LawFuel.com – 12 July 2012 – Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL RAPHAN was found guilty of conspiring to commit bank fraud and wire fraud in connection with a $66 million mortgage fraud scheme. RAPHAN
was convicted in Manhattan federal court after a two-week jury trial presided over by U.S. District
Judge Robert P. Patterson, Jr. He is the fifth attorney convicted in connection with this scheme.
Manhattan U.S. Attorney Preet Bharara said: “Michael Raphan was supposed to be a gatekeeper, representing the best interests of his client banks at real estate closings. Instead, he represented his own corrupt interests and those of his co-conspirators, and facilitated a massive mortgage fraud scheme. With his conviction today, Raphan is now the 16th and final defendant to be convicted in a scheme that typified much of what has been wrong in the mortgage industry.”
According to the Indictment previously filed in Manhattan federal court, other documents and statements made in court proceedings, and the evidence at trial:
In August 2011, this Office charged 14 individuals for their roles in a massive mortgage fraud scheme involving First Class Equities (“FCE”), a mortgage brokerage firm with offices located in Oceanside and Old Westbury, New York. Two other individuals pled guilty pursuant to cooperation agreements.
From 2004 to 2009, FCE arranged home sales between “straw buyers” – persons who posed as home buyers, but who had no intention of living in, or paying for, the mortgaged properties – and homeowners, who were often people in financial distress, and willing to sell their homes. FCE loan officers recruited straw buyers, who were often paid for their roles, and used them to obtain mortgage loans for the sham deals by submitting fraudulent applications to banks and lenders, and by making fraudulent representations about the straw buyers’ financial situations 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 RAPHAN, who appeared at real estate closings and distributed loan proceeds. RAPHAN typically appeared at closings as the attorney for the bank, but also represented straw buyers and sham sellers at closings. He reviewed and approved fake checks brought to closings, lied on settlement statements about how he was distributing bank
funds, and took other steps to ensure that FCE president and owner Gerard Canino and other members of the conspiracy made huge profits from the scheme to defraud banks. As a result of the scheme, banks were defrauded of tens of millions of dollars in mortgage loans and dozens of properties all over the New York area went into foreclosure.
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RAPHAN, 61, of Oceanside, New York, was convicted of one count of conspiracy to commit bank fraud and wire fraud and faces a maximum sentence of 30 years in prison. RAPHAN will be sentenced by Judge Patterson on October 23, 2012.
Mr. Bharara praised the FBI for its outstanding work 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.
All of the defendants charged in connection with the scheme, which include Canino, loan officers, attorneys, and a disbarred attorney, have now been convicted. The other defendants – Canino, Ian Katz, Omar Guzman, James Vignola, Henry Richards, Robert Thornton, Neal Sultzer, Michael Schlussel, Jacquelyn Todaro, Kevin Hymowitz, Michael Charles, Ralph Delgiorno, Pandora Bacon, Dennis Berkowsky, and Deborah Lazarou – have previously pled guilty and await sentencing.
This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander, Niketh Velamoor, and Andrew Goldstein are in charge of the criminal case.