Earlier today at the federal courthouse in Brooklyn, New York, an indictment was unsealed charging 10 defendants, including three attorneys and two licensed real estate brokers, with conspiracy, bank fraud, and wire fraud arising out of their mortgage fraud scheme. The indictment alleges that the defendants fraudulently obtained over $10 million in loans from American Home Mortgage, Fremont Bank, BNC Mortgage (a subsidiary of Lehman Brothers), and WMC Mortgage (a subsidiary of GE Money Bank).

The indictment was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, Joseph M. Demarest, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, and Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation. The defendants’ initial appearances and arraignments are scheduled later today before United States Magistrate Judge Roanne L. Mann, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. The case has been assigned to United States District Judge I. Leo Glasser.

The indictment charges Akin Ayorinde, Hervin Henry, Anthony Onua, Umana Oton, Max Shimba, John Star, Anthony Suazo, Marisol Vasquez, and two others with conspiracy to commit bank and wire fraud. In addition, Ayorinde, Henry, Onua, Oton, Shimba, Star, Suazo, and two others are charged with bank fraud, and Ayorinde, Henry, Onua, Shimba, and two others are charged with wire fraud.1

As detailed in the indictment, from January 2005 to May 2007, Ayorinde, Onua, and Star purchased properties located in Brooklyn and Queens. Ayorinde and Onua are attorneys licensed to practice in the State of New York, and Star is a real estate broker licensed in the State of New York. As part of the scheme, the defendants allegedly submitted false loan applications to create the appearance that the properties were being purchased by creditworthy individuals, when, in fact, the properties were purchased at inflated prices by straw buyers who were controlled by Ayorinde, Onua, and Star. Many of these straw buyers were recruited by Henry, a real estate broker licensed in the State of New York. The indictment charges that Suazo furnished fraudulent appraisals to support the inflated purchase prices of the properties, and Onua, Shimba, and Marisol Vasquez provided fraudulent title abstract reports and other documentation that falsely enhanced the purported value of the properties. These false documents induced lenders to issue loans which were far in excess of the true value of the properties.

The defendants were assisted in the fraud by a third attorney, Oton, who is also licensed to practice in the State of New York. Ayorinde, Onua, and Oton served as attorneys at the closings and allegedly were aware that there were fraudulent misrepresentations made to lenders in connection with the closings.

“This prosecution is another example of the results of the department’s ongoing efforts to investigate and prosecute allegations that licensed professionals abused their positions to perpetrate mortgage fraud,” stated United States Attorney Campbell. “We believe that professionals who serve as gatekeepers against fraud owe a duty to their clients and their oaths and should not compromise that duty by promoting their own selfish interests.”

FBI Assistant Director-in-Charge Demarest stated, “As attorneys and real estate brokers, these men know the ins and outs of dealing in real estate. We should expect them to be honest and serve their clients, but in this case they allegedly did just the opposite. Their activity hurts the trust that everyone should be entitled to when dealing with their attorneys and brokers. The FBI is dedicated to tracking down those that work to abuse the system and steal money while causing further damage to the real estate market.”

FDIC Inspector General Rymer stated, “The Federal Deposit Insurance Corporation Office of Inspector General is committed to its partnerships with others in the law enforcement community as we address mortgage fraud cases throughout the country. The American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that if the individuals indicted today have undermined that integrity, they will be held accountable.”

The maximum term of imprisonment for any defendant convicted of conspiracy to commit bank and wire fraud is 30 years. The indictment also seeks forfeiture of the proceeds of the defendants’ bank and wire fraud activities, including a criminal forfeiture money judgment and money traceable to the offenses.

The government’s case is being prosecuted by Assistant United States Attorneys Jonathan E. Green and Daniel A. Spector.

An East Norriton man accused of embezzling $6.3 million from his former employer pleaded guilty Thursday to wire fraud, bank fraud, filing a false tax return and making a false statement to the federal government.

Michael G. Spada, 50, was charged earlier this month with stealing from Scannapieco Development Corporation, in New Hope, and hiding the fraud from a bank and the Internal Revenue Service (IRS) that extended him a $3.2 million line of credit, according to the U.S. Attorney’s Office for the Eastern District of Pennsylvania.

