Two charged in $1M real estate scam

TRD New York /
Mar.March 03, 2009 03:14 PM

Two New York-based principals of a real estate investment company that once maintained offices in the Helmsley Building at 230 Park Avenue were arrested and charged today with bilking naive investors of a total of $1 million, the Manhattan district attorney’s office said.

Partners Sharmon Wade, 35, and Claudius Hannah, 45, allegedly used their Covenant Equity Group to convince unsophisticated real estate investors to each give them between $1,900 and $200,000 with promises of tremendous returns of 50 to 100 percent in one or two months, prosecutors said.

However, the pair never made any real estate investments, prosecutors said, despite claiming they would buy into projects such as the Allegro Palms, a residential condominium project in Riverview, Fla. Instead, the duo spent the money on nightclubs, restaurants, high-end clothes and spas, investigators said.

Between June 2007 and August 2008, Wade and Hannah allegedly lured investors with claims that they would purchase commercial properties at a discount and then flip them or refinance them, making large gains.

In echoes of the Bernard Madoff Ponzi scheme, prosecutors said Wade and Hannah gave early investors a small, speedy return to entice others to buy in, and paid others back in part or in full after they complained of poor gains.

Wade, of Jamaica, Queens, and Hannah, of Spring Valley, N.Y., were each charged with grand larceny, scheme to defraud, and violation of tax law and securities fraud. Hannah was also charged with forgery, and on the federal level, Wade was also charged with participating in a $10 million sub-prime mortgage fraud case.

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