Financial Fraud Enforcement Task Force Prosecutes Attorneys in $66M Mortgage Fraud Scheme

Three former attorneys and a disbarred lawyer plead guilty for participating a mortgage fraud scheme which involved more than 100 homes and over $66 Million.

U.S. Attorney Preet Bharara announced on June 8 that Jacquelyn Todaro, Neal Sultzer, Kevin Hymes, and Michael Schlussel pled guilty to conspiring to commit wire and bank fraud.

The scheme was operated by First Class Equities (FCE), which operated under several alias business names in Oceanside and Old Westbury, New York.

In August last year 14 people, including the above four as well as loan officers and other individuals, were charged in connection to a massive mortgage fraud scheme. FCE arranged home sales  between home owners and straw buyers. The straw buyers had no intention of ever living in or paying for the mortgaged properties.

The home owners were often in financial distress and willing to sell their homes. The Loan officers paid and recruited straw buyers to obtain mortage loans by submitting fraudulent applications to banks and lenders that falsified information about the straw buyers’ intentions with the properties, and financial assets.

After approving the loans the banks sent the proceeds to attorneys Todaro, Sultzer, and Hymes to finalize the mortgage transaction. The attorneys and Schlussel would then appear at real estate closings to distribute the loan proceeds to themselves and other consiprators. The attorneys submitted false statement to lenders about how the loan proceeds were distributed. Schlussel falsely represented himself as an attorney even though he had been disbarred.

Charges are still pending against remaining defendants in the scheme Ian Katz, Omar Guzman, Robert Thornton, Michael Raphan, and Ralph Delgiorno. Trial for these defendants is scheduled to begin July 2, 2012.

This case was coordinated with the Financial Fraud Enforcement Task Force. The task force was established by President Barack Obama to investigate and prosecute financial crimes.

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