09-19-05 -- Fauntleroy, Barry -- Guilty Plea -- News Release

Real Estate Investor Pleads Guilty in a Mortgage Fraud Scheme

NEWARK - A former New Jersey real estate investor pleaded guilty today to charges that he conspired with others to commit mortgage fraud by inducing the United States Department of Housing & Urban Development (HUD) to insure mortgage loans for unqualified buyers, enabling he and his co-defendants to earn huge profits on the sale of run-down properties financed by the fraudulently induced loans, U.S. Attorney Christopher J. Christie announced.

Barry Fauntleroy, 39, formerly of Mendham and currently residing near Atlanta, Ga., entered his plea in U.S. District Court in Newark before Judge Joseph A. Greenaway, Jr., who scheduled sentencing for Jan. 23, 2006.

Fauntleroy was president of EON Institute Inc. (EON), a real estate holding company in New Jersey. On June 2, 2005, a federal Indictment was returned alleging that from at least June 1999, through July 2001, Fauntleroy conspired with Devon Bowie, 53, of Malverne, N.Y., and others to prepare falsified loan applications and supporting documents which were submitted to the Federal Housing Administration (FHA), and which related to loans insured by the HUD.

Bowie was the president of Neighborhood Mortgage Bankers Company (Neighborhood Mortgage), which maintained an office in Elmsford, N.Y. Neighborhood Mortgage was a corporation in the business of making mortgage loans for residential properties. Neighborhood Mortgage was authorized by the HUD to make mortgage loans, subject to HUD regulations, that were insured under the HUD program.

"This defendant illegally manipulated unknowing buyers who sought to share in the American dream of owning their own home," said Christie. "A lot of low-income home buyers were hurt, and their dreams shattered by this con man's fraud."

At his plea hearing, Fauntleroy admitted that he, along with his co-conspirators, fraudulently induced HUD to insure certain mortgage loans made by Neighborhood Mortgage to unqualified borrowers, which enabled Fauntleroy, Bowie and their co-conspirators to earn huge profits from the sales of properties financed by the fraudulent loans.

Fauntleroy in pleading guilty acknowledged that as part of their scheme, he and others solicited and recruited individuals with relatively low income to buy homes in Essex County and elsewhere with the promise that the borrowers could buy homes with little or no money down. According to the Indictment, Fauntleroy and others then located dilapidated properties in Essex and elsewhere, that were available for sale. The co-conspirators then showed the borrowers the properties, represented to the borrowers that they owned the properties, that they would significantly renovate them and sell the properties to the borrowers at an agreed upon price, which represented the fair market value of the properties in the significantly improved condition.

Fauntleroy admitted that he and others then arranged for the borrowers to purchase the properties by assisting the borrowers in obtaining HUD-insured loans through Neighborhood Mortgage in the amount of the contract price.

Fauntleroy admitted that, in support of the HUD loan applications, his co-conspirators created and submitted false and fictitious bank statements, leases, IRS Forms W-2, verifications of past mortgage payments, pay stubs, attorney escrow letters, gift letters, verification of employment, real property appraisals and deposit checks.

According to the Indictment, Fauntleroy and others then purchased the properties at a reduced price, at times using the proceeds from HUD-insured loans obtained by the borrower, and re-sold the properties to the borrowers at the market, or contract, price, having done little or no work to renovate or otherwise improve the properties.

Fauntleroy pleaded guilty to Count One of the Indictment charging conspiring to commit mortgage fraud by making false statements to HUD, in order to induce it to make HUD-insured loans to objectively unqualified borrowers. The conspiracy count carries a maximum penalty of five years in prison and a $250,000 fine.

In determining an actual sentence, Judge Greenaway will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the offense, the defendant's criminal history, if any, and other factors. The judge, however, is not bound by those guidelines in determining a sentence.

Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all that time.

Christie credited Special Agents of the FBI, under the direction of Special Agent in Charge Leslie Wiser, Jr., Newark Division; Special Agents of the Housing and Urban Development, Office of Inspector General, under the direction of Ruth A. Ritzema, Special Agent in Charge of the New York/New Jersey Housing and Urban Development, Office of Inspector General, and Postal Inspectors with the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Thomas C. Van De Merlen, with bringing the case.

The Government is represented by Assistant U.S. Attorney Richard E. Constable, III of the U.S. Attorney's Office Criminal Division in Newark.

Defense Counsel: Thomas Ashley, Esq., Newark