Federal agents with the FBI and the Department of Housing and Urban Development (HUD) have charged five people in connection with a $33 million scheme to defraud homeowners and banks involving reverse mortgages in New York state and Connecticut.
The indictment, which was unsealed in White Plains, N.Y., federal court last week, alleges that the five defendants preyed upon vulnerable homeowners struggling with their monthly mortgage payments, according to a statement issued by Preet Bharara, U.S. Attorney for the Southern District of New York.
“When the defendants were done with the victims, after falsely promising to reduce or even eliminate their mortgage debt for fees, these homeowners were left much worse off, in even greater debt,” Bhara said in a press release. “With the charges today, and thanks to the investigative work of the FBI and HUD, the defendants now face federal fraud charges.”
Included in the indictment are Bruce Lewis, 65, and Jacqueline Graham, 47, who are identified as partners in a business they called the Pillow Foundation or the Terra Foundation, a company that described itself as a business that would investigate and eliminate mortgage debt in exchange for a fee.
Also charged were Anthony Vigna, 59, who worked as an in-house lawyer at Terra; Rocco Cermele, 54, who served as Terra’s director of operations; and Paula Guadagno, 58, a real estate title professional who performed real estate title work for Terra.
In at least 2011and 2012, the five defendants allegedly told potential clients that Terra could eliminate their monthly mortgage debt in exchange for a fee, when in reality, the company filed fraudulent discharges of mortgages at local county clerk’s offices in Westchester and Putnam Counties and in Connecticut.
These fraudulent documents made it appear as if Terra’s clients’ mortgages had been discharged, when in fact they had not, according to the indictment.
To profit from the scheme, investigators allege Terra and the defendants charged monthly fees that they said covered, among other things, audits of the clients’ properties that they often failed to perform.
Additionally, Terra and the defendants also encouraged clients to take out a second mortgage or reverse mortgage on the properties for which Terra had claimed to have discharged the first mortgages. By doing so, the fraudulent discharge documents would make it appear as though there were not any liens on the clients’ properties.
Once the clients had obtained second mortgages or reverse mortgages, the indictment states that Terra and the defendants retained substantial portions of the proceeds. Some of these second or reverse mortgages were made under HUD’s Home Equity Conversion Mortgage program.
“HUD’s reverse mortgage program was created to help our senior citizens find greater financial security through FHA-insured loans,” said HUD-Office of Inspector General (OIG) Special Agent-in-Charge Christina Scaringi. “The defendants’ alleged scheme to unjustly enrich themselves through the victimization of our senior citizens is a shameful act that will not be tolerated by the HUD OIG.”
In total, Terra and the defendants filed nearly 60 fraudulent discharges in Westchester and Putnam Counties in New York and in Connecticut.
The fraudulent discharges claimed to discharge mortgages with a total loan principal of over $33 million.
Each defendant is charged with one count of conspiracy to commit wire fraud, bank fraud and mail fraud, which carries a maximum penalty of 30 years in prison and a $1 million fine.
“As charged, the defendants exploited a program designed to help cost-burdened individuals enjoy the privilege of affordable housing,” said FBI Assistant Director-in-Charge William F. Sweeney, in a release. “Crimes of this nature not only hurt the victims financially, but often force upon them other forms of anguish while harming the financial integrity of the very programs established to help them.”
Vigna, Cermele and Guadagno were taken into federal custody on the morning of Thursday, December 1, and were presented in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.
Lewis and Graham remain at large as of this writing.
HUD-OIG plans to continue to “aggressively” pursue those who would prey on America’s senior citizens and encourages anyone having knowledge of such schemes to contact its HUD hotline.
Read the unsealed indictment here.
Written by Jason Oliva