Jacob Deutsch, 57, of Brooklyn, N.Y., pleaded guilty to a charge stemming from a wide-ranging mortgage fraud scheme involving 24 mortgage loans on numerous multi-family housing properties in Hartford, N.Y., totaling nearly $50 million.
According to court documents and statements in court proceedings, Jacob Deutsch and Aron Deutsch work at B H Property Management, LLC (BHPM), a property management company that manages numerous multi-family housing properties in Hartford. From September 2016 through May 2021, Jacob Deutsch, who ran the day-to-day operations of BHPM, and Aron Deutsch allegedly engaged in a scheme to defraud several financial institutions, government-sponsored enterprises Freddie Mac and the Fannie Mae, and the U.S. Department of Housing and Urban Development (HUD) by providing them with false information overstating the value of multi-family housing properties managed by BHPM in connection with loans secured by those properties.
As part of the scheme, Jacob Deutsch provided false rent rolls and falsified leases to the victim financial institutions and their appraisers, which either overstated the number of renters by listing fictitious renters or others not actually living there, or falsely inflated the amount of rent paid by occupants. Jacob Deutsch deceived inspectors into believing that unoccupied apartments were occupied by staging the apartments with furniture and by requiring BHPM employees to falsely tell inspectors they lived there and to lie to inspectors if asked whether there were vacancies.
For instance, a rent roll and income and expense summary submitted by Jacob Deutsch to CBRE Capital Markets, Inc. (CBRE) in June 2018 falsely represented that 16 Evergreen Avenue was 100 percent occupied when, in fact, not a single tenant resided there at the time. Later, Jacob Deutsch emailed CBRE pictures of money orders and checks purporting to reflect rent payments from fake tenants on the falsified rent rolls for 16 Evergreen Avenue to show proof of payment of rent when, in fact, the money orders and checks had been purchased by Aron Deutsch or BHPM employees at Aron Deutsch’s direction.
Jacob Deutsch also provided the victim financial institutions with false and inflated income statements and financials for the properties, doctored bank statements, doctored or false documents overstating the purchase price of various multifamily housing properties and doctored checks and invoices showing false or overstated capital improvements made to those properties. The false information provided by Jacob Deutsch induced the victim financial institutions to issue loans they otherwise would not have issued on the requested terms, or for amounts larger than they would have authorized had they been provided with truthful information. In addition, the false information induced Freddie Mac and Fannie Mae to purchase the resulting loans from the victim financial institutions, and induced HUD to issue a mortgage insurance commitment to a victim financial institution.
Jacob Deutsch and Aron Deutsch were arrested on a criminal complaint on May 19, 2021.
Jacob Deutsch pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud affecting a financial institution, an offense that carries a maximum term of imprisonment of 30 years. He is released on a $50,000 bond pending sentencing, which is not scheduled.
Aron Deutsch, 61, of Monsey, N.Y., pleaded guilty to the same charge on June 1, 2022. He is released on a $100,000 bond pending sentencing, which is scheduled for Nov. 3, 2022.
The investigation was conducted by the U.S. Postal Inspection Service, the Federal Housing Finance Agency’s Office of Inspector General, and HUD’s Office of Inspector General for Investigations. The case is being prosecuted by Assistant U.S. Attorneys Heather Cherry and Sarah Gruber.