Thursday, April 20, 2006

Former Mortgage Company Owner Pleads Guilty in Illinois Flipping Scheme

Lawrence V. Lynch, 53, Wilbraham, Massachusetts, the former president of Affordable Mortgage Co, pleaded guilty to federal charges of wire fraud and money-laundering conspiracy. He was charged in 2005 with twelve other people in connection with a real estate flipping scheme involving more than 100 homes in the greater Springfield area of Illinois.

At the hearing, according to media reports, Assistant U.S. Attorney William M. Welch II described one transaction where a borrower purchased a duplex without an opportunity to view both sides of the property. ”When he received the keys, he found a fire had burnt holes in the first and second floors, there was no staircase, the interior had been stripped of plumbing and electrical fixtures and there was no boiler,” Welch told Neiman. Lynch admitted to receiving a $16,500 kickback in connection with the transaction.

Those charged in the case were:

Albert V. Innarelli, closing attorney, Agawam, MA (disbarred)

Michael Bergdoll, Property Seller/Real Estate Developer, Wilbraham, MA

Anthony Matos, Property Seller/Real Estate Broker, Ludlow, MA

Pasquale A. Romeo, Property Seller/Real Estate Broker, Springfield, MA

Wilfred Changasie, Borrower Recruiter, formerly of Springfield, MA

Theodore C. Jarrett Jr., mortgage broker, Springfield, MA

James E. Smith, mortgage broker, Baltimore, MD

Jonathan Frederick, appraiser, Agawam, MA

Joseph Sullivan, appraiser, Springfield, MA

Mark L. McCarthy, mortgage broker, Wilbraham, MA

Edgar Corona, used car salesman, Springfield, MA

Kathryn Zepka, mortgage broker

The indictment alleged that Bergdoll, Romeo, Matos and others purchased distressed properties, typically in low-income neighborhoods, at resolve the properties rapidly at artificially inflated values. They utilized ‘runners’ to recruit prospective buyers and paid finder’s fees to the runners of approximately $2000 for the successful sale of properties.  The defendants represented to buyers that the buyers would not have to make down payments and that money would be kicked back at the time of closing. They also represented that certain repairs would be made to the properties before closing.

Bergdoll, Romeo, Matos and others, who had established business relationships with Jarrett, Smith, McCarthy, Lynch, Zepka and other mortgage brokers, referred many of the buyers to them for loans.  As many of the borrowers were not qualified, the defendants generated and processed false and fraudulent loan applications and documentation through lending institutions. False documentation reflected that buyers made down payments that were not actually made, reflected inflated borrower income and showed improvements that were not actually made to the properties. The defendants also generated bogus second mortgages to assist in securing loans and created fraudulent inflated appraisals.  The mortgage brokers and appraises received continued business along with ‘incentive’ payments such as cash or hidden interests in real estate deals.

Once the loans had been approved by the lending institutions, Bergdoll, Romeo and Matos referred the buyers to Innarelli and other attorneys. Innarelli generated false closing documentation to facilitate and conceal the fraud.  Innarelli received both continued business and ‘incentive’ payments such as cash or hidden interests in real estate deals. Anticipating foreclosure, Innarelli withheld real estate and utility payments owed by buyers at closing and kept the payments for his personal use.

mortgage fraud