First American Issued Phony Appraisals, Charges NY AG; Execs Knew It & Allowed It Anyway, Says Suit

(original post 11-2-07; modified 11-13-07)
The New York State Attorney General's Office announces:

• Attorney General Andrew M. Cuomo [Thursday] announced that he is suing one of the nation’s largest real estate appraisal management companies and its parent corporation for colluding with the largest savings and loan in the country to inflate the appraisal values of homes. In a scheme detailed in numerous e-mails, eAppraiseIT (“EA”), a subsidiary of First American Corporation (NYSE: FAF), caved to pressure from Washington Mutual (“WaMu”) (NYSE: WM) to use a list of preferred “Proven Appraisers” who provided inflated appraisals on homes. The e-mails also show that executives at EA knew their behavior was illegal, but intentionally broke the law to secure future business with WaMu.

• “The independence of the appraiser is essential to maintaining the integrity of the mortgage industry. First American and eAppraiseIT violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike,” said Attorney General Cuomo. “The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market. By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.”

For more, see New York AG Press Release - NY Attorney General Sues First American And Its Subsidiary For Conspiring With Washington Mutual To Inflate Real Estate Appraisals.

To view the New York AG's lawsuit, see Cuomo vs. First American Corporation and First American eAppraiseIT.

Go here to view E-Mail Excerpts in eAppraiseIT Case.

For CBS News coverage, see N.Y. AG: Appraisers Inflated Home Values (Real Estate Appraisers Colluded With Banks To Inflate Mortgage Values, Andrew Cuomo Says).

For an earlier story on the NY AG investigation of eAppraiseIT, which reportedly appraises up to 15,000 homes a year in New York, see New York Subpoenas First American Appraisal Unit (Bloomberg.com).

11-12-07 supplement:

For a recent story on inflated appraisals, see Banks bullying appraisers to boost values bad news (Kenneth Harney syndicated article).

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT. Cuomo OFHEO Fannie Mae Freddie Mac

More On NY AG Suit Alleging Puffed Up Appraisals

Syndicated columnist Kenneth Harney recently wrote a piece on the lawsuit brought by New York Attorney General Andrew M. Cuomo against First American Corp. and its appraisal management subsidiary, eAppraiseIT, alleging the practice of illegally inflated real estate appraisals. Highlights from the column:

• Cuomo's suit, which rattled mortgage lenders, appraisers and settlement service companies nationwide, accused First American and eAppraiseIT of knuckling under to illegal pressure from Washington Mutual, the giant Seattle lender, to hit the numbers needed to close loan deals.

***

• Washington Mutual was not named as a defendant in the complaint because, as a federally regulated bank, it is buffered from certain state legal attacks. In a statement, Washington Mutual said it was both "surprised and disappointed by the allegations," and has suspended business with eAppraiseIT pending its own investigation of the matter.

***

• Frank Gregoire, chairman of the Florida Real Estate Appraisal Board and a St. Petersburg appraiser, said "every appraiser deals with this stuff every day," routinely confronting threats of nonpayment and blacklisting if he or she refuses to play the game. Perry "Pat" Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that "it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street," where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors. "And they all think they're never going to get caught," said Turner.

For more, see Banks bullying appraisers to boost values bad news (San Francisco Chronicle).

To view the New York AG's lawsuit, see Cuomo vs. First American Corporation and First American eAppraiseIT.

Go here to view E-Mail Excerpts in eAppraiseIT Case.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT. Cuomo OFHEO Fannie Mae Freddie Mac

NY AG Investigating Mortgage Fraud; Focus On Illegal Pressure On Appraisers

Bloomberg.com is reporting:>

• "New York Attorney General Andrew Cuomo issued a subpoena to the real estate appraisal unit of First American Corp. in his investigation of whether mortgage brokers pressured appraisers to inflate property values."

The unit, eAppraiseIT LLC, reportedly appraises up to 15,000 homes a year in New York. For more, see New York Subpoenas First American Appraisal Unit.

