TWO REAL ESTATE EXECUTIVES PLEAD GUILTY IN MANHATTAN FEDERAL COURT TO $2 MILLION FRAUD SCHEME INVOLVING BATTERY PARK CITY CONDOMINIUM PROJECT
Preet Bharara, the United States Attorney for the Southern District of New York, and Ronald J. Verrochio, the Inspector-In-Charge of the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today that J. CHRISTOPHER DALY and MICHAEL ABREU, two executives at the Sheldrake Organization, a real estate development and management company, pled guilty in Manhattan federal court for their roles in a scheme to fraudulently obtain $2.2 million from a foreign-owned bank (the “Lender”). DALY, who was the owner and President of Sheldrake, and ABREU, who was the Director of Asset Management, used the funds obtained from the Lender to support the construction and operation of a $573 million luxury condominium project in Battery Park City, New York, called “Riverhouse.” DALY pled guilty today, and ABREU pled guilty yesterday before U.S. District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara stated: “Christopher Daly and Michael Abreu carried out a duplicate invoice scheme in which they exploited a bank to secure an additional $2 million for their development project. They ended up on the losing side of their real estate scheme and will now be punished for their crime.”
New York USPIS Inspector-in-Charge Ronald J. Verrochio said: “Postal Inspectors will vigorously pursue and bring to justice those individuals who use the U.S. Mail in the furtherance of criminal schemes against financial institutions, both foreign and domestic.”
According to the Information and statements made during the two guilty plea proceedings:
The Battery Park City Authority (“BPCA”) is a New York state public benefit corporation in charge of the commercial and residential development and maintenance of a segment of downtown Manhattan. In 2004, BPCA solicited bids for the construction of the Riverhouse Project, and Sheldrake ultimately won the bid for the development.
As part of the project, Sheldrake secured financing from the Lender. When Sheldrake received invoices from BPCA relating to the Riverhouse Project, Sheldrake submitted them to the Lender for reimbursement. From the beginning of the Riverhouse Project in early 2006, Sheldrake struggled to make timely payments to BPCA on its invoices. As Sheldrake’s payment problems persisted throughout the fall of 2006, the company’s representatives, including DALY and ABREU, assured BPCA representatives that the outstanding invoices and late charges would be paid. Nevertheless, while Sheldrake made payment on some outstanding amounts owed to BPCA during the fall of 2006, it did not pay the balances in full.
In January 2007, DALY, ABREU, and a co-conspirator (“CC-1”) agreed to submit a duplicate invoice from BPCA to the Lender, meaning that the Lender would be charged a second time for reimbursements that it had previously funded. In February 2007, ABREU submitted an invoice to the Lender requesting funding for approximately $2.2 million to which Sheldrake was not yet entitled. The Lender funded this invoice, among other payments, and wired the money to Sheldrake’s bank account in New York, New York. This additional capital was for a new real estate investment and the money helped keep the Riverhouse Project afloat.
In July 2007, on behalf of Sheldrake, a letter signed by DALY was sent to the Lender requesting a reimbursement for an invoice that had already been paid to Sheldrake in connection with an earlier invoice from February. Unaware that this charge had previously been funded, the Lender again funded the invoice request to Sheldrake and wired the money to Sheldrake’s bank account in New York, New York.
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DALY, 49, of New York, New York, and ABREU, 43, of Carmel, New York, each pled guilty to one count of conspiracy to commit mail fraud and wire fraud. This charge carries a maximum sentence of 20 years in prison; a maximum term of three years of supervised release; a maximum fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense; and a $100 mandatory special assessment. As part of each of their plea agreements, DALY and ABREU agreed to forfeit the proceeds obtained as a result of the offense.
Mr. Bharara praised the investigative work of the USPIS.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.12-118