Property developer from Indianapolis, Indiana admits to role in real estate investor scheme
A property developer and manager from Indianapolis, Indiana has pleaded guilty via videoconference to his role in a scheme that defrauded real estate investors, U.S. Attorney Philip R. Sellinger announced on Tuesday.
During a nearly two-year period, from August of 2016 to July of 2018, Herbert Whalen, aka “Bert Whalen,” 47, operated a business called "Oceanpointe Property Management" in Indy, and hatched a plan to get money from real estate investors.
Attorney Sellinger explained that Whalen did so by misrepresenting as well as hiding the poor condition of the properties managed by his company and then creating fake leases for unoccupied Oceanpointe properties.
As part of this scheme, people investing in these real estate properties were promised a copy of the lease and would be able to get rent payments as their return on the investment after repairs were made to the poor state of the property going into the investment.
Well, not only were many of these properties not repaired, Attorney Sellinger explained, but not rehabilitated or ever ready to be occupied.
Whalen and another conspirator, who also worked at Oceanpointe, told their employees to put together fake leases and make it look like their properties were rented when they actually weren't, even instructing them to put fake tenant names on the leases and then send them to Oceanpointe investors.
To try and hide the fact the properties were not maintained, Whalen told employees at Oceanpointe to cover the windows.
Whalen and others also picked which investors who voiced concerns about the property and possible fraud, would then get paid from the illegal pool of money.
He further tried to cover everything up by having an Oceanpointe employee create a false identity and claim on an online real estate forum, saying that Oceanpoint was an investor with another company.
By the end of their scheme, Whalen and the others cost millions of dollars in losses to investors, which he used for personal expenses.
“The defendant preyed upon innocent victims’ desire to improve their own financial position through what they thought were sound investments,” U.S. Attorney Sellinger said in a written statement. “Working with our partners at the FBI, we were able to discover his illegal activity and ensure that he will now face justice for his crimes. Combatting investment fraud remains one of our highest priorities, and this conviction sends a clear message that such conduct will be punished.”
“Investment fraud schemes take many forms and as long as there are trusting people, looking for what seems like a good way to protect and grow their money, these fraudsters will continue to strike,” Special Agent in Charge George M. Crouch Jr out of the Newark, New Jersey field office, said in a written statement. “The FBI is constantly on watch for thieves who paint their schemes as golden opportunities to build on your wealth when, in fact, they are only building theirs using your hard-earned money. The best protection is still prevention: do your homework and check multiple websites like FBI, SEC, and FINRA, to confirm legitimacy; don’t believe the hype – if it sounds too good to be true, it probably is; and view any seemingly great opportunity through the lens of skepticism. Lastly, if you suspect fraud, report it to tips.fbi.gov.”
In court, Whalen pleaded guilty to the first count in an indictment, charging him with conspiracy to commit wire fraud.
If convicted on the charge of conspiracy to commit wire fraud, he faces a maximum potential punishment of 20 years in prison and a fine of up to $250,000, or twice the gross loss or gain caused by the offense.
The government is represented by Assistant U.S. Attorneys Carolyn Silane of the Economic Crimes Unit and Ari B. Fontecchio of the Special Prosecutions Division in Newark.
Defense counsel: John Tompkins Esq., Indianapolis.