15 individuals have been charged for their alleged involvement in three separate mortgage fraud schemes.
US vs. Babar, et al
Syed A. Babar, New London, Connecticut was indicted on April 27, 2010 by a federal grand jury on charges of wire fraud and conspiracy offenses stemming from a mortgage fraud conspiracy that he is alleged to have headed. Earlier, Nathan Russo, Thomas Gallagher, Morris Olmer and David Avigdor were charged by federal criminal complaint for their alleged involvement in the conspiracy. The charges allege that, between February 2007 and April 2010, Babar, along with Russo, a Rhode Island-based mortgage broker; Gallagher a West Haven, Connecticut-based real estate appraiser; Olmer, a former attorney who has not been licensed to practice since February 2007, but who held himself out to be a lawyer, and Avigdor, an attorney who shared a New Haven, Connecticut office with Olmer, engaged in a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. A sixth member of the alleged conspiracy, Rab Nawaz, was arrested on June 2 on wire fraud and obstruction of justice charges.
The charges against the defendants allege that Babar recruited and paid straw purchasers up to $20,000 to nominally purchase homes. Babar and his co-conspirators then directed the straw purchasers to enter into sales contracts with the sellers of homes for a price higher than the actual price that the seller would receive. Members of the conspiracy submitted false documentation in connection with loan applications that were submitted, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales price and the loan amount being sought to fund each purchase. Babar and his co-conspirators allegedly created a fictitious construction company in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. Members of the conspiracy then split the fraud proceeds.
Contrary to the representations made on the loan applications, it is alleged that the straw purchasers never occupied the houses as their primary residences. They defaulted on the loans they obtained and let the houses go into foreclosure.
This mortgage fraud scheme involved approximately 35 properties and loans obtained in the amount of approximately $10 million. Current losses from the scheme are estimated to be at least $3 million.
Thomas Gallagher operated Autumn Appraisals, LLC, West Haven, Connecticut. It is alleged that his role in the scheme was to create fraudulently inflated appraisals of residential real estate in exchange for payments, often in cash, of thousands of dollars per home. The payments were well beyond the basic appraisal fee of about $375 that was disclosed in appraisals and on federal mortgage documents.
Russo was a mortgage broker employed by Action Mortgage Corp., a licensed mortgage broker in Cranston, Rhode Island. It is alleged that Russo provided brokering services to the scheme and prepared loan packages to provide to the lenders, which he reviewed to ensure that nothing looked amiss with the loan packages. It is alleged that Russo made significant fees on each mortgage that he brokered successfully.
Olmer had an office at 419 Whalley Avenue in New Haven, Connecticut. It is alleged that, Olmer‘s license to practice law in the State of Connecticut was suspended for six months on February 15, 2007. Olmer resigned his law license on August 28, 2008 and has not been licensed to practice since his February 2007 suspension.
Avigdor is an attorney who shared office space with Olmer in New Haven, Connecticut. Avigdor joined Olmer in May 2007 after Olmer lost his law license. Olmer and Avigdor were allegedly involved with many of the closings on the fraudulent transactions involved in the scheme. It is alleged that they distributed the fraudulent mortgage proceeds through Avigdor‘s IOLTA account and created false mortgage documents. Olmer and Avigdor allegedly used the IOLTA account to distribute approximately $641,000 in fraud proceeds to the bank account of the fictitious construction company.
This matter is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.
US vs. Guzman, et al
On September 9, 2008, Jose Guzman of Waterford, Conneticut pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud stemming from a mortgage fraud scheme that he headed between August 2004 and June 2007. After Guzman pleaded guilty, four other individuals also pleaded guilty to charges stemming from their involvement in the scheme. On Tuesday, June 15,2010, a federal grand jury returned a 38-count indictment charging an additional 10 individuals with conspiracy and various mail fraud, wire fraud and false statement charges stemming from the scheme.
Guzman has admitted that he operated a fraudulent mortgage business that arranged for individuals to obtain funding from various mortgage companies to fund mortgages of houses. Operating through various mortgage brokerage, property management and home improvement companies, Guzman and his co-conspirators arranged for “borrowers” to obtain funding from various mortgage companies and mortgage originators. The borrowers usually were individuals who had good credit but were of modest means with low levels of income. Guzman and his co-conspirators located real estate properties, specifically residential housing properties located in New London County, Connecticut, to be purchased by the borrowers using the funds loaned from various lenders. In order to recruit and entice the individuals to act as the borrowers, Guzman and his co-conspirators compensated the borrowers. In order to secure the funding from lenders, Guzman and his co-conspirators, falsified material information on the borrowers’ mortgage loan applications, including information regarding income, assets, employment, rent history, as well as the borrowers’ intention to make the properties their primary residence.
