Indiana Real Estate Developer and Property Manager Admits Ponzi Scheme to Defraud Investors of Millions of Dollars | USAO-NJ
NEWARK, N.J. – A property developer and manager from Indiana today admitted his role in a scheme to defraud real estate investors, U.S. Attorney Philip R. Sellinger announced.
Herbert Whalen, aka “Bert Whalen,” 47, of Indianapolis, Indiana, pleaded guilty by videoconference before U.S. District Judge Madeline Cox Arleo to the first count in an indictment, charging him with conspiracy to commit wire fraud
“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. “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. said. “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.”
According to documents filed in this case and statements made in court:
From August 2016 to July 2018, Whalen, who operated Oceanpointe Property Management in Indianapolis, engaged in a scheme to obtain money from real estate investors by misrepresenting and concealing the poor condition of properties managed by Oceanpointe and by creating fake leases for unoccupied Oceanpointe properties. Investors were promised that, after repairs and rehabilitations were completed, and tenants rented the properties, investors would receive copies of the leases and begin to receive rent payments as their return on investment. In reality, many Oceanpointe properties were not repaired and rehabilitated, and were not ready for occupancy. To conceal this fact from victim investors, Whalen and a conspirator directed Oceanpointe employees to draft fake leases, making it appear to investors that Oceanpointe properties were rented, when, in fact, the properties remained vacant. Whalen instructed Oceanpointe employees to place fake tenant names on leases to send to Oceanpointe investors.
When investors attempted to view the properties that they had purchased, Whalen directed Oceanpointe employees to cover the windows to conceal the poor condition of the properties and the fact that the properties remained vacant. Whalen and others commingled tenant rent payments and selected which investors would be paid from the pool of funds in order to silence investors who voiced concerns and evade detection of the fraud. In order to prevent investors from leaving Oceanpointe and exposing the fraudulent conduct, Whalen directed an Oceanpointe employee to create a false identity and falsely claim, on an online real estate message forum, that the Oceanpointe employee was an investor with Oceanpointe and another company, and that Oceanpointe had addressed all of the concerns regarding the investment property. These misrepresentations and others led to millions of dollars in losses to investors, which Whalen used to, among other things, fund his lifestyle.
The charge of conspiracy to commit wire fraud carries 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. Sentencing is scheduled for July 14, 2022.
U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, with the investigation leading to today’s guilty plea.
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.