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Washington Township woman sentenced in $15M scheme

By Valley News Dispatch
Saturday, Oct. 19, 2013, 12:56 a.m.
 

A Washington Township woman will spend the next 3 12 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.

 

 
 


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