The Star-Ledger

His Ship Has Sailed ... To Prison

Ex-broker gets 21 months in property-flipping mortgage fraud scheme

The Star-Ledger — Tuesday, March 28, 2006

BY TED SHERMAN
Star-Ledger Staff

Two years ago he was in the Caribbean, sailing aboard a 54-foot yacht named for the gypsy life.

The sleek boat is gone now and Barry C. Fauntleroy will spend the next 21 months in federal prison – sentenced yesterday in a mortgage fraud scheme involving dozens of government-backed loans that federal prosecutors said netted hundreds of thousands of dollars.

Fauntleroy, 40, also was ordered to pay more than $524,000 in restitution to the U.S. Department of Housing and Urban Development.

The former real estate broker and one-time radio talk show host pleaded guilty in September to conspiring to recruit homebuyers and help unqualified borrowers obtain more than $2 million in federally backed loans through falsified applications – including fake bank statements, pay stubs, W-2 forms and employment verification letters. Most of the mortgages failed and the properties went into foreclosure.

In court before U.S. District Judge Joseph Greenaway in Newark, Fauntleroy said his intentions were only to help put people in homes, but conceded repeatedly that he had broken the law.

"If any of those homeowners felt I tried to hurt them, I'm sorry. That was not my goal," he said. "I felt I had the opportunity to do something for people, but I flouted the law."

Fauntleroy, formerly of Mendham, headed a string of companies, including Neighborhood Properties Group and EON Institute Inc., that purchased distressed houses – many obtained through tax sales or foreclosures – that were then resold for as much as double or triple the original price.

The real estate transactions became the focus of both federal and state criminal investigations after a series of stories in The Star-Ledger documenting the property flips of dozens of dilapidated houses in Newark, East Orange, Irvington and elsewhere.

Buyers claimed they were promised renovated houses that in many cases received scarcely more than paint and new siding, while authorities later charged that values of most of the properties were greatly overblown by appraisers – some of whom have since lost their state licenses.

Many homebuyers eventually defaulted on the government-backed loans, saying they were saddled with major repair bills on houses worth far less than they paid, atop mortgages they could not afford.

After the collapse of the operation, Fauntleroy lived for a time aboard a luxury sailboat named "Romany Life" in St. Lucia and the Grenadines. He later sold the boat and returned to the United States to face the criminal and civil charges.

Under federal sentencing guidelines, Fauntleroy could have received between 37 and 46 months. At yesterday's sentencing, however, attorney Thomas R. Ashley of Newark said his client had cooperated with authorities and had accepted responsibility for his actions. He noted Fauntleroy had spent the last few months working as a volunteer in New Orleans helping to rebuild homes after Hurricane Katrina.

Assistant U.S. Attorney Richard E. Constable III, who handled the prosecution, said Fauntleroy played an integral role in the mortgage scam and urged the judge to impose a substantial sentence.

"It's ridiculous that Mr. Fauntleroy continues to maintain he did nothing wrong in light of the fact he pleaded guilty and homeowners he defrauded are still trying to pick up the pieces," he said.

Greenaway said Fauntleroy's stated intentions to provide housing opportunities may have been laudable, but his methods were not.

"Despite good intentions, this is a crime that has severe detrimental effects on the community," he said.

Greenaway sentenced Fauntleroy to 21 months in a federal prison camp in Montgomery, Ala., and ordered that he stay out of the mortgage and real estate business.

U.S. Attorney Christopher Christie said the sentence "sends a message that there are consequences to fraud."

But consumer activist Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which had first raised red flags about Fauntleroy's businesses and later worked to restructure the loans of those who purchased houses through his companies, called the sentence a "slap in the face" to victims of the scheme.

"I think it's disgraceful," she said. "At least 50 people were foreclosed on – some of them had just too much debt."

Two others who also pleaded guilty with Fauntleroy have already been sentenced.

On Friday, Devon Bowie, 54, of Malverne, N.Y., who headed the mortgage company that financed the deals and later sold the mortgages to unsuspecting banks, was sentenced to a year in prison after pleading guilty. He agreed to pay $500,000 in restitution.

On Tuesday, Peter Port, 52, of Roslyn, N.Y., an attorney and title agent who also admitted to filing falsified loan applications, was sentenced to five months and also agreed to reimburse the government $500,000.

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