PREET BHARARA, the United States Attorney for the Southern District of New York, announced that ALI HARIRI, a former executive at Atheros Communications, Inc. (“Atheros”), was sentenced today in Manhattan federal court to 18 months in prison for his participation in the largest hedge fund insider trading case in history. U.S. District Judge RICHARD J. HOLWELL, who imposed the sentence, also imposed a two-year term of supervised release and a $50,000 fine.
Manhattan U.S. Attorney PREET BHARARA said: “Ali Hariri’s sentencing provides another reminder of how pervasive insider trading has become and the lengths to which corrupt insiders will go to misuse confidential information for their own personal gain. It should also remind those who might contemplate similar crimes that we will ultimately find you, prosecute you, and convict you. This office is committed to stopping insider trading in its tracks to protect the integrity of our markets.”
According to documents previously filed in Manhattan federal court and statements made during HARIRI’s guilty plea proceeding:
From 2008 to March 2009, HARIRI, a vice president at Atheros, engaged in an insider trading scheme in which he obtained material, nonpublic information (“inside information”) relating to Atheros. HARIRI provided this inside information to ALI FAR, a hedge fund manager, for the purpose of executing profitable securities transactions. HARIRI knew that the information he provided to FAR was material and non-public, and he disclosed it in breach of fiduciary and other duties of trust and confidence that he owed to ATHEROS. In exchange for inside information regarding Atheros, FAR provided HARIRI with tips to buy and sell the stocks of other technology companies.
On March 3, 2010, HARIRI, 39, of San Francisco, California, pled guilty to conspiring to commit insider trading crimes. HARIRI also pled guilty to substantive securities fraud. FAR has also separately pled guilty to conspiring to commit insider trading crimes and to substantive securities fraud. He is awaiting sentencing.
Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission. Mr. BHARARA noted that the investigation is continuing.
This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a co-chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys JONATHAN STREETER and REED BRODSKY and Special Assistant U.S. Attorney ANDREW MICHAELSON are in charge of the prosecution.

Richard S. Hartunian, United States Attorney for the Northern District of New York, and John F. Pikus, Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation, announced that a federal grand jury in Albany returned a seven-count indictment yesterday charging John M. Hogan, Jr., with committing wire fraud in connection with the sale of a paper mill in Middle Falls, New York.
The indictment charges that, in or about October 2004 through December 2009, Hogan, now age 75, of Saratoga, who was then an attorney representing both the party selling the paper mill, St. Regis Investment Group, LLP, and the buyer, United Fibers, LLC, concealed from the buyer, among other things, the existence of hazardous environmental conditions at the paper mill, the Environmental Protection Agency’s (“EPA”) ongoing efforts to cleanup the paper mill, the seller’s statement to EPA that he was unable to pay for the cost of cleanup, a time-critical removal action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and the potential financial liability to United Fibers as the buyer of the paper mill.
The wire fraud charges carry a maximum statutory penalty of up to 20 years’ imprisonment, a $250,000 fine, or both, and a period of up to three years’ supervised release to follow any term of imprisonment. The arraignment in the case will be scheduled for the week of November 8, 2010, at which time the schedule for trial will be set.
The investigation in this matter was conducted by the Albany Division of the Federal Bureau of Investigation. The case is being prosecuted by the United States Attorney’s Office for the Northern District of New York.
An indictment is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent until, and unless, proven guilty.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that NOEMI DODAKIAN, a/k/a “Emi Dodakian,” and CHONG SHING WU were found guilty yesterday afternoon by a federal jury of wire fraud conspiracy based on their participation in a fraudulent advance-fee scheme that spanned years and robbed victims across the country of more than $7 million. U.S. District Judge LEONARD B. SAND presided over the nine-day trial.
Manhattan U.S. Attorney PREET BHARARA said: “Noemi Dodakian and Chong Shing Wu lured their victims with the promise of outlandish returns into entrusting them with millions of dollars, which the defendants used to pad their own lifestyle while sending their victims into financial ruin. This verdict sends a clear message that this Office, with its partners at the FBI, will bring those who perpetrate advance fee schemes to justice.”
According to the evidence introduced at trial and other documents and proceedings in the case:
Beginning in at least 2005, DODAKIAN held herself out as a “facilitator” for two separate fraudulent advance fee schemes. In one scheme, DODAKIAN told victims that she was helping to recruit investors to pay certain upfront fees to secure the release of hundreds of millions of dollars held in an account at the World Bank. DODAKIAN and her co-conspirators raised millions of dollars from victims by promising them huge returns on their investments within a matter of weeks, and by giving victims worthless “promissory notes” that purportedly guaranteed the returns. In reality, there was no World Bank account, and DODAKIAN spent victims’ money and shared the money with her co-conspirators.
In the other scheme, DODAKIAN told victims that she was raising money for an investment program that would enable investors to share in the proceeds of an alleged $23 billion “note” underwritten by the Federal Reserve. WU held himself out as an agent of the Federal Reserve and the proponent of the alleged $23 billion note. Year after year, DODAKIAN, WU, and their co-conspirators persuaded victims to give them money by telling them that the funds would be used simply to pay the final fees or expenses associated with gaining access to the proceeds of the alleged note. In reality, the note did not exist, and DODKAIAN and WU spent victims’ money and shared it with their coconspirators.
DODAKIAN alone received over $6 million from over 330 victims across the country. She and WU together spent hundreds of thousands of dollars of the proceeds from their criminal acts on personal purchases. Specifically, DODAKIAN used victims’ money for mortgage and college tuition payments, and WU bought luxury goods and diamond jewelry worth $17,000. In addition, DODAKIAN withdrew over $600,000 of victims’ money in cash, and WU withdrew nearly $200,000. As a result of the fraudulent schemes perpetrated by DODAKIAN and WU, some victims lost their life savings and their homes, and two victims were unable to afford healthcare expenses related to chronic illnesses.
Two other defendants charged in the Indictment in this matter pled guilty and were sentenced on September 28, 2010: ROBERT INGRAM was sentenced to 144 months in prison, and OLIVIA JEANNE BOWEN was sentenced to 63 months in prison.
Another defendant, DAVID NORMAN, a/k/a “Jim Norman,” is awaiting extradition from Canada. The charges contained in the Indictment are merely accusations, and NORMAN is presumed innocent unless and until proven guilty.
Mr. BHARARA praised the Federal Bureau of Investigation for its outstanding work on the case.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys NICOLE W. FRIEDLANDER and HOWARD S. MASTER are in charge of the prosecution.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that MARK ALAN SHAPIRO, the founder of the Cobalt Companies was sentenced today to 85 years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. SHAPIRO was sentenced in Manhattan federal court by U.S. District Judge KIMBA M. WOOD, who presided over the three-week jury trial at which SHAPIRO, along with codefendants IRVING STITSKY and WILLIAM B. FOSTER, was found guilty.
Manhattan U.S. Attorney PREET BHARARA said: “Mark Shapiro is a career con-man who stole millions of dollars from hundreds of investors by selling worthless interests in a bogus investment offering. This Office will continue to work with our partners at the Federal Bureau of Investigation to ensure that sham investment opportunities like Cobalt do not corrupt the marketplace.”
According to the Superseding Indictment previously filed in Manhattan federal court, the evidence at trial, and statements made at the sentencing proceeding:
Beginning in late 2003, SHAPIRO, STITSKY, and FOSTER founded a group of companies that operated under the name “Cobalt,” which purportedly engaged in the acquisition and development of multi-family real estate properties throughout the United States. Through the Cobalt entities, SHAPIRO, STITSKY, and FOSTER fraudulently induced victims to invest by, among other things: (a) misrepresenting Cobalt’s operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by SHAPIRO and STITSKY, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt’s purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by SHAPIRO and STITSKY, and did not own several of the properties that it claimed to own.
In order to carry out their scheme, SHAPIRO, STITSKY, and FOSTER established Cobalt’s corporate headquarters in Springfield, Massachusetts, a satellite Cobalt office in Miami, Florida, and a telemarketing center in Great Neck, New York. SHAPIRO controlled and managed all aspects of Cobalt’s Massachusetts and Florida offices, while Stitsky was in charge of the telemarketing center in New York. The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about, among other things, the investment for which the investors’ funds were solicited, and the identities and relevant background information about the individuals controlling the Cobalt entities.
In addition, in furtherance of the scheme, SHAPIRO and FOSTER created and sent false financial statements and fake account statements that purported to show that SHAPIRO had liquid assets in excess of $3 million.
In addition to the prison term, Judge WOOD sentenced SHAPIRO, 50, of Avon, Massachusetts, to three years of supervised release and ordered him to pay $22,075,631 in restitution and to forfeit $23,152,235 in proceeds from his offenses.
IRVING STITSKY, 56, of Milan, New York, was sentenced to 85 years in prison on July 6, 2010, and WILLIAM B. FOSTER, 70, of East Hampton, Massachusetts, was sentenced to 3 years in prison on September 22, 2010.
During the sentencing proceeding, Judge WOOD stated: “The offense resulted in devastating injury to hundreds of victims. For many, it wiped out their life savings at the end of their lives when they no longer had the ability to earn substantial amounts of money.”
Mr. BHAHARA praised the work of the Federal Bureau of Investigation in this case.
This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Assistant U.S. Attorney MARC P. BERGER of the Office’s Security and Commodities Fraud Task Force is in charge of the prosecution.

