The Expert Podcast

National Realty investment advisors You may have seen their ads On CNBC On Fox news on news stations If you're in the New York area you probably saw their billboards at the entrance of the Lincoln tunnel George Washington bridge They were very high profile In the mid or late 2000 tens 17, 18, 19 Advertising A very high rate of return for investors On real estate Security's real estate Investments Let's all come to an end national Realty investment advisors has filed bankruptcy and is now on a cease and desist order From the bureau of securities In New Jersey For fraudulent activities we're going to break down this case Because it shows how a fraud case looks how of investment scam looks All of the signs of seeing the scam were visible Before this all came crashing down So if you're an investor Looking at potential investment looking at a place to put your hard earned money And you don't want to get scammed Here's things you can look at And also it's a breakdown of this particular fraud And we'll relate it to some other frauds
Every time we have a client that comes to us where they've been scammed out of money They put their money into a Ponzi scheme After the fact we're doing an investigation deconstructing it There's always things that we find that could have been visible before the investor lost money That could have avoided that loss to begin with When we're doing an asset search or an asset recovery for an investor It's a difficult time because that investor already lost the money Sometimes we can get the money back Sometimes we can find out where the assets are but it's much better for you as an investor to discover a scam before You put the money in or if you already put money in to get it out before it blows up one last thing you may remember that Back last year a year ago in may of 2021 we actually featured National Realty investment advisors as a scam This was before really anything had come out And Now come out So what does it look like Here's the state of New Jersey bureau of securities in the matter of national Realty investment advisors And all the related names and we're not going to go through the whole thing It's a 63 page document We'll go through some of the highlights that are very interesting You could almost make a movie about this and let's see what were the clues And this can also show how we do an investigation and what goes into an investigative research of a fraud First of all findings of fact the respondents were involved in a massive securities fraud So that's the basic they usually start with the big headline massive securities fraud And this is done by the government agencies security bureau in New Jersey
Section two respondents executed their scheme by employing a nationwide advertising campaign radio advertisement 21% returns Well there's your first red flag Anytime you see An investment scheme offering a high rate of return You might think that's good But if it's a fixed rate no risk no ups and downs That's a red flag to look at It doesn't mean by itself It's a scam but you want to know more about it So high rate of return a lot of advertising there's Red flag number one And it goes on to say that you'll get an annual distribution of 6% Which Seemingly robust you know back in 2017 18 and 19 getting 6% on your money was pretty good When interest rates were low They did not disclose to investors These returns were from not from profit but from a return of your original money So you gave them money and they just gave you 6% back every year They could keep doing that For more than 10 years they ran out of your money
So That's a red flag number two And of course now we know where that money went The respondents the defendants misused the investor money And for their own personal benefit that retained companies they had a sorted pass which we'll talk about some other previous criminal past Or regulatory past making lavish payments to their family Including Suzano's wife for no show jobs It sounds like the Sopranos right They're giving no show jobs to relatives This is supposed to be an investment deal not some kind of cement company or garbage company And here's the first crack in the armor Salsano one of the principals was arrested He used a forged document To induce an investor to increase their investment So there was an investor looking to put in more money And in order to try to get them to do that One of the principals allegedly forged the document to show her That more money was being made from this scheme than was actually being made That document was very easily Discovered If you had verified or anybody had verified that this document didn't Come from an actual bank but was made on Photoshop that could have avoided further loss Now it's one thing to forge a document to show to an investor You look most investors Aren't going to be sophisticated enough To do forensics on a document Although if you're putting a lot of money at risk tens of thousands presumably in this case I believe that she was asked to put up 250,000 You would probably want to do some due diligence on what you're being presented If you're going to buy a $250,000 house for example you're going to get a title search title insurance all kinds of due diligence But throwing $250,000 on investment Nobody took the time to even verify this one document that it was true
