The New Jersey Attorney General’s Office and the New Jersey Bureau of Securities have filed a lawsuit against a New York City man, several members of his family and 68 corporations they allegedly created to carry out a massive securities fraud scheme.

The suit claims individual defendants obtained more than $42 million from more than 100 real estate investors, and diverted millions to pay their personal expenses.

The complaint was filed in Superior Court in Essex County against Joseph Greenblatt; his wife, Alexandra Horvath; his father, Max Greenblatt; the estate of Joseph Greenblatt’s mother, Vera Greenblatt; and Maywood Capital Corp., a New Jersey corporation based in Paramus that allegedly was the umbrella company for the investment scheme.

According to a statement from the Attorney General’s office, defendants allegedly placed newspaper ads offering interests in “safe” mortgages. Joseph Greenblatt solicited investors in California, Florida, Massachusetts, New Jersey and New York, among others, to invest in residential properties in New York City that were in need of repair. The ads claimed the investments were ideal for IRAs, Keoghs, pensions and personal portfolios, and investors allegedly were promised 14 percent interest, plus additional profits when the buildings were renovated and resold.

“We allege, the investments were largely unsecured and were used to pay the defendants’ personal expenses,” Attorney General Peter Harvey said.

According to the complaint, corporations formed by the individual defendants would purchase properties for renovation and/or resale through Maywood Capital. Investor funds were purportedly invested in the entity owning the property and secured by mortgage interests in the property. But many of the properties controlled by the defendants were over-mortgaged and did not produce profits promised to investors.

The complaint charges that many investors’ mortgage interests were never recorded or were extinguished without their knowledge so that new investments could be secured by mortgages on the buildings in question. In certain cases, defendants did not own the properties that they mortgaged to investors.

In 1995, Joseph and Max Greenblatt pled guilty to criminal charges in Kings County, N.Y., in connection with an unrelated securities fraud scheme, according to the Attorney General’s office. The New Jersey complaint alleges that the Greenblatts’ latest scheme was used, in part, to fund $5 million in restitution ordered as a result of the New York guilty pleas.

The complaint also names Peter Vogel, legal counsel for Maywood Capital; Jerome Rosenthal, who solicited investments for Maywood Capital; and Value Capital Group, a new umbrella company incorporated by the Greenblatts and Vogel in New York on March 18, 2004.

The other corporate defendants are Maywood Management Corp., Maywood Construction Corp., Maywood Consolidated Properties and AP Construction Associates – used by the individual defendants to manage investment properties – and 63 shell corporations formed to purchase particular properties and solicit investments.

Investor funds that were supposed to be maintained in individual accounts for individual properties were transferred to Maywood Capital’s main corporate account, where they allegedly were co-mingled and disbursed as “officer loans” to pay the personal expenses of individual defendants. Joseph Greenblatt, Max Greenblatt and Vogel allegedly received more than $9.4 million in officer loans from investor funds.

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Send tips or a Letter to the Editor to jessica@inman.com or call (510) 658-9252, ext. 133.

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