Chief Operating Officer of Money Service Company Pleads Guilty in Manhattan Federal Court to Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $50 Million

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that BERNARD McGARRY, the Chief Operating Officer of Mount Vernon Money Center (“MVMC”), pled guilty yesterday to defrauding MVMC clients, including banks that had received TARP funds, universities, and hospitals, out of over $50 million that had been entrusted to MVMC. McGARRY pled guilty to one count of conspiracy to commit bank and wire fraud and six counts of bank fraud before U.S. District Judge JOHN F. KEENAN in Manhattan federal court.
MVMC’s former President, ROBERT EGAN, pled guilty to the same charges in connection with his role in the scheme on September 15, 2010. According to the Indictment and statements made during various proceedings in this case:
MVMC engaged in various cash management businesses, including replenishing cash in over 5,300 Automated Teller Machines (“ATMs”) owned by banks and other financial institutions. In addition, MVMC provided armored car services to banks, financial institutions, and retailers, through a subsidiary called Armored Money Services (“AMS”). MVMC also provided payroll services to various employers, including hospitals and universities, which permitted employees to cash their paychecks on their employers’ premises. In connection with these businesses, MVMC owned and operated several cash vaults, in which MVMC and its affiliated businesses stored and processed cash collected from and distributed to its clients, and other cash depositories such as the Federal Reserve Bank.
From 2005 through February 2010, McGARRY and EGAN, solicited and collected hundreds of millions of dollars from MVMC’s clients, based in part on the representations that they would not commingle clients’ funds or use the funds for purposes other than those specified in the various contracts between MVMC and its clients. In fact, these representations were false, and EGAN and McGARRY misappropriated tens of millions of dollars of MVMC’s clients’ funds.
The defendants engaged in a practice known as “playing the float.” More specifically, MVMC was entrusted on a weekly basis to hold tens of millions of dollars for its clients for specific business purposes for a specified period of time. Relying upon the continual influx of funds, EGAN and McGARRY misappropriated the clients’ funds for their and MVMC’s own use, to cover operating expenses of the MVMC operating entities, to repay prior obligations to clients, and for their own personal enrichment.
Furthermore, in connection with MVMC’s ATM replenishment business, and in violation of MVMC’s contractual obligations, MVMC commingled different banks’ and other clients’ money in its vaults and bank accounts. Instead of segregating cash for each of its clients, MVMC personnel, acting at the direction of EGAN and McGARRY, diverted whatever cash arrived in the vault, regardless of its source, to replenish ATMs. McGARRY maintained control over MVMC’s bank accounts, and transferred funds between and among MVMC’s businesses in order to cover operating losses or to repay client obligations.
In February 2010, as a result of the fraudulent commingling and misappropriation of customer funds described above, though MVMC had been entrusted with approximately $70 to $75 million by its clients, it only held approximately $20 to $25 million in cash in its vaults and bank accounts. During his guilty plea, McGARRY admitted that he and EGAN “played the float” and that they used customer money to cover operating shortfalls in the business, in violation of contractual obligations to keep their customers’ money segregated.
Following EGAN’s arrest in February 2010, the U.S. Attorney’s Office for the Southern District of New York obtained an Order from U.S. District Judge RICHARD M. BERMAN, placing MVMC in receivership. As a result, a court-appointed receiver now administers the day-to-day business of MVMC, including administering claims by victims of the fraud.
McGARRY, 50, of Yonkers, New York, faces a maximum penalty of 210 years in prison and a maximum fine of over $100 million.
Manhattan U.S. Attorney PREET BHARARA stated: “Bernard McGarry’s betrayal of his clients’ trust was particularly egregious, given who they were—health care and educational institutions and banks receiving taxpayer funds. His plea comes on the heels of the guilty plea of his co-conspirator, former MVMC President Robert Egan. This successful prosecution underscores our commitment to rooting out corruption in the financial services industry along with our law enforcement partners.”
Mr. BHARARA praised the investigative work of the FBI and SIGTARP and added that the investigation is continuing.
This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as Co-Chair of the Securities and Commodities Fraud Working Group and SIGTARP Special Inspector General NEIL M. BAROFSKY serves as Co-Chair of the Rescue Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900 or Wendy.Olsen@usdoj.gov. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html on the Internet.
This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys ANTONIA M. APPS and ANNA E. ARREOLA are in charge of the prosecution.

