BREAKING: N. J. Criminal Corruption Sting Largest In History

… its history emerged recently from the federal protection program long enough to plead guilty to a $50 million bank fraud. Dwek, 37, pleaded guilty in federal court in

Newark to one count each of money-laundering and bank fraud, charges that can put him in prison for up to 11 years.

As Mr. Dwek stood before U.S. District Judge Jose L. Linares in Newark in his less than 30-minute appearance he entered pleas to separate counts of bank fraud and money laundering in connection with two bogus checks totaling more than $50 million that he tried to deposit at the PNC Bank.

“I am guilty your honor,” he declared, firmly and without hesitation. Later in

Monmouth

County, the scene was repeated before Superior Court Judge Thomas Scully in Freehold, where Dwek pled to similar state charges.

Many people are wondering about who Dwek really is and want to know more about him and the explosive details about his private con schemes and his role as the cooperating witness in one of the biggest ongoing federal corruption investigation where finally some details are starting to come to light.

The 2006 scheme is how Dwek originally came to the attention of federal prosecutors, who then turned him into an informant. Following his arrest, Dwek apparently spent 29 months as a cooperating witness, setting up rabbis and others in the religious community, as well as leaders which included sitting mayors, current political candidates and public officials on charges ranging from political corruption to money laundering in an undercover sting operation that prosecutors have called unprecedented in its scope.

Allegedly, Dwek snared 45 people in the string, of the 45, so far seven — all from

Hudson

Hoboken and Secaucus. — have pleaded guilty. Those who have been arrested and say they are innocent include the former mayors of

The U.S. Attorney’s office issued an advisory just before the hearing of which Dwek plead guilty saying only that “a central figure” in the July 23 arrests of 45 people on public corruption and money laundering charges would appear in federal court before U.S. District Judge Jose L. Linares in Newark. A spokesman for the office declined to answer questions. Dwek’s attorney did not return calls to our office. Dwek is described in nearly every criminal complaint and every indictment as a “cooperating witness who had been charged with bank fraud” but his name never appears in the court records and he has not appeared publicly in any court as a witness since the sting started. The first trial for those accused in the corruption sting is scheduled for January 2010, and Dwek is expected to be the main witness in the case.

In less than four years, Dwek has gone from a well-respected real estate mogul with a $300 million empire in seven states to a FBI informant, community outcast and admitted felon.

The following was reported in “The Daily Record”:

… The subjects of the arrests also include religious leaders from the Syrian Jewish enclaves in

Brooklyn, Deal and Elberon. Sources said the IRS and FBI this morning seized documents from the Deal Yeshiva and the Ohel Yaacob synagogue on

Ocean Avenue in Deal.

The Deal Yeshiva is a religious school which teaches children in the Sephardic Jewish tradition, The Yeshiva has two separate divisions: a boys’ school on

Logan Road in

Ocean

Township and a girls’ school on Wall Street in

West Long Branch.

The school was founded more than 20 years ago by Rabbi Isaac Dwek and Raizel Dwek, the parents of Solomon Dwek, of

Ocean

Township. Rabbi Dwek was the school’s president, and Raizel was its treasurer, until 2006, when their son’s real estate empire began to crumble after Dwek deposited a bad $25.2 million check at a drive-through window at the PNC Bank in Eatontown. …

Now the second wave of stories is suggesting that Dwek may actually be the key witness in many other arrests.

Here’s a report from Bloomberg:

… The cooperating witness is Solomon Dwek, a real estate developer in

Monmouth County,

New Jersey, who was charged

May 11, 2006, with scheming to defraud PNC Bank out of $50 million, according to a person familiar with the matter and court records.

Prosecutors alleged that Dwek deposited two $25 million checks from another account of his, which had a zero balance. Dwek then wired $22.8 million out of PNC, falsely assuring bank officials that he would forward funds to cover the overdraft, according to prosecutors.

Dwek posted a $10 million bond, secured by $3 million in equity in the homes of his mother-in-law and sister-in-law. Dwek was never indicted, instead receiving 17 extensions from a judge to continue the period in which his case had to be presented to a federal grand jury. …

An Asbury Park

Press investigation indicated that people who knew Dwek say he was wealthy, private, quiet, easy going and a pillar of the community. Business associates believed him to be a respected leader of a religious school, a successful real estate investor, a philanthropist and a devoted father of five. But according to court documents Dwek’s real estate empire may have been built on a foundation of crime which included money-laundering, bank fraud and lies.

How could his empire expand so fast and collapse even faster? And how could major banks, lenders, investors and even family members have been so blind to provide millions of dollars to a man they now say owes them more than $338 million?

Star Ledger:

Star Ledger reported that there examination of court documents it showed before Dwek became an informer for the FBI, he was running a wild Ponzi operation in which one investment was being used to pay off the debt mounting from the last one and on into the millions in the same kind of geometry that eventually exposed financier Bernard Madoff. The documents also seem to show that once Dwek turned informant he was so good at his work — money launderer to religious leaders, bribe-taking developer to politicians — that some of his targets seemed to be virtually throwing money at him.

In an amended bankruptcy petition, Dwek disclosed almost $500,000 in 20 separate secret payments:

There was $75,100 from a former partner, “left in a garbage bag behind his office.”

And another $28,400, labeled as “kickbacks for the sale of

Florida properties.”

Some $9,000 in deposits returned on a cancelled deal for two condominium units located in

Miron,

Israel.

And $5,000 that were listed as “fictitious charitable donations given through Solomon Dwek’s American Express card.”

According to other court filings, investors were led to believe that Dwek would buy properties and simultaneously flip those sales to what turned out to be fictitious third parties at a higher price.

