Archives For Stolen Funds

Marat Lerner, 41, Brooklyn, New York, the former president of a debt relief services business, pleaded guilty today to one count of wire fraud conspiracy and one count of committing wire fraud while he was on pre-trial release.  Lerner admitted that he lied to his victims and that he stole money that the victims had intended to use to pay off their home mortgages.  

According to court documents and facts presented at the guilty plea proceeding, Lerner was the owner of the “Lerner Group,” a business that claimed to provide debt relief services, including mortgage modifications, principally to the Eastern European immigrant community in Brooklyn.  Many of the victims that the defendant defrauded were already experiencing financial hardship and had specifically sought Lerner’s assistance to help reduce their monthly mortgage payments.  Lerner, in turn, promised that he could help them lower their monthly mortgage payments by working with their mortgage lenders to secure a mortgage loan modification or federal homeowner assistance.  To carry out his fraud, Lerner instructed the victims that he needed access to their bank accounts so that he could directly transmit payments to the mortgage banks on the victims’ behalf, and that the payments would be addressed to either an escrow agent that would hold the funds until their mortgages had been modified, or to entities affiliated with their mortgage lenders.  Lerner further instructed the victims not to contact their mortgage lenders directly and that he would serve as the liaison between the victims and the victims’ lenders.    

In reality, Lerner stole over $2.5 million from the victims – money that the victims had intended to use to pay their mortgages.  Once Lerner gained access to the victims’ bank accounts, Lerner transmitted funds from their accounts to companies and/or bank accounts that he himself controlled.  Lerner kept the majority of the victims’ money, spending it on personal and business expenses, including a BMW, luxury goods, and expensive meals.  To conceal his fraud, Lerner told the victims to disregard notifications from their mortgage lenders regarding delinquent payments and past due balances.  

In January 2023, Lerner was indicted by a federal grand jury in the Eastern District of New York and arrested in connection with the above fraud.  Pursuant to an order of the United States District Court for the Eastern District of New York, Lerner was released on bail and instructed, among other things, not to commit additional crimes.  However, Lerner continued to steal from his victims even after being arrested for the same conduct.  After his arrest in this case, between January 2023 and May 2023, Lerner stole at least $10,000 from his victims.  Lerner’s bail was subsequently revoked. 

As a result of Lerner’s years-long fraud, mortgage lenders have initiated foreclosure proceedings against several of the victims.  As part of his guilty plea, Lerner has agreed to pay approximately $2,554,217.11 in restitution to the victims. 

The proceeding was held before United States District Judge Nicholas G. Garaufis.  When sentenced, Lerner faces a maximum sentence of 50 years’ imprisonment.  Lerner has also agreed to pay $2,554,217.11 in restitution.   He was indicted in January 2023.

Breon Peace, United States Attorney for the Eastern District of New York, James Smith, Assistant Director-in-Charge, New York Field Office (FBI), and Thomas Fattorusso, Special Agent-in-Charge, New York Field Office, Internal Revenue Service – Criminal Investigations (IRS CI), announced the guilty plea.

As he admitted today, Marat Lerner turned the victims’ American dreams into a nightmare by promising mortgage and debt relief, and instead preyed on their hard-earned life savings for his own personal gain,” stated United States Attorney Peace. “My Office will continue to protect immigrant communities against those who choose to use their positions of trust to defraud and steal from them.

Marat Lerner operated as an underground broker in his local community; but instead of completing his end of the bargain by paying their mortgages, he pocketed the money of his unsuspecting victims to live a life of luxury. This wasn’t just a money scam, this fraud affected his own community’s homes and families.  Those who fell prey to Lerner’s deceit defaulted on their mortgage payments, and some fell into foreclosure.  Today’s guilty plea and agreed restitution is just one step towards his victims getting justice, and his sentencing is the next,” stated IRS CI Special Agent-in-Charge Fattorusso.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.   Assistant United States Attorneys Nicholas Axelrod and Genny Ngai are prosecuting the case with assistance from Paralegal Specialist Jacob Menz.

William Mccullough, 63, Westerly, Rhode Island, was sentenced today to 12 months and one day of imprisonment, followed by three years of supervised release, for stealing more than $700,000 from clients of his real estate law practice.

