Podcast 301: $4.8 Million in Real Estate Ponzi Scheme

How a Rhode Island woman fleeced neighbors and friends in a massive real estate ponzi scheme…

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Show Transcription:

Eric Worral: (00:00)
Hey everybody. Welcome back to another episode of RentPrep for Landlords. This is episode #301 and I’m your host Eric Worral. And today we’re going to be talking a bout a four point $8 million Ponzi scheme that is involved with real estate. And we’re going to talk about what happened with this what was going on out in Rhode Island, how it all went down and what you should know about it and what we can learn about it. All right guys, we’re going to get to that right after this.

Voice Over: (00:32)
Welcome to the RentPrep for Landlords podcast and now your host, Eric Worral

Eric Worral: (00:37)
Just a quick aside, I wanted to share a little tip, a little story from a, actually few hours ago. So, I had a meeting at the RentPrep office here and one of our employees who’s developing into a really nice product manager for the company.

Eric Worral: (00:53)
So he’s going to be helping us keep an eye on our product that we’re developing. He mentioned something and then I said, this kind of reminds me of that Tom Green Show and I don’t know if you guys have ever heard of that show or know what that show was really goofy show. I don’t know what channel it was on. Maybe like Comedy Central or something. I have no idea what it was. This like a late night talk show that was just really odd. But when I said it, I was like, he’s not going to have any idea what I’m talking about. But he didn’t know about the show. He didn’t know about the person or reference anything. And I find this happening more and more as of late for myself where I’m referencing things and people aren’t sure what I’m talking about.

Eric Worral: (01:33)
I was reading something other day it was about Zion Williamson who, if you’re not familiar, number one overall pick in the NBA draft. And he broke some scoring record, you know? Yeah. Those obscure statistics that sports seem to love, like scored over 25 points and 10 straight games in his rookie year while wearing mismatched shoes or something. But it was a record that, or at least a feat that hasn’t been replicated since Michael Jordan was a rookie. So in his quote about it, he was saying that he’s he’s very familiar with him and his mom used to make them watch a film of Michael Jordan and I was like, wait a minute. Like his mom used to make them watch film, like, like past tense, you know, like Michael Jordan wasn’t a basketball player at any point that he was interested in basketball. So I looked up Jordan’s last year in the league and it turns out that Zion Williamson was three years old when that happened.

Eric Worral: (02:27)
And for me, like I I grew up watching Michael Jordan big fan and just used to like, anytime I could, I didn’t have cable TV, but anytime he was on NBC or anything I would try and watch it. And now this guy was taking the league by storm. Right now, like during his course of memories of his life has never watched one live moment of Michael Jordan playing basketball on my, Oh yeah, I feel with that and yeah, I don’t know. It seems like it’s being a reoccurring theme. The last few weeks here. I took my first cholesterol pills a couple of days ago trying to get my cholesterol down. You know, just a lot of other, other life stuff. This is kind of fun, you know, to deal with. But the things we all deal with, you know how you cope with them and how you, how you rationalize them or at least fit them into your life and your story that you tell yourself is important.

Eric Worral: (03:17)
Cause I think for some people it kind of shakes them up and other people you just kind of laugh and go. Yeah. All right, let’s keep moving. So in the spirit of just keep moving, I would like to get to the podcast topic today. We are, as I mentioned or maybe didn’t mention, I might’ve re recorded this, but we have an article from fbi.gov which I don’t know if I’ve ever been on this site and it actually looks pretty good. Like it looks like an official news site, which makes me think it’s new. I don’t know. Usually you see a .com site and it’s like the ugliest thing you’ve ever seen. It actually looks pretty sharp, but the title of it is real estate Ponzi scheme. This was published on February 26th, 2020 and then underneath the title here it says Rhode Island Woman’s Fraud Preyed on Friends and Neighbors, and it’s got this kind of like drone footage shot of what I’m assuming is a her house.

