N.J. accuses big builder of Philly rowhouses of $630 million fraud

The company and its affiliates built over 1,100 rowhouses in Philly and planned major developments on the city’s waterfront, as well as in northern New Jersey, New York City, and Palm Beach, Fla. In a national advertising blitz, it promised investors big-bucks returns of 12% — perhaps better than 20%.

But on Tuesday, New Jersey issued a “cease and desist” order against the Secaucus-based National Realty Investment Advisors alleging they “fraudulently” sold $630 million worth of securities in the last four years to “at least” 1,800 investors nationwide.

The state Bureau of Securities found that rather than relying on cash-flow proceeds, company officers used investors’ money to pay off other investors and diverted “millions of investor dollars to make lavish payments to family members,” the state Attorney General’s Office said.

» READ MORE: A big builder in Philly advertises huge investor returns on radio and Fox News. Now the FBI and SEC are tuning in.

That included pay for a no-work job for the wife of portfolio manager Thomas N. Salzano, who last year was criminally charged with fraud by federal authorities.

Officers hired “family-owned or controlled companies,” New Jersey officials said, among them a construction company in which Salzano’s son was chief financial officer.

While NRIA and its entities haven’t been charged criminally, they have been under investigation by federal agencies and officials in three states. The 63-page order itemized what the New Jersey Attorney General’s Office called “unlawful conduct,” mandating that the company “cease and desist” engaging in it.

“The fraudulent conduct identified … is striking,” acting Attorney General Platkin said in a statement.

It was unclear whether NRIA, which has filed for bankruptcy protection, plans to appeal the order. Company officials had no immediate comment.

The order prohibits NRIA “from engaging in the conduct described in the order itself, or from further securities law violations,” and publicizes the alleged fraud, the state Attorney General’s Office said. It was unclear how the order would be enforced.

NRIA has roots in Philadelphia, formed in 2006 to build and renovate homes to take advantage of the city’s 10-year tax-abatement program for new construction. NRIA said it built more than 1,100 units in various neighborhoods, including the Bridgeview complex in South Philadelphia and Ortlieb Square in Northern Liberties.

» READ MORE: South Fla. pols wondered where campaign cash came from. The answer led to a beleaguered N.J. developer.

In 2018, the company launched a heavily marketed offering called the NRIA Partners Portfolio Fund, trumpeting its largest developments — in Philly, where it owns a vast tract of waterfront property that remains unbuilt upon; Hudson and Bergen Counties, N.J.; Brooklyn; and Palm Beach.

» READ MORE: New rowhouse enclave planned for former Foxwoods site on South Philly waterfront

The Inquirer reported in September that the company had undertaken a major marketing campaign for the fund, spending an estimated $9 million on TV ads since the start of 2019. Nearly all of it went to Fox News for ads that mostly ran on the Tucker Carlson Tonight and Hannity shows. It plastered billboards at the entrances of the Lincoln and Holland Tunnels, the Attorney General’s Office said.

However, New Jersey officials said that rather than generating hefty profits with its initiatives, the company acted “to conceal the company’s poor performance,” which included using investors’ money for annual payouts. The company filed for bankruptcy on June 7.

In response to The Inquirer’s questions, in September NRIA had said that was part of a special “‘buy, build, and sell’ strategy,” and that investors were told how the company planned to deploy their contributions.

However, the order issued Tuesday stated that investors had not been informed their money would go to other investors.

State officials also said the company resorted to “straw purchasers to create nonexistent sales,” and violated “generally accepted accounting principles” in reporting revenues.

They added that in an effort to compensate for the lack of profits, NRIA invested heavily in junk bonds with the investors’ money.

In addition to NRIA and the Portfolio Fund, the order named NRIA Capital Partners Inc., and NRIA Structured Credit Strategies LLC.

Acting Bureau of Securities Director Amy G. Kopleton said that NRIA and its entities “offered investors a securities opportunity that sounded too good to be true.

“And it was.”