PREET BHAHARA, the United States Attorney for the Southern District of New York, announced that WILLIAM B. FOSTER, the former owner, President, and CEO of Cobalt Financial, Inc., was sentenced today to three years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. FOSTER was sentenced in Manhattan federal court by U.S. District Judge KIMBA M. WOOD, who presided over the three-week jury trial at which FOSTER, along with co-defendants MARK ALAN SHAPIRO and IRVING STITSKY, were found guilty.

According to the superseding indictment, the evidence at trial, and statements made at the sentencing proceeding:

Beginning in late 2003, FOSTER, STITSKY, and SHAPIRO founded a group of companies that operated under the name “Cobalt,” which purportedly engaged in the acquisition and development of multi-family real estate properties throughout the United States. Through the Cobalt entities, FOSTER, STITSKY, and SHAPIRO fraudulently induced victims to invest by, among other things, (a) misrepresenting Cobalt’s operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by STITSKY and SHAPIRO, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt’s purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by STITSKY and SHAPIRO, and did not own several of the properties that it claimed to own.

In order to carry out their scheme, FOSTER, STITSKY, and SHAPIRO established Cobalt’s corporate headquarters in Springfield, Massachusetts, and a telemarketing center in Great Neck, New York. FOSTER, who worked out of Cobalt’s Massachusetts office, was identified in the Cobalt marketing materials as the individual responsible for overseeing all aspects of the operations of all of the Cobalt entities.

The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about the investment for which the investors’ funds were solicited, including false representations about: (i) the identities and relevant background information about the individuals controlling the Cobalt entities; (ii) the identities of Cobalt’s business partners; (iii) the properties that Cobalt owned; (iv) the properties in which investor funds were to be invested; (v) the history of the Cobalt entities; (vi) the amount of management fees to be taken by Cobalt entities from the investor funds; (vii) the uses of the management fees taken by Cobalt entities from the investor funds; and (viii) SHAPIRO’s educational background. FOSTER, STITSKY, and SHAPIRO then caused millions of dollars of investors’ funds to be transferred to accounts for the defendants’ personal benefit.

In addition to the prison term, Judge WOOD sentenced FOSTER, 70, of East Hampton, Massachusetts, to three years of supervised release and ordered him to pay $22 million in restitution and to forfeit $23 million in proceeds from his offenses.

IRVING STITSKY, 55, of Milan, New York, was sentenced to 85 years in prison on July 6, 2010. SHAPIRO, 50, of Avon, Connecticut, is scheduled to be sentenced on October 14, 2010.

During the sentencing proceeding, Judge WOOD stated: “It is a very serious, egregious scheme that defrauded hundreds of people of their hard-earned money. Some people in fact face financial ruin.” Of Foster’s role, Judge Wood said, “Mr. Foster was in a position of trust with respect to the investors and it is a position of trust that he abused.”

Mr. BHAHARA praised the work of the Federal Bureau of Investigation in this case.

This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney MARC P. BERGER is in charge of the prosecution.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that RAVI PERSAUD, a real estate attorney, and GEORGE ESSO, a former loan officer, were found guilty yesterday of participating in a multi-million-dollar mortgage fraud scheme through GuyAmerican Funding Corp., a mortgage brokerage located in Queens, New York. The scheme involved the use of numerous fraudulent loan applications designed to trick banks into lending money to unqualified borrowers for the purchase of residential properties in the New York City area. In total, ESSO and RAVI PERSAUD were charged along with eight other defendants in a scheme that defrauded banks out of more than $23 million in home mortgage loans.

According to the Superseding Indictment and the evidence introduced at trial before U.S. District Judge SHIRA A. SCHEINDLIN:

RAVI PERSAUD and ESSO participated in a massive mortgage fraud scheme operated through a branch office of GuyAmerican Funding located on Liberty Avenue, in Jamaica, New York. ESSO was a loan officer at GuyAmerican and a licensed real estate broker who received thousands of dollars in commissions based on fraudulent loan applications submitted to lenders. In particular, ESSO was personally involved in submitting loan applications on behalf of borrowers that contained numerous false statements relating to the borrowers’ income, employment, and residence. For example, ESSO and another loan officer, PEGGY PERSAUD, agreed to list fake jobs on the borrowers’ loan applications in order to convince banks that the borrowers made more money than they actually did and were therefore a good credit risk. ESSO directly participated in obtaining over $1 million in fraudulent mortgages through false statements.

Several of the co-conspirators charged as part of the scheme worked with GuyAmerican loan officers to recruit homeowners in financial distress who were willing to sell their homes. These co-conspirators used “straw buyers”—persons who posed as home buyers in exchange for a fee, but who had no intention of living in the mortgaged properties—to perpetrate the scheme. The co-conspirators then arranged home sales between the distressed sellers and the straw buyers, frequently using the same straw buyer to obtain multiple mortgage loans, and all using fraudulent representations about the supposed purchasers’ net worth, employment, and income.

RAVI PERSAUD acted as the closing attorney in connection with many of these fraudulent transactions, including on loans in which the same straw buyer was used to purchase multiple properties within a short period of time. As the closing attorney, RAVI PERSAUD was supposed to represent the interests of the bank in connection with the real estate transaction and distribute the loan proceeds according to a schedule that he provided to the bank. Instead, the evidence established that RAVI PERSAUD acted at the behest of his coconspirators in the scheme, receiving the loan proceeds into his attorney account and subsequently making illicit payments from the loan proceeds to his co-conspirators. RAVI PERSAUD also assisted the scheme by writing checks to co-conspirators in order to set aside six months worth of mortgage payments from the closing proceeds, so that the lenders would not discover the scheme. He further concealed these payments by sending false documents to the banks regarding how the loan proceeds were being distributed.

