2 Lawyers and Appraiser Among 5 Indicted for Mortgage Fraud

Allison Tussey —  August 29, 2013 — 1 Comment

Theresa Sanders, a/k/a Theresa Hayes, 55, most recently of Westerville, Ohio, an attorney, Tracie Clark, 41, Wimauma, Florida, Michelle Powers, 51, DeRuyter, New York, an attorney, Steven Essig, 60, an appraiser, and Paul Sakowski, 44, both of Syracuse, New York, have been indicted for their roles in a mortgage fraud ring that operated for years and netted more than $1 million by preying upon first-time home buyers and institutional lenders.

The five defendants bilked consumers by advertising a rent-to-own opportunity in which first-time home buyers with low credit were offered the chance to own their own homes with no down payments and no closing costs. The accused then took out fraudulent loans against those properties, conned lenders into believing they were paying off underlying mortgages, and then pocketed the money.

The 19-count indictment, in Onondaga County Court, New York, charges Sanders and Clark with Residential Mortgage Fraud in the Second Degree, a class C felony; five counts of Grand Larceny in the Second Degree, also class C felonies; three counts of Grand Larceny in the Third Degree, class D felonies; two counts of Scheme to Defraud in the First Degree, class E felonies, and eight counts of Falsifying Business Records in the First Degree, also class E felonies.

Clark was the final defendant arraigned on the indictment in Onondaga County Court before the Honorable Judge Anthony F. Aloi. The other four defendants were arraigned one week prior. Judge Aloi set bail for Sanders at $250,000 cash/bond.

If convicted, the defendants face up to twenty years in prison.

The investigation leading to these indictments revealed an elaborate scheme in which Sanders purchased dozens of dilapidated homes in and around the City of Syracuse from the U.S. Department of Housing and Urban Development, and had some of them appraised for more than what she paid for them. After paying for the properties, Sanders then took mortgages out on each of the homes, usually in the names of her family members.

Armed with a new round of appraisals valuing the homes at unjustified values, the defendants applied for what they told lenders were refinance loans in the names of the prospective buyers, despite the fact that these buyers had never before owned the homes they were refinancing. Lenders, believing they were paying off underlying mortgages, wired closing funds to accounts controlled by the defendants, who then pocketed the money.

At the closings, buyers were surprised to learn that they would carry not one mortgage, but two — the second, which was not previously disclosed to them, was controlled by the defendants and varied in amounts up to more than $18,000. Believing they had no choice, buyers acquiesced to the “second mortgages” in hopes that they would be able to move forward as new homeowners.

To prevent discovery of their crimes, the defendants used a variety of excuses to withhold from the buyers the deeds to the properties, which caused the buyers to suffer numerous further hardships stemming from their difficulties in demonstrating that they were the rightful owners of the properties.

Attorney General Eric T. Schneiderman announced the indictment.

“Preying on innocent New Yorkers who want nothing more than an opportunity to buy their own home is repugnant,” said Attorney General Eric Schneiderman. “This office will continue to work diligently and collaborate with state and federal partners to ensure those who would exploit the system for their own financial gain feel the full weight of justice.”

HUD-OIG Special Agent-in-Charge, Northeast/Mid-Atlantic Regions Cary Rubenstein said, “The United States Department of Housing and Urban Development, Office of the Inspector General is tasked with investigating allegations of waste, fraud and abuse in HUD-sponsored programs. What we have here today is a group of mortgage industry professionals who perpetrated a sophisticated fraud in order to enrich themselves at the expense of individual people who were seeking the American dream of home ownership. As a result of their conduct, additional risks were placed on the FHA Insurance program — risks that are ultimately borne by American taxpayers. We vigorously investigate matters that place the public and the FHA Insurance program at risk to ensure that fraudsters are brought to justice and that they are administratively removed from future participation in government programs. We wish to thank our partners at the New York State Attorney General’s Office for committing the resources and effort necessary to prosecute the perpetrators of this mortgage fraud.”

New York State Police Superintendent Joseph A. D’Amico said, “This case has brought to justice individuals who, in their elaborate scheme, not only defrauded mortgage companies, but also victimized unsuspecting third parties looking to own their own homes. Financial crimes, or any crime, will not be tolerated in New York State. For years, the actions of these defendants hurt homeowners, businesses, and our economy. I thank the New York State Attorney General’s Office, the New York State Department of Financial Services, the U.S. Department of Housing and Urban Development Office of the Inspector General, and the Internal Revenue Service, Criminal Investigations Division for their continued partnerships.”

The Attorney General thanks the following partners for their valuable assistance in this case: the New York State Police, the New York State Department of Financial Services, the U.S. Department of Housing and Urban Development Office of the Inspector General, the U.S. Internal Revenue Service, Criminal Investigations Division, the Onondaga County District Attorney’s Office, and the Columbus, Ohio Division of Police.

The case was investigated by New York State Police Investigator Kevin Buttenschon, HUD-OIG Assistant Special Agent-in-Charge Heather Yannello, and Office of the Attorney General Investigators Andrea Buttenschon, Scott Petucci, David Buske, and Joel Cordone, under the supervision of Supervising Investigator Richard Doyle, Deputy Chief Investigator Antoine Karam, and Chief Investigator Dominick Zarrella.

The case is being prosecuted by Assistant Attorneys General Nicholas J. DeMartino and Joshua S. Vinciguerra, under the supervision of Deputy Bureau Chief Stephen Maher, Bureau Chief Gail Heatherly, and Executive Deputy Attorney General for the Criminal Division Kelly Donovan.

Allison Tussey

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