Racketeering scheme in New Jersey

March 10, 2009 4:29:26 PM PDT
There are major developments in an Eyewitness News investigation. The New Jersey Attorney General's office is filing civil RICO (racketeering) charges against a disbarred lawyer and his son, accusing them in a widespread investment scheme. It is an Eyewitness News exclusive.

The defendants, Seth and Marty Gendel, ran a property management firm in Totowa, New Jersey. They are accused by the Attorney General's office of orchestrating a pattern of racketeering that included making false promises to investors, submitting fraudulent mortgage applications and failing to make mortgage payments, resulting in ruined credit.

"They took a good group of families and they violated us, our trust," Jennifer Pena said.

Pena and her husband, Devon McKnight, bought a now boarded up Newark, New Jersey, home in 2006 as an investment. The appeal, no money down, just their good credit. It was a deal orchestrated by Martin and Seth Gendel, who ran Casey Properties.

"I can't afford to fix it up," McKnight said. "I have no credit to do anything, so basically, I couldn't even take out a loan to kind of fix it up if I wanted to."

In the complaint, the Attorney General's office alleges the Gendels, mortgage brokers and others conspired in a pattern of racketeering to solicit investors to buy properties in distressed neighborhoods at grossly inflated prices to generate unwarranted profits for themselves.

Eyewitness News Reporter Sarah Wallace: "Your credit as a result of this? "
Barbara:"It's shot, yeah."
Wallace: "Still shot?'"
Barbara: "Yes, I can't even, I don't even apply for it even more at this point. We have no credit. I can't get any credit what so ever."

Eyewitness News first spoke with Barbara Borys, her husband and several other investors last year, some who bought several properties through the Gendels.The investors say the Gendels promised to manage the homes and pay the mortgages, but then came the foreclosure notices and destroyed credit.

"And once we started getting letters from the banks that the mortgages weren't being paid, I knew right away then, there's trouble," Barbara said. "And it just got worse, it just got worse."

The McKnight's Newark home has a mortgage of $330,000. They say they've been told it's worth a fraction of that and haven't been able to sell it. The AG's office claims many homes in the Gendel scheme have been condemned, left vacant or abandoned. Martin and Seth Gandel were not available for comment. Seth now lives in a doorman building on Manhattan's Upper East Side.

"I just want to get my credit cleared and get the house out of my name and move on," McKnight said. "I really just don't ever even want to think of them ever again, so that's just what I'm looking forward to."

The AG's office says that many homes in this alleged scheme have been condemned or abandoned, which just adds to neighborhood blight in already distressed areas. Sources say that there is also an ongoing criminal investigation into the Gendels and others.