Wednesday, June 10, 2009

NY Attorney Charged In "Seller Financing" Mortgage Fraud Scam; Accused Of Using Bogus Documents To Cheat Property Sellers, Banks

In New York City, the New York Law Journal & the Office of the Manhattan U.S. Attorney announce:
  • An attorney with the New York City Law Department who had a gambling problem was arrested [last week] for mortgage fraud that involved inventing a lawsuit and forging the signature of a bankruptcy judge. Hugh Zuber, 38, of Monsey, N.Y., allegedly used the Corporation Counsel's office for a meeting with one of his victims in one of two schemes to defraud property sellers in the Bronx and Spring Valley of hundreds of thousands of dollars.

According to the criminal complaint, in one case, Zuber agreed to represent a Bronx property owner in the sale of an 11-unit rental building on Creston Avenue in April 2006. Zuber arranged to sell the building to Alana Property Management LLC for $950,000 in February 2007. What Zuber did not disclose was that he had formed Alana Property himself and that it was controlled by his brother. The terms of sale were $400,000 in cash with the remaining $550,000 to be in the form of seller-financing (ie. a ten year note secured by a first mortgage on the subject property) to the seller. Unbeknownst to the seller, at or around the closing of sale, Alana Property then allegedly used false information to secure a $705,000 first mortgage from a lending institution, using $400,000 to fund the downpayment owed to the seller, with Zuber and his co-conspirator pocketing the difference, and leaving the seller's $550,000 note in second collateral position. Zuber initially made periodic payments to the seller on account of the $550,000 note before ultimately stiffing him.

In the second case, according to the criminal complaint, Zuber represented the seller of a 6-unit rental house in Spring Valley, which sold for $625,000. Zuber did not disclose to the seller that he had a business relationship with the purchaser. Zuber and his co-conspirator arranged to obtain a $500,000 mortgage with an application that failed to disclose some important facts, including that $200,000 of the purchase price was directly financed by the seller. Once this sale closed, Zuber began making payments to the Spring Valley victim on account of the $200,000 in seller financing. The deferred payments to this victim eventually ceased as well, according to the allegations.

For more, see:

(1) If the charges prove true that attorney Zuber screwed his clients out of their money and property, The Lawyers’ Fund For Client Protection Of the State of New York may find itself on the hook for the losses up to a maximum of $300,000 for each client loss, provided the clients apply for reimbursement within two years after they discover their loss.

For those clients screwed out of their money and property by reason of the dishonest conduct of their attorneys in other states and Canada, see:

posted by Home Equity Theft Reporter at 4:07 AM