Thursday, December 17, 2009

Attorney Cops Plea In "Seller Financing" Fraud Scam; Accused Of Using Bogus Docs To Cheat Property-Selling Clients Out Of Thousands In Building Equity

From the Office of the U.S. Attorney (New York City/Southern District):
  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced that HUGH ZUBER -- a lawyer formerly employed by the Office of the Corporation Counsel for the City of New York -- pleaded guilty today to two counts of mail fraud arising from his participation in schemes to defraud two former clients. ZUBER had represented the clients, in a personal capacity, in connection with their sale of real estate to ZUBER's sister and a business associate.

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  • In April 2006, a property owner retained ZUBER to represent him in the sale of a building located at 2538 Creston Avenue in Bronx, New York. ZUBER arranged the sale of the property to Alana Property Management LLC for $950,000, without disclosing to his client that his sister managed the company. At ZUBER's urging, his client subsequently agreed to accept a different sales arrangement than was reflected in the contract of sale. Specifically, ZUBER fraudulently convinced his client to accept $400,000 in cash from Alana at closing, plus a 10-year note for the balance of $550,000, which ZUBER falsely told his client would be secured by a mortgage on the property. Following the February 2007 closing, ZUBER made several monthly payments purportedly on the note, then stopped.(1)

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  • In 2006, ZUBER also represented a property owner in the sale of a building located at 35 Rose Avenue in Spring Valley, New York. ZUBER arranged the sale of the property for $625,000 to an individual with whom ZUBER had a business relationship. At ZUBER's urging, his client subsequently agreed to accept from the purchaser $425,000 in cash and a $200,000 10-year note, which ZUBER falsely told his client would be secured by a mortgage on the property. Following the July 2007 closing, ZUBER made several monthly payments purportedly on the note, then stopped.(2)(3)

For the U.S. Attorney press release, see Attorney Pleads Guilty In Manhattan Federal Court To Deceiving Clients In Real Estate Deals.

For earlier reports on this story, see:

(1) According to the original charges, unbeknownst to the seller, at or around the closing of sale, Alana Property 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 unsecured note in a position inferior to the 1st mortgage. Zuber initially made periodic payments to the seller on account of the $550,000 note before ultimately stiffing him. See Criminal Complaint: U.S. v. Zuber.

(2) According to the original charges, Zuber and his co-conspirator arranged to obtain a $500,000 institutional 1st mortgage, the proceeds of which were used to fund the $425,000 cash downpayment, leaving the seller's $200,000 unsecured note in a position inferior to the 1st mortgage. Zuber initially made periodic payments to the seller on account of this note before ultimately stiffing him. See Criminal Complaint: U.S. v. Zuber.

(3) The Lawyers’ Fund For Client Protection Of the State of New York, which is in the business of reimbursing client money that is misused in the practice of law, may find itself on the hook for the losses suffered by Zuber's screwed-over clients. According to its website, the Fund may be liable for up to a maximum of $300,000 for each client loss, provided the screwed-over clients apply for reimbursement within two years after they discover their loss. There is no aggregate maximum on awards involving one lawyer, its website states. The Fund lists typical reimbursable losses to include the theft of estate and trust assets, escrow deposits in real property transactions, settlements in personal injury litigation, debt collection receipts, money embezzled in investment transactions with law clients, and unearned fees paid in advance to lawyers who falsely promise their legal services.

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

Maps available courtesy of The National Client Protection Organization, Inc.

posted by Home Equity Theft Reporter at 4:04 AM