According to court documents and statements made in court today, prior to his resignation from the Connecticut bar in March 2019, McCullough operated a law practice in Stamford, Connecticut for several years.  As part of his practice, McCullough worked on real estate transactions for clients.  In that capacity, McCullough received funds from clients and knew he was required to deposit those funds in an Interest on Lawyers’ Trust Account (“IOLTA Account”) and use them in accordance with his duties to each client.  In March 2018, the Connecticut Statewide Grievance Committee audited McCullough’s IOLTA Account and found that he had failed to maintain required documents for several years.  The audit revealed that more than $1.27 million was due to clients, but the IOLTA Account held less than $600,000.  A subsequent criminal investigation revealed that McCullough defrauded clients by using funds in his IOLTA Account to cover funds owed to others, and for his own use.  McCullough made false representations to clients, including providing a false and inaccurate closing statement to at least one individual, to prevent the scheme from being uncovered.

McCullough’s clients lost approximately $720,851.05 through this scheme. by U.S. District Judge Victor A. Bolden sentenced McCullough and ordered him to pay full restitution.

On November 22, 2022, McCullough pleaded guilty to one count of wire fraud.

McCullough, who is released on bond, is required to report to prison on January 8.

Vanessa Roberts Avery, United States Attorney for the District of Connecticut, made the announcement.

This matter was investigated by the U.S. Secret Service and the Wallingford Police Department.  The case was prosecuted by Assistant U.S. Attorney Ross Weingarten.

 

Tammy Hamrin, formerly known as Tammy A. Cheek, 58, Virginia Beach, Virginia, the former president of an escrow and title company was sentenced today to 18 months in prison for misappropriating $715,000 of closing funds in connection with 48 real estate transactions for which she served as the settlement agent.

According to court documents, Hamrin was a licensed title and settlement agent and was the president, secretary, and treasurer of Preferred Escrow and Title, Inc. During 48 real estate transactions between January 2018 and approximately February 2018, Hamrin misappropriated $715,000 of closing funds that had been deposited by various lenders and individual buyers into the company’s escrow account. She did so by making seven unauthorized wire transfers of funds from the escrow account to certain entities at the request of a person with whom Hamrin had an online personal relationship.

During this period, Hamrin partially replenished the funds that she had misappropriated by depositing approximately $199,000 of her own money into the escrow account, resulting in a remaining shortage of approximately $516,000. As a result, all 48 closings were affected. Among others, losses were sustained by sellers, buyers, business entities, financial institutions, various lienholders, municipal clerks of court and treasurer offices, and a title insurance company.

Raj Parekh, Acting U.S. Attorney for the Eastern District of Virginia, and Brian Dugan, Special Agent in Charge of the FBI’s Norfolk Field Office, made the announcement after sentencing by U.S. District Judge Raymond A. Jackson.

Assistant U.S. Attorney Alan M. Salsbury prosecuted the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 2:21-cr-2.

Seth Andrew, 42 has been charged with wire fraud, money laundering, and making false statements to a financial institution, in connection with a scheme in which Andrew stole $218,005 from a charter school network that he founded.

As alleged in the Complaint unsealed today[1]:

In 2005, Seth Andrew helped create “School Network-1,” a series of public charter schools then based in New York City, New York.  In the Spring of 2013, Andrew left School Network-1 and accepted a job in the United States Department of Education and, thereafter, as a senior adviser in the Office of Educational Technology at the White House.  While employed at the Department of Education, and at the White House, Andrew was paid by School Network-1.  In November 2016, Andrew left his role in the White House and, shortly thereafter, in January 2017, Andrew officially severed his relationship with School Network-1.

School Network-1 comprises several charter schools throughout United States including several in New York City.  Pursuant to an agreement with the New York State Board of Regents, School Network-1’s New York-based charter schools must maintain an “escrow account” that may be accessed only if the school dissolves.  Three such escrow accounts, for three New York City-based School Network-1 schools, were opened by Andrew and other School Network-1 employees at  “Bank-1” in 2009, 2011, and 2013.  As to each of those three accounts – Escrow Account-1, Escrow Account-2, and Escrow Account-3 – Andrew was a signatory and had access to the funds in them.  However, pursuant to the charter agreement, the funds in the Escrow Accounts were reserved in case the school dissolved, and the funds could not be moved by Andrew, or anyone, without proper authorization.

After he severed his relationship with School Network-1, on March 28, 2019, Andrew entered a Bank-1 branch in New York City and closed both Escrow Account-1 and Escrow Account-2.  Bank-1 provided Andrew a bank check in the amount of $71,881.23 made payable to “[School Network-1] Charter School” (“Check-1”) and a second bank check in the amount of $70,642.98 to “[School Network-1] Harlem Charter” (“Check-2”).  Check-1 and Check-2 represented the funds that were in Escrow Account-1 and Escrow Account-2, respectively.