ESSO, 38, of Saint Albans, New York, was convicted of one count of conspiracy to commit bank and wire fraud and one count of bank fraud, and faces a maximum penalty of 60 years in prison.

RAVI PERSAUD, 44, of Glen Head, New York, was convicted of one count of bank and wire fraud and three counts of bank fraud. He faces a maximum sentence of 120 years in prison.

Both defendants will be required to pay restitution to the victims of their offenses, and to forfeit the proceeds of their crimes.

PEGGY PERSAUD, ORETTE KILLIKELLY, and ELTON LORD previously pled guilty.

The case against CHEDDI GOBERDHAN is still pending.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation and the New York State Banking Department and thanked them for their assistance in this case.

Manhattan U.S. Attorney PREET BHARARA stated: “The real estate professionals found guilty yesterday sacrificed their licenses to their greed, and sought to profit at the expense of the banks that relied upon them. This verdict sends the clear message that we will continue to work tirelessly, together with our law enforcement partners, to prosecute mortgage fraud and to hold professionals accountable when they cease to be gatekeepers and decide to join the fraud themselves.”

This case was part of the coordinated takedown of “Operation Bad Deeds,” a joint federal, state, and local law enforcement operation targeting mortgage fraud crimes, announced on October 15, 2009, in which 41 defendants were charged in various mortgage fraud scams in New York, Pennsylvania, Ohio, and North Carolina.

This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The cases arising from “Operation Bad Deeds” are being overseen by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys ANTONIA M. APPS and REBECCA ROHR are in charge of the prosecution.

MANHATTAN SUPREME COURT — Four individuals who were part of “one of the largest and most complex” mortgage fraud cases in the country were convicted on various charges related to a massive real estate scheme, the Manhattan DA said Friday.

The four guilty defendants used a Long Island-based mortgage company to convince banks to front them massive loans so they could purchase distressed properties, but instead they pocketed most of the money, according to prosecutors.

Aaron Hand, 38, Eric Shields, 45, Kenneth Law, 54 and Jerry Strklja, 35, were convicted on Friday after a month-long trial.

They were charged with stealing $100 million from banks and for defrauding home sellers, including some in Manhattan, prosecutors said.

“These defendants built a corrupt enterprise — complete with corrupt lawyers, bankers, appraisers, straw buyers and others — to control every aspect of the residential lending process,” District Attorney Cy Vance Jr. said in a statement.

They all face up to 50 years in prison when they’re sentenced in September.

Ten others who were indicted as part of the fraud pleaded guilty earlier this month.

By Shayna Jacobs

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that IRVING STITSKY, the former managing partner of Cobalt Capital Funding, LLC, and executive vice president of Cobalt Real Estate Services, LLC, was sentenced today to 85 years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. STITSKY was sentenced in Manhattan federal court by United States District Judge KIMBA M. WOOD, who presided over the three-week jury trial at which STITSKY, along with co-defendants MARK ALAN SHAPIRO and WILLIAM B. FOSTER, were found guilty.

According to the Superseding Indictment, the evidence at trial, and statements made at the sentencing proceeding:

Beginning in late 2003, STITSKY, SHAPIRO, and FOSTER founded a group of companies that operated under the name “Cobalt,” which purportedly engaged in the acquisition and development of multi-family real estate properties throughout the United States. Through the Cobalt entities, STITSKY, SHAPIRO, and FOSTER fraudulently induced victims to invest by, among other things: (a) misrepresenting Cobalt’s operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by STITSKY and SHAPIRO, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt’s purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by STITSKY and SHAPIRO, and did not own several of the properties that it claimed to own.

In order to carry out their scheme, STITSKY, SHAPIRO, and FOSTER established a telemarketing center in Great Neck, New York. STITSKY was in charge of the Great Neck telemarketing center, where he trained dozens of callers to pitch prospective Cobalt investors about the Cobalt private offering. The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about the investment for which the investors’ funds were solicited, including false representations about: (i) the
identities and relevant background information about the individuals controlling the Cobalt entities; (ii) the identities of Cobalt’s business partners; (iii) the properties that Cobalt owned; (iv) the properties in which investor funds were to be invested; (v) the history of the Cobalt entities; (vi) the amount of management fees to be taken by Cobalt entities from the investor funds; (vii) the uses of the management fees taken by Cobalt entities from the investor funds; and (viii) SHAPIRO’s educational background.

For example, in the summer of 2004, STITSKY solicited a Cobalt investor by misrepresenting that Cobalt owned the Hotel Simone in Miami, Florida, whereas, as STITSKY well knew, Cobalt did not own that property. STITSKY, SHAPIRO, and FOSTER then caused millions of dollars of investors’ funds to be transferred to accounts for the defendants’ personal benefit.

In addition to his prison term, Judge WOOD sentenced STITSKY, 55, of Milan, New York, to three years of supervised release and ordered him to pay $22,075,631 in restitution and to forfeit $23,152,235 in proceeds from his offenses.

STITSKY’s co-defendants, WILLIAM B. FOSTER, 70, of East Hampton, Massachusetts, and MARK ALAN SHAPIRO, 50, of Avon, Connecticut, are scheduled to be sentenced on July 26 and July 29, 2010, respectively.

In sentencing STITSKY, Judge WOOD stated that “this was a vast securities fraud preying on individuals who were, for the most part, not particularly sophisticated in investing” and that “it warrants very severe punishment.” Judge WOOD also described STITSKY to be “just as the government describes, an inveterate con-man.”

U.S. Attorney PREET BHARARA said: “Irving Stitsky is a recidivist fraudster who stole millions of dollars from hundreds of investors through trickery and deceit. He preyed on vulnerable victims, including widows and retirees, by falsely promising guaranteed returns on their investments in Cobalt’s South Beach, Florida-based real estate scam. This office remains committed to working with our partners at the Federal Bureau of Investigation to weed con-men like Stitsky out of the marketplace.”

Mr. BHAHARA praised the work of the Federal Bureau of Investigation in this case.

This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a co-chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Assistant United States Attorney MARC P. BERGER is in charge of the prosecution.

