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Dad laundered money from reality-TV star son, spent millions on condos, prosecutors say

Toronto Star logo Toronto Star 2019-05-09 Martin Vassolo - Miami Herald
a close up of a pan on a table: Joseph Menaged faces charges of defrauding banks in partnership with his son, former Property Wars reality TV star Scott Menaged, who in 2017 was sentenced to 17 years in prison for orchestrating a real estate scam that defrauded investors of $34 million (U.S.). © Dreamstime Joseph Menaged faces charges of defrauding banks in partnership with his son, former Property Wars reality TV star Scott Menaged, who in 2017 was sentenced to 17 years in prison for orchestrating a real estate scam that defrauded investors of $34 million (U.S.).

MIAMI—Even as his son was to be sentenced to 17 years in prison for orchestrating a real estate scam that defrauded investors of $34 million (U.S.), Joseph Menaged told a judge he remained a “proud” father.

“Scott is a son that I’m very proud of,” he said during the 2017 sentencing of his son, Yomtov Scott Menaged. “As a matter of fact, I had a lot of fathers that would envy me of having a son like Scott.”

But prosecutors say the relationship between Scott Menaged, a real-estate investor and former Property Wars reality TV star, and his father wasn’t solely built on warm father-son bonding — but, critically, on the millions of dollars the son wired to his dad in the years leading up to his conviction.

Now Joseph Menaged faces charges of defrauding banks into financing his purchase of multimillion-dollar properties in Miami Beach and New York City.

Menaged, a 65-year-old resident of Miami Beach, and his New York accountant were indicted in April on charges of bank fraud, transactional money laundering, conspiracy to commit bank fraud and a forfeiture allegation after prosecutors said they falsified tax forms and business records to explain the millions of dollars transferred to Menaged from his son and to create the appearance that Menaged earned a legitimate income.

Between 2011 and 2017, Scott Menaged transferred nearly $11.5 million to Joseph Menaged via checks and electronic transfers, using the bank accounts of his real estate companies to wire a chunk of his fortune to his father.

Scott Menaged, who pleaded guilty in 2017 to conspiracy to commit bank fraud, aggravated identity theft and money-laundering conspiracy, admitted to submitting false credit applications using the identities of dead people and embezzling millions of dollars from a lending firm as part of a real-estate scam.

Between 2013 and 2016, Scott Menaged obtained about 2,712 mortgage loans totalling nearly $734.5 million. Of those, only 96 involved actual property transactions. The remaining loans represented “phantom real estate purchases” involving straw buyers. He was ordered to pay the various victims $33.5 million in restitution.

Seemingly in an attempt to legitimize the money his son gave to him, Menaged set his sights on high-priced real estate in Miami Beach, according to an Internal Revenue Service official.

He secured more than $6.5 million in mortgage loans from Bank United and Morgan Stanley. And in 2015, he purchased a $3.2-million apartment unit in New York City and two units at 3315 Collins Avenue in Miami Beach valued at $2.6 million and $5 million.

Prosecutors do not allege mortgage fraud in the indictment, stating that Menaged had been approved for the loans and began paying monthly mortgage payments to the banks in 2015.

But a grand jury concluded that Menaged and his accountant, Stephen Brown, conspired to commit bank fraud by creating and backdating fraudulent documents to explain the $11.5 million transferred to Menaged from his son.

Those documents included fabricated tax forms to create the appearance that Menaged earned income, false business records to “substantiate” deposits into Menaged’s bank accounts and false letters of explanation in response to financial institutions’ inquiries, according to the indictment.

“Defendant Menaged is charged, along with his New York based Accountant, for defrauding financial institutions into financing multiple luxury real estate purchases by lying and manipulating records to paint a fictitious picture of where and how Defendant Menaged was getting money,” wrote Assistant U.S. Attorney for the District of Arizona Monica Edelstein in a court filing this week.

Menaged is in federal custody in Miami but faces removal to Arizona. Prosecutors successfully argued that Menaged, who holds U.S. and Israeli citizenship, posed a risk of fleeing the country due to the lengthy prison sentence he faces if convicted, his family ties outside the U.S. and the strength of the evidence against him.

A U.S. magistrate judge ordered him detained pending trial, writing that Menaged appeared to have the financial resources to flee the U.S. and that his sole source of income is “strongly tied to the criminal conduct alleged in the indictment.”

In a statement to the Miami Herald, Menaged attorney Richard Baron said his client “vigorously denies that he was engaged in any wrongdoing whatsoever and looks forward to clearing his name in a court of law.”

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