Tuesday, August 15, 2017

Tampa Feds Squeeze $475K Civil Settlement From Real Estate Operator Accused Of Peddling Condo Apartments To Elderly Buyers By Recruiting Them, Paying Them To Artificially Inflate Sales Prices, Then Failing To Disclose Material Information When Obtaining Reverse Mortgages To Cash Out On Transactions

From the Office of the U.S. Attorney (Tampa, Florida):
  • Acting United States Attorney W. Stephen Muldrow announces a civil settlement with Alexander Olympus Zarris that resolves alleged violations of the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) through reverse mortgage transactions engineered by Zarris at a Tarpon Springs condominium complex. Zarris will pay $475,000 to address the damage his conduct caused to a lending program overseen by the Department of Housing and Urban Development (HUD). This is the third civil settlement reached in this vital area of civil affirmative enforcement.
    ***
    From 2008 to 2011, the United States Attorney’s Office and HUD’s Office of Inspector General (“OIG”) investigated Zarris’s practices and concluded that he had improperly obtained the proceeds of federally insured reverse mortgages that, but for his conduct, would not have been underwritten by the lenders.

    Investigators learned that Zarris had engaged in sales transactions where he concealed the amounts that he had paid to the buyers to artificially inflate the appraised values of condominium complex units.

    He recruited elderly buyers (over the age of 62) to purchase units at inflated values and, as part of those sales transactions, required them to immediately apply for reverse mortgages in the maximum amount possible. Zarris, or others working with him, would then assist the elderly buyers in applying for reverse mortgages, including filling out their loan applications. The applications submitted on behalf of these buyers failed to disclose certain information that was material to the bank’s decision to underwrite the reverse mortgages. Through these practices, Zarris was able to create the appearance of equity so that the elderly buyers could obtain the reverse mortgages. The proceeds of the mortgages were then wired to a company owned by Zarris at the reverse mortgage closing.

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