Preet Bharara, the U.S. attorney for the Southern District of New York, announced that attorneys Jacquelyn Todaro, Neal Sultzer and Kevin Hymes, as well as former attorney, Michael Schlussel, pled guilty to conspiring to commit wire fraud and bank fraud in connection with a $66 million mortgage fraud scheme, involving more than 100 home mortgage loans for residential properties in the New York City area, Westchester County, Dutchess County, and Long Island. Sultzer, Schlussel, Hymes and Todaro pled guilty before U.S. District Judge Robert Patterson.
According to the Indictment previously filed in Manhattan federal court, as well as statements made in public proceedings:
First Class Equities (FCE), a/k/a Thunder Funding, a/k/a TAT Mutual Capital, was a mortgage brokerage firm with offices located in Oceanside and Old Westbury, N.Y. In August 2011, 14 individuals were charged in connection with their roles in a massive mortgage fraud scheme, including FCE’s owner and president, loan officers, attorneys, and one disbarred lawyer. As part of the scheme, FCE arranged home sales between straw buyers and homeowners who were often people in financial distress and willing to sell their homes. Loan officers at FCE recruited straw buyers — many of whom were paid — and obtained mortgage loans on their behalf by submitting fraudulent applications to banks and lenders that made false representations about the straw buyers’ net worth, employment, income, and plans to live in the properties.
After approving the loans, the lenders sent the mortgage proceeds to attorneys who were involved in these transactions, including Todaro, Sultzer, Hymes, and another attorney. Todaro, Sultzer, Hymes, and Schlussel, acting on behalf of the fourth attorney involved in the scheme, would then appear at real estate closings and distribute the loan proceeds. Schlussel held himself out as an attorney, but in fact, he had previously been disbarred and was not licensed to practice law. He and the other attorneys submitted false statements to the lenders about how they were distributing the loan proceeds, and made illicit payments, typically totalling tens of thousands of dollars or more per transaction, from the loan proceeds to themselves and to other members of the conspiracy.
In addition, Todaro and Schlussel caused false documents to be provided to lenders in order to obtain home equity lines of credit, or second mortgages, on properties purchased through straw buyers the same day, the proceeds of which Todaro distributed among certain members of the conspiracy.
Todaro, 42, of Westbury, N.Y., pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with her plea, Todaro agreed to forfeit $6,554,842. She will be sentenced by Judge Patterson on Sept. 13, 2012.
Sultzer, 61, of Plainview, N.Y., pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, Sultzer agreed to forfeit $10,689,500. He will be sentenced by Judge Patterson on Oct. 1, 2012.
Schlussel, 50, of Merrick, N.Y., pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, Schlussel agreed to forfeit $5,878,442. He will be sentenced by Judge Patterson on Sept. 24, 2012.
Hymes, 39, of Armonk, N.Y., pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, Hymes agreed to forfeit $7,606,500. He will be sentenced by Judge Patterson on Sept. 27, 2012.
In addition to Todaro, Sultzer, Schlussel, and Hymes, five other defendants charged in the scheme — Canino, Pandora Bacon, Michael Charles, James Vignola, and Henry Richards — have also pled guilty and are awaiting sentencing.
Charges are still pending against the remaining five defendants — Ian Katz, Omar Guzman, Robert Thornton, Michael Raphan, and Ralph Delgiorno — who are presumed innocent unless and until proven guilty. The trial for any remaining defendants is scheduled to begin on July 2, 2012.
This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander, Andrew Goldstein and Niketh Velamoor are in charge of the criminal case.