A resident of Butler, Pa., pleaded guilty in federal court to charges of conspiracy and money laundering, U.S. Attorney David Hickton announced.
Jeffrey Garbinski, 44, pleaded guilty to two counts before U.S. District Judge Cathy Bissoon.
In connection with the guilty plea, the court was advised that Garbinski owned and operated the Closing Company of PA, which closed residential real estate transactions. Sabrina Spetz was an attorney who closed many of the transactions at issue. Garbinski also operated a mortgage broker business called Main Street Mortgage Services, which did business as Asset Mortgage and Financial Services Inc., and he was a title insurance agent.
Rather than immediately paying the liabilities, Garbinski, with Spetz’s knowledge and assistance, siphoned money from the company for years to support his lifestyle and for other business ventures. He would then use the money from the next transactions to pay the liabilities from the previous transactions. He would pay the monthly mortgage payments on the outstanding mortgages that should have already been paid to avoid discovery of his fraud. Eventually, the liabilities grew so large that Garbinski was no longer able to pay the liabilities and he filed for bankruptcy.
Although Garbinski committed this scheme regarding customers of the Closing Company, he also committed this scheme with his own personal residence. Dollar Bank funded a $600,000 loan to Garbinski arranged through his mortgage broker business and closed by the Closing Company. Basically, the loan through Dollar Bank was a typical refinance transaction in which all of the liabilities associated with the collateral, which was Garbinski’s personal residence, were supposed to be paid off. Garbinski submitted a loan application that failed to report two significant mortgages on the property, and he also arranged to submit fraudulent title search records that did not reveal the two mortgages. Long after the loan closed, Dollar Bank discovered that they were in third lien position rather than first lien position. Now that Garbinski has filed for bankruptcy, Dollar Bank expects to suffer a total loss on that loan because the sale of the collateral is unlikely to pay off the first two liens on the property.
Ultimately, the title insurance company will likely have to pay substantial claims because of this fraud. The Closing Company was a representative of Fidelity National Title Insurance Co. Fidelity conducted an audit of the Closing Company of PA pursuant to the title insurance contract between Fidelity and the Closing Company. As part of that audit, Fidelity requested and obtained from Spetz bank statements that did not show the fraudulent withdrawals because the statements had been altered by Spetz at Garbinski’s direction.
In terms of the money laundering, a homeowner sought to refinance a loan through Northwest Savings Bank. Because of concerns that Northwest had with Garbinski, Northwest refused to let the Closing Company close the transaction, and demanded that Fidelity close the transaction. Fidelity, however, was unaware of the transaction and did not close the loan. In order to make it appear that Fidelity was involved in closing the loan, the settlement statement was fabricated and provided to Northwest. The settlement statement falsely represented that Fidelity closed the transaction. In addition, Garbinski created a letter with wiring information for what was represented to be the trust account for Fidelity. In fact, the account number is for the Closing Company. The loan closed on Feb. 24, 2010, and was funded through a wire transfer from Northwest Savings Bank to the Citizens Bank account of the Closing Company. That money was supposed to have been used to pay off a liability associated with the collateral.
On Feb. 25, 2010, Garbinski withdrew $38,316 in cash from that account. Bank surveillance pictures showed Garbinski making the withdrawal. On that same day, Garbinski deposited $37,500 of that cash into the Clearview Federal Credit Union account of JAG Management LP, which was basically a shell company that Garbinski owned.
Judge Bissoon scheduled sentencing for July 24. The law provides for a total sentence of 50 years in prison, a fine of $1,500,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offenses and the criminal history, if any, of the defendant.
Assistant U.S. Attorney Brendan Conway is prosecuting this case on behalf of the government.