A Clifton Park couple who bilked an estimated 15 investors out of $1.6 million in a real estate pyramid scheme plead guilty in federal court on Tuesday to mail fraud.
Steven and Jeanne O’Brien, who appeared before Judge Thomas J. McAvoy in U.S. District Court in Albany, could each face up to 20 years in prison and a fine of up to $250,000 when they are sentenced in May.
The couple has agreed to pay restitution to the victims.
The couple started Save-A-Home LLC in 1998, which they operated from their home and a commercial location on Route 9 in Clifton Park.
They solicited investors and promised above-market rates of return, as high as 20 to 30 percent, within several months of a sale of a property.
Steven O’Brien purchased, renovated, maintained and then sold properties on behalf of Save-A-Home, while Jeanne O’Brien managed day-to-day operations, including receipt of investor checks and payment of dividend checks.
She controlled the Save-A-Home bank account and made withdrawals and deposits on behalf of the company.
From 2000 through late 2003, the O’Briens knowingly devised a scheme to defraud investors by making false representations, according to the U.S. Attorney’s Office.
Beginning with a single investor, Save-A-Home purchased and resold a few real estate properties, returning the promised rate of return to the investor. The investor referred several friends to the O’Briens as potential investors.
More than 20 investors from New York and New Jersey gave the O’Briens cash investments under Save-A-Home agreements.
The O’Briens told investors that their principal investments were safe and would be returned on or before a specified time with profits and that the investors could withdraw their investments and profits at any time.
U.S. Attorney Glen Suddaby said Save-A-Home stopped acquiring real estate shortly into its operation and didn’t have enough money to generate returns as promised.
Yet the O’Briens continued to encourage investors and made money from investors by operating a pyramid scheme, using funds obtained from later investors (those at the bottom of the pyramid) to pay returns to early investors (those at the top of the scheme).
They told investors that Save-A-Home had purchased properties in Albany, the Bronx, New Jersey and in Florida and that the company had offices in New Jersey and Florida. Steven O’Brien even took investors to see the properties.
When Save-A-Home was unable to send investors dividend checks, Jeanne O’Brien sent e-mail messages to investors falsely claiming that the delay was due to restructuring of Save-A-Home or other unforeseen circumstances.
The U.S. Attorney’s office said that months earlier, Save-A-Home’s accountant advised Jeanne O’Brien that Save-A-Home had lost $700,000 in 2002 and was a failing business concern. O’Brien knew there were no assets or funds available to pay investors.
Even though they knew Save-A-Home had failed and there was no money to pay investors, on Nov. 15, 2003, the O’Briens asked an investor to mail them an agreement and checks totaling $50,000 and deposited funds in Save-A-Home’s account.
Meanwhile, the O’Briens used investors’ money for their own personal expenses, including a home mortgage, an automobile lease, the purchase of a recreational vehicle and a loan to Steven O’Brien’s brother for the purchase of real estate, said Suddaby.
The case was investigated by the FBI Albany Division, with assistance from the New York State Police.
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Categories: Schenectady County