2002-04-24 -- Burke, Timothy, et. al -- Indictment -- News Release
Three Indicted in Equity-Skimming Scheme
NEWARK - Three persons who allegedly participated in an "equity-skimming" scheme involving properties throughout New Jersey were indicted today on charges of diverting tens of thousands of dollars per month in rental income to their own use, rather than towards mortgage or tax payments, U.S. Attorney Christopher J. Christie announced.
Charged in a four-count federal Indictment, alleging conspiracy to commit equity skimming and mail fraud, were:
• Timothy Burke, 51, of Bridgeport, Conn., charged with conspiracy, equity skimming and two counts of mail fraud
• Paul Ligas, 42, of Lyndhurst, charged with conspiracy, equity skimming, and two counts of mail fraud, and
• Renee Wilmot, 37, of Lyndhurst, charged with conspiracy, equity skimming and two counts of mail fraud
Count One of the Indictment alleges a conspiracy to commit equity skimming and mail fraud between 1993 and 1999. Conviction on that count carries a maximum penalty of five years in federal prison and a $250,000 fine.
Count Two alleges equity skimming, and counts three and four allege mail fraud, all during the period between 1993 and 1999. Conviction on each of those counts carries a maximum of five years in prison and a $250,000 fine.
Under U.S. Sentencing Guidelines, the U.S. District Judge to whom this case is assigned would, upon conviction, determine the actual sentence based upon a formula that takes into account the severity and characteristics of the offense, and each defendant's criminal history, if any.
Parole has been abolished in the federal system. Under the Sentencing Guidelines, defendants that are given custodial terms must serve nearly all that time.
The Indictment alleges that between 1993 and 1999, Burke and Ligas engaged in equity skimming, and that Wilmot joined them in 1996. Burke and Ligas owned and operated businesses named Lincoln Management, Franklin Properties and Tower Management (collectively "Lincoln Management") in carrying out their scheme. Wilmot was their office manager. All three businesses were located in Lyndhurst, initially at 63 Ridge Road and later at 219 Stuyvesant Ave.
Equity skimming is a name generally applied to a type of fraud that consists of the practice of purchasing residential properties whose owners are in default on their mortgages or their real estate taxes, and then diverting rental income from these properties for personal gain rather than applying this rental income toward mortgage payments, the payment of taxes and other property-related expenses.
The defendants told various homeowners in default that by selling their residences to Lincoln Management, that would wipe the slate clean and that Lincoln Management would take over all of the homeowners' property-related debts and obligations.
The Indictment identifies eight specific properties acquired by Lincoln Management. They were located in Garfield, Hillside, West Orange, Newark, Plainfield, Ridgewood and Paterson. In each case, the original homeowner had defaulted on his/her mortgage loan or on his/her property tax payments.
After buying the properties from the homeowners, Lincoln Management diverted the rental income from these properties for the use of the defendants, but did not make the mortgage or tax payments owing on them.
In some cases, Lincoln Management collected rent from the very same homeowners from whom it had bought the property. The properties were eventually foreclosed upon by the banks that had made the original mortgage loans.
The Indictment alleges that over 168 properties were involved in Lincoln Management's scheme. In the month of June 1998, for example, the total rental value of the properties then controlled by Lincoln Management was $82,000.
Various banks and federal agencies, such as HUD and Veterans Affairs, that had insured some of these mortgage loans sustained losses on the properties taken over by Lincoln Management. For example, HUD lost over $1.4 million on the Lincoln Management properties.
An Indictment is a formal charge made by a grand jury, a body of 16 to 23 citizens. Grand jury proceedings are secret, and neither persons under investigation nor their attorneys have the right to be present. A grand jury may vote an Indictment if 12 or more jurors find probable cause to believe that the defendant has committed the crime or crimes charged.
Despite having been indicted, every defendant is presumed innocent, unless and until found guilty beyond a reasonable doubt following a trial at which the defendant has all of the trial rights guaranteed by the U.S. Constitution and federal law.
Christie credited Postal Inspectors, under the direction of Kevin J. Burke, Postal Inspector in Charge of the Postal Inspection Service in Newark, and Special Agents in the Office of the Inspector General of Veterans Affairs, under the direction of Special Agent in Charge Bruce T. Sackman, Department of Veterans Affairs, Northeast Field Office, with developing the case against the defendants.
The Government is represented by Assistant U.S. Attorney Bohdan Vitvitsky of the U.S. Attorney's Frauds and Public Protection Division in Newark.