Former White Plains luxury real estate developer Michael P. D”™Alessio is facing probable prison time for swindling investors out of $58 million.
D”™Alessio, 53, pleaded guilty Thursday in Manhattan federal court to wire fraud and concealing assets from bankruptcy court.
He commingled investors”™ funds in “Ponzi-like fashion,” according to a news release from U.S. Attorney Geoffrey S. Berman, and channeled the funds through a series of shell companies.
The funds were used to cash out early investors, cover debts and pay off gambling debts.
D”™Alessio is president and CEO of Michael Paul Enterprises, which was based in White Plains until recently. Last year, he moved his home from Westchester to the Upper East Side of Manhattan.
For more than 25 years he built and managed commercial and residential real estate projects. More recently, he focused on luxury residential projects in Manhattan, the Hamptons and Westchester.
He bought townhouses on the Upper East Side, for example, demolished or gutted them and built luxury condominiums. Several projects, according to court pleadings, saw little or no construction.
From 2015 to this past April, according to court pleadings, he sold shares in separate limited liability companies for each project and assured investors that the funds would be used only for developing the specific LLC property. Investors were promised guaranteed monthly interest payments and returns of up to 16 percent a year and a share of profits when the property was sold.
In reality, the government charged, D”™Alessio channeled funds to the bank accounts of shell companies he owned and controlled.
Some of the money, the government charged, was used to pay off “significant gambling” debts. One debt, according to a bankruptcy case, was for a $590,000 line of credit at the Borgata Hotel casino in Atlantic City.
D”™Alessio concealed his fraud, according to the government, by issuing false progress reports to investors.
Late last year, as payments dried up, investors began filing lawsuits. At least 29 individuals, and well as several companies, have sued D”™Alessio in Westchester, Manhattan and the Hamptons.
Several investors are themselves real estate developers. When they sued, D”™Alessio was dismissive.
“There was absolutely no fraud committed,” he said in an email to the Business Journal in April. “Just a case of disgruntled seasoned real estate investors with big damaged egos.”
Three banks petitioned U.S. Bankruptcy Court in April to force D”™Alessio into Chapter 7 liquidation. In response, the developer declared $23,350 in assets and $165 million in liabilities. He identified 115 companies registered at 12 Water St., White Plains.
The government accused D”™Alessio of making false declarations in the involuntary bankruptcy case by omitting money and property belonging to his estate.
In June, he petitioned the court to liquidate his companies, declaring $49.7 million in assets and $97.5 million in liabilities.
After his Aug. 30 arrest, he posted a $5 million personal recognizance bail and was released to home detention, including permission to stay at a home in Westchester when he had visitation rights with a child. The court replaced home confinement on Thursday with a curfew that allows D”™Alessio to leave home from 7 a.m. to 9 p.m.
The court was notified on Wednesday of D”™Alessio”™s intent to change his plea to guilty. But three letters sent more than a month ago to U.S. District Judge Jesse M. Furman signaled his desire to seek leniency. Such character references are customarily submitted after a defendant pleads guilty and before sentencing.
Robert A. Haskins, a managing director of U.S. Trust Private Wealth Management in Westport, Connecticut, for instance, wrote that D”™Alessio “is without peer” among the legions of businessman he has dealt with.
He said he has worked closely with D”™Alessio on numerous projects and transactions for more than 10 years.
“He is a great manager who treats his employees fairly, knows how to motivate them and has provided a spirit of comradery and teamwork within his firm. In addition, he is a man of great integrity and character. He is a great husband and father as well.”
Sentencing was scheduled for March 22. The maximum prison sentences are 20 years for wire fraud and five years for concealing bankruptcy assets.
D”™Alessio is represented in the criminal case by Benjamin Brafman and Jacob Kaplan of Brafman & Associates PC and by Jonathan Sloan Abernethy of Cohen & Gresser LLP, both in Manhattan. He is represented in the bankruptcy cases by Sanford Philip Rosen of Rosen & Associates in Manhattan.
