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Corruption, Theft Allegations Mounting In New Jersey Developer's Bankruptcy Case

As the bankruptcy case of National Realty Investment Advisors progresses, its web of alleged fraud, self-dealing and potential conflicts of interest is growing ever more tangled.


Two of its ousted leaders are now accused of stealing more than $400K from company coffers, according to a June 23 Chapter 11 filing for the Secaucus, New Jersey-based developer in New Jersey Bankruptcy Court.

Meanwhile, other filings from separate creditors since the start of July have leveled contradictory accusations against NRIA’s new management: that it both remains improperly connected to those former leaders and that it acted too rashly to shed one of those connections.

The most salacious claim, the one involving theft of company funds, stems from a June 29, 2021, check Rey Grabato Jr., NRIA’s founder and sole member, allegedly wrote to himself for $420K out of the TD Bank account the company used along with its main investment vehicle, the NRIA Partners Portfolio Fund.

Days later, according to the NRIA filing, Grabato wrote a check for the same amount to then-NRIA executive Thomas Nicholas Salzano, who ran the Portfolio Fund. Salzano’s wife, Olena Budinska, later deposited the check into her personal account, also at TD Bank, according to the filing by NRIA Independent Manager Brian Casey. Casey introduced copies of the checks and Budinska’s deposit slip as evidence.

Casey was appointed independent manager of NRIA in October, soon after the Philadelphia Inquirer reported the company was the subject of criminal and civil investigations at the federal level as well as in multiple states. His appointment came around the same time Salzano stopped working for NRIA, months after being arrested in March and later sued for fraud by the Securities and Exchange Commission, according to a cease-and-desist order issued on June 21 by the New Jersey Bureau of Securities.

Not Quite A Clean Break

NRIA told investors in September Salzano had only been an independent consultant and was removed that July, but later disclosed he had continued to consult “on a historical basis,” the New Jersey cease-and-desist order stated.

By this spring, Casey had removed both Grabato’s partner Coley O’Brien from his post as NRIA managing director and Grabato as president and CEO of NRIA. In a motion requesting to continue certain ongoing business contracts, Casey stated he had advised NRIA's construction operations team it would not be doing further business with entities that had personal relationships with Grabato, O’Brien, Salzano or other former "insiders." He further advised he was unaware of any such ongoing business relationships.

An aerial photo of the condominium project developed by U.S. Construction on behalf of National Realty Investment Advisors in Delray Beach, Florida.

But Casey did not name Arthur Scutaro, who remains the NRIA Partners Portfolio Fund vice president and adviser, as an insider despite Scutaro having been a longtime associate of Salzano.

Both Scutaro and Salzano were found by the SEC to have participated in multiple forms of fraud committed by a former telecommunications company known as Norvergence founded by Salzano's brother Peter Salzano. Scutaro, Nick Salzano, O’Brien and Grabato were named as co-defendants with NRIA in the cease-and-desist order from NJBOS. 

In a statement Friday, O'Brien denied he had been involved in any wrongdoing and said he was "stunned" by the allegations leveled against NRIA's leadership team.

"As I continued to learn additional details of alleged actions, I began preparing my exit from the company and officially severed all ties with the firm following January of 2022," O'Brien said in his statement. "However, despite my complete dissociation from the company  as well as the documented records, emails, and more that demonstrate I never engaged in any wrongful activities as they were deliberately concealed from myself and others — I was shocked and confused when the New Jersey Bureau of Securities named me in a Cease & Desist order nearly six months later."

O'Brien added he believed he was included in New Jersey's cease-and-desist order because of the scope of the investigation and his passive investor status, but asserted it was rife with factual errors.

"As I eagerly look ahead to setting the record straight and finally putting this chapter of my life behind me, I have full confidence that the evidence and facts of the case will inevitably be recognized and ensure the truth is told," he said.

A group of creditors has also objected to Casey’s motion to assume contracts, claiming he didn't provide specific information about any of the contracts in question and that some were for projects NRIA’s investor materials listed as completed. The objection also claimed Casey was hired to manage NRIA by Scutaro and might not be as independent as he presented himself to be.

“The objectors have justifiable concerns that the counterparties to the contracts proposed to be assumed may have relationships with the perpetrators of the fraud,” the creditors’ filing stated.

Conflict-of-interest allegations don't end there.

The trustee appointed by the U.S. Department of Justice to NRIA’s bankruptcy case filed its own objection to NRIA’s proposed counsel in the bankruptcy case, S. Jason Teele of law firm Sills Cummis & Gross, on July 11. Teele represented NRIA in multiple legal disputes from 2019 through at least late last year, including an internal investigation into alleged misconduct by Scutaro and Salzano and a separation lawsuit sparked by O’Brien's ouster, per disclosures in Teele's application to represent NRIA in bankruptcy court.

The corner of 1401 South Christopher Columbus Blvd. in South Philadelphia, which has sat empty for years as various development plans have come and gone.

Teele also personally represented Grabato, Salzano and Scutaro over the past three years when they were named defendants in civil lawsuits over their dealings for NRIA as recently as April, though he claimed in his disclosures in June to no longer represent any of them.

