Jacquelyn Torado, 42, Westbury, New York, Neal Sultzer, 61, Plainview, New York, and Kevin Hymes, 39, Armonk, New York, and former attorney Michael Schlussel, 50, Merrick, New York, pled guilty to conspiring to commit wire fraud and bank fraud in connection with a $66 million mortgage fraud scheme involving over 100 home mortgage loans for residential properties in the New York City area, Westchester County, Dutchess County, and Long Island.
According to the indictment previously filed in Manhattan federal court, as well as statements made in public proceedings:
First Class Equities (FCE), a/k/a Thunder Funding, a/k/a TAT Mutual Capital, was a mortgage brokerage firm with offices located in Oceanside and Old Westbury, New York. In August 2011, 14 individuals were charged in connection with their roles in a massive mortgage fraud scheme, including FCE‘s owner and president, loan officers, attorneys, and one disbarred lawyer. As part of the scheme, FCE arranged home sales between “straw buyers”””people who posed as home buyers, but who had no intention of living in, or paying for, the mortgaged properties””and homeowners who were often people in financial distress and willing to sell their homes.
Loan officers at FCE recruited straw buyers””many of whom were paid””and obtained mortgage loans on their behalf by submitting fraudulent applications to banks and lenders that made false representations about the straw buyers’ net worth, employment, income, and plans to live in the properties.
After approving the loans, the lenders sent the mortgage proceeds to attorneys who were involved in these transactions, including Torado, Sultzer, Hymes, and another attorney. Torado, Sultzer, Hymes, and Schlussel, acting on behalf of the fourth attorney involved in the scheme, would then appear at real estate closings and distribute the loan proceeds.
Schlussel held himself out as an attorney, but in fact, he had previously been disbarred and was not licensed to practice law. He and the other attorneys submitted false statements to the lenders about how they were distributing the loan proceeds and made illicit payments, typically totalling tens of thousands of dollars or more per transaction, from the loan proceeds to themselves and to other members of the conspiracy.
In addition, Torado and Schlussel caused false documents to be provided to lenders in order to obtain home equity lines of credit, or second mortgages, on properties purchased through straw buyers the same day, the proceeds of which Torado distributed among certain members of the conspiracy.
Torado pled guilty to one count of conspiracy to commit wire fraud and bank fraud and faces a maximum sentence of 30 years in prison. In connection with her plea, Torado agreed to forfeit $6,554,842. She will be sentenced by Judge Patterson on September 13, 2012 at 4:00 p.m.
Sultzer, pled guilty to one count of conspiracy to commit wire fraud and bank fraud and faces a maximum sentence of 30 years in prison. In connection with his plea, Sultzer agreed to forfeit $10,689,500. He will be sentenced by Judge Patterson on October 1, 2012 at 4:00 p.m.
Schlussel pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, Schlussel agreed to forfeit $5,878,442. He will be sentenced by Judge Patterson on September 24, 2012 at 4:00 p.m.
Hymes pled guilty to one count of conspiracy to commit wire fraud and bank fraud and faces a maximum sentence of 30 years in prison. In connection with his plea, Hymes agreed to forfeit $7,606,500. He will be sentenced by Judge Patterson on September 27, 2012 at 4:00 p.m.
In addition to Torado, Sultzer, Schlussel, and Hymes, five other defendants charged in the scheme””Canino, Pandora Bacon, Michael Charles, James Vignola, and Henry Richards“”have also pled guilty and are awaiting sentencing.
Charges are still pending against the remaining five defendants””Ian Katz, Omar Guzman, Robert Thornton, Michael Raphan, and Ralph Delgiorno“”who are presumed innocent unless and until proven guilty. The trial for any remaining defendants is scheduled to begin on July 2, 2012.
Preet Bharara, the United States Attorney for the Southern District of New York, announced the guilty pleas.
Mr. Bharara praised the FBI for its outstanding work in the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander, Andrew Goldstein, and Niketh Velamoor are in charge of the criminal case.
Manhattan U.S. Attorney Preet Bharara said, “In helping to perpetrate this massive mortgage fraud scheme, these individuals exploited their trusted positions as attorneys. And Michael Schlussel went a step further, representing himself as an attorney in good standing, when, in fact, he was not. 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.”