Washington Township woman sentenced in $15M scheme
A Washington Township woman will spend the next 3 1⁄2 years in a federal prison for her part in a $15 million scam.
Bonnie Gardner, 56, of Quarry Lane received the prison sentence on Friday from U.S. District Judge Nora Barry Fischer in Pittsburgh. In addition, she will serve three years of supervised release after completing the prison term.
In May, Gardner pleaded guilty to wire fraud, mail fraud and conspiracy for defrauding more than 100 victims out of more than $15 million through a “house-flipping” investment scheme with Frank Guzik Jr., 44, of Derry. Guzik is wanted by federal authorities but remains at large.
According to federal prosecutors, Gardner and Guzik implemented an elaborate Ponzi scheme through which they solicited investors in investment and development groups, such as East Haven Investments, East Haven Development and East Haven Realty.
Those groups were supposed to buy properties, make improvements to them and then sell, or “flip,” them at a profit.
In order to secure the investments, Guzik and Gardner made a series of misrepresentations to the investors, including promising them 8 percent to 14 percent returns, federal authorities said.
As collateral for the investments, Guzik and Gardner provided the investors mortgages on various properties. The investors believed that East Haven would be unable to sell those properties unless the mortgages were satisfied but later learned that many of the mortgages were never filed, the authorities said.
The investigation revealed that documents on some of the mortgages were forgeries and that Guzik and Gardner provided multiple investors with mortgages on the same properties.
As a result, the purported value to the mortgage holders, who were unaware of the duplicate mortgages, was well in excess of the properties' actual values.
Some of the investors received monthly interest payments on their investments. Others chose to roll their monthly interest over into the investment. But the investment never earned interest, despite investor statements to the contrary.
Prosecutors said Guzik and Gardner used new investor funds to pay interest to individuals who had invested earlier, and to support their own lifestyles.
Beginning in April 2005, Guzik and Gardner needed to sell some of the properties to generate cash flow and to show investors that East Haven was profitable, but they couldn't sell the properties. They then persuaded a number of individuals to act as straw purchasers of the properties.
The authorities said the mortgage documents falsely reported that the purchasers made substantial down payments from their own funds. In fact, Guzik and Gardner deposited investor funds into the straw purchasers' bank accounts. Then the straw purchasers would write a certified check that they would bring to the closings.
Guzik and Gardner paid the straw purchasers, using investor funds, as well as the mortgage and utility payments for those properties.
They then prepared a glossy pamphlet reporting the sales of the properties in order to lure more investors.
Prosecutors said around November 2007 and continuing until about March 2008, Guzik began withdrawing funds from the East Haven accounts. By the end of March 2008, East Haven's bank accounts had minimal or zero balances.
At the same time, Guzik used $200,000 to purchase untraceable gold coins from International Precious Metals in Texas, where he was last seen.
He secured two short-term loans totaling $475,000 in early March 2008, promising to repay them at 20 percent interest by March 18, 2008.
On or about March 17, 2008, Guzik disappeared, and his whereabouts are still unknown, federal authorities said. He did not repay the loans, stopped making interest payments on investments totaling about $15 million, and never accounted for the principal investments.
Guzik was indicted in 2010 on charges of bank, wire and mail fraud and conspiracy.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Flurry of business activity enlivening quaint Saxonburg
- Meals delivery on holiday helps to remember Penn Hills boy who drowned
- New Kensington homicide suspect faces trial on tampering charge
- Salvation Army taking iconic red kettles online
- DUI checkpoints take on dangerous drivers
- Middle schoolers stem STEM Challenge at Penn State New Kensington
- Allegheny Twp. residents challenge legality of drilling in neighborhoods
- Apollo-Ridge Education Foundation donates $12,000 to revamping middle school library
- Frankstown Acres parents pleased — kids stay at Center Elementary
- Eagle Scout project gives Knoch High Stadium press box a face-lift
- Car dealership, church receive OKs for Harmar moves