2002-02-06 -- Grieser, Gary -- Indictment -- News Release

NEWARK - A Monmouth Beach man was indicted today on charges that he committed mortgage fraud by using "straw buyers" in 200 mortgage loan transactions and that he evaded more than $555,000 in taxes on the illegal proceeds of the scheme, U.S. Attorney Christopher J. Christie announced.

Gary Grieser, 46, was previously sentenced in March 2001 to serve 57 months in prison, following his guilty plea to charges in a separate fraud Indictment. Grieser admitted then that he used his infant son's name and social security number to fraudulently obtaining mortgage loans on 13 different properties in Asbury Park, Belmar, Long Branch, Neptune, Paterson, Piscataway, and Plainfield.

In the 31-count Indictment returned today, Grieser - currently incarcerated at the federal correctional institution at Fort Dix - was charged with one count of conspiracy to commit wire fraud, 15 counts of wire fraud, 12 counts of conducting monetary transactions in criminally-derived property, and three counts of income tax evasion, according to Assistant U.S. Attorney Alain Leibman.

The Indictment alleges that Grieser evaded federal income taxes on more than $2.6 million in proceeds from the scheme - unreported income that he used to finance an extravagant lifestyle, including the rental of several Mercedes Benz automobiles, lavish dining and travel expenses, and the purchase and remodeling of a home for himself in Monmouth Beach.

If convicted Grieser faces a maximum of five years' imprisonment and fines of $250,000 on each of the conspiracy and wire fraud counts; a maximum of 10 years' imprisonment and fines of $250,000 on each of the monetary transaction counts; and a maximum of five years' imprisonment, a $100,000 fine, and costs of prosecution on each of the income tax evasion counts.

Under U.S. Sentencing Guidelines, the U.S. District Judge to whom Grieser's new case is assigned would, upon a conviction, determine the actual sentence based upon a formula that takes into account the severity and characteristics of the offense, as well as Grieser's criminal history. Parole has been abolished in the federal system. Under Sentencing Guidelines, defendants who are given custodial terms must serve nearly all that time.

The mortgage loan transactions involved so-called "land flips," in which real estate was purchased or was under contract to be purchased at a relatively low price and was to be resold shortly thereafter to another at a significantly higher price.

Fraudulent land flips involved several steps - including the recruitment of "straw buyers," who were paid to lend their names and other biographical information for the fraudulent mortgage applications, as outlined in the Indictment:

• the higher price on resale did not fairly represent the market value of the property in an arms-length transaction, but was an artificially high price, generally supported by an inflated and false appraisal;

• the higher, fraudulent resale price was used to generate a mortgage loan; and

• the proceeds of the mortgage loan were disbursed for purposes including completion of the initial purchase of the property and distribution to the participants in the scheme.

In the fraudulent land flips, the individuals identified as the purchaser-borrowers on the resale - the straw buyers - had no genuine interest in owning, occupying, or holding title to the particular property and was often unaware that property was being purchased, and a mortgage loan obtained, in their name, according to the Indictment.

Through various means Grieser and his co-conspirators obtained the name, social security account number, date of birth, driver's license information, and employment and income information from such straw buyers to allow Grieser and his co-conspirators to conduct transactions using those individuals' identities.

Some straw buyers, according to the Indictment, were offered as much as approximately $4,000 for each property to be acquired in their name.

Others were not informed that property would be purchased in their name, but instead were falsely offered an opportunity to participate as investors or joint venturers in Capital Assets, a company created by Grieser, which they were told was engaged in the purchase and sale of properties. These persons were asked to pay a participation fee to a Grieser co-conspirator of as much as approximately $1,000 and to provide their identifying information. In exchange, those persons were told to expect thousands of dollars for their participation in the venture and as their share of profits when properties were repaired and resold, and most did receive some monies.

By 1997, the mortgage loans went into default and many went into foreclosure, and the properties deteriorated. The balances on the mortgages became the legal responsibility of "straw buyers," whose names had remained on the original mortgage documents for the properties, despite Grieser and his co-conspirators having led them to believe that they would not have such responsibility.

Grieser used hundreds of thousands of dollars in proceeds he obtained from the fraudulent mortgage loans and from the rents collected on the straw buyer properties for his personal benefit and, in 1997, to open a tanning salon called The Tanning Factory in Eatontown, New Jersey.

An Indictment is a formal charge made by a grand jury, a body of 16 to 23 citizens, Christie noted. 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 Indictment, 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 Special Agents of the FBI, under the direction of Kevin Donovan, Special Agent in charge of the FBI's Newark office; and Special Agents of the IRS, under the direction of Special Agent in Charge Anne D. Fahy, with bringing the case. He also credited the assistance provided to the investigation by the office of Monmouth County Prosecutor John Kaye.

The Government is represented by Assistant U.S. Attorney Leibman of the U.S. Attorney's Fraud and Public Protection Division in Newark.

Defense Counsel: formerly John C. Whipple, Esq., Morristown (attorney status presently not clarified)