37 months in prison for Vineyard Commons developer

The real estate developer behind Vineyard Commons, a luxury residential complex in Highland, faces 37 months in federal prison for defrauding lenders and making false statements to the federal government.

Michael Barnett, 48, of Marlboro was also sentenced Wednesday by Judge Kenneth Karas of the Southern District of New York to three years supervised release, ordered to forfeit $200,000 in ill-gotten gains and required to pay more than $1.3 million in restitution, according to a spokesman for U.S. Attorney Preet Bharara.

Barnett had been accused by federal prosecutors of taking kickbacks and inflating invoices as part of a scheme to fraudulently obtain loans insured by the U.S. Department of Housing and Urban Development.

Vineyard Commons developer pleads guilty to defrauding lenders

Federal guidelines recommended a sentence of between 37 and 46 months.

Barnett had sought a sentence consisting of house arrest, probation and community service, according to court filings, so that he could attend to his family needs.

"Based on inexperience and poor judgement, he cut corners and made bad decisions," his attorney, Joseph Conway, wrote in a sentencing memo.

In a letter to the court, Barnett expressed remorse and said he hoped his children would not be "emotionally and collaterally damaged from the poor choices" he made.

READ: Vineyard Commons: Public might pay for $27 million FHA loss

READ: Vineyard Commons developer pleads guilty to defrauding lenders

READ: How the East Fishkill developers of a luxury housing complex in Highland went bankrupt

Barnett, described by prosecutors as a former car thief and "low-level fraudster," sought kickbacks of about $865,000 in exchange for contracts to a general contractor, JK Scanlan, and a lumber supply company, Universal Forest Products, hired as a subcontractor to provide framing and rough carpentry work.

In exchange for the work, the companies filed fraudlent, inflated invoices with a federally insured mortage lender, according to a sentencing memo filed by prosecutors.

The fact that fraud took place in 2009, during the collapse of the national real estate market, initially worked in Barnett's favor, as he was able to induce the contracting companies to participate in his scheme because little work was available.

Barnett likely never realized that Congress, in the wake of the housing and credit market collapses, would amend lending laws to criminalize fraud directed at HUD, the Federal Housing Administration and the mortgage lending business.

In the memo, prosecutors said a prison sentence "would reflect Congress' intent that those who defraud mortgage lenders be held 'fully accountable.' "

Judge Karas agreed and imposed the prison sentence.

John Ferro: 845-437-4816; jferro@poughkeepsiejournal.com; Twitter: @PoJoEnviro