For story update, see First American Issued Phony Appraisals, Charges NY AG; Execs Knew It & Did It Anyway, Says Suit.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT.

"Entire Industry Is A Scam," Says NY AG As Subpoenas Go Out To 14 Loan Modification Firms; "Intent To Sue" Sent To Another

Bloomberg News reports:

• New York Attorney General Andrew Cuomo subpoenaed 14 loan-modification companies and plans to sue [another] as part of a probe of the “foreclosure rescue” industry.(1) [...] "Many of these companies charge upfront fees which are specifically prohibited by law,” Cuomo said in a conference call. “Sometimes homeowners even end up paying a higher cost after one of these companies gets involved.” Cuomo said that in many ways the “entire industry is a scam” because the U.S. Department of Housing and Urban Development provides assistance to struggling homeowners for free.

For the story, see Cuomo Subpoenas 14 Loan Modifiers, Plans Lawsuit.

See also: New York AG press release, see Cuomo Announces Intent To Sue ‘Amerimod’ Loan Modification Company In Investigation Of Foreclosure Rescue Scams Targeting Homeowners Nationwide (Long Island-Based American Modification Agency Charged Illegal Up-Front Fees and Used Deceptive Marketing to Target Homeowners Facing Foreclosure; Cuomo Also Issues Subpoenas to Fourteen Other Loan Modification Companies Across the Country in Nationwide Investigation).

(1) According to the NY AG's office, it has served a notice of intent to sue on American Modification Agency, Inc. (“Amerimod”) and its owner and President Salvatore Pane, Jr., accusing the company of charging illegal upfront fees and using false advertising to reel in struggling homeowners. Amerimod is headquartered in Uniondale, NY and claims to operate in all 50 states, servicing thousands of consumers nationwide.

Cuomo has also issued subpoenas to fourteen loan modification companies: American Home Recovery Corporation; CloseMore Financial Corporation; Elite Results Group, Inc.; FLM Law Center LLP, a/k/a Federal Loan Modification Law Center and Federal Loan Modification; Hometown U.S.A., Inc.; Global Modifications, Inc. a/k/a The Law Office of Brett Margolin, P.C.; Loan Modification Affiliate Exchange, Ltd, a/k/a LoanMAE; Nationwide Modification Agency, Inc.; NMA Legal Services, P.C.; Northeast Mortgage Services; People’s First Financial, Inc.; Raymond Lewis & Fitch, Inc.; Settled For Less, Inc.; and the Law Depot, Inc. a/k/a the Loss Mitigation Legal Network.

NY AG Reaches Settlement With Credit Agencies In Ongoing Mortgage Industry Investigation

In connection with a New York Attorney General investigation(1) into all aspects of the mortgage industry for more than a year, including lenders, securitizers, due diligence providers, and credit rating agencies, a June 5, 2008(2) press release announced:

• Attorney General Andrew M. Cuomo [...] announced that he has reached landmark agreements with the nation’s three principal credit rating agencies that will fundamentally reform the Residential Mortgage-Backed Securities (“RMBS”) market. The agreements with Standard & Poor’s (“S&P”) Moody’s Investors Service, Inc. (“Moody’s”), and Fitch, Inc. (“Fitch”) will dramatically increase the independence of the ratings agencies, ensure that crucial loan data is provided to the agencies before they rate loan pools, and increase transparency in the RMBS market.

• Under the agreements with Attorney General Cuomo, the credit rating agencies will fundamentally alter how they are compensated by investment banks for providing ratings on loan pools. In addition, the ratings firms will all now require for the first time that investment banks provide due diligence data on loan pools for review prior to the issuance of ratings. This will ensure that significant data, which was not previously disclosed to the rating agencies, will be received and reviewed by them before any bonds are rated.

For more, see AG Cuomo Announces Landmark Reform Agreements With The Nation's Three Credit Rating Agencies (Standard & Poor’s, Moody’s, and Fitch Agree to Change Fee Structures, Obtain Due Diligence Information for the First Time, and Create Due Diligence and Lender Standards for Residential Mortgage-Backed Securities).

