Three attorneys and a former attorney pleaded guilty in Manhattan federal court for conspiring to commit wire and bank fraud in connection with a $66 million mortgage fraud scheme.
Jacquelyn Todaro, Neal Sultzer, Kevin Hymes and Michael Schlussel, who participated in this scam without a lawyer’s license on behalf of a fourth attorney involved in this conspiracy, all face a maximum jail sentence of 30 years for their actions.
According to an indictment as well as statements made in court, the mortgage brokerage firm First Class Equities arranged home sales between straw buyers—people who pretended to be homebuyers but had no intention of living in the property—and homeowners who were often in financial distress and willing to sell their house.
Loan officers at FCE recruited the straw buyers and obtained mortgage loans on their behalf by submitting fraudulent applications to banks and lenders that made false representations about their net worth, employment, income and plans to occupy the home.
After approving the loans, the lenders sent the mortgage proceeds to the attorneys who were involved in these transactions. The attorneys appeared at real estate closings and distributed the loan proceeds there, the indictment said.
The attorneys submitted inaccurate statements to the lenders about how they were distributing the loan proceeds. Additionally, the indictment said they made illicit payments that totaled tens of thousands of dollars or more for every transaction, from the loan proceeds to themselves and to other members of the conspiracy.
Also, the attorneys caused false documents to be provided to lenders in order to obtain home equity lines of credit on properties purchased through straw buyers the same day. The proceeds were then also distributed to all the individuals involved in this scheme.
The scam involved over 100 home mortgage loans for residential properties in New York City, Long Island, as well as Westchester and Dutchess Counties.
In August 2011, 14 individuals from First Class Equities were charged for their roles in this scam, including the owner and president, loan officers, attorneys and one disbarred lawyer.
“In helping to perpetrate this massive mortgage fraud scheme, these individuals exploited their trusted positions as attorneys,” said Preet Bharara, U.S. attorney for the Southern District of New York. “With their guilty pleas, they now stand convicted for the roles they played in undermining the integrity of the mortgage industry and the legal profession.”
