LAWFUEL – The Legal Newswire – MICHAEL J. GARCIA, United States Attorney for the Southern District of New York, and MARK J. MERSHON, Assistant
Director-in-Charge of the New York Office of the Federal Bureau
of Investigation (“FBI”), announced today the arrests of MICHAEL
HERSHKOWITZ and IVY WOOLF-TURK in connection with an elaborate
scheme to defraud approximately 70 individuals of over $27
million.
As alleged in the Complaint filed in Manhattan federal
court:
HERSHKOWITZ and WOOLF-TURK, working through a Manhattan
real estate development company, The Kingsland Group, Inc., and
related entities (collectively, “The Kingsland Group”),
fraudulently induced approximately 70 individuals (the “Investor
Victims”) to loan them, in the aggregate, over $27 million,
purportedly to fund the renovation of approximately sixteen
multi-family apartment buildings located in upper Manhattan.
As part of the fraud, HERSHKOWITZ and WOOLF-TURK falsely represented
that the Investor Victims would hold, as collateral for the
loans, interests in bona fide first mortgages in the various
properties in which they thought they were investing. In fact,
the Investor Victims did not hold recorded, first mortgages in
the properties. The defendants have defaulted on a number of the
loans by failing to make scheduled payments of both interest and
principal. To date, the Investor Victims’ losses exceed $27
million.
Beginning in 2003, HERSHKOWITZ and WOOLF-TURK commenced
a series of projects to renovate approximately sixteen multifamily
apartment buildings in upper Manhattan. The defendants
purportedly planned to rent the renovated apartments or
ultimately, to refinance, or sell the properties at significantly
higher prices. Supposedly to raise an aggregate of approximately
$78 million they needed for the renovation projects, the
defendants, from September 2003 through March 2007, borrowed a
total of approximately $27 million from the Investor Victims, and
approximately $51 million from various other investors, including
Intervest Mortgage Corporation and Dominion Financial Corporation
(collectively, the “Financial Institution Investors”).
The loan agreements with the Investor Victims typically required that The
Kingsland Group make interest payments on a monthly basis and
that the principal would come due after a period of between 18
months to three years.
In exchange for the loans from the Investor Victims,
HERSHKOWITZ and WOOLF-TURK promised above-market rates of return
(typically between 11.5% and 13.5%), and represented that the
Investor Victims would hold, as collateral, together with one or
more other investors, percentage interests in bona fide first
mortgages in the particular properties in which they were
investing. As part of their effort to obtain financing,
HERSHKOWITZ and WOOLF-TURK provided the Investor Victims with
mortgage documentation, which falsely represented that Investor
Victims held first mortgages in the particular properties. The
defendants also provided the Investor Victims with fraudulent
copies of title insurance policies for the properties in which
they were investing.
The actual mortgages registered with New York City’s
Automated City Registration Information System (“ACRIS”)1 show
that the recorded first mortgages in the properties in fact are
held solely by other investors (including the Financial
Institution Investors) from which HERSHKOWITZ and WOOLF-TURK had
obtained financing, and not by the Investor Victims. Moreover,
title insurance policies that HERSHKOWITZ and WOOLF-TURK provided
to the Investor Victims were never issued by a title insurance
company in favor of the Investor Victims, but instead appear to
be doctored versions of policies issued in favor of other
beneficiaries.
The principal for the first of the loans came due on
April 15, 2005. At that time, HERSHKOWITZ and WOOLF-TURK failed
to repay the approximately $1,300,000 then due to the Investor
Victims. From April 15, 2005, through May 1, 2007, six other
loans to the Investor Victims, totaling approximately $7.8
million, also came due and were not paid. From September 2003
until July 2007, HERSHKOWITZ and WOOLF-TURK, through the
Kingsland Group, made the required interest payments to the
Investor Victims as they came due, but beginning on or about July
1, 2007, HERSHKOWITZ and WOOLF-TURK failed to make a total of
over $200,000 in interest payments due to the Investor Victims.
After HERSHKOWITZ and WOOLF-TURK failed to repay loans
when they were due, certain of the Investor Victims raised
questions concerning the mortgages they believed they held on the
subject properties. HERSHKOWITZ and WOOLF-TURK then took
elaborate, affirmative steps to conceal the fraud, continue their
scheme, and avoid foreclosure on the loans. Among other things,
HERSHKOWITZ and WOOLF-TURK provided certain of the Investor
Victims with fraudulent ACRIS recording sheets, which falsely
state that the Investor Victims hold recorded mortgages on the
subject properties.
HERSHKOWITZ and WOOLF-TURK are charged with conspiracy
to commit mail fraud and wire fraud. If convicted, the
defendants face a maximum sentence of 20 years’ imprisonment.
HERSHKOWITZ, 51, resides in Manhattan and Atlantic
Beach, New York. WOOLF-TURK, 51, resides in Port Washington, New
York.
The defendants will be presented later today before
United States Magistrate Judge HENRY B. PITMAN.
Mr. GARCIA praised the investigative efforts of the FBI
in this case.
This investigation is being handled by the Major Crimes
Unit of the United States Attorney’s Office. Assistant United
States Attorneys MARCUS A. ASNER and HARRY A. CHERNOFF are in
charge of the prosecution.
The charges contained in the Complaint are merely
accusations and the defendants are presumed innocent unless and
until proven guilty.
07-199