(1) On March 3, 2008, Attorney General Cuomo entered into agreements with the Office of Federal Housing Enterprise Oversight and the two largest securitizers of home loans in the United States -- Fannie Mae and Freddie Mac -- requiring them to buy loans from banks that meet new standards designed to ensure independent and reliable appraisals.

In addition, AG Cuomo has sued First American and eAppraiseIT for allegedly colluding with the largest savings and loan in the country to inflate the appraisal values of homes, and allegedly otherwise allowing the savings and loan to strong-arm them into a system designed to rip off homeowners and investors alike, according to this NY AG Press Release, and this NY AG civil lawsuit.

NY AG prosecutors have also sent subpoenas to Wall Street firms seeking information related to the packaging and selling of debt tied to high-risk mortgages, and has reportedly given one firm immunity from prosecution in return for help in learning whether debt-rating firms and investors got enough information about the loans being sold.

(2) I recognize that a seven week-old story may be a bit stale, but it's news to me - better late than never.

Cuomo Keeps Promise; Nails Wall Street With Subpoenas In Continuing Subprime Junk Mortgage Investigation

In New York City, Reuters reports:

• New York state prosecutors have sent subpoenas to Wall Street firms seeking information related to the packaging and selling of debt tied to high-risk mortgages, a person familiar with the matter said on Wednesday. The subpoenas, sent by the office of New York Attorney General Andrew Cuomo, requested information from a number of Wall Street firms. [...] Cuomo last month said he would subpoena investment banks as part of an expanding probe into the $10 trillion U.S. mortgage industry. [...] Last month, Cuomo sued First American Corp and one of its property appraisal units for colluding with Washington Mutual, one of the largest U.S. home lenders, to inflate property appraisals. A week later, he announced the office had sent subpoenas to Fannie Mae and Freddie Mac, giant mortgage agencies sponsored by the U.S. government.

For more, see New York subpoenas Wall Street on mortgages. OFHEO

Spitzer's Litigation Example: A Legacy For New York

In New York, Forbes reports:

• New York Gov. Eliot Spitzer's political career may have been fatally undermined, but his pioneering use of litigation to catalyze regulatory and policy change will endure. New York State Attorney General Andrew M. Cuomo continues to follow Spitzer's example in this respect, despite complaints about his aggressive tactics.

• These initiatives have filled a regulatory gap opened by President George Bush's generally hands-off, market-friendly approach. Cuomo's investigations cover a broad spectrum of policy areas and, following the Spitzer pattern, tend to target conflicts of interest whereby companies have allegedly exploited consumers.

Among NY AG Cuomo's recent work is a mortgage appraisals investigation, in which a lawsuit was filed against First American Corporation and its appraisal unit, for allegedly conspiring with Washington Mutual to inflate its real estate appraisals. During the course of the investigation, Fannie Mae and Freddie Mac involuntarily got dragged into the fray and were ultimately persuaded (or strong-armed, depending on your point of view) by Cuomo to agree to change their practices to curb inflated mortgage appraisals (with a major assist earned by U.S. Senator Charles Schumer of New York, Chair of the Senate Banking Committee’s Housing Subcommittee, who no doubt "persuaded" the federal regulators at the Office of Federal Housing Enterprise Oversight ("OFHEO") - who have oversight responsibilities over Fannie and Freddie - to go along with the deal and concede the investigatory turf battle they may have had with the New York AG).

For the story, see Cuomo Follows Spitzer's Litigation Example.

In a related Op Ed piece in The Providence Journal, At least admire Spitzer for his foes. Cuomo OFHEO Fannie Mae Freddie Mac

NY AG, Fannie, Freddie, Feds Reach Agreement Expected To Deal Major Blow To Appraiser Strong-Arming, Appraisal Fraud In Home Mortgage Lending Industry

An announcement from the New York State Attorney General's Office:

• Attorney General Andrew M. Cuomo [yesterday] announced that the nation’s two largest purchasers of home loans, Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), have entered into cooperation agreements requiring them to only buy loans from banks that meet new standards designed to ensure independent and reliable appraisals. The agreements, among the New York Attorney General, Fannie Mae, Freddie Mac and their federal regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), also create an independent organization to implement and monitor the new appraisal standards. [U.S.] Senator Charles Schumer, Chair of the Senate Banking Committee’s Housing Subcommittee, praised the agreement and the reforms which he has supported.