The U.S. trustee is also arguing that when NRIA, still under Grabato’s leadership, retained Steele as a restructuring attorney, it paid over $500K in what a February disclosure form listed as payment of former legal fees. Teele is holding that payment, as well as legal fees accrued since, in escrow pending the outcome of the bankruptcy case, which the trustee argued qualifies him as an NRIA creditor.

The Jilted Development Partner

The creditors’ objection to Casey’s motion to assume contracts bemoaned a lack of specifics on how NRIA would decide which contracts to fulfill and for how much money.

But among the contracts NRIA did not seek to continue was one with Philadelphia-based U.S. Construction as general contractor and co-developer on a project for 19 condo units and five detached houses in Delray Beach, Florida.

In response, USC filed its own motion July 12 seeking to compel NRIA to meet its contractual obligations, stating that with all condos completed and 18 sold and the five houses nearly done, the project had already brought in more revenue than it cost. By tearing up the contract now, USC alleged, NRIA would be jeopardizing a further $35M in net profit and attempting an impractical mid-project switch of construction teams, which would cause delays and jeopardize the prices of the unsold units. 

USC President John Farina, in a document filed to support the motion, said NRIA had communicated just enough in the past few months to keep subcontractors working on the site even though it had stopped paying them. Farina sourced the development deal himself, he added, and USC led every step of the process, with NRIA not even sending any representative to construction milestone events or tours by potential buyers.


Casey did not provide a reason to USC for the reversal, leaving USC to assume it was because Salzano’s son Dustin is its part-owner and chief financial officer, according to filings. Farina argued in his filing that his leadership of the genesis and development of the Delray Beach project proved that it had nothing to do with any connection between the Salzanos.

“It appears Brian Casey’s desire to terminate [NRIA’s relationship with] USC is driven by a desire to visit the sins of Mr. Salzano upon his son based on the ethereal notion that a familial relationship equates to complicity,” Farina’s filing stated. 

USC has already sued NRIA over a similarly abrupt termination of a development deal for a South Philadelphia site. In that instance, USC spent four years securing entitlements, arranging financing and hiring subcontractors in anticipation of breaking ground near the end of last year. When NRIA, through Casey, informed USC in December it no longer wanted to proceed with construction and instead wanted to sell the land as a development site, USC secured a $40M offer. It never heard back from NRIA, leaving the buyer to abandon the deal, the lawsuit stated.

“There is no legal reason Mr. Casey would fail to investigate the proposal,” Farina’s filing stated. “Rather, it appears it is as simple as, it comes from USC so it must be bad … Never has the phrase ‘throwing the baby out with the bathwater’ been so apropos.”

The potential buyer for the South Philly site, New Jersey-based Accurate Builders & Developers, later purchased a development site in the neighborhood of Northern Liberties, less than 3 miles away, for $25M, Hankin Sandman Palladino Weintrob & Bell partner John Palladino told Bisnow in a phone call on Wednesday.

“These aren’t fly-by-night guys,” Palladino, who represents USC in its lawsuit over the South Philly site, said of Accurate. “It is a substantial developer, and it was incumbent upon Casey to investigate. I can’t say definitively that he didn’t, but we have no knowledge that he did.”


In NJBOS’ cease-and-desist order, the financial enforcement agency alleged Nick and Dustin Salzano exchanged emails regarding the structuring of a development fee NRIA was charging its investors, in which Dustin advised his father that doing so upfront would violate generally accepted accounting principles. 

“If [Nick Salzano] called the NJBOS and asked for advice, they would have told him the same thing Dustin told him,” Palladino said. “He told [his father] to do the right thing. I’m not sure how that’s any evidence of being a co-conspirator. I talk to my son about his job and give him advice, but that doesn’t make me entangled with his business.”

The cease-and-desist order also noted NRIA had retained a real estate marketing and property management business that Dustin co-founded, paying hundreds of thousands for work on multiple properties. For some other projects, NRIA hired Thomas “T.J.” Salzano, another son of Nick Salzano, to find buyers in his capacity as a Compass real estate agent. Some of the latter properties were sold to dummy companies that NRIA employees allegedly set up, using investor money, to give the illusion properties were performing better than they were, NJBOS said.

“What I know that I can tell you about, because my involvement [NRIA] is related strictly to this lawsuit, but we found that the deals [Dustin‘s company arranged] were arm’s length, standard-rate and invariably beneficial,” Palladino said. “Look at the Delray Beach project: 19 units built, 18 sold.”

The New Jersey bankruptcy court will hold a hearing to decide on Casey’s motion to assume contracts on July 19, which will be a chance for Bankruptcy Court Judge John K. Sherwood to show how he views Casey’s relationship with Grabato, Scutaro and Salzano.

Several creditors, including investors into NRIA’s fund and U.S. Construction, have lost trust in Casey’s ability to act in the best interests of various creditors, even if their reasons vary widely. When asked if he believes Casey is acting in a manner inconsistent with maximizing investor returns, Palladino was unequivocal.

“Yes,” Palladino said. “I say yes based on the facts that we know. We know we gave [NRIA] a $40M offer and to our knowledge they didn’t follow up. We know he’s trying to remove us from the Delray Beach project despite the fact that it's almost finished, which makes no sense.”

UPDATE, JULY 14, 10:45 A.M. ET: This story has been updated to include a statement from Coley O'Brien, NRIA's former managing director.