Eric Worral: (04:07)
Yeah, it’s her house in East Greenwich Rhode Island, and it is gorgeous. I mean, you’ve got a really nice pool just like, you know, one of those houses that you’re like, wow, like that looks like it’s a video game or something. But it says a Rhode Island woman who prayed on the trust of friends, family, and neighbors. And a dubious investments game. One that gilded her reputation and lifestyle while fleecing her victims of 4.8 million was sentenced this month to eight years in prison. She was also ordered to pay back her victims. So Monique Brady plied guilty last July in federal court to running a fraud scheme. Prosecutors I have described as reprehensible, insidious and depraved. Brady 45 of East Greenwich claimed her property preservation company, MNB like Michael National Basketball. I guess I’m still stuck on that theme. Had contacts to rehabilitate new England properties. She said she needed investments of 20,000 to $80,000 to pay subcontractors to perform the work and return investors were promised. Now here’s where your red flags are going to go up, right? A 50% yield once the rehabilitation work was complete. So in the end, investigators determined it was all a $10 million charade. There was no large scale property rehab and only a few legitimate low dollar contracts. Almost all the money was being used to prop up Brady’s Ponzi scheme and support a lavish lifestyle on the backs of friends who thought they knew her.

Eric Worral: (05:38)
You know, I don’t think this is really a lesson that we can pull from this cause most of us know, if you hear about an investing opportunity that is a 50% yield that is talking in the terms of like a year or two. It’s probably not a good thing to invest in. That’s a little bit too sweet. I don’t remember what the investment numbers were that the Ponzi, a famous Ponzi scheme. What am I talking about here? Madoff. What did Madoff promise? Let’s see if we can figure this out. Madoff Promised Returns, going to the old Google. Madoff promissed consistent returns a 10 to 12% and delivered, or at least it appeared his investment strategy delivered on those terms. So I thought it was higher than that. I thought he was like promising like 20%. But maybe I’m wrong on that.

Eric Worral: (06:26)
There’s from aol.com. Let’s see if a Wikipedia has anything with promise invested. Yeah. So according to a Wikipedia and going on a little tangent here it says that made out discussed is a suppose and methods in 1970s, he had placed investment funds into convertible arbitrage positions in large cap stocks with promising investment returns are 18% of 20% in 1982. I’m seeing if there’s any other promises on here. No, do do. Yeah, I know. Yeah. It looks like 18 to 20% too. So when you have somebody like Bernie Madoff who is, you know, creating these ridiculous promises anywhere from 10 to 20%, and somebody comes in and says. I can get you 50%, usually a pretty good red flag. So just something to chew on says here that she had lifelong friends who were just totally and completely betrayed by her said pepper dialer, a special agent in the FBI’s Boston field office who worked with internal revenue service special agents on the case.

Eric Worral: (07:33)
Brady’s victims among them, multimillionaires, firefighters, young and elderly represented the cross-section of the Toni community. 30 minutes South of Providence. Most had a very close connection to Brady and investigators identified 23 individuals who lost their investments in the scheme, which encouraged investors to roll over purported gains to increase their stakes and potential windfalls. Some lost everything in the scam, which went on for at least four years before Brady was arrested on April 25th, 2019 as she prepared to flee the country the burden of this loss is nearly impossible to put into words, said one victim. The stress my family has endured is beyond measure. Even my children’s futures are all through forever. The scam came to light after the IRS criminal investigation discovered and consistencies between Brady spending and her business that led to closer forensic analysis and then a deeper dive into financial records that showed repeated deposits of large tracks, including some of 50,000 or $60,000.

Eric Worral: (08:29)
And the high dollar figures are not that unusual in real estate. We’re flipping houses and extensive remodels can reach into six figures, but the sham fell apart quickly when federal agents began interviewing Brady’s investors. I can only imagine if you’re a, somebody who’s invested, you know, let’s say 20 $50,000 with a friend of yours. And then the FBI calls, I don’t even know how this happens, right? Cause they said the FBI never calls you. And that’s how those scams are, right? The FBI’s not going to call you asking for your information. So let’s say however the FBI gets in contact with you and they want to talk about your friend who you’re investing in. I mean that talk about a pit in your stomach. There’s gotta be like one of the worst feelings there. So it’s saying here that essentially where the wheels came off for her special agent Mark Hamza the IRS criminal investigation division, we are presenting them with the records from these vendors where she did little or no actual work and they’re providing us with these promissory notes for 50,000 or $60,000 investments.