12% of all cases in the country were filed from the metro area in 2009

New York has earned the dubious honor of being the nation’s leader in mortgage fraud last year, according to a report from the LexisNexis Mortgage Asset Research Institute.

MARI’s 12th Periodic Mortgage Fraud Case Report shows that of the 67,190 suspicious-activity reports filed with the Financial Crimes Enforcement Network last year, 12% came from the New York metro area.

“The data suggests that in 2009, there was a 7% increase in the number of incidents of fraud reported on top of the 26% increase reported in 2008,” said Jennifer Butts, the institute’s manager of data processing, and the report’s co-author. “While this is a noticeable increase, we believe that mortgage fraud is significantly understated.”

The report, which also ranks the top 10 states in terms of reported mortgage fraud, ranked New York second last year, up from third in 2008.

Application misrepresentation — which was 59% of all reported fraud types — topped the list for the sixth year in a row as the most common type of fraud last year. Appraisal and valuation misrepresentation came in second place, increasing to 33% in 2009 from 22% in 2008.

MARI didn’t have the figures broken down for New York City or state.

By James Comtois

A Hudson resident is among 16 individuals indicted in a mortgage fraud scheme involving 40 properties and losses of $12 million in Summit County.

Ohio Attorney General Richard Cordray and Summit County Prosecutor Sherri Bevan Walsh announced the indictments March 24.

The indictments were the culmination of a two-year investigation by the Summit County Mortgage Fraud Task Force, according to a press release from the county sheriff’s office, which operates the task force.

The individuals are alleged to have “committed mortgage fraud by inflating the values of the homes, falsifying mortgage loan applications and skimming money from mortgage proceeds at closing,” according to the press release.

Officials said the losses could be more than $12 million.

Shawn Anthony of Hudson was charged with three counts of engaging in a pattern of corrupt activity, first-degree felonies; two counts of theft, second-degree felonies; six counts of telecommunications fraud, fourth-degree felonies; six counts of falsification, fourth-degree felonies; six counts of money laundering, third-degree felonies; and two counts of securing writings by deception, fourth-degree felonies.

Contact information for Anthony or his attorney could not be found by press time.

Others indicted include: Todd Cerankowski, Tiffany Gibson, Paul Gosden, Nicki McManis, Anthony Ramsey, Frank Ruggiero, Leroy Steele and Hope Turner of Akron; Daniel Spahr and Sonora Turner of Cleveland; Andrea DeStefanis, Brian DeStefanis and Donna DeStefanis of Medina; John Scordos of Parma and Otelia Simmons of Uniontown.

Those individuals are facing a total of 138 charges, which include theft, telecommunications fraud, money laundering, engaging in a pattern of corrupt activity, securing writings by deception and falsification.

The individuals represented eight companies: Dynasty 500, Inet Mortgage/T&N Financial, LES Investments/E Style Holdings/Regal Investments, P&B Investments/Renovator’s Unlimited, American Homebuyers, O.E. Simmons Realty, Skys the Limit and T.C. Appraisers.

Inspector Bill Holland of the Summit County Sheriff’s Department said the 16 are suspected of allegedly being involved with more than 100 properties “throughout greater Summit County.”

Because of a variety of reasons, only 40 were used in the indictments. Holland said the individuals have not been arrested and are awaiting a future court date, which has not been scheduled.

The cases will be prosecuted by the Ohio Attorney General’s Special Prosecutions Unit and the Summit County Prosecutor’s Office.

“This type of fraud wreaks havoc on our communities,” Cordray said in a press release. “The players in these kinds of schemes are willing to lie, cheat and steal with no regard to the damage they leave in their wake. Neighborhoods are stuck with boarded-up homes and lower property values, and municipalities and school districts suffer from the community’s deflated tax base.”

The Summit County Mortgage Fraud Task Force, which operates in conjunction with the Ohio Organized Crime Investigations Commission, is made up of officers from various Summit County and Ohio law enforcement agencies, including the Summit County Sheriff’s Department, Summit County Fiscal office, Akron Police Department, Cuyahoga Falls Police Department and the Ohio Bureau of Criminal Identification and Investigation.

Officials said they conducted about 96 interviews and issued more than 120 subpoenas to lending institutions, title companies, real estate agencies as well as other sources of information as part of the investigation.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Marina Dubin, a real estate paralegal, was sentenced yesterday to two concurrent three-year prison sentences in connection with her involvement in a multimillion-dollar, sub-prime mortgage fraud scheme and another foreclosure rescue scheme. Dubin, 33, of Brooklyn, New York, pleaded guilty to two counts of conspiracy to commit mail, wire, and bank fraud on June 12, 2008, before United States District Judge Richard J. Holwell, who also imposed the sentence yesterday in Manhattan federal court.

The Mortgage Fraud Scheme

According to the Indictment, other documents filed in these cases and related cases and statements made in court:

From 2004 through January 2007, DUBIN was a paralegal who acted as the bank attorney and settlement agent for numerous loans obtained by the participants in a wide-ranging mortgage fraud scheme. The scheme was led by Aleksander Lipkin 31, of Brooklyn, New York, and other participants included mortgage brokers and loan processors who worked at the Brooklyn mortgage brokerage firm AGA Capital NY, Inc. (“AGA Capital”) and its successors, as well as real estate appraisers, loan account executives, a lawyer, straw buyers, and others. DUBIN and her co-defendants submitted loan applications containing false information and material omissions, as well as other false documentation such as bank statements, to obtain loans that otherwise would not have been funded.

During the course of the mortgage fraud scheme, AGA Capital and its successors brokered over 1,000 home mortgages and home equity loans with a total face value of at least $200 million dollars and earned at least $4 million in commission fees on those loans. The various lenders defrauded by the scheme have claimed actual losses of approximately $11.6 million on loans that have completed foreclosure.

Of the 27 defendants charged in this case (United States v. Aleksander Lipkin, et al.), 25 pleaded guilty; one of the defendants, attorney Alexander Kaplan, 35, of Brooklyn, New York, was found guilty following a jury trial and is scheduled to be sentenced on April 6, 2010.

Garri Zhigun, 33, of Brooklyn, New York, who supervised the operations of AGA Capital and was Likin’s business partner, was sentenced on May 28, 2009, by Judge Holwell to 100 months in prison, three years of supervised release, and was ordered to forfeit $2.5 million and pay approximately $11.6 million in restitution.

