Spitzer says targets Brooklyn mortgage fraud ring
Wed Nov 29, 2006 2:54pm ETBy Jonathan Stempel
NEW YORK, Nov 29 (Reuters) - A Brooklyn mortgage fraud ring duped homebuyers and lenders by falsifying documents and overstating property values, ruining the credit of many people who bought homes in minority neighborhoods, New York Attorney General Eliot Spitzer said on Wednesday.
Spitzer sued 11 people over the scheme, which he said lasted from 2002 until early this year and hurt dozens of borrowers and lenders, in a lawsuit filed with the state supreme court in Manhattan.
Four defendants -- Isaac Katz, Yoel Silberstein, Shaya Saks and Theodore Welz, all of New York's borough of Brooklyn -- agreed to settle by paying nearly $1.8 million to help compensate victims, and accepting increased oversight of, or restrictions on, their activities. Spitzer is seeking fines, restitution and other penalties from the other defendants.
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"The perpetrators of this scam promised minority home buyers an opportunity to climb the economic ladder," Spitzer said. "In reality, the defendants profited handsomely while their victims saw their financial security impaired or even ruined."
Steve Cohn, a lawyer representing Katz, declined to comment. Lawyers for Silberstein, Saks and Welz did not immediately return calls for comment.
According to the complaint, Katz and Silberstein bought properties at foreclosure sales or "distressed" prices in Brooklyn's Bedford-Stuyvesant, Bushwick, Crown Heights, East Flatbush and East New York neighborhoods, hoping to "flip" them to make quick profits.
Spitzer said defendant Amenophis Alleyne of Plainfield, New Jersey, would receive finder's fees for encouraging African-American buyers with good credit, including some friends and family, to buy the properties.
Alleyne, who is black, assured them that they could buy with no money down, and that rental income from tenants would cover their mortgage payments, Spitzer said. Thereafter, mortgage brokers Saks and Welz would induce banks to make loans by exaggerating borrowers' assets, while real estate appraisers Erik Johnson of Ronkonkoma, New York, and Jeffery Richardson of Brooklyn would exaggerate property values by at least $50,000, Spitzer said.
Finally, Brooklyn lawyers Devon Clarke, Benzion Frankel, Joseph Treff and Rephoel Weitzner, who handled the closings, would misrepresent the actual sales prices on deeds, tax records and other loan documents, Spitzer said.
Spitzer said that as a result of the scheme, many buyers ended up with high-rate mortgages they could not afford and ended up in default or foreclosure.
Moreover, Spitzer said the scheme artificially raised home prices in the area, making it harder to buy and sell, and defrauded lenders who made the bad loans.
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Treff declined to comment. Johnson and Weitzner did not immediately return calls for comment. The other defendants could not immediately be located.