BALTIMORE, MD— An Attorney was sentenced to five years in prison on Friday for wire fraud conspiracy, wire fraud and obstruction of justice in connection with stealing investors who loaned him money to secure property.
U.S. District Judge J. Frederick Motz also ordered Gregory E. Grantham, age 57, of Oceanside, California, to pay restitution of $17.4 million.
Here are the facts and circumstances surrounding this case, according to officials.
- Grantham is a licensed attorney and between September 2009 and September 2011, was employed as General Counsel for IAGU Underwriters, LLC, as well as maintaining a private law practice.
- Graham’s co-defendant, Mervyn Phelan operated IAGU, which was in the business of underwriting loan applications submitted by real estate developers and then locating project financing from banks and other financial entities.
- Between mid-2010 and August 2011, Grantham and Phelan became involved in a fraudulent scheme carried out by Patrick Belzner and Brian McCloskey, who both resided in Baltimore County.
- McCloskey owned a real estate development business known as the McCloskey Group, LLC. Belzner, a home builder, began working with McCloskey in late 2008 or early 2009.
- Phelan and IAGU began working with the McCloskey Group trying to locate sources of financing for its projects in 2009.
- Beginning in 2009 and continuing through June 2011, Belzner and McCloskey persuaded a series of private lenders to fund loans to establish that the McCloskey Group had reserves of cash that would supposedly help it obtain loans it was seeking in connection with real estate development projects through IAGU.
Belzner and McCloskey falsely represented the following:
- The funds would be maintained in an escrow account under the control of Kevin Sniffen, a licensed attorney and escrow agent in Baltimore County.
- The funds would not be used for any other purpose and that the money would be returned to the lender, either upon the funding of the loan or after a specified period of time.
- In return for this temporary use of the lender’s funds, Belzner and McCloskey promised to pay substantial fees or interest.
However, once the lenders transferred their funds into the escrow accounts, Belzner directed McCloskey to remove those funds from the escrow accounts without the knowledge or permission of the lenders.
Belzner and McCloskey then used the majority of the stolen funds to pay for their personal and business expenses. The total losses resulting from the scheme were approximately $20 million.
Beginning in about the late summer of 2010, Grantham and Phelan co-operated with Belzner and McCloskey in their scheme to defraud by doing the following:
(1) Making false representations to help persuade private lenders and investment partnerships to loan sums of money to the McCloskey Group.
(2) Making false representations to dissuade previous escrow account lenders from demanding the return of their funds when the original time period established for the loan expired without the McCloskey Group obtaining financing for the project in question.
The court ruled that Grantham was responsible for $17.4 million in losses as a result of the scheme.
Grantham and Phelan also obstructed grand jury proceedings from September to December, 2012.
On September 26, 2012, FBI agents served Grantham and Phelan with grand jury subpoenas which called for the production of documents relating to the scheme. By this time, Belzner had already been indicted for conspiracy to commit wire fraud.
Grantham and Phelan agreed that they would not produce certain records in their possession, because those records would reveal their cooperation with and assistance to Belzner and McCloskey in providing false information to the escrow account lenders and their counsel.
The records that Phelan and Grantham were willing to produce were provided to the FBI on November 19, 2012; incriminating records were not produced or were deleted from their computers and compact discs.
Patrick J. Belzner, a/k/a “Patrick McCloskey,” age 45, of Selbyville, Delaware, was sentenced to 15 years in prison for wire fraud conspiracy, wire fraud and tax evasion, and was ordered to $19.8 million in restitution.
Brian McCloskey, age 42, of Baltimore and Kevin Sniffen, age 53, of Phoenix, Maryland have each pleaded guilty to their roles in the conspiracy and are scheduled to be sentenced on December 12, 2014, and December 19, 2014, respectively.
Mervyn A. Phelan, Sr., age 74, of Newport Beach, California, has pleaded guilty and is scheduled to be sentenced on December 5.