But it's one thing to try to fool an investor Well six months after that Fake document They try to fool TD bank What they did was They forged another document to try to get a bank to pay 20 million To this investment scheme Look it's one thing to try to scam an a retail consumer investor It's another thing to try to scam a bank A bank is going to check these things out Right So if you give them a fake letter of credit to try to get 20 million from a bank that's pretty risky That's not a smart thing to do even for a criminal That's not a smart thing to do Banks are going to check this stuff out And then The bank informed them that That was a fraudulent document and they pursued even more To try to force them and coerce them to give the money We'll look at that momentarily Here's where we first discovered this possible fraud One of the Principles of this company Scutaro Had a company many years ago 20 years ago called Norvergence and Norvergence turned out to be scam they were selling these fake phone boxes to companies that said look if you buy this box and lease it from us You'll have free phone bills You get it you lease it from us for $150 a month or whatever it was and you won't have to pay your phone bill anymore This box connects to the phone system So you don't have to pay long distance You have free phone service Well it turns out that once you sign the lease for this box This company Norvergence sold that lease to a capital management company they got paid upfront for the lease And now you are stuck with this box as a small business and your phone bill didn't go down It was just a big scam So Scutaro Put this deal together and there was An investigation and he had to sign a $50 million allegedly Agreement For settlement Well that was all public records This matrix box Right It was all public record So how do you get around that if you're forming a new company Well what you do is you pay web companies to try to hide that information They paid $400,000 From NRIA To web companies to try to conceal their association with Norvergence They made up these fake websites that had different news about Norvergence they made it seem like it was a nonprofit They use web marketing as a conduit to Make up fake entities called norvergence LLC and norvergence foundation To have search engine results So if you did a Google search these fake Websites and blogs Would show up instead of the actual fraudulent stories they even took it a step farther Scutaro who was involved with norvergence change the spelling of his name from Scutaro with two T's To Scutaro with one T to disassociate himself from norvergence history We discovered this back in 2020 21 So it was easy enough to find For an investor that wants to protect their money Also venturous is inside the corporation One of the principals guy named O'Brien Was actually trying to be the voice of reason He actually was trying to change terms on an agreement to try to make it more legal To make it more legitimate And So Zano Was Aggressive He says don't tarnish what will be created Give me a corrected agreement If you know what's good for you This guy was threatening his own Partners To keep doing things illegal I'm not signing this a-hole powerplay Right So even inside of a scam there's people that sometimes try to be more of a voice of reason to keep it straight Where one person may be the one that's the poison In the soup so to speak Even to the point where this Salzano was saying that he's giving him orders to get on our strategic page get on the same page as me Right This guy O'Brien was trying to keep things at least close to being on the straight and narrow Or not as illegal allegedly but Salzano was screaming at him To keep doing things the way he wanted to And this gets back to the money part The company failed to disclose to investors that the monthly 6% payments We're a return of their own capital So if you invested a hundred thousand They would give you 500 a month 6,000 a year or 6% but really that wasn't coming from profits of the company That was just your own money They're giving you little bits and pieces of it back While they held the rest And used it up for their own purposes mostly marketing advertising and their own salaries while they were doing this They still claim that the company was going to pay returns out of the cash flows Distributed to the company by the investments
Right They weren't funding the returns from investments They were funding it from their own Investors own money After a few years of doing this when they started to get people asking questions and looking more into it They finally disclosed that the company was going to pay returns out of their own Capitol And a month of coupons Might have A source from investor money It's kind of a way to try to cover it up after the fact it didn't work But the fact that they changed it Kind of imply that they knew it was wrong in first place And there was a lot of other red flags One of which is one of their largest builders that they use to do construction on their properties was a company called us construction Well One of the principles sons of NRIA I know Sodano son was the CFO of that company So there are double dealing or or inside dealing with their own companies that was not disclosed to investors Which allegedly should be There were other payments to design consultants Who's there were people son-in-law the website company was a cousin business formation fee were done by a brother So there was a lot of family dealings for expenses of the company And like most frauds there were direct payments There were payments to Solano's wife Close to 2 million altogether 200,018 300,019 another 300,020 plus 1.3 million So add it up It's about 2 million paid to the guy's wife directly And here's another one This is not to get too much into the weeds but NRIA started to want to try to extract money from investors by charging an asset management fee or a property management fee Or a finder's fee and they tried to reword that fee a couple of different ways It was anywhere from three to four sometimes 5% And they would take the development fees upfront on deals Sometimes