CHICAGO (CN) – A woman claims she lost $175,000 in a Ponzi scheme from which two real-estate agents netted $16 million, by promising hundreds of suckers guaranteed returns on investments in rehabbed apartment buildings and loan purchases.
Alison Koy sued licensed real estate salesmen Michael Morawski and Frank Constant, both of whom she says were criminally charged in May with mail fraud and wire fraud.
She also sued Northwest Realty Partners dba Keller Williams Team Realty and Keller Williams Realty. Northwest Realty is based in Palatine, Ill., Keller Williams in Austin, Texas, according to the complaint in Cook County Court.
Koy says Morawski worked for Northwest Realty, whose website describes him as “a director of KW (Keller Williams) Commercial division.” Constant described himself as “a ‘Member of the Agent Leadership for Keller Williams Reality’ (sic),” according to the complaint.
According to Keller Williams Realty’s website, the company “has almost ‘80,000 real estate agents operating in more than 700 market centers (offices) across the United States and Canada (and) is currently the second-largest residential real estate company in the United States,” the complaint states. (Parentheses in complaint.)
Koy says Morawski and Constant founded a sham investment corporation known as Michael Franks LLC and “offered investors passive ownership in multi-family residential properties and/or the purchase of promissory notes. Passive ownership was represented as an investment with a 7%-9% annual return; notes would generate an annual return of between 8% and 30%.”
Koy claims an employee of Keller Williams Realty told her “that he and his wife had been investing with Michael Franks, that they had received a 100% return on their investment and that they received regular monthly checks.”
She says she attended an investors meeting where Morawski and Constant “held themselves out as Keller Williams agents and … represented that an investment with Michael Franks carried no risk and would pay them a return of at least 50%.”
Koy says she invested more than $175,000 in ownership units of Bridgeport Apartments and began receiving monthly checks from Michael Franks.
But she says the checks stopped coming a few months later, and when she asked Morawski about it, she was told “that was because their computer crashed and they now had so many investors, checks would be going out quarterly instead of monthly.”
Koy says she sued Keller Williams Realty, along with Morawski and Constant, because “but for her belief in the connection between Michael Franks and Keller Williams, she would not have made those investments.”
She adds: “Constant and Morawski were the only principals of Michael Franks, raising over 16 million dollars from over 300 investors. … To raise money, Constant met with prospective investors, including plaintiff, and told them a series of lies and omitted material facts in order to get them to invest.”
The lies included that the investments were “risk-free and would pay at least a 50 percent investment return,” but it was just a Ponzi scheme, Koy says.
She says the men used their suckers’ money “to pay personal expenses of Morawski and Constant including car payments, country club dues, and loans to Morawski’s friends.”
Koy seeks compensatory damages of $175,884 and punitive damages of $1 million. She is represented by Steven Rosenberg.