California Attorney Sentenced to Five Years for Defrauding Investors

By January 3, 2016Tax Crimes, Tax Fraud

On Nov. 14, 2014, in Baltimore, Maryland, Gregory E. Grantham, of Oceanside, California, was sentenced to 60 months in prison, three years of supervised release, and ordered to forfeit/pay restitution of $17.4 million. Grantham pleaded guilty to wire fraud conspiracy, wire fraud and obstruction of justice. According to court documents, between September 2009 and September 2011, Grantham, a licensed attorney, was employed as General Counsel for IAGU Underwriters, LLC which was operated by Mervyn Phelan. Between mid-2010 and August 2011, Grantham and Phelan became involved in a fraudulent scheme carried out by Patrick Belzner and Brian McCloskey. McCloskey owned a real estate development business known as the McCloskey Group, LLC. Belzner, a home builder, worked with McCloskey. Phelan and IAGU began working with the McCloskey Group trying to locate sources of financing for its projects. Beginning in 2009 and continuing through June 2011, Belzner and McCloskey persuaded a series of private lenders to fund loans to establish that the McCloskey Group had reserves of cash that would supposedly help it obtain loans it was seeking in connection with real estate development projects through IAGU. In return for this temporary use of the lender’s funds, Belzner and McCloskey promised to pay substantial fees or interest. However, once the lenders transferred their funds into the escrow accounts, Belzner directed McCloskey to remove those funds from the escrow accounts without the knowledge or permission of the lenders. Belzner and McCloskey then used the majority of the stolen funds to pay for their personal and business expenses. The total losses resulting from the scheme were approximately $20 million. Grantham and Phelan obstructed grand jury investigation of the fraud scheme. Patrick J. Belzner, aka Patrick McCloskey, was previously sentenced to 15 years in prison for wire fraud conspiracy, wire fraud and tax evasion, and ordered to pay $19.805 million in restitution. Brian McCloskey, Kevin Sniffen, and Mervyn A. Phelan, Sr., are scheduled to be sentenced at a later date.