Suburban developers accused of $16 million fraud involving Palatine condo complex
A pair of suburban real estate developers are among six defendants indicted by a federal grand jury on allegations they devised and participated in scheme that cost banks and mortgage lenders $16 million and left condo buyers with loans they could not afford, authorities said Thursday.
The scheme, federal prosecutors said, revolved around the marketing and sale of condominiums at the 50-acre The Woods at Countryside development in Palatine.
The indictment accuses Vince Manglardi, 59, of Long Grove and Theodore "TJ" Wojtas, 43, of Glenview of using an assortment of advertising methods and sales pitches to falsely promote the purchase of condos at the Woods as "a means to financial independence and wealth." The indictment says they enticed prospective condo buyers with unsustainable financial incentives, such as down payment refunds and up to three years' worth of mortgage payments, maintenance costs and property tax payments.
The defendants are accused of preparing false sales contracts and mortgage loan applications; misrepresenting the number of condos sold at the development; and using shell companies to conceal from mortgage lenders the source of buyers' down payments, which prosecutors say were nonexistent private funds called "American Freedom Fund" and "Buyers Equity Fund," which Wojtas claimed to head.
Manglardi and Wojtas could not be reached for comment Thursday. A phone message left at their firm, Renaissance Residential, was not returned.
Also named as defendants are attorney David Belconis, 56, of Long Grove; Nunzio Grieco, 63, of Palatine, formerly an employee of the developers; Walter Vali, 62, of Mundelein, formerly a mortgage loan originator; and Karin Ganser, 62, of Palatine, formerly a licensed real estate saleswoman, according to the U.S. attorneys office in Chicago.
Among the allegations against Ganser is that she and Manglardi bought three condos in her daughter's name by forging her signature on numerous documents. Her daughter had no ability to pay the mortgages on the condos and no intent to live in any of the units, the indictment states.
Belconis declined to comment Thursday. A message left for Ganser was not returned. Vali and Greico could not be reached for comment.
All six defendants will be arraigned on a date to be determined by the U.S. District Court, authorities said.
Among the charges are various acts of wire fraud, mail fraud and false statements to financial institutions, federal prosecutors said. Each count of the indictment carries a maximum prison sentence of 30 years and maximum fine of $1 million. The indictment also seeks the forfeiture of $16 million, authorities said.
As a result of the scheme, the indictment states, banks and mortgage lenders unwittingly funded risky, speculative property investment deals on unfavorable terms to unqualified borrowers who defaulted on their loans and were unable or unwilling to repay them.
The Woods has been beset with financial difficulties since 2007, after Renaissance Residential received a $63 million promissory note to convert 719 apartments into condos. The housing bubble burst soon after, and in the first six months of 2010, 98 condos there fell into foreclosure -- nearly half of all the units that had been sold and a quarter of all the foreclosures in Palatine during that time.
The conversion received financial assistance from Palatine in the form of a $6 million bond issue, then the village created a special tax on the complex's residents to pay off the bond. The money paid for the addition of streetlights and fire sprinklers that are required under village code for an apartment-to-condo conversion, Village Manager Reid Ottesen said.
Although buyers said they initially were told to expect the tax to be $600 a year, many received bills three times that amount after Renaissance Residential received an assessment reduction from the county for unsold units. That left the residents who had bought condos to pick up the slack, leading to the higher bills and, some residents said, many of the foreclosures.
"It's been a very unfortunate situation for the people who bought in there, because of the dishonest way things had been done," Ottesen said Thursday, adding that the village has done what it can to help residents of the complex. "Finally this should allow people there to begin moving forward."
• Daily Herald staff writer Barbara Vitello contributed to this report.