• “With this agreement, Fannie Mae and Freddie Mac have become leaders in transforming the mortgage industry,” said Cuomo. “Now national banks have a clear choice: immediately adopt the new code and clean up appraisal fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac – it is that simple.”

***

• “Today’s agreement with Fannie Mae and Freddie Mac begins to set right what had gone so horribly wrong in the mortgage industry – rampant appraisal fraud,” said Cuomo. “The integrity of our mortgage system depends on independent appraisals. Again and again our industry-wide investigation found that banks were putting pressure on appraisers to drive up the value of loans just to make a quick buck. We believe the new standards, and the new independent monitor agreed to today, can begin to erase this problem from the industry. I want to particularly thank Senator Schumer for all of his help in readying this important agreement today.”

In exchange for Fannie Mae & Freddie Mac entering into these agreements, Attorney General Cuomo has agreed to terminate its investigations into Fannie & Freddie. However, a lawsuit by the NY AG alleging widespread dubious appraisals against First American and its subsidiary eAppraiseIt is still pending, and the NY AG's industry-wide investigation into mortgage fraud continues.

In addition, an impending turf battle between the New York AG's office and OFHEO, a federal government agency, regarding the investigation into Fannie and Freddie has, by reason of these agreements, has apparenly been settled amicably (see earlier post - Feds vs. NY AG: Lending Fraud Probe Turf Battle Emerging?).

For a summary of the agreements, see NY Attorney General's Press Release: New York Attorney General Cuomo Announces Agreement With Fannie Mae, Freddie Mac, And OFHEO (Nation’s Two Largest Purchasers of Home Loans Agree to Only Buy Mortgages From Banks That Meet Requirements of New Home Value Protection Code ~Independent Institute Established with $24 Million from Fannie Mae and Freddie Mac to Implement and Monitor Code ~Senator Schumer Praises Agreement).

Go here for the OFHEO Press Release.

Click below for the Home Value Protection Program and Cooperation Agreements:

• NY Attorney General and OFHEO with Fannie Mae ,
• NY Attorney General and OFHEO with Freddie Mac.

Go here for the newly adopted Home Valuation Code of Conduct.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this announcement.

35 Law Firms Named In Suit Seeking To Void 100,000+ Money Judgments; 20+ Add'l Firms Currently In NY AG's Crosshairs In Ongoing "Sewer Service" Probe

From the Office of the New York State Attorney General:

• Attorney General Andrew M. Cuomo [Wednesday] announced his office has sued 35 law firms and two debt collectors(1) in New York State in order to throw out an estimated 100,000 default judgments improperly obtained against New York consumers. This is the latest action in Cuomo’s ongoing investigation into unlawful debt collection practices. According to the lawsuit [...], the companies relied on a Long Island company, American Legal Process (ALP), to notify New York consumers that they faced debt-related lawsuits. ALP, however, failed to properly serve consumers across the state with legal papers, causing thousands to unknowingly default and have costly judgments entered against them without the chance to respond or defend themselves.(2) In April of this year, Cuomo’s Office announced criminal and civil cases against ALP and its owner, William Singler, for this fraudulent business scheme.(3)(4)

***

• Attorney General Cuomo also announced that as part of his ongoing investigation into fraudulent process servers and debt collectors, his Office is determining which other law firms statewide relied on ALP to serve legal process on New Yorkers facing lawsuits. More than 20 such firms have been identified to date and his Office is notifying those firms of its intent to seek to vacate any default judgments those firms have obtained based on ALP affidavits of service.