Through this conspiracy, it is alleged that the co-conspirators collected large commissions, fees and other money from more than 100 mortgages that were funded based on fraudulent representations. As a result of defaults on the mortgages, the lenders suffered losses of more than $3.6 million.
William Athan, Brian Guimond, Rosa Garcia and Isaura Guzman have previously pleaded guilty to charges stemming from the scheme. The additional 10 defendants charged in the indictment that was returned on June 15 are:
Maurizo Lancia, 47, Trumbull, Connecticut, a licensed attorney and licensed mortgage broker. Lancia controlled and operated Royal Financial Services, LLC, a mortgage brokerage company with offices in Trumbull and New London, Connecticut. It is alleged that Lancia acted as a mortgage broker and closing agent in connection with fraudulent real estate transactions.
David Kinney, 51, Woodbridge, Connecticut, a licensed attorney with offices located at 685 State Street in New Haven, Connecticut. It is alleged that Kinney acted as an attorney and closing agent in connection with fraudulent real estate transactions.
Stacey Petro, 35, Branford, Connecticut, a licensed mortgage broker who controlled and operated First Source Mortgage Solutions, Inc., based in New London, Connecticut. It is alleged that Petro acted as a mortgage broker in connection with various fraudulent real estate transactions.
Michael Russo, 45, New Haven, Connecticut, a licensed real estate sales agent who worked at Elizabeth Athan Realty in New London, Conneticut and at Broad Street Investment Group in New London, Connecticut. It is alleged that Russo sought out residential real estate properties to be bought and sold and recruited individuals to act as buyers in connection with various fraudulent real estate transactions.
Yunio Gonzalez, 58, New London, Connecticut, the owner of IEK Professional Services, a New London-based bookkeeping and tax preparation service. Gonzalez was also a licensed real estate sales person and worked at Elizabeth Athan Realty. It is alleged that Gonzalez recruited a family member to act as a buyer in connection with a fraudulent real estate transaction, and that Gonzalez acted as the seller in connection with the same transaction.
Melissa Valentin, 26, Uncasville, Connecticut, worked at Elizabeth Athan Realty at certain times during the conspiracy. It is alleged that Valentin recruited family members to act as buyers in connection with fraudulent real estate transactions, and she herself acted as both a buyer and a seller in connection with fraudulent real estate transactions.
Michael Hodges, 51, New London, Connecticut, worked at J.G. Property and Investment Management Company, and at Broad Street Investment Group at certain times during the conspiracy. It is alleged that Hodges sought out properties to be purchased and sold and recruited individuals to act as buyers in connection with fraudulent real estate transactions.
Jane Soulliere, 43, New London, Connecticut and Angel Urena, 23, New London, Connecticut are alleged to haven recruited individuals to act as buyers and also acted as buyers themselves in connection with various fraudulent real estate transactions.
Maria Logan, 45, Plainfield, Conneticut is alleged to have acted as a buyer in connection with various fraudulent real estate transactions.
Each of the 10 defendants are charged with one count of conspiracy and multiple counts of mail fraud. In addition, Lancia, Kinney, Russo, Gonzalez, Valentin and Hodges are charged with multiple counts of wire fraud. The indictment also charges Kinney and Gonzalez each with one count of making a false statement to the FBI during the course of the investigation.
This matter is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Michael S. McGarry.
US vs. Levitin
Menachem Yosef Levitin, also known as Joseph Levitin, 24, New Haven, Connecticut, was arrested on a federal criminal complaint charging him with wire fraud stemming from a New Haven-based mortgage fraud scheme. It is alleged that, beginning in 2006, Levitin was involved in the fraudulent purchase of more than 50 multi-family properties in New Haven, Connecticut. It is alleged that straw buyers were used to purchase properties that Levitin brought to them, and that loan applications contained materially false statements related to, among other things, the amount of deposits that were paid and leases of tenants who lived there. Many of these homes were foreclosed upon, resulting in losses to the lenders. It is alleged that Levitin used the proceeds from approximately 40 fraudulent real estate transactions to purchase and renovate at least 51 houses that Levitin and other investors now own and operate as rental properties. On May 18, the U.S. Attorney’s Office filed a civil complaint seeking forfeiture of the 51 Levitin properties.
