Real Estate Developer And Property Manager Charged In Ponzi Scheme To Defraud Investors Out Of Millions Of Dollars
NEWARK, N.J. – A property developer and manager has been arrested on charges stemming from a scheme to defraud real estate investors, U.S. Attorney Craig Carpenito announced today.
Herbert Whalen a/k/a “Bert Whalen,” 45, of Indianapolis, Indiana, was indicted by a federal grand jury on November 20, 2019, on one count of conspiracy to commit wire fraud and three counts of wire fraud. Whalen was arrested Nov. 21, 2019, and is scheduled to appear this afternoon before U.S. Magistrate Tim A. Baker in Indianapolis, Indiana. His arraignment date in Newark federal court has not yet been scheduled.
According to the indictment:
Between August 2016 and July 2018, Whalen, the owner of Oceanpointe Property Management in Indianapolis, Indiana, engaged in a scheme to obtain money from victim real estate investors by misrepresenting and concealing the poor condition of properties managed by Oceanpointe and by creating fake leases for unoccupied Oceanpointe properties. Employees from Company 1 and Oceanpointe promised investors that, after repairs and rehabilitations were completed, and tenants rented the properties, investors would receive copies of the leases and begin to receive rent payments as their return on investment. In reality, many Oceanpointe properties were not repaired and rehabilitated, and were not ready for occupancy. To conceal this fact from victim investors, Whalen and Coconspirator 1 directed Oceanpointe employees to draft fake leases, making it appear to investors that Oceanpointe properties were rented, when, in fact, the properties remained vacant. Whalen instructed Oceanpointe employees to place fake tenant names on leases to send to Oceanpointe investors.
When investors attempted to view the properties that they had purchased, Whalen directed Oceanpointe employees to cover the windows to make the properties appear to investors as if work was being completed, when, in fact, it was not. Oceanpointe employees did this to conceal the poor condition of the properties and the fact that the properties remained vacant. Whalen, Coconspirator 1, and others commingled tenant rent payments and selected which investors would be paid from the pool of funds in order to silence investors who voiced concerns and evade detection of the fraud. In order to prevent investors from leaving Oceanpointe and exposing the fraudulent conduct, Whalen directed an Oceanpointe employee to create a false identity and falsely claim, on an online real estate message forum, that the Oceanpointe employee was an investor with Oceanpointe and Company 1, and that Oceanpointe had addressed all of the concerns regarding the investment property. These misrepresentations and others led to millions of dollars in losses to investors, which Whalen used to, among other things, fund his and Coconspirator 1’s lifestyle.
The conspiracy count and the three counts of wire fraud with which Whalen is charged each carry a maximum potential punishment of 20 years in prison and a fine of up to $250,000, or twice the gross loss or gain caused by the offense.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, with the investigation leading to the indictment.
The government is represented by Assistant U.S. Attorney Ari B. Fontecchio of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.