Sentencing in the case is scheduled for June 21. Spada faces a maximum possible sentence of 60 years imprisonment, a $1.7 million fine, three years’ supervised release. He could also be ordered to pay $6.3 million in restitution and forfeit proceeds from his crimes, which includes his home in East Norriton and a New Jersey beach house.

Before his arrest, he was controller and chief financial officer of the Bucks County-based firm and the company’s other real estate and management companies.

Spada embezzled the funds by diverting company checks to his own account and took more than $400,000 in unauthorized salary between 2000 and 2009, according to authorities. He then failed to report most of the stolen money on tax returns and lied to IRS agents about this last June, reports indicate.

Scannapieco Development Corporation and its other companies had accounts at Bank of America, the successor to Summit Bank and Fleet Bank.

Spada had one individual, identified as “T.S.” in court papers, sign checks under false pretenses.

One SDC company, Headquarters Hotel Associates, owned the Sheraton Atlantic City Convention Center Hotel that had a mortgage with Bank of America. From 2000 to 2004, the East Norriton executive gave 56 checks to T.S. to sign, some in amounts as much as $100,000, purportedly to pay the hotel complex’s mortgage. Instead, Spada put the money in his own personal account at the bank.

The defendant used most of the embezzled money to fund a multi-million dollar brokerage account, and he spent $2.7 million on an ocean front home in Brigantine, N.J., according to federal prosecutors. The shore residence has an estimated value of $4.2 million.

Spada was employed with the company since the 1980s. He is married and has three adult daughters.

Assistant U.S. Attorney Mark B. Dubnoff prosecuted the case. The East Norriton man is being defended by Thomas Ostrander.

The former chief financial officer of a New Hope-based development corporation embezzled more than $6 million from the company over a nine-year period and invested some of the funds in his multi-million dollar shore home, federal authorities said Tuesday.
After stealing the money from Scannapieco Development Corp., Michael G. Spada, 50, of Norristown hid the embezzlement from the Internal Revenue Service and a bank that extended him a $3.2 million loan, according to the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
The once trusted CFO used the $6.26 million he allegedly stole to trade securities and purchase real estate in Brigantine, N.J., including an oceanfront home worth $4.2 million, a federal information filed against Spada said.
Spada was charged Monday with wire fraud, bank fraud, filing a false tax return and making a false statement to federal authorities investigating a fraud case.
If convicted, Spada faces up to 60 years in jail, a $1.75 million fine and could be ordered to pay more than $6 million in restitution and forfeit his swanky shore home, among other things.
From 2000 to 2009, Spada allegedly embezzled the funds by diverting company checks to his own account and taking more than $430,000 in unauthorized salary from Scannapieco Development Corp., a construction firm with more than 25 years experience that has built large-scale projects in New Hope, Philadelphia, Baltimore and Atlantic City.
From 2000 to 2004, Spada got company owner Tom Scannapieco to sign off on 56 checks, some of which were up to $100,000, that Spada said were to pay for a mortgage the company had on the Sheraton Atlantic City Convention Center Hotel in Atlantic City.
But authorities said Spada diverted the money to his own Bank of America accounts. The rip off tied to those particular checks totaled nearly $2 million, the information said.
The CFO allegedly opened a Univest Bank account in or about September 2002 to gain greater access to Scannapieco’s personal accounts at that bank. Spada then transferred large sums of cash out of the owner’s personal accounts, said authorities.
From February 2005 to May 2009, Spada illegally deposited 53 checks worth nearly $3 million combined into his account.
Again, the CFO got the company’s owner to sign off on the checks, this time by telling him they were for a refinanced mortgage on the Atlantic City Sheraton, said authorities.
Spada siphoned another $824,000 from a company account into his personal bank account from February 2005 through April 2009, said records.
The accused man also allegedly arranged for himself to collect $430,280 in unauthorized salary between 2001 and 2008.
Spada was legitimately owed about $1.25 million over the seven-year period. Records said Spada was supposed to earn between $90,000 and $100,000, plus bonuses, annually.
Records state Spada filed an income tax return in 2008 claiming he had $265,192 in taxable income for the year. In reality, his taxable income was about $1.18 million, authorities said.
Spada lied about the embezzlement when questioned by special agents from the IRS, according to the government. He also did not tell Bank of America about his swindling when the bank agreed to extend him and his wife a loan.
“By making false representations…Spada exposed Bank of America to potential losses of up to $3.2 million,” according to the information.
A call to Spada’s home for comment was not immediately returned.
The case was investigated by the IRS and the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Mark B. Dubnoff.
Scannapieco Development Corp.’s projects include redeveloping a factory in New Hope into a 62-unit riverfront condominium community called The Waterworks. The firm also reworked some 40 forty Civil War era buildings in Philadelphia’s Spring Garden area into 95 luxury condominiums, dubbed Wallace Court.

