years in prison for evasion of assessed tax payments. U.S. District Judge James K. Bredar has scheduled sentencing for September 3, 2014, at 10:00 a.m.
Brian McCloskey, age 42, of Baltimore, and Kevin Sniffen, age 52, of Phoenix, Maryland, have each pleaded guilty to their roles in the conspiracy and are awaiting sentencing.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
United States Attorney Rod J. Rosenstein praised the FBI and IRS-Criminal Investigation for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorneys Jefferson M. Gray and Kathleen O. Gavin, who are prosecuting the case.