The same day that Andrew closed Escrow Account-1 and Escrow Account-2, Andrew entered a Manhattan branch of a different FDIC-insured bank (“Bank-2”) and opened a business bank account in the name of “[School Network-1] Charter School” (“Fraud Account‑1”).  To open that account, Andrew represented to a Bank-2 employee that he was a “Key Executive with Control of” School Network-1 Charter School, which was a lie.  Andrew then deposited Check-1 into the account but, that day, Andrew did not deposit Check-2.

Five days later, on April 2, 2019, Andrew used an ATM machine in Baltimore, Maryland, to deposit Check-2 into Fraud Account-1.  It appears Andrew waited to deposit Check-2 because it was made payable to “School Network-1 Harlem Charter” and not “School Network-1 Charter School.”  Had he tried to deposit Check-2 when he opened Fraud Account-1 it would not have been honored by Bank-2.

At the time Andrew deposited Check-1 and Check-2 into a Bank-2 bank account, Andrew was contemplating obtaining a mortgage from Bank-2 to purchase a residential property.  At that time, Bank-2 offered certain customers, as a promotion, more favorable mortgage interest rates if those customers maintained a certain amount of funds in Bank-2 accounts.  Specifically, for every $250,000 on deposit, up to a total of $1 million, Bank-2 would lower that qualifying customer’s mortgage interest rate by 0.125%.  Thus, in total, if a qualifying customer maintained $1 million or more of his/her funds in Bank-2 accounts that customer would receive a 0.5% interest rate deduction on a Bank-2 mortgage.  But to take advantage of the interest rate deduction promotion, Bank-2 required that the funds a customer deposited be funds owned by the customer or, in some instances, a business the customer owned, controlled or was lawfully associated with.  Bank-2 did not permit a customer to utilize money owned by someone else to gain the benefit of the interest rate deduction promotion.

By April 2019, because of the $142,524 Andrew deposited in Bank-2, using the money he stole from two charter schools, Andrew deposited a total of approximately $1,007,716 with Bank-2, and therefore became eligible to receive a 0.5% interest rate deduction – the largest deduction a customer could receive from Bank-2’s promotion.  Without the $142,524 deposited stolen funds, Andrew would have been eligible for only a 0.375% interest rate deduction.  On August 21, 2019, Andrew purchased a residential property located in New York, New York, for approximately $2,368,000.  To effectuate that purchase, Andrew, and his spouse, obtained a mortgage from Bank-2 in the amount of $1,776,000 with an interest rate of 2.5% –  taking full advantage of the promotion Bank-2 offered.

On October 17, 2019, Andrew closed out Escrow Account-3 and received a check (“Check-3”) made payable to “[School Network-1] Endurance” in the amount of $75,481.10.

On October 21, 2019, Andrew deposited Check-3 into an account that he opened at a third bank (“Fraud Account-2”).  Approximately one month later, Andrew obtained a check from Bank-2 for $144,473.29, which constituted the funds stolen from Escrow Account-1 and Escrow Account-2, and Andrew ultimately deposited those funds into Fraud Account-2.  Five days later, Andrew rolled the funds in Fraud Account-2 into a certificate of deposit.  That certificate of deposit matured on May 20, 2020, which earned Andrew $2,083.52 in interest.  Andrew then transferred the funds from the certificate of deposit – including the funds stolen from the Escrow Accounts – into a bank account held in the name of a particular civic organization that Andrew currently controls, thereby concealing the money’s association with School Network-1, and depositing the stolen money into an account under Andrew’s complete control.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), made the announcement today

Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Seth Andrew abused his position as a founder of a charter school network to steal from the very same schools he helped create.  Andrew is not only alleged to have stolen the schools’ money but also to have used the stolen funds to obtain a savings on a mortgage for a multimillion-dollar Manhattan apartment.  Thanks to the FBI’s diligent work, Andrew now faces federal charges for his alleged scheme.”

FBI Assistant Director William F. Sweeney Jr. said:  “Locking into the lowest interest rate when applying for a loan is certainly the objective of every home buyer, but when you don’t have the necessary funds to put down, and you steal the money from your former employer to make up the difference, saving money in interest is likely to be the least of your concerns. We allege today that Andrew did just that, and since the employer he stole from was a charter school organization, the money he took belonged to an institution serving school-aged children. Today Andrew himself is learning one of life’s most basic lessons – what doesn’t belong to you is not yours for the taking.”

Andrew is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of money laundering, which carries a maximum sentence of 20 years in prison, and one count of making a false statement to a bank, which carries a maximum sentence of 30 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Ryan B. Finkel is in charge of the prosecution.

The charges in the Complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.