J. Christopher Daly, 49, New York, New York, and Michael Abreu, 43, Carmel, New York, two former executives at the Sheldrake Organization, a real estate development and management company, were sentenced in Manhattan federal court to 15 months and one year and one day in prison, respectively, for their roles in a scheme to fraudulently obtain $2.2 million from a foreign-owned bank.
Daly, who was the owner and President of Sheldrake, and Abreu, who was the Director of Asset Management, used the funds obtained from the Lender to support the construction and operation of “Riverhouse,” a $573 million luxury condominium project in Battery Park City, New York. Daly and Abreu each pled guilty in April 2012 to one count of conspiracy to commit mail fraud and wire fraud. U.S. District Judge Naomi Reice Buchwald sentenced Abreu and Daly on September 20, 2012.
According to the Information filed in Manhattan federal court and statements made during court proceedings:
The Battery Park City Authority (“BPCA”) is a New York state public benefit corporation in charge of the commercial and residential development and maintenance of a segment of downtown Manhattan. In 2004, BPCA solicited bids for the construction of the Riverhouse Project, which Sheldrake ultimately won.
As part of the project, Sheldrake secured financing from the Lender. When Sheldrake received invoices from BPCA relating to the Riverhouse Project, Sheldrake submitted them to the Lender for reimbursement. From the beginning of the Riverhouse Project in early 2006, Sheldrake struggled to make timely payments to BPCA on its invoices. As Sheldrake‘s payment problems persisted throughout the fall of 2006, the company’s representatives, including Daly and Abreu, assured BPCA representatives that the outstanding invoices and late charges would be paid. Nevertheless, while Sheldrake made payment on some outstanding amounts owed to BPCA during the fall of 2006, it did not pay the balances in full.
In January 2007, Daly, Abreu, and a co-conspirator (“CC-1”) agreed to submit a fraudulent invoice from BPCA to the Lender for charges that had not yet been billed, and to which they were not yet entitled. The fraudulent invoice, in the amount of approximately $2.2 million, was submitted in February 2007. The Lender funded this invoice, among other payments, and wired the money to Sheldrake‘s bank account in New York, New York.
When the real BPCA invoice for approximately $2.2 million was received by Sheldrake in July 2007, Daly signed a letter that was sent to the Lender requesting reimbursement a second time. Unaware that this charge had previously been funded, the Lender again funded the invoice request to Sheldrake and wired the money to Sheldrake‘s bank account in New York, New York.
In addition to his prison term Daly was sentenced to 18 months of supervised release, ordered to pay $2.2 million in restitution to Sheldrake‘s former business partner, a victim of the offense, and ordered to forfeit $500,000. In addition to his prison term, Abreu was sentenced to one year of supervised release. He was also ordered to pay $2.2 million in restitution to Sheldrake‘s former business partner, forfeit $62,500, and pay a $100 special assessment fee.
Preet Bharara, the United States Attorney for the Southern District of New York, announced the sentences.
Manhattan U.S. Attorney Preet Bharara stated: “The ‘double-dipping’ fraud in which these defendants engaged has earned them both prison terms as well as the forfeiture of their illgotten gains.”
Mr. Bharara praised the investigative work of the USPIS.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force.
Assistant U.S. Attorney David I. Miller is in charge of the prosecution.