The Foreclosure Rescue Scheme

From November 2003 through April 2005, Maurice McDowall, 55, of Brooklyn, New York, Lipkin and Dubin engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, New York, were in foreclosure or facing foreclosure, by offering them a plan to “save” their homes. The proposed plan included the refinancing of the homeowners’ debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to “sell” their homes to straw buyers, who would apply for loans to be used to “save” the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to pay off the homeowners’ old debt and make one year’s worth of payments on the new loans. The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit. Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

McDowall, who directed the daily operations of the scheme, and Lipkin, a mortgage broker who coordinated the submission of fraudulent information to lenders on behalf of straw buyers, obtained more than 80 home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.

Dubin served as the settlement agent for the vast majority of the fraudulent loans obtained in the course of the scheme. In that capacity, she organized closings, prepared documents, and disbursed the fraudulently obtained proceeds to various defendants.

McDowall was previously sentenced by United States District Judge Robert P. Patterson to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release. In addition, Judge Patterson ordered McDowall to forfeit $2.5 million.

Of the three other defendants charged in this case, one pleaded guilty and the other two were found guilty on charges of conspiracy, wire fraud, and bank fraud, following a 12-day jury trial in Manhattan federal court.

Lipkin was sentenced by Judge Holwell for his role in both the mortgage fraud scheme and the foreclosure rescue scheme (United States v. Maurice McDowall, et al.) on June 4, 2009, to 110 months in prison, five years of supervised release, and was ordered to forfeit $7 million and pay approximately $11.6 million in restitution.

In addition to the 36-month prison term, Dubin was sentenced to three years of supervised release. Judge Holwell also ordered Dubin to forfeit $7 million and pay approximately $11.6 million in restitution.

Mr. Bharara praised the work of the Federal Bureau of Investigation, the New York City Police Department, and the Department of Homeland Security’s U.S. Immigration and Customs Enforcement. He also thanked the New York State Attorney General’s Office for its role in the investigation.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The mother-and-son owners of the strip club where Sean Bell was killed were nabbed Tuesday in a $2 million mortgage fraud scam.

Queens prosecutors say Martina Duran, 57, and Roger Arias, 36, used identities stolen from the dead and the elderly to buy and sell three properties.

One victim was an elderly woman from the Dominican Republic who had never set foot on U.S. soil, prosecutors say.

Duran pocketed $250,000 from the July 2006 sale of a $500,000 South Ozone Park home, prosecutors said.

“These type of financial crimes have real-life consequences and will not be tolerated,” said Queens District Attorney Richard Brown.

Duran and Arias were each being held in lieu of $250,000 bond following arraignment.

Duran boasted to investigators that she had more than $1 million in assets in the Dominican Republic and needed armed guards to escort her throughout the country.

She and her son owned the defunct Club Kalua, where Bell was fatally shot in 2006 by cops probing reports of prostitution.

Two men, accused of selling the same property twice, were convicted on several counts, including grand larceny.

Mavis Samuel, 41, and Carlyle Ebanks, 55, were charged with selling the same Crown Heights building twice, to two different straw buyers.  They were convicted of Grand Larceny in the Second Degree and multiple counts of Falsifying Business Records in the First Degree. When they are sentenced April 13, they will face up to 15 years in prison.

The defendants first sold 1162 Pacific Street in September 2004. In that transaction, they paid a straw buyer $4,000 to buy the building. Though the straw buyer held the deed, Ebanks and Samuel maintained control of the building. While the straw buyer was recovering from a traumatic brain injury in spring 2005, Samuel convinced him to deed the property back to her.

Then, in November 2006, Ebanks approached a friend and told him that if he bought the building, Samuel and Ebanks would make him a partner in their real estate investment company. The defendants illegally inflated the “partner’s” income and savings account balance on a $1 million mortgage application, to buy 1162 Pacific Street for that price. With that “sale”, they paid off the mortgage on the original straw purchase, pocketed between $300,000 and $400,000, and maintained ownership.

In the time between the two sales, the building burned down. The case originated with the investigation into a string of suspected arsons in Crown Heights in early 2006.

These are mortgage scammers. And now, some national organizations, including the Federal Bureau of Investigation, are targeting them.

On Thursday in New York, one of the organizations that tries to steer homeowners to legitimate counselors teamed up with Mayor Michael Bloomberg to roll out a “Loan Modification Scam Alert.” The goal: to prevent yet more people from giving money to financial predators. The nonprofit organization, NeighborWorks, has already tried to warn distressed homeowners in California, Florida, Texas, Ohio, and Maryland. California leads the nation in complaints about mortgage fraud.

“It is a rising problem, with more and more people every day calling to say they have been scammed,” says Eileen Fitzgerald, chief operating officer of NeighborWorks. “Folks are desperate, and they are willing to try anything.”

Although there are no national numbers on how many people are being scammed – many people are too embarrassed to report they got taken – there are probably hundreds of thousands of victims, Ms. Fitzgerald says.

The problem will get worse this year, she anticipates, because so many adjustable-rate mortgages (ARMs) are coming up for renewal – especially in California, Florida, Arizona, and Nevada. Particularly problematic could be option ARMs, in which the homeowner decides how much money he or she can afford to pay each month.

“Your ability to pick the amount you can afford to pay is definitely becoming much harder, and the monthly payments on the vast majority of these mortgages are going up,” Fitzgerald says.

At the same time, the number of loan modifications made by the companies servicing mortgage payments remains relatively small but growing.

As of the end of January, 116,000 permanent loan modifications had made since last February, when the Obama administration unveiled its Making Home Affordable Program, according to the US Treasury on Wednesday. The Obama program provides incentives to lenders to modify mortgages.

The 116,000 figure is double the number in December. In addition, 76,000 homeowners have been offered permanent loan modifications but have not signed the paperwork yet.

However, many more mortgage problems persist. As of September 2009, the Mortgage Bankers Association reported, 5.8 million mortgages were at least 60 days delinquent. This includes homes that have entered the foreclosure process.

TransUnion, a credit reporting company, released its own numbers on Tuesday. At the end of the fourth quarter last year, it said, 6.89 percent of all US mortgage payments were at least 60 days past due. That was an all-time high.

Enter unscrupulous loan-modification companies. They advertise on late night-television or radio shows and sound as if they are linked to the Obama program.

“Many of them have the word ‘hope’ in their phone number,” says Jonathan Mintz, commissioner of the Consumer Affairs Department in New York. “But it’s a false hope.”

