Former Homewood trustee sentenced to six months

IL Homebuilder James Garofalo of Madison Homes Partnership, and owner of restaurants, charged in mortgage fraud scheme, argues for reduced sentence.

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July 20, 2010

BY JOHN K. RYAN
Attorney Michael Monico said the next six months will be difficult for his client James Garofalo, of Homewood.

The former Homewood village trustee and local businessman was sentenced Monday to six months in prison for his role in a mortgage fraud scheme that included houses in several Southland communities.

"His family is strong. He'll get through it," Monico said.

U.S. District Judge Wayne Anderson also gave Garofalo two years of probation, 300 hours of community service and ordered him to undergo alcohol treatment.

Garofalo, as co-owner of Olympia Fields-based Madison Homes Partnership homebuilders, was charged with selling eight new and existing homes to straw buyers at inflated prices. Madison Homes Partnership no longer does business.

Prosecutors said about $5.2 million was taken out in loans on the eight houses, but the straw buyers had no intention of living in the homes or paying back the mortgages. After the homes went into foreclosure and were resold, lenders lost approximately $1.3 million.

Using the money he got for selling the homes, Garofalo agreed to pay finders fees and commissions (about $400,000 for the eight homes) to scheme organizers, knowing a portion would be kicked back to the buyers, according to the indictment.

Garofalo, who runs The Egg & I restaurant in Chicago Heights and whose family recently opened Grady's Grill in Homewood, pleaded guilty in 2009 to two counts of wire fraud.

Anderson cast Garofalo, in his role as a homebuilder, as the one who created the possibilities for the crimes to take place.

Sentencing guidelines advised a minimum prison sentence of 3 years and 5 months for Garofalo, but Anderson said he sought a sentence that would send a message about the seriousness of Garofalo's crime but not cripple his ability to pay restitution to the lenders who were the victims of the scheme.

"The (Egg & I) may disappear if I give you 41 months," Anderson said. "We want to see the business continue to operate and restitution to continue."

Garofalo told the judge he has already paid about $250,000 in restitution - which included his recent income tax refund and his cashed-in IRA.

Assistant U.S. Attorney Daniel May argued that Garofalo should not be allowed to "buy" his way out of jail.

Anderson said a person should get points for paying back victims because it mitigates prior bad acts. The judge also credited Garofalo for cooperating in other cases involving the mortgage fraud scheme, and for contributing to needy causes through his restaurant business.

"That's worth something," he said.

Before sentencing, Garofalo was contrite, telling Anderson he has learned a lesson about the effects of his actions.

"It's not just about me. It's about my wife, my family, (my) employees," said Garofalo, who has four children.
Garofalo was elected trustee in April 2007 as part of Mayor Rich Hofeld's Greater Homewood Party. He resigned in May 2008, just before the indictment was announced.

"It's unfortunate," Hofeld said. "He's a successful businessman. He'd be the first to admit he made a terrible mistake."

As for the judge's order to go through alcohol treatment, Monico said Garofalo's consumption of alcohol came up during the presentencing investigation by a probation officer.

"It can sometimes be an issue in dealing with what (Garofalo's) been going through," Monico said.

Anderson ordered Garofalo to report to prison Sept. 27. The location will be determined at a later date.

Garofalo declined comment after the hearing.

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