Two New York men were sentenced in Connecticut for their involvement in a $50 million multifamily mortgage fraud scheme.
Jacob Deutsch, 58, who ran day-to-day operations at Hartford-based B H Property Management, will serve prison time for orchestrating the scheme alongside his cousin Aron Deutsch, 63, according to a press release by the U.S. Attorney’s Office.
The scheme encompassed 24 mortgage loans on numerous multifamily housing properties in Hartford, totaling nearly $50 million. The “sheer volume of false documents and material misrepresentations’’ involving the cousins was “staggering,” according to federal prosecutors.
The duo engaged in fraudulent activities between September 2016 and May 2021, deceiving financial institutions, government-sponsored enterprises including Freddie Mac and Fannie Mae, and the U.S. Department of Housing and Urban Development.
They provided false information that overstated the value of multifamily housing properties managed by BHPM in connection with loans secured by those properties.
As part of the scheme, Jacob Deutsch supplied false rent rolls and fabricated leases to victim financial institutions, overstating the number of renters or inflating rent amounts.
He manipulated inspections by staging unoccupied apartments with furniture and instructing employees to lie to inspectors about occupancy.
False information submitted by Jacob Deutsch induced financial institutions to issue loans they would not have granted if they’d been given accurate information. The deception also led Freddie Mac and Fannie Mae to purchase loans and prompted HUD to issue a mortgage insurance commitment to a victim financial institution.
A loan application with CBRE Capital Markets for a Hartford building said the annual rent income was $280,000 when the building was actually empty, the Hartford Courant reported.
Both Jacob and Aron Deutsch were arrested on May 19, 2021, and later pleaded guilty to conspiracy to commit mail fraud and wire fraud affecting a financial institution on July 12, 2022, and June 1, 2022, respectively.
Jacob Deutsch, who had a previous wire fraud conviction in the Eastern District of New York, was sentenced to 62 months in prison, four years of supervised release, and a $10,000 fine.
Aron Deutsch received five-years probation and a $1 million fine.
After his arrest and while released on bond, Jacob Deutsch victimized another lender to secure an $11 million loan. He’s required to report to prison on March 8.