New York City recently passed a mortgage antifraud law that requires loan-modification companies to reveal that they cannot charge upfront fees. People in need are encouraged to call a 311 phone number to get referred to legitimate counselors. But many of the scammers are located in other parts of the United States.

For example, a man in Queens, a borough of New York City, recently contacted a California company that was advertising heavily on radio and television that it could modify mortgages.

“They asked for $4,800 upfront, and the desperate homeowner sent them $2,200 dollars,” says Petra Tuomi, policy director at the Center for New York City Neighborhoods, a network of nonprofits that provides services for housing counseling. “They told him to stop paying the mortgage to the lender, and then he was stuck with them.”

The company has since gone out of business, and the man lost his $2,200.

PREET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment yesterday charging LOUIS CHERICO, a lawyer who practiced in New York City and Westchester County, with participating in a wide-ranging scheme to commit mortgage fraud, obstruction of justice, and money laundering.

According to the Indictment filed in Manhattan federal court:

From July through December of 2002, CHERICO participated in a fraudulent real estate investment scheme which had, as its primary objective, the purchase of multi-million-dollar residential properties in various communities in Westchester County, New York, including Purchase, Eastchester, and Rye, with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were equal to or in excess of one hundred percent of a property’s actual sale price, so that the defendant and his co-conspirators did not have to put any of their own money at risk in the transaction.

CHERICO served as the attorney for various co-conspirators in negotiating and closing the fraudulent purchases that were part of the scheme. CHERICO and his co-conspirators submitted to numerous federally-insured banks various documents, including loan applications, contracts of sale, deeds, real estate transfer documents, and title reports. Those documents contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home, as well as the borrower’s intent to reside in the property as a primary residence, when, in fact, the properties were typically purchased for investment purposes. As a result of the scheme to defraud, CHERICO and his co-conspirators obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance.

The Indictment also charges CHERICO with laundering the illegal proceeds obtained from the sale of one of the properties used in the mortgage fraud scheme by transferring the proceeds from a bank account controlled by CHERICO to an account that was controlled by one of his co-conspirators, DOMINICK DeVITO. The transaction was designed to conceal and disguise the nature, location, source, ownership, and control of the illegal proceeds.

The Indictment further charges CHERICO with obstruction of justice, and conspiracy to obstruct justice, in connection with the 2003 sentencing of DOMINICK DeVITO, following DeVITO’s conviction in United States v. Pasquale Parello, et al.,(01 Cr. 1120) in United States District Court for the Southern District of New York on charges of racketeering and mortgage fraud. Specifically, CHERICO assisted DeVITO in concealing profits that DeVITO earned from the sale of a property located in Purchase, New York, and in submitting an affidavit containing false and misleading information about the sale to the United States Probation Office.

CHERICO, 69, of Eastchester, New York, was arrested this morning and was presented and arraigned this afernoon in Manhattan federal court. The case has been assigned to United States District Judge COLLEEN McMAHON.

If convicted, CHERICO faces a maximum sentence of 30 years in prison on each of the six counts of mortgage fraud, 20 years in prison on the money laundering count, 10 years in prison on the obstruction count, five years in prison on the conspiracy to obstruct justice, and a fine of the greater of $1,000,000, or twice the gross gain or loss resulting from the crime.

Kings County District Attorney Charles Hynes announces indictments against a dozen individuals arrested by his Mortgage and Real Estate Fraud Unit.

A major milestone in every homeowner’s life is the day when they pay off their mortgage and their humble abode is truly theirs.

That being said, you can truly understand how Marine Park resident Jean Kemp felt when she got a phone call from a bank demanding she make an installment on her mortgage — 22 years after she made her last payment.

“It was so scary. I was just furious,” Kemp told reporters Thursday when it was announced that an unscrupulous attorney and his sidekick were responsible for “stealing” her home and using it to secure a $225,000 mortgage — two of a dozen scam artists in Kings County District Attorney Charles Hynes’ ever growing real estate rogues gallery.

Standing with Kemp, Hynes explained that Victor Koltun and Jarrett Haber, the attorney, doctored paperwork to make it look like they owned Kemp’s home, even though her family has been living there since 1975 (they hadn’t had a mortgage on the property since 1987).

The duo then used the property, as well as several others, to get a $225,000 loan, Hynes said. They reportedly used the money to pay down a large debt related to another real estate scam they were conducting in Long Island.

“Ordinarily, in real estate deals, you would say, ‘Get a lawyer.’ Now you say, ‘Get an honest lawyer,’” Hynes said, adding that his Mortgage Fraud and Real Estate Crimes Unit arrested Koltun and Haber after learning of Kemp’s plight through State Senator Carl Kruger’s (D-Mill Basin, Brighton Beach) office.

Upon learning that a second mortgage miraculously appeared on her house, Kemp, whose husband is in a nursing home, contacted Kruger’s office, looking for help. Finding something shady, Kruger’s people contacted the D.A.’s office, who arrested Haber and Koltun after a brief investigation.

Kruger was with Hynes and Kemp to announce the arrest Thursday.

“With mortgage fraud gaining status as the ‘crime of choice’ among thosewho prey on the elderly and other vulnerable residents, I applaud the efforts of District Attorney Hynes in aggressively pursuing those whoperpetrate this crime and prosecuting them to the fullest extent of the law,” he said in a statement.

But Kemp’s plight was one of several mortgage swindling stories outlined Thursday. Ten other flim flam artists have also been recently been indicted in various investigations conducted by the Mortgage Fraud and Real Estate Crimes Unit. Some of them were down right devilish.

Case in point: Attorney Alan Rocoff found himself being investigated by the Real Estate Crimes Unit when allegations were made that he had pocketed more than $200,000 he gained from an auction on a foreclosed church at 2525 Snyder Avenue in East Flatbush back in 2005.

Rocoff, who has now been suspended from practicing law in New York, reportedly got more than $300,000 for the property at auction.

After paying off all of the debts attached to the house of worship, Rocoff, the court appointed referee, allegedly held onto the money, despite repeat attempts of Pastor Robert Booker Sr., the owner of the property, to reclaim the leftover cash.

When Pastor Booker died in 2008, he was still trying to get the money owed to him returned, family members told reporters, who said that they were “jubilant” that justice had finally been served.

“This was his life,” his daughter Dorcel Egerton told reporters. “He would go outside and administer to the community, help people, giving people money.”

Rocoff is currently charged with grand larceny in the second degree.

