Real estate’s dark side

From stealing buildings to faking city construction documents, more fraud being detected




When it comes to real estate scams and crimes in New York, no economic cycle is spared. As The Real Deal and other publications have documented, a number of cash-strapped industry players have turned to devious acts during the recession as finances have grown tight. But it’s not just the bad times that breed bad behavior. Many of the scams now being discovered and prosecuted have their roots in the mid-2000s era of lax underwriting standards and easy credit.

Richard Farrell, head of the Brooklyn District Attorney’s new Mortgage Fraud and Real Estate Crimes Unit, said the sky-high real estate prices of the boom lured a lot of scammers and career criminals into the industry.

“The values that houses hit throughout the country and especially in [New York] were exponential,” Farrell said. “When you’ve got houses that doubled in value in three years rather than a decade and a half, a lot of fraud can slip in.”

Real estate fraud, he added, “is the new bank robbery — with no guns — because it’s where the money is.”

This month, The Real Deal dissected some of the crimes and scams now afflicting the industry. We took an in-depth look at three criminal cases to learn just how different kinds of scams can play out. In one case, bribes were allegedly exchanged for fake construction testing documents, another documented the “theft” of a Bronx building, while the last involved a high-flying real estate developer accused of convincing friends and family to invest in non-existent projects.

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Meanwhile, industry insiders say more struggling developers may be raiding the finances of their own projects. In the managing agent business, which has been largely cleaned up in the last decade or two, several recent arrests have involved building managers accused of pocketing the funds entrusted to them. In some instances, these managers prey on boom-time buildings with brand new condo boards who don’t spot the red flags. Finally, there’s a recap of some of real estate’s recent offenders — ranging from Natavia Lowery, recently convicted of slaying real estate broker Linda Stein, to Italian conman Raffaello Follieri.

The mechanics of a con job

Robbing Peter to pay the condo bill

Crossing the line

Cracking down on managing agent misconduct