FBI informant Solomon Dwek, shown at right in this photo. His monthly stipend and agreement to pay his expenses in connection with the federal bankruptcy case expire today..
NEWARK — Having lost his freedom, federal informant Solomon Dwek is also about to lose his allowance.
Abruptly sent to jail Tuesday for lying to the FBI, Dwek was receiving a $12,500 monthly stipend from the federal bankruptcy trustee trying to sort out the remains of his failed real estate empire later found to be built upon massive fraud.
That allowance expires today, as does an agreement to pay Dwek’s expenses in connection with the bankruptcy case — including the cost of a $100-an-hour private security contingent. That agreement is unlikely to be renewed, those connected with the case say.
Dwek, 38, was using the money to support his wife and six children — including a son born just weeks ago. His family, shunned from their Orthodox Sephardic community in Deal, now lives in Baltimore.
The key figure in a sweeping federal corruption and money laundering sting, Dwek began cooperating with the government after being charged in an unrelated $50 million bank fraud.
The high-profile investigation, which came to light two years ago, was the largest federal corruption sting in New Jersey history. It led to the arrests of 46 people, including mayors, legislators, five Orthodox rabbis and a man brokering black market kidneys for transplant.
Over time, though, Dwek’s value as a witness in the trials that followed began to fade. Details of his history as a con man surfaced, and his seemingly non-stop efforts on surveillance recordings pushing officials to take money led to several acquittals.
While some saw him as a liability, the U.S. Attorney’s office still planned to put him on the stand in the corruption trial now under way of former Secaucus Mayor Dennis Elwell, who is accused of taking $10,000 in cash to expedite approvals of a purported hotel project. Before the trial began, however, the FBI learned Dwek was arrested in Baltimore last month on charges of failing to return a rental car.
Authorities said Dwek lied to his FBI handler, claiming at first it was a case of mistaken identity, and then filing a false affidavit.
On Tuesday, U.S. District Judge Jose Linares — calling Dwek a "consummate defrauder and an extremely conning liar" — abruptly revoked Dwek’s bail and threw him in jail for violating his cooperation agreement with the government. He now sits in the Essex County Jail awaiting sentencing on the bank fraud charges.
Dwek’s absence could complicate the resolution of the bankruptcy case. Only Dwek knew the details of the massive investment scheme that fell apart before he began life as an FBI informant, said Charles Stanziale, the court-appointed bankruptcy trustee overseeing the dissolution of Dwek’s once vast real estate portfolio.
Through Dwek’s cooperation, Stanziale said he learned Dwek had been running a Madoff-style $400 million Ponzi scheme, fueled by fraudulent mortgages on phantom properties and new investors who never raised questions until they stopped getting paid. It all collapsed in 2006 after Dwek was charged with bank fraud after passing a bogus $25 million check at a bank drive-through window and then trying to do it again the next day.
"He supplied me with information with regards to people he dealt with; people he conspired with; people he laundered money for; people he defrauded; and properties that he had that he bought and sold that may not have been evident from the records," Stanziale said of that cooperation.
In an agreement with creditors and approved by the bankruptcy judge, the trustee had been paying Dwek a monthly allowance of $12,500 and expenses for his assistance sorting out the properties and deals — all while he was also secretly working for the FBI during the three-year sting operation in an effort to gain leniency when ultimately sentenced for the bank fraud.
Stanziale, who said he was not told of Dwek’s role as an informant until the sting operation became public, credited his assistance for bringing tens of millions of dollars back to the creditors and to the banks.
With Dwek in jail, creditors see little likelihood his allowance will continue.
"The fact that he’s now incarcerated means there won’t be any costs for security and compensation of travel," said Walter J. Greenhalgh of Duane Morris in Newark, an attorney for the oversight committee representing unsecured creditors in the case. "While no request from his attorneys to extend his allowance, our initial reaction would be that he not be compensated because he’s not on call as he was before."
Dwek’s bankruptcy attorney, Timothy Neumann, did not return calls for comment.