Apollo Woman Sentenced to 42 Months in Prison for Massive Mortgage Fraud Scheme
PITTSBURGH - A resident of Apollo, Pa., has been sentenced in federal court to 42 months of incarceration and three years of supervised release on her conviction of mail and wire fraud conspiracy, United States Attorney David J. Hickton announced today.
United States District Judge Nora Barry Fischer imposed the sentence on Bonnie Gardner, 56.
According to information presented to the court, Gardner participated in a massive fraud scheme involving more than $15 million in losses to more than 100 victims. The investigation has subsequently determined that Gardner and Frank Guzik, Jr., through various investment and development groups, such as East Haven Investments, East Haven Development, East Haven Realty, etc., devised and implemented an elaborate Ponzi scheme through which they successfully solicited investors.
The purported business of East Haven was to purchase properties, make various improvements to the properties, and then to sell them. In order to secure the investments, Guzik and Gardner made a series of misrepresentations to the investors. As collateral for the investments, Guzik and Gardner provided the investors mortgages on various properties. The investors believed that East Haven would be unable to sell the properties on which they held mortgages unless the mortgages were satisfied. Many of these mortgages were never filed, which the investors later learned.
The investigation has also revealed that the satisfaction pieces on some of the mortgages were forgeries. Guzik and Gardner also provided multiple investors with mortgages on the same properties. Thus, the purported value to the mortgagees was well in excess of the property's value. The investors were, of course, unaware that other investors held mortgages on the same properties.
Some of the investors received, if requested, monthly interest payments on their investments. Others chose to roll their monthly interest over into the investment, having been erroneously told by Guzik and Gardner that no tax was due on the accrued interest if it was rolled over. The investment never really earned any interest, despite the investor statements indications to the contrary and despite the payment of interest payments. In other words, Guzik and Gardner used new investor funds to pay interest to individual who had invested earlier, and also to support the lifestyles Guzik and Gardner were living.
Beginning in April of 2005, Guzik and Gardner needed to sell some of the properties to generate cash flow and to show investors that East Haven was profitable, but they could not sell the properties. Thus, Guzik and Gardner convinced a number of individuals to act as straw purchases of the properties. The mortgage documents falsely reported that the purchasers made substantial down payments from their own funds to purchase the properties. In fact, Guzik and Gardner deposited investor funds into the straw purchasers' bank accounts and then the straw purchasers would withdraw the money in the form of a certified check that they would bring to the closings as if they had made the down payment from their own funds. In addition, Guzik and Gardner paid the straw purchasers, using investor funds, the mortgage and utility payments for those properties. Guzik and Gardner then prepared a glossy pamphlet reporting the sales of the properties for use in inducing further investors.
Beginning around November 2007 and continuing until in or around March 2008, Guzik began withdrawing funds from the East Haven accounts by cash and check. By the end of March 2008, East Haven's National City accounts, into which investor checks had been deposited and from which investor interest checks had been drawn, had minimal or zero balances. During the same time period, Guzik withdrew $200,000 to purchase untraceable gold coins from International Precious Metals in Texas. Guzik also received two- short term loans totaling $475,000 in early March 2008, promising to repay them at 20% interest by March 18, 2008.
On or about March 17, 2008, Guzik disappeared, and has not been heard from since. He did not repay the loans, stopped making interest payments on investments totaling approximately $15 million, and never accounted for the principle investments. His whereabouts are still unknown.
Assistant United States Attorney Brendan T. Conway prosecuted this case on behalf of the government.
U.S. Attorney Hickton commended the United States Postal Inspection Service, the Criminal Investigation Division of the Internal Revenue Service, and the Monroeville Police Department for the investigation leading to the successful prosecution of Gardner.