Hartford apartment owner pleads guilty in mortgage fraud scheme that could cost $50M
One of the managers of an extensive commercial real estate portfolio in Hartford admitted Tuesday that he participated in an elaborate fraud that persuaded mortgage lenders, among other things, that at least one vacant apartment building was fully occupied and may have led to the issuance of as much as $50 million in fraudulent mortgage loans.
Jacob Deutsch, 57, of Brooklyn, N.Y., pleaded guilty in U.S. District Court in Hartford to conspiracy to commit mail fraud and wire fraud affecting a financial institution. A cousin, Aron Deutsch, 61, of Monsey, N.Y., pleaded guilty in June to the same charge arising from the same case. Both face possible prison sentences.
The U.S. Attorney’s office said there were 27 Hartford properties involved in the fraudulent conspiracy, from Asylum Hill to the South End.
The two Deutsches are associated with BH Property Management, which lists offices at 1010 Wethersfield Ave.
Federal authorities said the conspiracy ran from September 2016 to May 2021 and the victims were multiple banks; government sponsored, secondary mortgage lenders Freddie Mac and Fannie Mae; and the U.S. Department of Housing and Urban Development. Federal prosecutors said lenders were persuaded to make loans on properties that didn’t meet their lending criteria based on contrived information from BH Property Management about the value of its multi-family housing properties.
Court filings show that in one case, Jacob Deutsch went to extraordinary lengths — renting furniture and recruiting phony tenants — to persuade lenders to refinance BH Property Management’s $1.2 million purchase in 2017 of a 24-unit apartment building at 16 Evergreen Ave. in Hartford’s West End.
The building was vacant, but Deutsch admitted in court that he produced phony rent rolls and leases, arranged to have employees move clothing into apartments and pretend they lived there, staged apartments with rented furniture, and created “doctored’ gas and electric bills to make it appear as if tenants were paying for utilities.
The mortgage originator on the Evergreen Avenue apartment was CBRE Capital Markets, which sold the loan to Freddie Mac upon closing.
“For instance, a rent roll and income and expense summary submitted by Jacob Deutsch to CBRE Capital Markets, Inc. in June 2018 falsely represented that 16 Evergreen Avenue was 100 percent occupied when, in fact, not a single tenant resided there at the time,” the U.S. Attorney’s office said. “Later, Jacob Deutsch e-mailed CBRE pictures of money orders and checks purporting to reflect rent payments from fake tenants on the falsified rent rolls for 16 Evergreen Avenue to show proof of payment of rent when, in fact, the money orders and checks had been purchased by Aron Deutsch or BHPM employees at Aron Deutsch’s direction.
“Jacob Deutsch also provided the victim financial institutions with false and inflated income statements and financials for the properties, doctored bank statements, doctored or false documents overstating the purchase price of various multifamily housing properties, and doctored checks and invoices showing false or overstated capital improvements made to those properties.”
Jacob Deutsch and Aron Deutsch were arrested on May 19, 2021. A date for their sentencing has not been scheduled.
