Acting Attorney General John J. Hoffman announced that a mortgage broker from Jersey City was sentenced to state prison today for laundering the proceeds of a criminal scheme in which he conspired to steal more than $1.2 million from lenders by filing fraudulent mortgage applications, diverting mortgage proceeds and falsifying settlement statements.
Brian Lyles, 43, of Jersey City, the owner of BKL Property Management, LLC, was sentenced to eight years in state prison, including two years and eight months of parole ineligibility, by Superior Court Judge Stuart A. Minkowitz in Morris County. Lyles pleaded guilty on Feb. 11 to first-degree money laundering. Lyles’ company, BKL, pleaded guilty through its attorney to second-degree theft by deception. BKL must pay $200,000 in restitution as a result of the guilty plea.
In pleading guilty, Lyles admitted that he laundered the proceeds of a criminal scheme in which he conspired with others to falsify loan applications in order to cause banks to loan money to unqualified home buyers for the purchase of homes in Jersey City at inflated prices. He and his co-conspirators fraudulently obtained four loans totaling more than $1.2 million.
The scheme involved arranging two simultaneous sales of each property and diverting loan proceeds. Straw purchasers initially bought the homes through “short sales,” which are pre-foreclosure sales where the mortgage holder agrees to permit the home to be sold for less than the amount due on the loan.
The straw purchasers in turn sold the homes at much higher prices to other purchasers who were the borrowers for the fraudulently obtained loans. Those purchasers were recruited with a pitch that they could obtain investment properties with no money down and receive rental income. The loan proceeds were used to make the initial discounted purchase in the short sale. After making certain other required payments, Lyles and his co-conspirators stole the remaining loan proceeds by diverting them at closing
Lyles admitted that he defrauded lenders in connection with four loans totaling approximately $1,219,860: (1) a $331,182 loan for a home on Virginia Avenue in Jersey City made by Wells Fargo Bank on June 26, 2008 (short sale price: $179,000), (2) a $276,810 loan for a home on Bidwell Avenue in Jersey City made by Wells Fargo Bank on July 23, 2008 (short sale price: $195,000), (3) a $298,187 loan for a home on Bayview Avenue in Jersey City made by Wells Fargo Bank on Sept. 9, 2008 (short sale price: $180,000), and (4) a $313,681 loan for a home on Claremont Avenue in Jersey City made by Bank of America on July 10, 2009 (short sale price: $145,000).
Lyles and his co-conspirators falsified information on the loan applications, including information on the bank account balances of the applicants, so that the applicants could obtain loans for which they were not qualified. They submitted false supporting documents, including fraudulent bank statements, and falsely stated that the home would be the primary residence of the borrower.
The lenders were thereby induced to issue mortgages based on the inflated price of the property, while they were not told of the discounted purchase of the property in the short sale. In addition, Lyles conspired with settlement agents who would divert loan proceeds to him and other co-conspirators. They would file fraudulent HUD settlement statements indicating that the borrower made required payments at closing and that the loan proceeds were properly disbursed.