Connecticut attorney Richard Novak pleaded guilty last week in U.S. District Court to making a false statement on a federal mortgage loan document.
The Connecticut Mortgage Fraud Task Force, developed in 2009 to investigate and prosecute state mortgage fraud cases and related financial crimes, was investigating a fraud scheme led by Syed Babar where Novak was one of the participants in this plan.
The scheme, which is being investigated by the FBI and HUD, consisted of the participants obtaining residential real estate loans, including loans insured by the FHA, through the use of sham sales contracts, false loan applications and fraudulent property appraisals.
According to court documents and statements made in court, Novak acted as the attorney representing the seller of a residence in East Haven, Conn. Novak also had power of attorney for the seller and had previously lived at the residence.
When Novak closed the property in June 2008, he signed a HUD-1 settlement statement that contained false statements. Some of the misrepresentations in the signed settlement included an overstatement of the amount required to pay off a second lien on the property, a representation that the buyer had paid a $22,000 deposit when no deposit was ever paid, a representation that $48,345 was owed to “Sheda Telle Construction” for an “outstanding invoice” when there was no outstanding invoice, and a representation that $6,140 of the seller’s funds would be used to pay off “GE Money Bank for PMSI in appliances” when no such payoff was owed.
The property went into foreclosure with the lender suffering a loss of more than $120,000.
Novak faces a maximum five-year prison term when he is sentenced on June 6.
In early February, Babar also pleaded guilty to leading this mortgage fraud scheme, which resulted in losses of more than $3.2 million to lenders.