In another part of the scheme described in a series of lawsuits filed by the trustee, Dwek allegedly paid off Eli Seruya, the comptroller of his uncle’s business, to facilitate the fraudulent deals being made through the company. The trustee described gifts to Seruya of a new Lexus, partial payments on nine condominiums in

Israel, and transfers through Dwek’s American Express account in excess of $1.3 million to a synagogue where the controller’s brother was a rabbi and he had access to its accounts, and had the ability to write checks to himself, the court documents charge.

The payments mostly came from people who were set up by Dwek. And the money went straight to the feds, the documents show. The entries, in Dwek’s own words, were included in the amended petition because by law all assets must be accounted for, even, it seems, if the money came from a sting and was passed on to the feds.

Those payments were detailed on an amendment to Dwek’s original bankruptcy petition to correct the list of assets he held, and were described in startlingly frank language. Included were checks coming out of several

Florida and Israeli real estate deals, some involving partial payouts to Eliahu Ben Haim, principle rabbi at Congregation Ohel Yaacob in Deal. Ben Haim was among those charged in July with money laundering. Another $15,300 came out of a $20,000 cancelled deal that involved Ben Haim and Moshe “Michael Altman,” a

Hudson

County developer who, according to the criminal complaints, “washed” more than $600,000 in dirty checks to cash for Dwek through charitable, non-profit entities.

The most curious — and still unexplained — payment included on the new asset list filed with the court was $75,100 in cash received from Barry Kantrowitz, a

Monmouth

County real estate broker who represented Dwek in many property deals. According to the filing, the cash was left in a garbage bag behind the broker’s office.

Dwek’s bankruptcy attorney, Timothy Neumann, would not elaborate on the filing.

“I’m not at liberty to talk about it. The document speaks for itself,” he said.

In court Dwek admitted he schemed with mortgage broker Joseph Kohen, 39, of Deal, to defraud PNC Bank of more than $50 million and launder $22.8 million of the proceeds through other banks.

Kohen pleaded guilty in the case in March 2007. His sentencing is pending.

Court records describe his business enterprise as a multimillion-dollar scam orchestrated by Dwek who cheated friends and even his own uncle on fraudulent land deals.

His real estate properties were basically a shell game. He used money from investors to repay others, cover shortfalls on so-called “bleeder” properties that did not generate the income needed to cover carrying costs, taxes or mortgage payments, and also to make charitable donations, according to filings by Charles Stanziale, the court-named trustee in the case.

“Dwek was able to raise money from new investors by delivering false profits to earlier investors and creating an illusion that he was a successful, philanthropic real estate mogul who delivered incomparable investment returns,” stated Stanziale in court papers.

The Ponzi scheme ultimately collapsed like a house of cards after HSBC Bank, which provided Dwek with a $25 million credit line, belatedly did a title search and discovered that it did not own the mortgages on properties it believed it was financing on behalf of Dwek in

Neptune. According to court documents, Dwek already owned the properties. When the bank finally began looking at the property records, red flags went up, said Stanziale in court filings.

Most of the defendants charged in the string operation are claiming them and the government where duped by Dwek and as a result federal authorities framed “innocent people” to avoid a long jail term.

Dwek posed as a developer, secretly recorded conversations and so called payoffs to officials involving proposed projects, and he recorded several rabbis in

New York and

New Jersey, along with others in their religious community, regarding alleged money laundering schemes.

The lawyers contend Dwek fabricated cases for the FBI, all in hopes of avoiding a lengthy prison term.

“I think a jury will look at the tapes and at Dwek, and they will come to the conclusion that the only one guilty of criminal conduct is Dwek. He is one of the most vilified criminal defendants we’ve had in the last decade, and the government wants to erase all of his bad conduct — even things he has not been charged with — to make him their star witness,” said Robert Fuggi, a lawyer for Assemblyman Daniel Van Pelt.

Other lawyers said Dwek’s own misdeeds, which are still being untangled by federal prosecutors, tower over the alleged crimes of their clients and tapes in the corruption case show Dwek pushing money on people — not public officials asking him for payoffs.

“When there is an undercover informant, he’s supposed to be uncovering crime that is going on. In the case of Assemblyman Van Pelt and many others, that was not going on. Dwek fabricated the crime, not uncovered the crime. He was the instigator of the crime, and he tried to entrap Van Pelt and others,” said Fuggi.

Prosecutors, however, regularly point out entrapment defenses seldom succeed in court.

Willis said federal prosecutors may attempt to try some clients without Dwek to avoid opening a “Pandora’s box.” That would be difficult and unusual, said several former federal prosecutors.

“He almost has to testify,” said John J. Fahy, former political corruption chief at the U.S. Attorney’s Office in

Newark.

For jurors to hear the tapes of alleged bribes, someone must testify they are legitimate, and Dwek is apt to be the best one to do it, said Mark Rufalo, former head of the organized crime strike force at the U.S. Attorney’s Office.

“The

U.S. attorneys gave him his Chanukah gift early this year. He’s looking realistically at getting only five years (in prison) and that is pretty lenient,” said attorney Peter Willis, who is representing Assemblyman L. Harvey Smith and Jersey City Councilman Mariano Vega.

Sources:

U.S. District Court in

Newark

FBI

PNC Bank

Monmouth

County Superior Court

The Daily Record

Bloomberg

An

Asbury Park

Press

Star Ledger

Robert Fuggi Lawyer

John J. Fahy, former political corruption chief at the U.S. Attorney’s Office in

Newark.

Mark Rufalo, former head of the organized crime strike force at the U.S. Attorney’s Office.

Defense attorney Peter Willis

By

Michael Webster: Syndicated Investigative Reporter.

Nov 3, 2009

7:30 PM PST

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