Real estate investment firm executives charged over Ponzi scheme

The chairman and a senior executive of Secaucus-based real estate investment firm National Realty Investment Advisors LLC (NRIA) have been charged for their role in a scheme to defraud more than 2,000 investors in a scheme $650 million Ponzi scheme, and for conspiring to evade $26 million in tax debt, U.S. Attorney Philip R. Sellinger said.

Thomas Nicholas Salzano, aka “Nicholas Salzano”, a 64-year-old man from Secaucus, and Rey E. Grabato II, a 43-year-old man from Hoboken and the Republic of the Philippines, are charged in an 18-count indictment unsealed on October 12. Earlier, in June, the New Jersey Bureau of Securities issued a summary cease and desist order to the NRIA.

Both men are charged with conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud and conspiracy to defraud the United States. Salzano is also charged with two counts of aggravated impersonation, two counts of tax evasion and five counts of subscribing to false tax returns.

Salzano was arrested on October 12 and appeared by video conference before U.S. Investigative Judge Leda Dunn Wettre on October 13. Grabato is still at large.

Also on October 13, Arthur S. Scuttaro, a 62-year-old from Nutley, the former NRIA sales chief, pleaded guilty before U.S. District Judge Evelyn Padin in federal court in Newark to an information charging him one count of conspiracy to commit securities fraud in the same scheme. His sentencing is scheduled for February 23, 2023.

“Fraudulent marketing campaign to deceive investors”

Officials from the US Attorney’s Office, the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS) condemned the scheme and applauded the charges.

“As stated in the indictment, these defendants conspired to create a high-pressure fraudulent marketing campaign to deceive investors into believing that their bogus real estate business was generating substantial profits,” Sellinger said.

“In reality, their criminal tactics were straight out of the Ponzi scheme playbook so they could cheat their investors and line their pockets. Our message from today’s charges is that we remain deeply committed to rooting out all types of financial fraud schemes. These schemes undermine our markets and erode public confidence in investing. Together with our law enforcement partners, we will continue to prioritize the investigation and prosecution of financial crime in all its forms. »

“This case should serve as a cautionary tale to the consumer,” said FBI Special Agent in Charge James E. Dennehy. “Before entrusting your hard-earned savings to someone, do your research on the trustee and the product they sell; become familiar with the red flags that can alert you to fraud; don’t let dollar signs cloud your judgment; and remember the old adage that if it sounds too good to be true, it probably is.

“Clever brochures, flashy ads and ads featuring celebrities miss the most important element – ​​credibility. The FBI works diligently to protect the American public, arrest offenders, and recover stolen funds that have not evaporated. The sad reality is that the consumer is rarely cured. Skepticism and analysis remain the best protection.

“It was a brazen scheme of staggering proportions,” said Tammy Tomlins, acting IRS Criminal Investigations Special Agent in charge of the Newark field office. “These defendants prioritized their own greed, stealing $650 million from investors, while conspiring to evade $26 million in taxes. The indictment sends a clear message that IRS Criminal Investigation Special Agents and our law enforcement partners remain vigilant and will vigorously pursue those who attempt to enrich themselves through fraudulent means. .

Alleged $650m Ponzi scheme busted by authorities

According to documents filed in that case and statements made in court, Grabato was president of the NRIA and Salzano was the company’s chief executive.

From February 2018 to January 2022, Salzano and Grabato defrauded investors and potential investors of NRIA Partners Portfolio Fund I LLC, an NRIA-managed real estate fund, of $650 million through lies, deception, misleading statements and significant omissions.

These included misrepresentations about the NRIA’s financial situation, how the defendants and their conspirators used fund investors’ money, and Salzano’s leadership role at the NRIA and his history of fraud.

They executed their scheme through an aggressive multi-year national marketing campaign that involved thousands of emails to investors; advertisements on billboards, television and radio; and investor meetings and presentations.

Salzano led and directed the marketing campaign, which used deception, material misrepresentations and omissions, and falsified documents to manipulate investors.

The marketing campaign aimed to mislead investors into believing that the NRIA was a solvent company that was generating large profits. In reality, the NRIA generated little or no profit and operated like a Ponzi scheme, which was kept afloat by new investors.

Although they invested almost none of their own capital in the company, the defendants embezzled millions of dollars of investors’ money.

Salzano hid his true leadership role at the NRIA while using Grabato as an alternate CEO in an effort to avoid investor scrutiny of Salzano’s earlier guilty plea for defrauding small businesses in Louisiana through a a large telecommunications company.

Salzano and Grabato also orchestrated a separate plot to defraud the IRS in its effort to collect $26 million in unpaid taxes Salzano owed to the U.S. Treasury. Salzano and Grabato allegedly lied to the IRS, used an applicant network, opened bank accounts in the names of bogus entities, and used false and fraudulent corporate documents.

Defendants face hefty fines and many years in prison

The conspiracy to commit securities fraud and the conspiracy to defraud the United States, counts charged in the indictment, carry a maximum sentence of five years in prison and fined $250,000. The securities fraud charge carries a maximum sentence of 20 years in prison and a $5 million fine. The counts of wire fraud conspiracy and wire fraud both carry a maximum sentence of 20 years in prison and a $250,000 fine.

The tax evasion counts carry a maximum sentence of five years in prison and a $100,000 fine. The counts of misrepresenting taxes each carry a maximum sentence of three years in prison and a fine of $100,000. Counts of aggravated identity theft carry a mandatory two-year prison sentence, which must be served consecutively to any other sentences handed down.

In a separate civil action, the Securities and Exchange Commission filed a lawsuit on October 13 in the District of New Jersey against Salzano, Grabato, Scuttaro and others based on the allegations underlying the Ponzi scheme alleged in the indictment and information.

U.S. Attorney Sellinger credited FBI Special Agents, under Special Agent in Charge James E. Dennehy in Newark, and IRS-Criminal Investigation Special Agents, under Acting Special Agent responsible Tammy Tomlins in Newark, with the investigation. He also thanked the Securities and Exchange Commission, New York Regional Office, for its cooperation and assistance during the investigation.

The government is represented by Assistant U.S. Attorneys Jonathan Fayer of the Economic Crimes Unit and Lauren E. Repole, Chief of the General Crimes Unit.

The charges and allegations contained in the indictment are only accusations and the defendants are presumed innocent until proven guilty.

For updates on this story and others, visit www.hudsonreporter.com and follow us on Twitter @hudson_reporter. Daniel Israel can be reached at disrael@hudsonreporter.com.