With a U.S. Securities and Exchange Commission (SEC) probe underway, a whistleblower is alleging that fraud is taking place at Secaucus-based real estate fund National Reality Investment Advisors (NRIA), which boasts over $1 billion in assets under management.
By John Heinis/Hudson County View
“The record shows, FOIA request prove, that in August 2020 I filed a report with the SEC on a whistleblower statute and filed a report. I was communicating with the chair of the SEC before that,” Barry Minkow, 55, exclusively told HCV in a phone interview.
His August 7th complaint filed with the SEC said the NRIA’s conduct is a fraudulent investment, in particular a Ponzi/pyramid scheme.
“NRIA is offering returns that appear to be unparalleled in the industry. Their cost of capital is, for lack of a better term, astronomical. They advertise on a national scale every day for new investors (see point 2) AND they are offering returns ranging from 10% per year paid monthly,” he wrote, noting that other commercials made the same claims with 16 and 21 percent.
Minkow later points out that he is not your typical fraud investigator.
“I worked with the SEC uncovering frauds mostly from your Los Angeles office with Peter Del Greco. We did numerous cases together. However, I returned to prison for insider trading in 2011 and was released in 2018,” the report says.
“There was never a time when I submitted an investment fraud case to the SEC that it did not result in a TRO or indictment (public company submissions are another story and why I went back prison). So in the interest of full disclosure I am a two-time loser. However, I cannot afford to make another mistake. I do not believe I am wrong about this entity although I hope am based on the scope/size of this company’s reach.”
Minkow famously started the ZZZZ Best carpet cleaning company, eventually a publicly traded company, when he was still in high school, though it collapsed in 1987 and ended up being revealed as a massive Ponzi scheme that cost investors $100 million.
While he was sentenced to 25 years in prison on charges including racketeering, securities fraud, money laundering, embezzlement, and bank fraud, he ended up serving under seven-and-a-half years.
After a second prison stint for insider trading and church fraud, Minkow has been focused on uncovering corruption in the private sector, especially when it comes to Ponzi schemes (his exploits are depicted in the 2018 theatrical release Con Man).
On August 10th, three days after submitting his report to the SEC, Minkow engaged in an email conversation with NRIA Senior Project Manager Brian Harrington asking the implications of doing a five-year, $250,000 investment.
“Your principal will always be secured by the entire portfolio (currently 18 developments valued at $1.2 billion). This structure offers much more diversity & security than being dependent on just a small number,” according to Harrington’s emailed response.
Furthermore, the company executive says that if Minkow’s friend invested the minimum of $50,000, he would receive a “profit-sharing bonus.”
“Your percentage goes up the more your friend invests. I’ll send you the bonus email detailing the percentage from $300K up to $1 million,” Harrington wrote.
“That’s a crime: I believe our report showed clearly that someone at the senior executive level is corrupt,” Minkow exclaimed over the phone.
On October 9th, the SEC said through a subpoena that they had opened a formal investigation into the NRIA, seeking Minkow’s documents and communications related to the Hudson County company.
“Fraud is not compartmentalized: you have an environment there where the number 1 goal is raising money. Yes, NRIA, has some very nice properties they’ve bought, they have some very good projects and some very good partners,” he continued.
“But that’s all the skin of the truth stuffed with a lie. For example, they double pledge their real estate holdings resulting in not one of their investors actually having a real estate secured investment which is what they advertise.”
Last month, former NRIA Portfolio Manager Thomas Nicholas Salzano was charged by the U.S Attorney’s Office with wire fraud and aggravated identity theft after using a sham loan document to defraud an investor out of hundreds of thousands of dollars.
The criminal complaint in that case identifies Individual 1 as a vice president and senior independent project manager at NRIA who offered Victim 1 a guaranteed 6 percent return for each unit purchased, paid monthly, for the first two to two-and-a-half years of the five-year term, and the potential of greater guaranteed returns after the initial period.
Near the end of 2018, Individual 1 approached Victim 1 about a supposed new opportunity to become a joint venture partner with NRIA in a property in North Bergen allegedly owned by NRIA.
According to Individual 1, the minimum investment was $300,000, and Victim 1 could use her original $150,000 investment in the NRIA fund toward the required $300,000 investment in the North Bergen property.
Victim 1 asked Individual 1 for more information on the North Bergen property. Individual 1 sent Victim 1 materials purporting to show that NRIA intended to obtain a $25 million bank loan on the property, described as “a ground up condo project.”
Federal prosecutors also said at the time that NRIA has $1.25 billion in assets under management.
Minkow says that’s just the tip of the iceberg at NRIA, noting that their executive vice president senior project manager is Arthur Scutaro, while an Arthur Scuttaro is named in a 2009 bankruptcy filing that includes several other defendants such as Salzano.
Ultimately, Minkow acknowledges that some people may be skeptical of what he has to say due to his past indiscretions, but he points out that he’s on probation until June 2022 and could face harsh penalties if he lies to law enforcement.
“I looked at them [NRIA] back in 2019 and started watching their commercials and reading their social media posts where they advertised ‘Greed is good.’ I’d been out of jail for like a year and I didn’t want to get back into this, but I thought to myself, ‘this just doesn’t sound good at all,” Minkow recalled.
“Then I remembered Judge Seitz at my sentencing hearing in Miami telling me on the record that when I got out, I needed to help people by uncovering fraud but to stay far away from public companies. And after I found out NRIA is raising a million dollars a day from the public, I was glad I got involved to hopefully help people before they lose money.”
Harrington and other NRIA representatives did not return inquiries seeking comment.