Mr. Ponzi comes to Delray Beach
Two thousand investors poured more than $600 million into NRIA. A proposed Delray Beach development was among those used to raise money.
Small bombshells explode everywhere in hundreds of pages of court documents detailing the finances and fraud allegations against National Realty Investment Advisors and its principals.
Why should Florida care? While it’s not known how many Florida investors were among the 2,000 who poured more than $600 million into NRIA, the company used a proposed Delray Beach project to raise money flowing into the scheme, an apartment complex planned for Southeast First Avenue. It wasn’t the only Delray property NRIA was involved in, reporter John Pacenti wrote in The Coastal Star.
A federal grand jury, the New Jersey Bureau of Securities and the U.S. Securities and Exchange Commission all describe a Ponzi-like scheme, in which new investors in real estate projects were told they were reaping profits. In actuality, their profits were mostly money from newer investors — the hallmark of the fraudulent scheme Charles Ponzi made infamous in 1920.
A wife, an ex-wife and a romantic friend. New Jersey resident Thomas Nicholas Salzano is the man most often mentioned in the criminal allegations, and the only one whose past and present romantic liaisons are pulled into the picture. More than $1.2 million went to his wife, his ex-wife and a person with whom he had “a romantic” relationship, said the federal indictment. The SEC found the wife’s income was suspect in part because she received money from NRIA but did not work there: Her occupation was babysitter.
None of the three is charged with criminal or civil fraud.
Big spenders. Where else did the money go? Some money from new investors was given to previous investors as profits. But not all of it. The feds tracked investors’ cash to, among other things, luxury cars, antiques, jewelry, envelopes of cash and $91,000 spent at the Jersey shore, which may include $26,000 paid for a weeklong birthday party.
And, because the feds can be cruelly detailed when they want, the indictment also says some of the ill-gotten gains were spent on erectile dysfunction drugs.
Not the first fraud allegation rodeo. The Federal Trade Commission charged that Salzano helped orchestrate a nationwide telecommunications scheme between 2002 and 2004. The company promised to slash phone and internet bills to churches, municipalities and other groups. Instead, it left them in debt to collection agencies.
The FTC settled with the company for $50 million in 2006.
In 2013, Salzano pled guilty to five counts of theft by fraud in Louisiana in connection with the scheme.
A shadow CEO. According to the 18-count federal indictment, Ren Grabatto II, identified as the head of NRIA and its investment fund, was never in charge. Salzano pulled the strings. In order to hide Salzano’s past, NRIA spent hundreds of thousands of dollars to have an Indian firm scrub the web clean of his history; including fake social media posts and misleading websites. One such website stated the telecommunications company was a non-governmental operation established to raise awareness about melting glaciers and rising sea levels.
There’s more to come: NRIA’s assets are tied up in U.S. Bankruptcy Court, where it filed Chapter 11 last June. In federal court in New Jersey, Salzano has pleaded not guilty to all 18 criminal counts stemming from his role at NRIA.
Grabatto hasn’t been served with the SEC civil complaint. As of Jan. 31, he could not be found. The securities agency believes he is in the Philippines. It isn’t giving up. The SEC has hired a private investigation firm to scour the country for the executive.