For the NY AG's press release, see Attorney General Cuomo Sues To Throw Out Over 100,000 Faulty Judgments Entered Against New York Consumers In Next Stage Of Debt Collection Investigation (37 Law Firms and Collectors Named in Lawsuit for Failing to Properly Notify New Yorkers Being Sued for Owing Debt; Cuomo Seeks to Vacate Over 100,000 Faulty Judgments Statewide and Provide Restitution to Victims).

For more from the NY AG on this lawsuit, see:

• Lawsuit: In re Honorable Ann Pfau v. Forster & Garbus, et al. (28 pages),
• Go here for Statewide Map of Default Judgments by Region,
• Go here for the NY AG's press release en Español.

Go here for other posts on "sewer service."

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) The law firms and debt collectors named in the lawsuit are: Forster & Garbus; Sharinn and Lipshie; Kirschenbaum & Phillips, P.C.; Solomon and Solomon, P.C; Goldman & Warshaw, P.C.; Eltman Eltman and Cooper; Eric M. Berman, P.C.; Stephen Einstein & Associates, P.C.; Fabiano and Associates; Jones Jones Larkin O’Connell; Panteris & Panteris, LLP; Zwicker and Associates; Relin, Goldstein & Crane; Woods Oviatt Gilman; Leschack & Grodesnky; Hayt Hayt & Landau; Pressler & Pressler; Jaffe & Asher; Mullen & Iannarone; Arnold A. Arpino & Associates; Houslanger & Associates; Mann Bracken, LLC; Smith Carroad Levy & Finkel; McNamee, Lochner Titus & Williams; Thomas Law Office; Fleck, Fleck & Fleck; Eric Ostrager; Cohen & Slamowitz, LLP; Cullen and Dykman LLP; Winston & Winston, P.C.; Cooper Erving & Savage, LLP; Robert P. Rothman, P.C; Gerald D. DeSantis; Greater Niagara Holdings, LLC; Rodney A. Giove; Advanced Litigation Services, LLC; and Jason L. Cafarella.

(2) According to his press release, the NY AG alleges that, ALP, as a legal process server, was hired by high-volume debt collection law firms in New York to serve legal papers, usually a summons and complaint, notifying individuals that they are being sued and must answer the complaint. ALP, however, allegedly engaged in “sewer service,” where process servers take advantage of individuals facing lawsuits by failing to properly alert them and denying them the chance to respond. As a result, tens of thousands of judgments were obtained against unsuspecting New Yorkers, many of whom first learned they were being sued when they found their bank accounts frozen or their wages garnished. ALP covered up the fraud by falsifying sworn affidavits of service in courts across New York. The law firms and debt collectors sued then used these false affidavits to obtain default judgments against NY consumers. The Attorney General’s Office estimates that the average default judgment totaled approximately $5, 474 (based on this average amount, these default judgments apparently were not obtained in connection with foreclosure actions; one can only wonder how rampant sewer service is in foreclosures).

(3) See NY AG Files Criminal Charges & Parallel Civil Suit Against Process Serving Firm & Its CEO Alleging Massive "Nail & Mail Sewer Service" Operation.

(4) Carolyn Coffey, an attorney with MFY Legal Services, a nonprofit provider of free legal services in New York, said: “Over and over again we see hundreds of the most vulnerable New Yorkers -- the elderly, disabled, and working poor -- blindsided by default judgments in lawsuits that they never even knew about until after the cases were over. Our justice system is built on the basic premise that everyone has a right to be heard in court before a judgment can be entered against them, and the debt collection law firms that engage in sewer service deny New Yorkers this fundamental right. MFY commends Attorney General Cuomo for taking these steps to remedy the devastating effects of sewer service, and for sending the message to debt collection law firms that they must comply with the most basic requirements of due process.”

