Crime & Safety

Judge Sentences Former Highland Country Club Owner for Fraud Scheme, Money Laundering

Jeffrey Garbinski will serve 6½ years in prison followed by five years of supervised release.

A mortgage broker and former Highland Country Club owner was sentenced Wednesday in federal court on his conviction of conspiracy and money laundering, according to the U.S. District Attorney's office in Pittsburgh.

Jeffrey Garbinski, 45, of Chippewa Township, Beaver County, will serve 78 months in prison followed by five years of supervised release.

United States District Judge Cathy Bissoon imposed the sentence and also ordered Garbinski to pay approximately $3 million in restitution, including $350,000 he defrauded from his parents.

According to information presented to the court:

Garbinski owned and operated the Closing Company of PA, which closed residential real estate transactions. He also operated a mortgage broker business called Main Street Mortgage Services, which did business as Asset Mortgage and Financial Services, Inc., and he was a title insurance agent.

Closing companies have trust accounts and the money from the lenders funding the loans goes into the trust account. At or shortly after the closing, those funds are disbursed consistent with the lender's instructions and the settlement statements. Liabilities associated with the collateral are supposed to be paid immediately so the liens related to the property are paid and the lender stands in first lien position.

Rather than immediately paying the liabilities, Garbinski siphoned money from the company for years to support his lifestyle and for other business ventures, with assistance from Sabrina Spetz, an attorney who closed many of the transactions at issue.

Garbinski would then use the money from the next transactions to pay the liabilities from the previous transactions. He paid the monthly mortgage payments on the outstanding mortgages that should have already been paid to avoid discovery of his fraud.

Eventually, the liabilities grew so large that Garbinski was no longer able to pay the liabilities and he filed for bankruptcy.

Although Garbinski committed this scheme regarding customers of the Closing Company, he also used the scheme with his own home.

Dollar Bank funded a $600,000 loan to Garbinski arranged through his mortgage broker business and closed by the Closing Company. The Dollar Bank loan was a typical refinance transaction in which all of the liabilities associated with the collateral, in this case Garbinski's home, were supposed to be paid off.

Garbinski submitted a loan application that failed to report two significant mortgages on the property, and he also arranged to submit fraudulent title search records that did not reveal the two mortgages.

Long after the loan closed, Dollar Bank discovered that they were in third lien position rather than first lien position. Ultimately, the title insurance companies paid substantial claims because of this fraud, the U.S. district attorney's office said. 

The Closing Company was a representative of Stewart Title Guaranty Co. and Fidelity National Title Insurance Co. Fidelity conducted an audit of the Closing Company pursuant to the title insurance contract between Fidelity and the Closing Company.

As part of that audit, Fidelity requested and obtained bank statements from Spetz that did not show the fraudulent withdrawals because the statements had been altered by Spetz at Garbinski's direction. 

In terms of the money laundering, an owner of a home sought to refinance a loan through Northwest Savings Bank. Because of concerns that Northwest had with Garbinski, Northwest refused to let the Closing Company close the transaction, and demanded that Fidelity close the transaction.

Fidelity, however, was unaware of the transaction and did not close the loan. In order to make it appear that Fidelity was involved in closing the loan, the settlement statement was fabricated and provided to Northwest falsely representing that Fidelity closed the transaction.

In addition, Garbinski created a letter with wiring information for what was represented to be the trust account for Fidelity, but was in fact the account number for the Closing Company.

The loan closed on Feb. 24, 2010, and the loan was funded through a wire transfer from Northwest Savings Bank to the Citizens Bank account of the Closing Company. That money was supposed to have been used to pay off a liability associated with the collateral.

On Feb. 25, 2010, Garbinski withdrew $38,316 in cash from that account. Bank surveillance pictures showed Garbinski making the withdraw. On that same day, Garbinski deposited $37,500 of that cash into the Clearview Federal Credit Union account of JAG Management LP, which was essentially a shell company that Garbinski owned.

According to the Pittsburgh-Post Gazette, Garbinski was indicted by a federal grand jury in November 2011, the same month he pleaded guilty in Common Pleas court to stealing money from the Highland Country Club in West View, where he had been the owner and operator.

In that case, the P-G reports he was sentenced to 9 to 18 months of house arrest and ordered to pay more than $174,000 in restitution.

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