these deals weren't even done yet and they were taking these fees And these fees were found by their accountant to not be properly recognized in compliance with general accepted Accounting procedures practices So they were charging fees that the accounting practices didn't allow them to charge and their accounting company said no you can't do this you can only do it after the fact You can't charge us upfront and NRIA went back and forth With emails trying to figure out a way to do mental gymnastics to still be able to charge this fee Some of which were allegedly illegal there Accountants stated that income and revenue from development fees would only be recognized at the time the project is sold not upfront not during the process And they asked them very directly Do you are you saying we can't charge these fees and their accountant said yes In big bold letters you can't do this And then the email went like this Solano Ask the accountant to confirm the NRIA should never collect the fee until the very end even under the way we are doing our accounting To which the account responded Yes you should never do this But Afterwards they went back and forth internally to try to figure out another way to extract this fee In fact Dustin Solzano who was the manager or one of the executives of the of the construction company said why don't we call it a finder's fee not a development fee And you know he's a third-party general contractor not an attorney not an investment person was getting involved with this company which kind of shows the involvement of non executive level parties And here comes O'Brian again O'Brien urged Salzano To phase out the excessive development fee pointing out that it's not sustainable We must phase this upfront fee out immediately It's not sustainable
What did Salzano say he's troubled by that suggestion We can not reduce these fees That's a no go development fees Give us the flex We need to pay staff So they needed this to pay their expenses They needed this upfront fee To pay their expenses Otherwise they did not have the cashflow O'Brien took it a step further He said in bold how can you charge a development fee on a structure that does not exist That's one of their executives talking to another executive saying in caps yelling how can you Charge a development fee How did Solzano reply He says don't say this in writing all these comments don't belong where you're saying them We need to do this face to face So he knew it was not something you should document
This is what goes on inside of a scam inside of a fraud There are many other smaller pres You know in relation mini scams and frauds happening internally and red flags and smoking guns The bottom line is at The New Jersey security agency said respondents made untrue statements of material fact in order to Get investments Basically they lied to get money from people That's what scammers do
I'll leave you with the link to the document in the video Comments
It's good reading I'm not going to go through all the details Like I said it's 60 pages The bottom line is at the New Jersey securities agency said You're half the cease and desist You can no longer Solicit funds you can no longer even operate to continue your operation and fortunately this happened while the company was still kind of operating There may be some assets left to payback some investors presumably some investors will get less than what they put in They're not going to get all their money back This is why it's important When you're putting a lot of money Or a big percentage of your money at risk that you
Good investigation You perform due diligence on who you're sending your money to just because they have a website and advertising and a fancy sales presentations does not mean That it's legitimate It doesn't mean it's fraud either but this is how you check there's two or three things that every investor could have checked out checked out the principals checked out the documents checked out some of their their backgrounds not relying only on the information given to you by the company but doing your own research because obviously the company's only going to give you the good stuff All right We have a division of our company that does some some a document preparation for motor vehicles And sometimes people ask because we have a website they say well I just want to call to make sure you're not a scam Are you guys a scam Well don't ask the scammer if they're a scam because you're going to get the same answer If somebody is legitimate they're going to say no we're legitimate We're not a scan If somebody is a scammer They're going to say the same thing No one's going to say all right You asked though Yeah we're a scammer You can't get the information the company that you're Checking out You have to get it from a third party or do your own research So this is a very good read There's a lot of good information in this document I'm sure there'll be more to come From NRIA You don't see their ads anymore or Not on CNBC anymore These the federal sec will probably get involved They'll probably be some prosecutions or at least indictments Again all this is alleged at this point There's no criminal prosecutions or there's no Convictions All it's alleged right now but the parties involved some of this will show you they plead the pled the fifth over a thousand times Altogether So in interviews with investigators They You know pled there Right under the fifth amendment from self-incrimination a thousand times To not answer questions that by itself says something Hopefully it's good information for you Put your comments below Do you have any experience with NRIA Did you put money in Did you avoid them Do you have another scam that you lost money on Tell us what you think