The investigation is ongoing and the affidavit that has been filed in conjunction with the criminal complaint remains sealed.
These mortgage fraud prosecutions, which are presented in more detail below, are the latest result of a coordinated law enforcement effort to combat mortgage fraud and related financial crimes in Connecticut. Those charged include attorneys, mortgage brokers, licensed real estate agents, an appraiser and others. The alleged schemes primarily involve properties in New Haven, New London and Windham Counties, Connecticut but in recent months, the U.S. Attorney’s Office also has prosecuted individuals involved in significant mortgage fraud in Hartford and Fairfield Counties, Connecticut.
This matter is being investigated by the Federal Bureau of Investigation, the U.S. Department of Housing, Office of Inspector General, and the U.S. Postal Inspection Service. The criminal case is being prosecuted by Assistant United States Attorney David T. Huang and the civil forfeiture case is being handled by Assistant United States Attorney Julie G. Turbert.
David B. Fein, United States Attorney for the District of Connecticut; Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation; Diane DeChellis, Special Agent in Charge of U.S. Housing and Urban Development, Office of Inspector General in New England; Robert Bethel, Inspector in Charge of the U.S. Postal Inspection Service in New England, and Susan M. Dukes, Special Agent in Charge of the Internal Revenue Service – Criminal Investigation – Boston Field Office made the announcements.
U.S. Attorney General Eric Holder and other federal law enforcement officials announced the results of “Operation Stolen Dreams,” a nationwide initiative targeting individuals involved in mortgage fraud schemes. Since March 1, Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. In addition to federal criminal cases, Operation Stolen Dreams also focused on civil enforcement, restitution for victims and increasing cooperation with state and local partners. As a result, the initiative has resulted in 191 civil enforcement actions, which have resulted in the recovery of more than $147 million.
“Mortgage fraud ruins lives, destroys families and devastates whole communities, so attacking the problem from every possible direction is vital,” said Attorney General Holder. “We will use every tool available to investigate, prosecute, and prevent mortgage fraud, and we will not rest until anyone preying on vulnerable American homeowners is brought to justice.”
“The charges announced in conjunction with past prosecutions and several active and ongoing investigations, demonstrate the commitment of the Department of Justice and our federal and state partners to prosecute those whose illegal activity have contributed to our nation’s recent banking crisis and helped to litter our cities and neighborhoods with foreclosed properties,” stated U.S. Attorney Fein. “I want to thank the participants in the Connecticut Mortgage Fraud Task Force who are diligently investigating these crimes, protecting the public and helping to restore confidence in our housing and financial markets.”
In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force is focusing on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes.
The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.
“The charges announced today are an example of the FBI’s commitment to combating mortgage fraud,” stated FBI Special Agent in Charge Mertz. “These cases allege organized criminal acts encompassing all facets of the mortgage process. Mortgage fraud is partially responsible for the billions spent in bailout money, the credit crisis and, in general, today’s tough economy which has so greatly impacted our families. Mortgage Fraud cannot be tolerated and, as the FBI continues to investigate these crimes, we encourage citizens who have information on mortgage fraud to contact the Connecticut Mortgage Fraud Task Force at 203-333-3512 or by sending an email to firstname.lastname@example.org.”
“The last number of years have seen enormous and damaging developments in the mortgage and housing markets with an urgent reliance on the government to bolster unstable marketplaces and devastated communities,” stated Kenneth M. Donohue, Inspector General of the Department of Housing and Urban Development. “The HUD OIG, in partnership with other federal agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”
“The Connecticut Mortgage Fraud Task Force is a great example of how multiple agencies can work together to investigate crime,” stated U.S. Postal Inspection Service Inspector in Charge Bethel. “This task force has evolved into a true partnership and has linked law enforcement agencies together to share information in combating this type of fraud.“
“Mortgage fraud, like all financial crimes, adds to the underground economy, erodes the integrity of our tax system and threatens the financial health of our communities,” stated IRS Criminal Investigation Special Agent in Charge Dukes. “IRS Criminal Investigation is proud to bring its financial expertise to the Connecticut Mortgage Fraud Task Force in pursuit of the individuals committing these crimes.”
U.S. Attorney Fein stressed that the charges are not evidence of guilt. The charges are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.
U.S. Attorney Fein acknowledged the critical supportive role of the United States Marshals Service in helping to administer this forfeiture action.