Deal, NJ – Mastermind of Multimillion-Dollar Fraud Scheme, Claims Name Forged on Mortgages

Dwek loses cars; home may be next

Value of properties has declined
Posted by the Asbury Park Press on 11/11/07
BY JAMES W. PRADO ROBERTS
STAFF WRITER

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It’s a hard-knock life for Solomon Dwek.

The monthly $12,700 allowance he receives from U.S. Bankruptcy Court is less than half of what he says he’s worth.

The bankrupt 35-year-old real estate mogul has long since stopped paying $13,200 in monthly mortgage payments on his Ocean Township home. One lender now wants to foreclose on it.

Last week, three of Dwek’s four luxury cars were seized to be auctioned.

Dwek hasn’t bought an $800 suit in a year-and-a-half. Now, between trips to Florida and a luxury resort in Arizona, he picks up $13 dress shirts at T.J. Maxx.

Dwek, who is also facing federal bank fraud charges, is on a comparatively tight leash these days.

The son of an esteemed rabbi to the wealthy Deal-area Syrian Jewish community, Dwek built an empire of some 350 properties, once worth perhaps half a billion dollars. It rose with a spasm of borrowing and buying, but many investors and lenders claim in court papers they lost their money to Dwek in a mountain of lies and fraud.

Dwek is free on $10 million bond, accused of defrauding PNC Bank with a bad $25 million check he deposited last year. Now he spends his days helping his bankruptcy trustee unravel and liquidate his complex web of commercial debt and high-interest loans on commercial and residential holdings in seven states.

But the sales have not gone well.

The red-hot residential housing sector that fueled Dwek’s spree is on ice, and commercial property values are showing signs of a slowdown. Dwek paid top dollar for many of his properties, and their value has sunk with the market.

“He was the canary in the coal mine,” said Gerard Cassidy, a banking analyst with RBC Capital Markets, a global investment bank. “He was the first large-scale developer in the mid-Atlantic region to have financial problems in the residential real estate market in a period when most people were not aware of the problems that were coming. Too many speculators got involved, lending standards were reduced far too much, and that led to the collapse in housing that we have today.”

Former Dwek partners soon may face colossal lawsuits from Dwek’s bankruptcy trustee, who says he will accuse them of fraudulently obtaining massive transfers from Dwek before Dwek’s assets were frozen following that bad PNC deposit in May, 2006. In bankruptcy court parlance, fraudulent transfers happen when a debtor off-loads property or money to insiders prior to a bankruptcy filing without fair-market compensation.

“The number is huge,” said trustee Charles A. Stanziale Jr., who declined to elaborate.

Under bankruptcy law, most of Dwek’s commercial lenders will get at least some of their money back when properties are sold and mortgages are paid, lawyers involved in the case say.

But about 50 members of Dwek’s own insular community claim Dwek owes them more than $100 million. Most won’t be repaid in full, if at all, because bankruptcy court puts them last in line. Mortgage lien holders, lawyers and court-appointed experts are paid first.

And the costs of the liquidation are adding up faster than the Lotto jackpot — lawyers and other professionals have been paid $4 million so far from Dwek’s assets.

Contributing to the expense and delay is that Dwek’s liquidation has been handled by two courts. It was in state Superior Court for nine months, before he was forced into federal bankruptcy court 10 months ago. More than 100 lawyers are involved.

In October, when the state-court-appointed fiscal agent asked for an additional $327,000 to pay his and other fees from the state action, creditor Washington Mutual Bank, which claims Dwek owes it $22.4 million, balked.

“These services were undertaken as part of a failed process financed by (Dwek’s) estate that ultimately yielded nothing for the overwhelming majority” of Dwek’s creditors,” wrote Washington Mutual attorney Stephen M. Packman. “While depleting the estate of massive amounts of money . . . the fiscal agent failed to render any benefit.”

That agent, Freehold lawyer Donald M. Lomurro, contests those allegations. At the direction of a state court judge, Lomurro wrote, he had been able to organize Dwek’s “inefficiently and loosely managed” properties. He also successfully had 23 of Dwek’s properties sold by the state court; the court-ordered sale of another 12 was halted when Dwek was forced into bankruptcy court in February.

So far, as few as three of Dwek’s properties have been ordered sold by the federal court.

One of them, a $2.2 million sale of a commercial property on Broad Street in Red Bank ordered in September, was originally ordered by the state judge.

Part of the delay is that the bankruptcy trustee Stanziale at first wanted to unload Dwek’s properties in bulk sales. In July, Stanziale abandoned that strategy after a committee of Dwek’s unsecured creditors rejected a single bid of $110 million for 141 properties.

The properties were costing Dwek’s estate $3 million a month, and the offer was just $10 million more than the mortgage debt. In a dropping real estate market, it’s unclear if the properties would attract the same bid today.

“What was being presented to the creditors committee, we believed, was not maximizing the value of the properties,” said committee attorney Walter J. Greenhalgh.

Bankruptcy sale signs have since popped up like mushrooms on Dwek’s properties, and Stanziale and his professionals are instead trying to sell the properties to individual buyers.

Tuesday afternoon is the deadline for buyers to force an auction by bidding up offers made on 20 properties totaling $33 million. Stanziale expects another 20 properties to be sold in December.

If there no higher bids, some of the properties will go for well under what Dwek has said they were worth just last month. One vacant subdivided 6-acre tract in Rumson that Dwek valued at $6.5 million has a starting bid of $5.5 million. A two-story office building in Tinton Falls has a bid of $4.1 million, also $1 million less than what Dwek wanted. Both bids are less than what court records show Dwek owes on the properties.

If that pattern holds, Dwek’s assets will be worth far less than the $400 million value he assigned them in February. Dwek has said creditors claim he owes them $350 million, some of which he disputes.

What houses don’t sell will be auctioned off in February, said Stanziale, who expects as many as 100 houses to be put on the block then.

“For sure, the drop in market value of residential values has affected these properties,” Stanziale said in a recent interview. “In some instances, the values have dropped below the mortgages.”

Dwek’s lawyer, Timothy P. Neumann, could not be reached for comment.

Stanziale defended the pace of the bankruptcy court action, saying, as Lomurro has, that Dwek’s holdings are extremely complex.

Nineteen months after Dwek’s assets were first frozen, some of Dwek’s investors believe there will be little left for them.

“Whatever value may have existed a year and a half ago has been diminished by the professional fees and the weakness of the real estate market,” said Richard K. Coplon, an attorney representing wealthy New York real estate investor Charles Ishay.

Ishay claims Dwek defrauded him of $5 million by lying about a nonexistent deal to buy the Deal Gold & Country Club.

“My client thinks he’s not going to get any money out of this,” Coplon said.