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Two Florida Hotel Investors Admit to Bilking Mortgage Lenders in a $67 million
Loan Scheme to Finance Hotels in Orlando and South Florida;
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Used Fraudulent Appraisals and False Hotel Income and Occupancy Rates


 
By Pedro Ruz Gutierrez, The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News 

February 21, 2006 - Two South Florida investors have admitted bilking mortgage lenders in a $67 million loan scheme to finance hotels in Orlando and South Florida.

Terry Singh Mughar, 47, and Jason Madow, 36, face one count each of conspiracy to commit wire fraud after prosecutors charged them without a grand-jury indictment earlier this month in Orlando's federal court.

Both reached plea agreements with the U.S. Attorney's Office that outline their scam. They face up to five years in prison in addition to a $250,000 fine and supervised release.

Two of the hotels, formerly known as La Suite Hotel and Orlando Grand Resort, are on International Drive and now operate under different names and ownership. Other properties include a former Travelodge in Fort Lauderdale and two hotels each in West Palm Beach and Miami-Dade.

According to court documents, from 1999 to 2001, Mughar of Miami-Dade inflated the price and value of hotels through fraudulent appraisals based on false hotel income and occupancy rates.

Mughar and Madow of Boca Raton used those reports, along with fake promissory notes, false income-tax statements and official-looking bank checks to secure the loans.

"Mughar's scheme was to obtain loans in amounts greater than the actual purchase price and true values . . . in order to obtain 100 percent financing . . . and to obtain large cash payments directly from the loan proceeds at closing," wrote Assistant U.S. Attorney Karen Gable in the plea agreements.

With each transaction, Mughar made minimal mortgage payments on his properties, paid his co-conspirators and sought additional hotels in distress. In September 1999, he sold a Holiday Inn Express hotel in Homestead and a Howard Johnson Plaza hotel in Cutler Ridge for more than $13 million, more than twice what he had paid for them a year earlier.

After the purchaser obtained financing from Morgan Guaranty Trust Co. of New York, Mughar made off with more than $2 million by designating a nonexisting broker.

That same year, Mughar and Madow -- a licensed mortgage broker -- traveled to Orlando to buy the La Suite Hotel while its owners were in U.S. Bankruptcy Court.

After inflating the purchasing price to $22 million and then agreeing to a $10.3 million net price, Mughar and others altered copies of bankruptcy-court documents stating the final price was $17 million. Mughar netted more than $2.6 million out of a $13.6 million loan from Morgan Guaranty Trust Co.

Mughar used part of that money to pay his cohorts, including Madow, and to finance his next acquisition. In early 2000, he agreed to buy the Orlando Grand Resort for $26 million. His loan application inflated the price to $33 million. He received $1.75 million in proceeds.

By late 2000 and early 2001, Mughar and Madow targeted two foreclosed hotels on Okeechobee Boulevard in West Palm Beach and obtained $10.8 million from Old Standard Life Insurance Co. after unsuccessfully trying to get a $23 million loan from another lending company.

When the sellers -- WBP Innkeepers -- first learned of the fraud, Mughar turned to Madow and his company Cotillion Investments to stand in as the purchaser.

As a condition, Mughar agreed to refinance the mortgage at his Travelodge in Fort Lauderdale. After filing false documentation, he obtained $6.5 million from Old Standard. Within three months, he defaulted on that loan and the others. His hotels have since foreclosed, and state courts have entered judgments against Mughar.

As part of the plea agreement, Madow agreed to forfeit his Highland Beach condominium penthouse near Boca Raton to the U.S. government. Both men, who have not been arrested, could not be reached for comment. They have a plea hearing March 2.

Pedro Ruz Gutierrez can be reached at pruz@orlandosentinel.com or 407-420-5620.

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Copyright (c) 2006, The Orlando Sentinel, Fla.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. NYSE:BUD, 



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