Eight people have been indicted in a New York mortgage fraud ring that prosecutors say operated for five years and cost lenders and consumers millions of dollars.
The 83-count indictment against members of The Sandella Group, which operated in and around New York City, was announced by New York Attorney General Eliot Spitzer and state Banking Superintendent Diana L. Taylor. Spitzer said he has filed a civil forfeiture action that seeks the recovery of more than $8 million from the defendants.
“The scams carried out by these defendants not only harmed targeted individuals and lending institutions,” Spitzer said in a statement, “but had the potential to undermine the housing market in the neighborhoods where they practiced their scheme. Protecting New York’s real estate market from this kind of fraud must be a priority for all law enforcement.”
Spitzer said the total amount of the alleged fraud is still being determined.
The indictment, filed in Kings County Supreme Court, alleges that members of the “Sandella enterprise stole millions of dollars from banks and other financial institutions by submitting false and forged documents to secure mortgage loans.”
Indicted were Louis Sandella, identified as the group’s leader; his brother, Michael Sandella; real estate lawyers Gary S. Shaw and Ida D’Angelo; and John J. Walsh, Danielle Moss, Geraldine Moss and Andreas Perdikos.
According to Spitzer, The Sandella Group paid people to act as straw buyers, who allegedly used phony documents to bilk lenders out of loans. Appraisers and real estate lawyers were also involved, he said.
“False information about these straw buyers’ employment, income and financial assets were provided to the banks to obtain the loans,” according to the statement. “The banks were also provided false real estate appraisal reports which often misrepresented the physical conditions of the properties, the market value of comparable properties and the identities of the individuals who prepared the reports.”
The reports, which Spitzer said were prepared by The Sandella Group, inflated properties value by as much as $100,000.
The statement carried an example of how the alleged scam worked. It involves the January 2004 sale of a house in the Flatbush section of Brooklyn.
While the actual value of the house was $310,000, “the Sandella Group falsely told the bank that the purchase price was $450,000, and applied to the bank for a loan in that amount.”
“The criminal enterprise gave the bank false information about the financial condition of a ‘straw buyer’ that it recruited as a front man in the transaction, and submitted a forged appraisal report,” according to Spitzer’s statement. “The group then pocketed the bulk of the inflated amount, and allowed the loan to go into default.”
The eight defendants have been charged with a number of felonies, including grand larceny, operating a criminal enterprise, fraud and falsifying business records. They face up to 25 years in prison.
