The former president/CEO of the Secaucus-based National Realty Investment Advisors (NRIA), along with an ex-portfolio managed, have been indicted for running a $650 million Ponzi scheme, while a third man pleaded guilty to his role.
By John Heinis/Hudson County View
Thomas Nicholas Salzano, 64, also known as Nick Salzano, of Secaucus, and Rey E. Grabato II, 43, of Hoboken and the Republic of the Philippines, are charged in an 18-count indictment with conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud, and conspiracy to defraud the United States, U.S. Attorney Philip Sellinger announced.
Salzano is also charged with two counts of aggravated identity theft, two counts of tax evasion, and five counts of subscribing to false tax returns. He was charged with one count of wire fraud and one count of aggravated identity theft back in March 2021.
In short, they are accused of defrauding more than 2,000 investors and conspiring to evade $26 million in tax liabilities.
Salzano was arrested yesterday, the day the indictment was unsealed, and is scheduled to appear by videoconference this afternoon before U.S. District Judge Leda Dunn Wettre, while Grabato remains at large.
Also today, Arthur S. Scuttaro, 62, of Nutley, the former head of sales at NRIA, pleaded guilty before U.S. District Judge Evelyn Padin in Newark federal court to an information charging him with one count of conspiracy to commit securities fraud in the same scheme.
His sentencing is scheduled for February 23rd, 2023.
The actions by federal prosecutors mark an epic fall from grace for NRIA, who have faced scrutiny since Salzano was initially charged last year. The following month, a whistleblower alleged massive fraud was taking place at NRIA, as HCV first reported.
Then in May 2021, a cooperating witness with the FBI told this reporter that Salzano was still privy to company business.
13 months later, the New Jersey Bureau of Securities issued NRIA a cease and desist after they determined NRIA engaged in $630 million in securities fraud between 2018 and 2022.
“As charged in the indictment, these defendants schemed to create a high-pressure, fraudulent marketing campaign to hoodwink investors into believing that their bogus real estate venture generated substantial profits,” Sellinger said in a statement.
“In reality, their criminal tactics were straight out of the Ponzi scheme playbook so that they could cheat their investors and line their own pockets. Our message from today’s charges is that we remain deeply committed to rooting out all types of financial fraud schemes. These schemes undermine our markets and erode the public’s trust in investing.“
Grabato was president of NRIA and Salzano was the firm’s shadow chief executive officer, the indictment says.
From February 2018 through January 2022, Salzano and Grabato defrauded investors and potential investors of NRIA Partners Portfolio Fund I LLC, a real estate fund operated by NRIA, of $650 million through lies, deception, misleading statements, and material omissions.
These included false representations about NRIA’s financial position, how the defendants and their conspirators used fund investor money, and Salzano’s managerial role at NRIA and his history of fraud.
The defendants executed their scheme through an aggressive multi-year, nationwide marketing campaign that involved thousands of emails to investors; advertisements on billboards, television, and radio; and meetings and presentations to investors.
Salzano led and directed the marketing campaign, which employed deception, material misrepresentations and omissions, and falsified documents to manipulate investors.
The marketing campaign was intended to mislead investors into believing that NRIA was a solvent business that generated significant profits.
In reality, NRIA generated little to no profits and operated as a Ponzi scheme, which was kept afloat by new investors. Despite investing almost none of their own capital into the business, the defendants misappropriated millions of dollars of investor money.
Salzano concealed his true managerial role at NRIA while using Grabato as a stand-in CEO in an effort to avoid scrutiny by investors of Salzano’s prior guilty plea to defrauding small businesses in Louisiana through a large telecommunications company.
Salzano and Grabato also orchestrated a separate conspiracy to defraud the IRS in its effort to collect $26 million in outstanding taxes Salzano owed to the U.S. Treasury.
Salzano and Grabato are alleged to have lied to the IRS, used a web of nominees, opened bank accounts in the names of phony entities, and used false and fraudulent company documents.
“This was a brazen scheme of staggering proportions/ These defendants prioritized their own greed, stealing $650 million from investors, while conspiring to evade $26 million in tax liabilities,” added Tammy Tomlins, IRS Criminal Investigation Acting Special Agent in Charge of the Newark Field Office.
“The indictment sends a clear message that the IRS Criminal Investigation special agents and our law enforcement partners, remain vigilant and will vigorously pursue those who attempt to enrich themselves through fraudulent means.”
The conspiracy to commit securities fraud and conspiracy to defraud the United States counts charged in the indictment both carry a maximum penalty of five years in prison and a $250,000 fine.
The securities fraud count carries a maximum penalty of 20 years in prison and a $5 million fine.
The wire fraud conspiracy and wire fraud counts are both punishable by a maximum penalty of 20 years in prison and a $250,000 fine. The tax evasion counts both carry a maximum penalty of five years in prison and a $100,000 fine.
The subscribing to false tax return counts each carry a maximum penalty of three years in prison and a $100,000 fine.
Furthermore, the aggravated identity theft counts carry a mandatory sentence of two years in prison, which must be served consecutively to any other sentence imposed.
In a separate civil action, the Securities and Exchange Commission (SEC) filed a complaint today in the District of New Jersey against Salzano, Grabato, Scuttaro, and others based on the allegations underlying the Ponzi scheme alleged in the indictment and information.