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Fourteen Indicted Over $58M Mortgage Fraud Payout

Nine brokers and five lawyers will face prosecution over their alleged role in a $58 million mortgage fraud scheme that banked on 100 loans across New York City and three state counties. According to a Thursday ""statement"":http://www.fbi.gov/newyork/press-releases/2011/manhattan-u.s.-attorney-announces-charges-against-14-defendants-in-58-million-mortgage-fraud-scheme-involving-long-island-mortgage-broker-first-class-equities, the U.S. attorney for the Southern District of New York and ""Federal Bureau of Investigation"":http://www.fbi.gov/ stepped up with a five-count indictment against the defendants.


Starting in 2004, nine brokers heading up Long Island-based First Class Equities (FCE) organized a complex mortgage scheme involving sham buyers, false mortgage loan applications, and misrepresentation by four lawyers and a disbarred attorney claiming otherwise. The scheme collapsed with the onset of the financial crisis in 2009.

""As alleged, this brazen and wide-ranging scheme defrauded banks and lenders of millions and enriched its participants, including real estate professionals who took advantage of their inside knowledge of the system to fleece it,"" U.S. Attorney Preet Bharara said in the statement. ""Mortgage fraud undermines the banking system and hurts hardworking homeowners, and we will continue to work with the FBI to make sure that those who commit such crimes are caught and prosecuted.""

The indictments claim that FCE president Gerard Canino masterminded the mortgage fraud scheme. Other defendants include loan officers Ian Katz, Omar Guzman, James Vignola, Henry Richards, and Robert Thorton, alongside real estate lawyers Neal Sultzer, Michael Raphan, Jacquelyn Todaro, and Kevin Hymowitz.


The statement names Ralph Delgiorno and Pandora Bacon as co-conspirators, and highlights Michael Schlussel's role as the disbarred lawyer who claimed otherwise.

Gerard Canino and his co-conspirators allegedly went through sham buyers to close deals for distressed properties, according to the statement. After acquiring the properties, the defendants sent fraudulent mortgage applications to lenders and financial institutions, falsifying the sham buyers' net work, income, employment status, and other plans for properties. The attorneys, plus Schlussel, acted on behalf of Canino and the others by appearing at closings and making false statements to lenders.

The statement says the defendants, playing both major and minor roles, benefited handsomely as a conspiracy, fingering Delgiorno for some $300,000 he received for acting as a straw buyer and the attorneys, plus Schlussel, who each pooled thousands of dollars in illicit payments from loan proceeds.

Brokers such as Thornton, Guzman, and Bacon falsified their documents, including fake W-2s, pay stubs, and employment verifications. Todaro acted as paymaster for the conspiracy, while Charles authorized false deals and transactions.

While Canino├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós FCE functioned as the primary front for operations, the statement says, other defendants allegedly ├â┬ó├óÔÇÜ┬¼├àÔÇ£flipped├â┬ó├óÔÇÜ┬¼├é┬Ø properties by transmitting funds through shell corporations owned and controlled by conspirators.

The U.S. attorney and FBI allege that ├â┬ó├óÔÇÜ┬¼├àÔÇ£scores of mortgages went into default and many of the properties went into foreclosure├â┬ó├óÔÇÜ┬¼├é┬Ø as a result of the $58 million scheme.

├â┬ó├óÔÇÜ┬¼├àÔÇ£Mortgage lenders provide capital so people can purchase homes. These defendants exploited the system to enrich themselves,├â┬ó├óÔÇÜ┬¼├é┬Ø said Janice K. Fedarcyk, the FBI assistant director responsible for filing the indictments. Their purpose wasn├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ót to assist home buyers; it was a thinly veiled, multi-million-dollar bank fraud scheme.├â┬ó├óÔÇÜ┬¼├é┬Ø

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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