TRENTON – The Attorney General’s
Office and the New Jersey Bureau of Securities
filed suit today against a New York City
man, Joseph Greenblatt, several members
of his family and 68 corporations that
they allegedly created to carry out a
massive securities fraud scheme, including
Maywood Capital Corp., a New Jersey corporation
based in Paramus that was the umbrella
company for the investment scheme, Attorney
General Peter C. Harvey announced. The
suit alleges that the individual defendants
obtained more than $42 million from over
100 investors, diverting millions to pay
their personal expenses.
Attorney
General Harvey and Bureau of Securities
Chief Franklin L. Widmann filed a complaint
today in Superior Court in Essex County
against Greenblatt; his wife, Alexandra
Horvath; his father, Max Greenblatt; the
estate of Joseph Greenblatt’s mother,
Vera Greenblatt; and Maywood Capital Corp.
In addition to Securities Law violations,
the complaint alleges that Joseph Greenblatt,
Max Greenblatt and two key associates
engaged in a pattern of racketeering activities
in violation of New Jersey’s Racketeer
Influenced and Corrupt Organizations (RICO)
statute.
“We
will do everything in our power to obtain
restitution for the investors who fell
victim to the greed of these defendants,”
said Attorney General Harvey. “The
defendants claimed to offer investments
in residential properties in New York
City secured by ‘safe’ first
mortgages. Investors were promised 14
percent interest, plus additional profits
when the buildings were renovated and
resold. In fact, we allege, the investments
were largely unsecured and were used to
pay the defendants’ personal expenses.”
Previously,
Joseph and Max Greenblatt pled guilty
in 1995 to criminal charges in Kings County,
New York, in connection with an unrelated
securities fraud scheme. New Jersey’s
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 Inc.,
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,
Inc. and AP Construction Associates, Inc.
– used by the individual defendants
to manage investment properties –
and 63 shell corporations formed to purchase
particular properties and solicit investments.
Deputy
Attorneys General Anna Lascurain, Chief
of the Securities Fraud Prosecution Section
of the Division of Law, and David Puteska
are handling the case for the Attorney
General. It was investigated by Supervising
Investigator James Lane and Investigators
Jake Gertsman and Julian Leone of the
New Jersey Bureau of Securities. The Bureau
was assisted by Investigator Alan Tunkavige
of the Florida Office of Financial Regulation,
under the supervision of Commissioner
Don Saxon.
The
complaint alleges numerous violations
of the New Jersey Uniform Securities Law,
including that the defendants engaged
in a scheme to defraud investors, sold
unregistered securities and acted as unregistered
broker-dealers. The complaint alleges
RICO violations by Joseph Greenblatt,
Max Greenblatt, Vogel and Rosenthal. The
complaint seeks permanent injunctive relief,
restitution for investors, disgorgement
of illegal profits and civil monetary
penalties, including, for the RICO defendants,
penalties equal to three times their illegal
gains. The complaint asks the Court to
freeze the assets of the individual and
corporate defendants and appoint a receiver
to identify and seize those assets.
“Through
our extensive investigation, we uncovered
a huge network of corporations that the
individual defendants allegedly used to
defraud investors from as far away as
California and Florida,” said Securities
Chief Widmann. “We have asked the
court to freeze the assets of the defendants
and appoint a receiver to take charge
of those assets on behalf of the investors.”
The
Fraudulent Scheme
The defendants placed newspaper ads offering
interests in “safe” mortgages.
Joseph Greenblatt solicited investors
in the states of 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.
Corporations formed by the individual
defendants would allegedly 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. In reality, many of the properties
controlled by the defendants were over-mortgaged
and did not produce the unrealistic profits
promised to investors. In many cases,
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, the defendants
did not even own the properties that they
mortgaged to investors.
Misappropriation
of Clients’ Money Alleged in the
Complaint
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. Joseph Greenblatt
allegedly received more than $8.8 million
to pay for personal expenses for himself
and his wife, including travel and purchases
of clothing and jewelry from stores such
as Saks Fifth Avenue, Neiman Marcus and
Polo/Ralph Lauren. Disbursements also
allegedly were made for monthly payments
on Max Greenblatt’s home in Rego
Park, N.Y., and his condominium in Florida.
Joseph Greenblatt was indicted by a state
grand jury in Bergen County in August
2004 on charges that he wrote $1.9 million
in bad checks to investors.
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