An indictment has been filed in Manhattan Federal Court charging 14 defendants for participating in a mortgage fraud scheme that involved over 100 home mortgage loans valued at more than $58 million.
The residential properties were located in New York City and Long Island, and Westchester and Dutchess counties.
The defendants charged in the indictment were Gerard Canino, Ian Katz, Omar Guzman, James Vignola, Henry Richards, Robert Thornton, Neal Sultzer, Michael Raphan, Michael Schlussel, Jacquelyn Todaro, Kevin Hymowitz, Michael Charles, Ralph Delgiorno and Pandora Bacon.
According to the indictment, the loans were made from 2004 to 2009 through the mortgage brokers First Class Equities, which had offices on Long Island in Oceanside and Old Westbury. Canino served as the president and owner of FCE, while his co-conspirators included five FCE loan officers, five real estate attorneys and a real estate title closer.
As part of the scheme, the co-conspirators arranged home sales between straw buyers who had no intention of living in the property and homeowners in financial distress who were willing to sell their home. The FCE loan officers allegedly obtained mortgage loans for the fraudulent deals by submitting false applications including W-2s and pay stubs to banks and lenders and using inaccurate representations about the straw buyers' net worth, employment, income, and plans to live in the properties.
“As alleged, this brazen and wide-ranging scheme defrauded banks and lenders of millions and enriched its participants, including real estate professionals who took advantage of their inside knowledge of the system to fleece it,” said Preet Bharara, U.S. attorney for the Southern District of New York. “Mortgage fraud undermines the banking system and hurts hardworking homeowners, and we will continue to work with the FBI to make sure that those who commit such crimes are caught and prosecuted.”
After approving the loans, the lenders sent the mortgage proceeds to their attorneys, who submitted false statement to the lenders about how they were distributing the loans. The attorneys allegedly made illegal payments from the loans to members of the conspiracy that totaled tens of thousands of dollars for every transaction.
The indictment said the real estate title closer omitted certain documents that he was required to provide and improperly notarized documents to further the fraud scheme.
In addition, two of the lawyers supposedly had false documents sent to lenders in order to obtain second mortgages on properties purchased by straw buyers. These proceeds then were divided among certain members of the conspiracy. Other members also allegedly funneled the money through shell corporations they owned to “flip” properties to other straw purchasers at higher prices to obtain new mortgages on the property, basically restarting the fraudulent scheme.
Many of the properties involved in these transactions are now in default or foreclosure.
“Mortgage lenders provide capital so people can purchase homes. These defendants exploited the system to enrich themselves,” said Janice Fedarcyk, assistant director in charge of the New York office of the Federal Bureau of Investigation. “Their purpose wasn't to assist home buyers; it was a thinly veiled, multimillion-dollar bank fraud scheme.”
All the defendants were charged with conspiracy to commit bank and wire fraud and face a maximum penalty sentencing of 30 years in prison and a fine of $1 million.