MFY’s 2008 report, Justice Disserved, documented many victims of improper service who had judgments unknowingly entered against them, often to devastating effect. SewerServiceAlpha

NY AG Slaps Subpoena On Mortgage Quality Control Reviewer; Firm To Cooperate, Gets Limited Immunity From Prosecution

The New York Times reports:

• A company that analyzed the quality of thousands of home loans for investment banks has agreed to provide evidence to New York state prosecutors that the banks had detailed information about the risks posed by ill-fated subprime mortgages. Investigators are looking at whether that information, which could have prevented the collapse of securities backed by those loans, was deliberately withheld from investors.

• Clayton Holdings, a company based in Connecticut that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.

***

• The Clayton agreement is the latest development in Mr. Cuomo’s efforts to uncover abuses in the mortgage business. In November, he sued a subsidiary of First American, a real estate services company, accusing it of inflating appraisals in an effort to secure business from Washington Mutual, the nation’s largest thrift.

For more, see Loan Reviewer Aiding Inquiry Into Big Banks. Cuomo OFHEO Fannie Mae Freddie Mac

NY AG Files Criminal Charges & Parallel Civil Suit Against Process Serving Firm & Its CEO Alleging Massive "Nail & Mail Sewer Service" Operation

From the Office of the New York Attorney General:

• Attorney General Andrew M. Cuomo [...] announced criminal charges against Long Island-based American Legal Process (“ALP”) and its CEO and President William Singler for a fraudulent business scheme in which the company allegedly failed to provide proper legal notification to thousands of New Yorkers facing debt-related lawsuits, causing them unknowingly to default and have costly judgments entered against them without the chance to respond or defend themselves.

• According to the court papers filed [...], ALP, as a legal process server, was hired by high-volume debt collection law firms in New York to serve legal papers, usually a summons and complaint, notifying individuals that they are being sued and must answer the complaint. ALP, however, allegedly engaged in “sewer service,” where process servers take advantage of individuals facing lawsuits by failing to properly alert them and denying them the chance to respond.

• As a result, thousands of judgments were allegedly obtained against unsuspecting New Yorkers, many of whom first learned they were being sued when they found their bank accounts frozen or their wages garnished. ALP allegedly covered up the fraud by falsifying sworn affidavits of service in courts across New York. The Attorney General’s Office also filed a parallel civil suit against ALP and Singler seeking a court order prohibiting them from engaging in improper service of process, monetary damages and substantial penalties.

***

• With respect to the notice sent to the law firm of Forster & Garbus, the Attorney General said: "I am putting all law firms on notice that they are responsible for the conduct of the companies they use to serve complaints and other legal documents. Law firms cannot turn a blind-eye to abuses perpetrated on their behalf.”

***

• According to the court papers [...], between January 2007 and October 2008, ALP claimed to have served 98,000 summons and complaints throughout New York State to New Yorkers alleged to owe debt. The majority of these were done through “nail and mail,” the method of service that is easiest to abuse. The Attorney General’s investigation revealed that thousands of legal documents were not properly served, or served at all, to the individuals they were intended for.(1)

For the entire NY AG press release, see AG Cuomo Announces Arrest Of Long Island Business Owner For Denying Thousands Of New Yorkers Their Day In Court (American Legal Process Provided “Sewer Service” to Thousands of New Yorkers Owing Debt According to Criminal Complaint and Civil Suit; Failed to Properly Notify the Individuals That They Faced Lawsuits As a Result, Individuals Would Unknowingly Default and Have Judgments Entered Against Them Without the Chance to Defend Themselves). Go here for version En español.

Go here for other posts on "sewer service" (a reference to the illegal process server practice of filing a sworn affidavit of proper service in court when none was actually made).

(1) Carolyn Coffey, an attorney with MFY Legal Services, a nonprofit provider of free legal services, said: “The consequences of sewer service are profound, especially on vulnerable New Yorkers. In MFY’s 2008 report, Justice Disserved, we documented many victims of improper service who had judgments unknowingly entered against them, often to devastating effect. [...] MFY applauds Attorney General Cuomo for taking the initiative to combat this illegal practice, especially because sewer service often injures the elderly, disabled and working poor of New York.” SewerServiceAlpha

Five Face Criminal Charges For Roles In Now-Defunct Upstate NY Sale Leaseback, Equity Stripping Foreclosure Rescue Peddling Operation

In Albany, New York, the Albany Times Union reports:

• A honeymoon in Europe, cruise to Antigua, spa treatments and free rent. It all came about, authorities say, because of a massive mortgage fraud scheme based on Central Avenue in Colonie. And now five defendants -- including a once-disbarred local attorney -- face felony charges from state Attorney General Andrew Cuomo that could send every one of them to state prison.

