I pleaded guilty for my role as an attorney on seven closings involving seven different sub prime mortgages in 2007 and 2008. Other than my closings fees, I made no money. The Feds never claimed that I knew about false appraisals, false income statements, false leases, false appraisals, or false loan applications.
There were two banks that handled most of the loans: First Central Savings Bank and First Meridian Mortgage. These banks made huge commissions when they sold these loans to bigger banks such as Wells Fargo and Countrywide. First Meridian and First Central didn’t lose money from the closings I handled. They made no claim for restitution in my case. What acts of fraud did First Central Savings Bank and First Meridian commit? I don’t know if these banks committed fraud in my case, but I know that they sued each other in Federal and State court for fraud and RICO. First Central claimed that First Meridian processed hundreds of fraudulent loans in the tri State region in 2007 and 2008, and passed off these bogus loans to First Central. In its defense First Meridian claimed that First Central knew all about these bad loans. Both banks couldn’t be more sleezy. First Meridian held back monies from the borrowers in each of these closings and made monthly mortgage payments on behalf of borrowers directly to First Central. First Central had an easier time selling these loans after it showed a history of mortgage payments. First Central claimed tens of millions of dollars in losses. But the Feds couldn’t be bothered to haul these two banks into criminal court. Too big to jail? To big to fail?
The properties I closed were worth far less than the false appraisals submitted to the banks. I didn’t know that these properties were gutted out hovels. Closing attorneys don’t get involved with appraisals or inspect houses. I wrote checks to the sellers of two of these run down properties. The checks totaled about a half a million dollars. Who were the owners of these near worthless three family shacks? The owners were two well established New Haven realtors named Ana Feigelman and Steve Freidman, who own “Team Realty.” Bonnie and Clyde. The Feds knew all about Bonnie and Clyde yet let them off the hook. Was Team Realty too big to fail? Team Realty has some of the worst on line reviews on the internet. Clyde handles property management for firms like Edgewood Elm Housing Inc., a non-profit that specializes in taking houses off the New Haven tax rolls thus shifting the tax burden to other taxpayers, and finagling government grants to plant trees in their neighborhood, thus increasing the value of their properties at the taxpayers expense.
And what about the appraisers in my case? Why didn’t they get charged? The government was too focused on the attorneys in my case. Almost half the people indicted in my case were attorneys, and a good percentage of the guys in my prison were closing attorneys from the tri-State region.
The prosecutor ominously told jurors in the trial of my co-defendant Constantinou that many people were part of this massive conspiracy, “even attorneys.” Constantinou referred many of his deals to a mortgage broker named Richard Sabrowske. Sabrowske closed the deals and sent Constantinou back referral fees, which the Feds said were “kickbacks.” Sabrowske was let off the hook and never got charged. You could probably call him today and apply for a mortgage.
The Feds let many other people off the hook in this “massive” conspiracy. The Feds called its bust “Operation Stolen Dreams” and said that mortgage fraud “ruins lives, destroys families and devastates whole communities” and is “partially responsible for the billions spent in bailout money.” In my case the Feds chose not to indict many sellers, appraisers, straw buyers, and many others who processed the fraudulent paperwork. And what about all the families who lied on their mortgage applications during the run up in the housing market? None of them got busted for getting mortgages they couldn’t afford. Most of them ended up living in their houses rent free for years while their foreclosures dragged on and on while the Federal government tried to get banks to modify loans with the “Obama Plan,” which was a complete Fed gov failure. Operation Stolen Dreams? The homeowners who didn’t pay $2,500.00 a month on their mortgages and property taxes for five years ended up saving $150,000.00 in rent they didn’t have to pay, all tax free.
The Feds refused to bust any of the bankers who “ruined lives, destroyed families and devastated whole communities.” During the savings and loan bank fraud fiasco of the 1980’s over one thousand bankers were prosecuted. Yet the mortgage fraud fiasco, which was seventy times larger than the savings and loan fiasco, produced no bank executive prosecutions. One of the alternate jurors in Constantinou’s trial gave the judge a hard time and questioned why all the big bankers got off the hook. But it wasn’t enough for Constantinou to dodge a conviction and five years behind bars. Constantinou is currently challenging his guilty verdict on appeal.