Other con artists busted by the DA’s Mortgage Fraud and Real Estate Crimes Unit included Joseph Nykian and Nitza Jones who were charged with forging power of attorney in order to take out a $300,000 mortgage on a St. Marks Avenue home without the owner’s consent, New York City Corrections Officer Margareth Blanc, who was charged with collecting more than $30,000 in Section 8 rental subsidies while living in a home owned by his sister, and Todd Graham, who was accused of placing an ad on Craigslist for an apartment in a building he neither owned nor managed. Graham reportedly collected the first month’s rents and a security deposits from two prospective tenants before his scam was uncovered, officials said.

Hynes estimated that the 12 suspects were responsible for bilking banks, homeowners and tenants of more than $2 million dollars with these scams.

“The diversity of crimes committed by all of these defendants shows the lengths to which some unscrupulous people will go to enrich themselves illegally,” Hynes said. “The arrests and indictments should serve as a strong warning to all who still think that they will devise some new scheme and get away with Real Estate and Mortgage Fraud related crimes.”

“No matter how creative they think they are, no matter what lengths they go to avoid detection, they will be caught and prosecuted,” he said.

NEW YORK – Manhattan District Attorney Cyrus Vance, Jr., announced the arrest and second indictment of former businessman Adam Hochfelder, 39, of Manhattan, on charges of defrauding investors in two real estate deals, following an investigation by the Manhattan District Attorney’s Office.

Monday’s indictment charges Hochfelder with engaging in schemes to steal approximately $2.5 million from investors in his purported acquisition of the Sagamore Hotel on Lake George, and The Peaks Resort and Spa in Telluride, Colorado. The new charges are in addition to a scheme that already led to a 58-charge indictment against Hochfelder in 2008 for stealing more than $17 million through a series of fraudulent loans from banks, friends, and family, and through a fictitious real estate venture.

“The defendant systematically defrauded his friends, family and business associates out of millions of dollars through phony real estate deals, repeatedly abusing the trust of those who believed he was an upstanding businessman,” said District Attorney Vance. “This type of serial fraud, whether victimizing experienced speculators or novice investors, is a serious crime that can threaten the financial well-being of its victims.”

As charged in the indictment and in court filings, in addition to the Sagamore Hotel, Hochfelder also stole money from investors in a real estate project called The Peaks Resort and Spa in Telluride, CO.

NEW YORK —Despite a depressed real estate market, mortgage fraud and other related crimes continue to be a major problem, according to Brooklyn District Attorney Charles Hynes. Today he announced charges against 12 people for a variety of unrelated housing schemes, including mortgage fraud.

Three out of the 12 scams involved people posing as landlords and collecting rent and security deposits on apartments they didn’t own.

Those charged come from a variety of backgrounds. “Included among the 12 filings today is an attorney, a resigned attorney, and a suspended attorney. In addition there’s a New York City corrections officer and also, there are incredible to me, repeat offenders,” Hynes says.

Prosecutors say two of the alleged repeat offenders, Russell Pitt and Nathan Farkas, convinced an unemployed Brooklyn woman to grant them power of attorney so they could refinance her home. Instead, prosecutors say they sold her home and kept the proceeds. Attorneys for both men could not be reached.

One victim, Jean Kemp, says she was shocked to learn a $225,000 dollar mortgage had been taken out on her home in Marine Park. “When the guy told me that I said, ‘you’re out of your mind, I never took a mortgage, our house has been paid since 1987,” Kemp says.

The Brooklyn DA’s office says it’s special real estate crimes unit continues to receive hundreds of complaints.

MICHAEL HERSHKOWITZ, Manhattan Real Estate Developer Sentenced to Four Years in Prison for $27 Million Mortgage Fraud and Ponzi Scheme

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that Manhattan real estate developer MICHAEL HERSHKOWITZ was sentenced today to four years in prison for his participation in a $27 million Ponzi scheme involving fraudulent loans secured by nonexistent mortgages.

According to the documents filed in the case in Manhattan federal court:

HERSHKOWITZ, working through a Manhattan real estate development company, The Kingsland Group, Inc., and related entities (collectively, “The Kingsland Group”), fraudulently induced approximately 100 individuals to lend the Kingsland Group over $27 million to fund the renovation of approximately sixteen multi-family apartment buildings located in upper Manhattan. HERSHKOWITZ and a co-conspirator, IVY WOOLF-TURK, falsely represented that the lenders would hold, as collateral for the loans, interests in bona fide first mortgages in the various properties in which they thought they were investing. In truth and in fact, HERSHKOWITZ did not record mortgages on behalf of the lenders. Some interest was paid to some of the defrauded lenders with loans made by other victims, and HERSHKOWITZ or WOOLF TURK made false statements to investors about the status of their loans. Ultimately the principal on the loans was not repaid when due, and the lenders learned that they did not have valid first mortgages on the properties in question, as had been falsely promised to them.

Numerous victims wrote letters to the Court, describing the impact of HERSHKOWITZ and WOOLF-TURK’s Ponzi scheme. One stated that she had “lost my life savings of a little over $200,000 because I trusted MICHAEL HERSHKOWITZ’s integrity,” and that her “life had changed completely, and I fight depression every day.” Another victim stated that because of the fraud, she “can no longer afford health insurance,” and “ha[s] no way to get decent health care despite having spinal cord and health problems.” Another complained that HERSHKOWITZ “preyed upon unsuspecting retirees, such as myself, with promises of safe, secure investments supported by New York City real estate.” Victims also complained that the fraud had decimated their retirement savings and their childrens’ college funds, and made them unable to make mortgage payments.

HERSHKOWITZ, 53, of New York, New York, previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. He was sentenced today by United States District Judge P. KEVIN CASTEL. In addition to the four-year prison term, Judge CASTEL ordered forfeiture of $27,184,750, representing the funds obtained through the fraud.

In sentencing HERSHKOWITZ, Judge CASTEL said, “this was a systematic course of criminal conduct.”

WOOLF TURK, of Port Washington, New York, previously pleaded guilty to a related charge and was sentenced on November 23, 2009, to five years in prison and restitution of $27,184,750.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation.

“Michael Hershkowitz and Ivy Woolf Turk defrauded nearly 100 victims out of more than $27 million dollars. Their victims entrusted sometimes a lifetime’s worth of hard-earned savings, only to lose everything. We will continue to work with our partners at the FBI to combat fraud and to bring those responsible to justice,” said U.S. Attorney PREET BHARARA.