• They stand charged with taking part in a multi-million-dollar scam in which Rivertown Investments of 1762 Central Ave. allegedly used bogus buyers to dupe banks, lenders, real estate owners and title insurance corporations.

• Kevin P. Wheatley, 37, a Waterford lawyer for the company, was quietly arraigned Thursday before Judge Stephen Herrick in Albany County Court on a 23-count felony indictment accusing him of first-and-second degree grand larceny, scheming to defraud, forgery and falsifying business records. The indictment alleged Wheatley stole property and the proceeds of a mortgage loan exceeding $1 million on April 24, 2007, in Albany County. It stated he committed the same crimes for several other properties in Albany County. All exceeded $50,000. The first-degree grand larceny count alone carries a possible 25-year prison sentence.(1)

***

• Rivertown owner Geoffrey Goldman, 34, of Albany faces a possible 15 years behind bars on charges of second-degree grand larceny and falsifying business records. Goldman started the company in 2002.

• Criminal complaints in the case described its actions as follows: Rivertown would solicit homeowners in financial distress to sell their homes to the company. Rivertown, in turn, would lease the homes back to them for a term, usually 18 months. It was under a promise that net equity would be held for downpayment on repurchase of the property.

• But despite promises that Rivertown would purchase the properties, the company allegedly used straw buyers who would obtain properties -- then immediately sign deeds transferring the titles to a Rivertown holding company without notifying lenders or getting their consent. Court papers noted an investigator said one defendant told him the monthly income of straw buyers was grossly inflated on mortgage applications.

• A criminal complaint against Geoffrey Goldman noted that a portfolio for Rivertown showed 105 lease-back properties in New York, Pennsylvania and New Jersey at prices ranging from $112,000 to more than $2.6 million. Closing dates ranged from August 2003 to March 2008. But authorities say in some cases homes were never sold back, customers were evicted and some clients who repurchased homes had to spend thousands of dollars beyond their initial agreement.(2)

***

• Wheatley is the only defendant who has been indicted.(3) Complaints show all the other defendants gave interviews with an investigator. A person with knowledge of the case said some defendants, if not all, have agreed to cooperate against Wheatley. Lawyers for the defendants could not be reached.

For more, see Loan fraud probe nets 5.

Thanks to an anonymous reader for the heads-up on the story.

(1) Repotedly, Wheatley, who started working for Rivertown in 2005, previously worked at law firms in Troy and Latham and was disbarred in 2002 by the Appellate Division's Committee on Professional Standards for "dishonesty, fraud, deceit and misrepresentation." Wheatley, who did not initially challenge the allegations, was reinstated in 2005, the story states. Wheatley's prior professional misconduct, which led to his disbarment, included failure to show up at court conferences, hiding files from clients and misrepresenting the status of cases to the court and clients, the story states.

(2) Others charged include:

• Jonathan R. Goldman, 28, of Newburgh, Rivertown vice president and chief marketing officer and an alleged straw buyer, was charged with scheming to defraud;

• Jordan Laccetti, 30, of Saratoga Springs, a loan officer at Rivertown, was charged with falsifying business records. Both face up to four years in prison;

• Jessica Peryea, 27, of Albany, a licensed real estate broker and sales director at Rivertown, who faces a grand larceny charge. Peryea, an alleged straw buyer, faces up to seven years behind bars.

(3) To the extent Wheatley, an attorney, was acting in his capacity as such when allegedly screwing over the victims, the victims may be able to turn to The Lawyer's Fund for Client Protection of the State of New York for recovery of money.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (directory now includes Canadian funds - courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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