Housing-fraud leader sent back to prison for work with CM Development

NORFOLK

The mastermind behind a Virginia Beach real estate company that defrauded investors of millions of dollars and left a trail of blighted homes in its wake was led from a courtroom in handcuffs Tuesday and returned to federal prison.

U.S. District Judge Jerome B. Friedman told Jacques McEntee that he had never seen “a more blatant disregard” for the terms of probation. He sentenced McEntee to more than two years in prison – nearly the maximum sentence allowed – for working with CM Development, the failed business run by McEntee’s brother, Cary.

In 2005, Friedman specifically ordered Jacques McEntee to avoid working in real estate or with his brother.

But Jacques McEntee continued to meet with investors, handle property transactions and solicit cash for the company. He was so involved that while serving time in prison in early 2007 for a probation violation, he continued to guide the business through regular telephone calls with his brother, Assistant U.S. Attorney Robert Krask said.

“If the law allowed for a longer punishment, we’d be asking for it,” Krask said Tuesday. “This charming con artist has caused another real estate debacle. The public needs to be protected from him.”

Jacques McEntee worked as a janitor before starting his first real estate business in Michigan in the late 1980s. That business collapsed amid allegations of wrongdoing and left investors out more than $4 million.

McEntee and his Michigan partners moved to Hampton Roads in the early 1990s and started MSRV, a company that renovated and sold houses. The company defrauded the federal government and investors of more than $12 million, and prosecutors at the time called it the largest case of housing fraud ever to hit Hampton Roads.

McEntee was convicted of bank fraud and conspiracy to commit bank fraud, and has been on probation since 2003, when he was released from prison. He has violated probation and been returned to prison twice since then, both times after testing positive for cocaine use.

In 2001, his brother Cary started CM Development. When they got out of prison, three of the four partners of MSRV went to work for the company. Jacques McEntee ran the company jointly with his brother, who served as it public face. Investors called Jacques the “mastermind” behind the operation.

The company’s goal was to buy houses in troubled neighborhoods, fix them up and rent them. CM Development persuaded investors to lend cash and use their credit to secure loans to purchase properties, and sold the houses among them, taking out larger loans each time.

By March of 2007, CM Development and its investors owned more than 250 properties in some of the most fragile neighborhoods across South Hampton Roads. But roughly half the houses sat vacant in various stages of disrepair. An investigation by The Virginian-Pilot last year found that the company had amassed hundreds of code violations and nearly $100,000 in unpaid property taxes. Banks have acknowledged that most of the properties had loans that far exceeded their true value.

The company and Cary McEntee are in bankruptcy court and the FBI is investigating.

In court Tuesday, much of the evidence – including cashed checks and internal CM Development documents – came from that investigation. An FBI officer sat near the prosecutor’s table and listened to Krask list McEntee’s violations.

Krask said McEntee set up a decoy house in Newport News and made it appear to probation officers he was living there. In reality, Jacques lived in the room over the garage in his brother’s 6,000 square- foot Virginia Beach home.

Jacques McEntee also met with investors on a number of occasions and, in one instance, purchased a Portsmouth house on behalf of CM Development, signing the property deed as a “managing member” of the company.

As CM Development crumbled under increasing amounts of debt in the spring of 2007, Jacques McEntee was paid more than $6,700 by the business. Krask said the money came from dwindling rental income that should have gone toward investors or mortgage payments.

“Mr. McEntee has perpetrated a fraud,” Krask said. “It’s entirely consistent with his history.”

McEntee declined to speak. His lawyer, Jon Babineau, said his client seemed “to have an addictive behavior pattern” in continuing work that “he knows is wrong.”

Krask asked Friedman to sentence McEntee to 27 months in prison, the maximum penalty he could recieve. Friedman said he reduced it to 25 months only because McEntee admitted to all the violations. He asked to turn himself in later, but the judge refused, ordering marshals to arrest McEntee immediately.

“There are victims here because of your violation,” the judge said. “I’m here to punish you for what you did.”

Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com