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Father and Son indicted for mortgage fraud December 16, 2009

Posted by jefhenninger in News.
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This is yet another example of a case that starts as a civil case that eventually turns into a criminal case.  As a result, it is important that any civil case such as this is either handled by a criminal defense attorney or one is brought on as a consultant.

Attorney General Anne Milgram announced that a father and son were indicted with their real estate firms for allegedly stealing approximately $4.5 million from mortgage lenders by providing false information in home loan applications.

The state grand jury indictment charges Martin Gendel, 64, of Montville, Seth Gendel, 35, of Long Island, N.Y., and the real estate firms they owned and operated, Casey Properties LLC, Lee Alan LLP and Andrea Management LLC, all based in Totowa. Each defendant is charged with conspiracy, theft by deception and two counts of money laundering, all in the second degree. The charges stem from an investigation by the Division of Criminal Justice Major Crimes Bureau.

The indictment was returned on Tuesday (Dec. 15) but was sealed until today, when the Gendels were arrested on the charges by Division of Criminal Justice detectives, assisted by local authorities. Martin Gendel was arrested at home in Montville and is being held in the Morris County Jail. Seth Gendel was arrested at home on Long Island and is being held in New York State pending extradition to New Jersey.

Between December 2005 and September 2007, the defendants allegedly deceived seven mortgage lenders into providing approximately $4.5 million in loans for purchases of 14 homes. Six homes were in Paterson, six in Newark and two in East Orange.

“We charge that these defendants falsified applications so unqualified home buyers could obtain $4.5 million in loans,” said Attorney General Milgram. “As detailed in a civil fraud complaint we filed earlier this year, the loans drove a scheme in which the defendants recruited investors to buy overpriced urban properties, then diverted loan funds for their own enrichment, leaving behind run-down homes and investors facing foreclosure.”

It is alleged that the defendants submitted fabricated information about employment and earnings in loan applications and on HUD settlement forms so that buyers could obtain loans for which they were not qualified. In some instances, they included false information about rental agreements and income from the properties. Nine buyers purchased the 14 homes.

In addition, the defendants allegedly deceived lenders by representing that expenses listed on HUD forms and ultimately paid out were legitimate expenses for home repairs when, in fact, no repairs were authorized or made. Some of the applications were checked off as though the homes would be the primary residence of the buyer, when the defendants knew they were being purchased solely as rental investment properties. Other false information submitted with the applications included false savings account balances and false occupancy letters.

Since June 2008, the Attorney General’s Office has filed a total of 11 civil mortgage fraud lawsuits naming 102 individual and corporate defendants whose actions have affected more than 950 victims, as well as property worth more than $29.1 million. The Attorney General has obtained indictments or guilty pleas in eight criminal mortgage fraud cases involving a total of 15 defendants. These defendants have been charged with victimizing more than 60 individuals and banks in connection with loans worth more than $15 million. In addition, the Attorney General has filed notices of violation against nine New Jersey-based companies for offering mortgage loan modification services without a debt adjustment license. They were assessed $45,000 in civil penalties ($5,000 each) and directed to pay consumer restitution.

The civil complaint filed by the Attorney General’s Office in March charges Martin Gendel, Seth Gendel, Casey Properties and Lee Alan LLP with violating New Jersey’s Civil Racketeer Influenced and Corrupt Organizations (RICO) statute. It charges the Gendels and six other defendants with using deception – and the credit information of their victims – to obtain fraudulent mortgage loans for the purchase of urban properties at grossly inflated prices. They convinced victims to buy homes in Newark, Paterson, Irvington and East Orange that were the subject of bogus appraisals, then profited by taking fees out at closing from the inflated equity.

The defendants told investors that Casey Properties would take care of all aspects of the sale and property management, including finding tenants, collecting rents, paying the mortgages and making needed repairs. However, Casey Properties never did maintain the homes or keep up the mortgage payments. In the end, victims had their credit ruined and were left responsible for dilapidated homes that had been foreclosed on and abandoned.

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1. New Book Says Clinton Barely Escaped Being Indicted – The Spoof (satire) | Denali Books - December 20, 2009

[…] Father and Son indicted for mortgage fraud « White Collar Crime News […]


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