A Doylestown lawyer admitted his guilt yesterday in federal court in connection with a $14.6 million mortgage-fraud scheme that victimized 35 homeowners from fall 2004 to June 2007.

Stephen G. Doherty, 43, pleaded guilty to 15 counts of conspiracy, wire fraud and related bankruptcy and money-laundering offenses. U.S. District Judge Mary McLaughlin set sentencing for May 24.

The government alleged that Doherty and four others targeted homeowners facing foreclosure, promised to help them save their homes, engaged in real-estate transactions with straw purchasers and obtained dozens of bogus mortgages.

Authorities said most of the victims did not ultimately lose their homes in the scheme. Doherty, a bankruptcy lawyer, admitted involvement with four mortgage scams involving homeowners in Chalfont, Quakertown, Perkasie and Lumberville. The Perkasie and Lumberville homeowners were clients of Doherty.

In fall 2004, Doherty mailed advertisements to distressed homeowners and referred respondents to co-defendant Edward McCusker, who owned a mortgage company. McCusker, who has pleaded not guilty in the case, allegedly told homeowners he could save their homes by getting a mortgage in someone else’s name for a year, while they leased the house back at a rent they could afford.

Instead, court papers said McCusker, of New Hope, arranged for the homeowner’s residence to be transferred to a straw purchaser, used fake documents to obtain a mortgage in the name of the straw purchaser and took proceeds of sales for himself and co-defendants.

The plea memo said that Doherty and his partner, Jeffrey Bennett, received an initial referral fee of $1,500 per mortgage, later increased to 2 percent of the loan proceeds. The fee wasn’t disclosed on the settlement form as being paid to Doherty and Bennett, the plea memo said, to conceal incentive payments the law firm was receiving to steer homeowners to McCusker.

When Doherty referred some homeowners to McCusker, he would file bankruptcy papers – not intending to actually proceed with bankruptcy – to delay the sheriff’s sale so that the sale to the straw purchaser could go through, the memo said.

When financing was obtained, Doherty dismissed the bankruptcy petition a day before closing, the plea memo said. Doherty is free on $100,000 unsecured bond pending sentencing. Three other defendants in the case – including McCusker’s wife; Jacqueline, of New Hope; Bennett, of Springfield, and John Bariana, of Mullica Hill, N.J. – have also pleaded not guilty.

In US law, Money Laundering is the practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money. It is the process of creating the appearance that large amounts of money obtained from serious crimes, such as real estate fraud, originated from a legitimate source. Today its definition is often expanded by government and international regulators to mean any financial transaction which generates an asset or a value as the result of an illegal act.

Jeffrey Bennett and Stephen Doherty of Doylestown-based Bennett & Doherty are charged with conspiracy to commit mail and wire fraud and conspiracy to commit money laundering and Doherty is also charged with bankruptcy fraud.

Two partners in a Pennsylvania law firm have been federally indicted along with three other defendants including two mortgage company owners in a wide-ranging alleged real estate fraud scheme.

Federal prosecutors in Philadelphia say the $14.6 million scheme involved 35 fraudulent loans, real estate deals in which purchases were made by straw buyers and false promises of help to homeowners trying to stave off foreclosure.

If convicted, Doherty could get a maximum of 385 years in prison and $4 million in fines and Bennett faces as much as 240 years and $3.2 million in fines.

“These are allegations. And now you have others wanting to join in hoping they hit a lucky number too,” says Bennett’s lawyer, George Bochetto of Bochetto & Lentz in Philadelphia. “Jeff Bennett is a fine, fine attorney who’s always worked hard on behalf of homeowners in tough situations.”