Check Out These Stories of Notorious Real Estate Scammers
All real estate professionals need to take fraud and unethical behavior seriously. After all, gaining a client’s trust is an incredibly important part of an agent’s job.
But what happens when agents decide to scam their clients or otherwise commit fraud? You’ve likely seen national news stories about real estate fraudsters, many of whom receive hefty prison sentences.
Last year, at least 13,638 people fell victim to real estate or rental fraud, such as the loss of funds from a real estate investment or fraud involving a rental or timeshare property, the FBI’s Internet Crime Complaint Center reported.
How do you spot a real estate scam? Rocket Mortgage recommends watching for the following red flags: lack of proper documentation, pressure to act immediately, unrealistic guarantees, or demands to wire money.
The rise of the internet and other new technology have only provided more opportunities for creative con artists to lure in unsuspecting victims, but scammers have existed since the beginning of time.
We’ve gathered the details of three notorious real estate scammers. The con artists operated in the early 1900s and early 2010s alike, proving that no matter the decade, criminals have always taken the opportunity to “get rich quick” in real estate.
From “I’ve Got a Bridge to Sell You!” to “Swampland in Florida”
The Scammer: George C. Parker
Several cases of real estate fraud are so infamous that they’ve spawned everyday phrases. If someone is especially gullible, you might say, “If you believe that, I’ve got a bridge in Brooklyn to sell you!”
It’s a reference to George C. Parker’s best-known turn-of-the-century scheme: Selling the Brooklyn Bridge to unwitting buyers, often recent immigrants. He reportedly accomplished it more than once, producing forged documents to prove that he was the bridge's owner and then convincing his buyers that they could make a fortune by controlling access to the roadway, according to The New York Times.
Some of Parker’s victims went so far as to erect toll booths on the bridge before they were removed by police.
Parker claimed to have sold the Brooklyn Bridge twice a week for years, but that wasn’t his only con. Throughout his life, Parker made a habit of “selling” iconic property that didn’t belong to him, including the Metropolitan Museum of Art, Grant's Tomb, and the Statue of Liberty.
He was arrested several times before ultimately being sentenced to life in prison for his scams in 1928, Realtor.com reported. He died eight years later in New York’s Sing Sing Prison.
In the years after the Brooklyn Bridge was completed in 1883, several other conmen attempted to “sell” it, continuing to target recent immigrants.
“Swindlers used to approach the stewards of international vessels docked at Ellis Island and pay them for information about passengers who might have money and be interested in buying property,” The Times reported. Eventually, processors at Ellis Island started handing out cards or booklets informing immigrants that they couldn’t purchase public buildings or streets, and the con faded away.
The lesson? If a deal sounds too good to be true, it probably is.
The Scammer: Charles Ponzi
If a con artist misrepresents what they’re selling, the scheme might be called “Swampland in Florida.” It’s a reference to one of the many scams of Charles Ponzi, the criminal who gave Ponzi schemes their name.
Ponzi’s largest scams spanned several U.S. states, including one in Boston involving international postal reply coupons that made him unbelievably rich before it all came crashing down.
He was sentenced to five years in federal prison for the Boston scheme, but after he was released, he was indicted on additional charges and sentenced to an additional seven to nine years as “a common and notorious thief,” The Jaxon reported. While appealing the conviction, he was released on bail and fled to Jacksonville, Florida, arriving in September 1925.
“During his stay in federal prison, Florida had become a real estate money-making dream for speculators,” The Jaxson reported. “In Miami alone, land values had increased 560% between 1921 and 1926… At the time, Jacksonville was rapidly growing and had recently become Florida’s first city with a population exceeding 100,000.”
In Jacksonville, Ponzi set up a real estate business called Charpon Land Syndicate. He advertised “prime Florida property” for sale, The Florida Times-Union reported. But the land wasn’t “prime” at all.
In reality, it was swampland about 65 miles west of Jacksonville in rural Columbia County. Much of the land was underwater.
According to The Jaxson, Ponzi’s plan was as follows: He would buy 100 acres of land at $16 an acre, then subdivide each acre into 23 sections, selling each section for $10 each. (That’s a 500% profit.) He would also sell shares in his company, promising a 200% profit within 60 days.
He had collected $7,000 from investors by the time Florida officials learned of the scam and shut down his company. He was ultimately sentenced to a year of hard labor at the Florida State Penitentiary.
Hoping to avoid returning to prison, Ponzi paid his $1,500 bail and appealed his conviction, then fled. He made it to Tampa under an assumed name and took a job as a waiter and dishwasher on an Italian freighter.
But Ponzi made the mistake of revealing his true identity to a shipmate, and word spread that he was on board, leading to his arrest at a stop in New Orleans. In February 1927, he was sent back to Boston to begin his sentence in Massachusetts State Prison.
When Ponzi, an Italian immigrant, was released in 1934, he was immediately deported to Italy.
His days of scamming in the United States might have been over, but his name lived on as countless others went on to commit fraud using a Ponzi scheme.
A Modern Ponzi Scheme
In the decades since Ponzi’s death, so-called Ponzi schemes have been found everywhere, including in real estate.
Robert Shapiro, the former head of Woodbridge Group of Companies, was sentenced to 25 years in prison in 2019 for his role in “one of the largest ever” Ponzi schemes, in addition to tax evasion, according to the U.S. Attorney’s Office for the Southern District of Florida.
Many of the victims reportedly were seniors who invested their retirement savings into the scam, HousingWire reported.
Shapiro was the mastermind of the $1.3 billion real estate fraud scheme, which scammed more than 8,000 investors across the country by telling them that “the companies held third-party real estate loans that would pay them high-interest rates,” The South Florida Sun Sentinel reported.
“But in reality, the real estate was often owned by Shapiro or didn’t exist at all,” The Sun Sentinel stated. “As the real estate portfolio failed to generate enough cash to pay interest owed to investors and satisfy loan obligations, Shapiro and his co-conspirators paid older investors with fresh money from new investors.”
Shapiro and his co-conspirators used “high pressure sales tactics,” marketing and promoting the investments “as low-risk, safe, simple, and conservative,” the U.S. Attorney’s Office for the Southern District of Florida explained. “And at minimum, investors were made to believe that Woodbridge’s real estate dealings would generate the funds used to pay the return on their investments.”
In addition to the prison time, Shapiro was expected to forfeit $100 million in assets, The Sun Sentinel reported in 2019. In the meantime, a bankruptcy court was overseeing the liquidation of nationwide real estate holdings once overseen by Shapiro. Investors were expected to receive 30 to 50 cents on the dollar.
Be Wary of Real Estate Cons
While learning about scammers who prey on unwitting victims can be disheartening and discouraging, take it as a lesson to be wary as you conduct business in the real estate world.
Do your research on common real scams, and be cautious as you work to protect yourself and your clients.
And if you’d like to read about even more notorious cases of real estate fraud, read Criminal Minds: Real Estate Agents Turned Bad, Vol. 1.
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