Everyone wants to have nice things. A beautiful house, a sporty car, some fancy jewelry, maybe even a high-powered weapon, but not everyone can afford those things or are able to buy them on their own. Enter: Straw buying. Keep reading to learn more about straw buying and how it can lead to legal troubles.
Straw Buying 101
Straw buying is when a person (aka the “straw buyer”) purchases goods or property on the behalf of another person, concealing the identity of the true buyer. This sounds like an effective way to get what you want if you’re unable to secure a loan yourself, right? Not so fast, straw buying, while not necessarily illegal, can result in many problems. It also has the potential to turn illegal quickly.
Many times the straw buyer receives a kickback for the use of their credit in return for purchasing the property or goods in their name. Straw buying turns illegal when the transaction involves fraud, criminal activity, or a purchase for someone who is legally barred from making the purchase themself.
The term “straw buyer” is connected to the legal term “straw man” which describes a person who possesses property to facilitate a transaction but has no real interest in owning it. “Straw man” gets its meaning from the word “scarecrow” which is used as a dummy (made with straw) or placeholder for a specific person.
Illegal vs. Legal Straw Buying
There are definitely times when straw buying is legal. For example, if an elderly neighbor or relative has someone go to the grocery store for them and purchase groceries, and then pays them back for the groceries, this is legal straw buying. The elderly person is obviously legally allowed to have the groceries, they just might not be able to physically go to the store themselves and shop for them.
Another case where straw buying may not be illegal is when a real estate investor uses a straw buyer to purchase a property because they already have multiple mortgages and believe it may be difficult to secure another loan. This isn’t illegal as long as the mortgages are repaid quickly, however if the loan goes into default, the straw buyer and real purchaser could face fraud charges.
In a scenario where the purchases, or ownership of the goods are heavily regulated, straw buying is usually illegal. An example of this is gun ownership. If someone is not of age to own a gun, or has had legal problems and is barred from owning a gun, having someone else make the purchase for them is illegal.
One other form of illegal straw buying is when someone with bad credit has someone with good credit take a loan out for them, filling out false paperwork in the process. The person with bad credit takes the money and spends it however they want, then does not pay the loan back. The lender may not have ever approved the loan if they believed the person taking it out may default on it.
Straw buying is not always illegal, but intent is the determining factor in straw buying situations. If someone uses a straw buyer to commit fraud, it is always illegal and always punishable by law.
Penalties for Straw Buying in New Jersey
New Jersey law is in line with federal regulations when it comes to straw buying and may even take it a step further. Depending on the goods or property acquired through a straw purchase, the penalty will vary.
Firearms: A straw purchase of a firearm is a federal crime that could result in a $250K fine and up to 10 years in prison. Arranging (aiding and abetting) a straw purchase of a firearm is a federal crime violating the Gun Control Act of 1968.
Loan/Mortgage: Straw buying a mortgage is considered illegal if the intent is to commit fraud. It is then considered mortgage fraud and the penalties can be severe. Depending on the mortgage, the penalty could be up to a year in prison and a few thousand dollars in fines, or fines well over $100K.
A New Jersey woman was sentenced to 6 years in prison in 2020 for her role in acting as a straw buyer to obtain loans to purchase high-end cars. Using false paperwork to obtain the loans made the purchases fraudulent.
The penalties for straw buying rely on what was purchased, how much money was involved, and whether intent to commit fraud is evident.
If You are Accused of Straw Buying
If you are facing accusations involving straw buying, you need to seek legal assistance immediately. Because there is a fine line in some cases between what is legal and what is not, it’s best to seek the help of an experienced attorney to navigate the process. The Law Offices of Robert J. DeGroot is trustworthy, experienced and ready to help!
Contact the Law Offices of Robert J. DeGroot today if you or someone you know if facing accusations of fraud resulting from straw buying.