Eric Worral: (09:25)
That was really the turning point. The interview with these people, a 67-year-old victim with a quadriplegic husband, an elderly parents with Alzheimer’s and dementia, sadness statement to the court that she lost both her life savings and her parents’ savings to Brady’s ploy. I cannot articulate the guilt that haunts me for having made such an irresponsible decision that was grounded in emotion instead of common sense. A said the victim and an impact statement. Monique was fully aware of who I was as a caregiver and she exploited that knowledge for our own selfish and criminal game. You know what, I’ll give this person credit cause a pretty honest, I’m kind of response to that because you think like, well why would you ever spend your parents money even on such a ridiculous 50% return? But they made a really good point and sometimes you hear these things and logic starts to get suppressed a little bit and the emotions kick in and you’d be like, what if I am privy to one of the few guaranteed 50% return investments?

Eric Worral: (10:25)
Oh my gosh. Like, if I did 100,000, it’d be one 50, and then the next year it’d be two 25 if I reinvested in the next year. You know, when you start playing those games I think a lot of that’s tough to, just investing in general, right? Cause you’re always trying to like play that game of like where can I get a good return for my money but also not risking too much. And of course, there’s scams like this that are out there too, but hopefully not that common cause this is a really sad one. So as you’re reading further in all these self-styled preservation experts solicited investments for the projects on 171 properties, no work was ever performed. In 98 of those prosecutors said Brady Brady’s conduct was as bad as you’ve ever seen in a Rhode Island fraud case. Brady even continued her scheme while incarcerated and awaiting sentencing according to a February 6th sentencing a memorandum.

Eric Worral: (11:16)
Her misconduct, including making more than 200 unauthorized phone calls from prison using other inmates, personal identification numbers. So I think there’s also something to be said here too, as far as if you’re going to get into an investment deal with somebody. So perhaps you’re just a, a, a silent investor and either they’re promising your returns doing your due diligence and checking the numbers and making sure that they have a good track record and really digging into it are all very important in this particular case. You know it probably wouldn’t have been that much. Dig digging before you realized that maybe there were some up. But I think in these cases though, it was the fact that all these people knew the person very well. So they probably didn’t do a lot of digging. And because of them, investigators said Brady case is a cautionary tale for anyone considering a get rich quick scheme.

Eric Worral: (12:11)
Her victims thought she was their friend and that she was doing them a favor, letting them in on something too good to pass up. But in this case was all too good to be true. IRS agent Homsi said, Brady’s affluent friends were just as taken in as those who could least afford it. Oftentimes these are people who are very successful in the business world and they would say, if it wasn’t Monique, I would have done much more due diligence, but they just had that implicit trust in her. Meanwhile, the investments were paying for Brady’s extravagances, including in $9,400 monthly mortgage. I told you if that house looks nice, trips to the tropics, Europe, multiple Superbowls, a luxury shoe collection, and an elective plastic surgery that she paid for in cash. It wasn’t until the scheme fell apart that its breath became apparent. Evidently, Brady encouraged secrecy among her investors.

Eric Worral: (13:00)
Another common play of scam artists and Ponzi schemes. She is skewed a talking business and social settings, set FBI special agent on the dialer. Potential investors might have seen that as a sign of class, while others might see a potential red flag. I guess if somebody tells you to keep a secret, always be wary of why you have to keep it a secret dialer side. So there’s a nice little takeaway at the end too, right? If you’ve got somebody offering you some sort of investment out there and they’re like, Hey, this is a limited time blabity, blabity, blah blah blah. But don’t tell anyone, you can’t talk to anyone else about this. This is just Russ. That might be a good indicator that they’re worried about you talking about something that’s going to get him in trouble. So I learned a few things from this article, but more than anything just found it pretty interesting and it’s good to know.

Eric Worral: (13:47)
The FBI has a nicely functioning website here, the fbi.gov I’m like very fascinated by this cause I’ve never, I feel like I’ve never come across it. So there’s that and if you guys want to check out that article we will have it in the show notes for you along with any other resources mentioned on our podcast as usual. All right guys. I hope you are having a great week and I hope you never fall victim to a real estate Ponzi scheme because it sounds awful. And I apologize for making light of that. Cause I know a lot of people have a, definitely have a tough time ahead of them because they fell victim to this. So hopefully doing these guys kind of updates once in a while kind of keeps you guys aware of what’s going on up there and what to be maybe suspicious of. All right guys, I hope you have a great weekend. I look forward to catching up with you next week. Take care.