Multi-Million-Dollar Real Estate Ponzi Schemer Sentenced to Nine Years in Prison for Securities Fraud and Money Laundering
Perpetrator of Investment Scheme Also Ordered to Pay More Than $28.6 Million
|U.S. Attorney’s Office June 04, 2013|
NEWARK, NJ—A Somerset County, New Jersey man was sentenced today to 108 months in prison for his role in defrauding victims of an investment scheme by misusing their capital contributions and misrepresenting the performance of their investments, U.S. Attorney Paul J. Fishman announced.
David Connolly, 51, of Watchung, New Jersey, previously pleaded guilty before U.S. District Judge William J. Martini to two counts of a superseding indictment charging him with securities fraud and money laundering. In addition to the prison term, Judge Martini, who imposed the sentence today in Newark federal court, ordered Connolly to pay $18,732,775 in restitution and forfeit $9,920,000.
According to documents filed in this case and statements made in court:
From at least 2006 through October 2009, Connolly orchestrated a real estate investment fraud scheme in which he took in more than $50 million from more than 200 victims, causing losses of at least $18 million.
To induce victims to invest, Connolly made numerous materially false and misleading statements and omissions. He told victims their money would be used to purchase a specific property, and the property would generate rental income that would be used to pay investors monthly distributions. Connolly also told victims their money would be held in escrow until the closing of a purported real estate transaction and that each property would be financially independent from all the others. Connolly misrepresented the amount of equity victims had in the properties, the condition of the properties, and the financial performance of the properties. Although the investment properties experienced significant negative cash flow, Connolly told investors they were performing well.
Connolly took significant portions of his victims’ money, which had been provided for specific real estate transactions, and used it for other purposes without victims’ knowledge. He funded unrelated real estate transactions in which he was engaged; paid prior victims; and paid himself. The scheme collapsed in the summer of 2009 after Connolly began defaulting on the mortgage payments for the investment properties.
In addition to the prison term, restitution, and forfeiture, Judge Martini sentenced Connolly to serve three years of supervised release.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation. He also thanked special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for their important contributions to the investigation.
The government is represented by Assistant U.S. Attorney Charlton A. Rugg and Senior Litigation Counsel Leslie F. Schwartz of the U.S. Attorney’s Office Criminal Division in Newark.
If you believe you are a victim of or otherwise have information concerning this alleged scheme, you are encouraged to contact the FBI at 973-792-3000.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.