Sunday, July 15, 2012

Scammer Who Ran Short Sale Ripoff By Recycling Homes Earlier Used In Straw Buyer Racket Cops Plea, Then Points Prosecutorial Spotlight Onto Cohorts

In New Haven, Connecticut, the New Haven Independent reports:

  • A young entrepreneur who struck it rich in New Haven real estate in his early 20s only to land in federal investigators’ crosshairs admitted to a judge that he broke the law—as Part II of a massive mortgage fraud case begins to take center stage. Menachem Joseph “Yossi” Levitin made the guilty plea [last week] in U.S. District Court in Bridgeport. He copped to committing mail fraud, wire fraud and bank fraud.

    He faces up to 30 years in jail and $20 million in fines for helping arrange to bilk lenders out of $10 million while leaving a trail of rundown New Haven properties. As part of Thursday’s plea deal, Levitin will give up ownership in 19 properties and forfeit about $160,000.

    The feds arrested him in 2010. They seized 51 of his properties—properties he and allies bought with the proceeds from alleged mortgage scams on 40 other properties perpetrated between October 2006 and November 2008.

    However, since then Levitin has remained in business as the feds have continued building a case against his alleged co-conspirators, two of whom were subsequently indicted last October.
  • A New Haven Realtor, Charles Lesser, also pleaded guilty to the same charges in the case Thursday. Lesser, who’s 30, acted as a broker in “at least 20 fraudulent transactions” connected to at least $2.8 million in lender losses, according to the government.

    How long Levitin and Lesser might have to spend in jail may depend on whether, and to what extent, they have been cooperating with the federal investigation.(1) Levitin’s case, and those of the others indicted, will come before U.S. District Court Judge Janet Hall. Hall is scheduled to sentence Levitin on Sept. 26.

    Which means months of waiting—and pressure—in the meantime. Levitin is believed to face enormous pressure, both from government prosecutors making cases against other targets, and from the tight-knit New Haven Chasidic community in which he was raised.
  • According to the federal complaint in the Levitin case, he and his partners ran two alleged scams, according to the feds: “seller assistance scams” and “short sale scams.”

    Here’s how the former allegedly worked: Levitin found owners eager to unload rundown properties. He allegedly acted as a middleman—agreeing on a sales price; finding a buyer; arranging for the appraisal. He got an appraiser to prepare an appraisal document for $30,000 to $145,000 more than the value of the house. He allegedly had a sale document drawn up to reflect the higher, pretend price.

    The fraudulent documents, plus fake leases and rent payment records, were used to obtain mortgages at the inflated price. The alleged schemers allegedly pocketed the difference between the real sales price and the inflated price.

    Meanwhile, the new owner wouldn’t pay the mortgage. The lender would foreclose; it wouldn’t be able to sell the house for the inflated value of the mortgage.

    That problem—a house with a mortgage higher than its value—has plagued properties throughout New Haven neighborhoods, leaving them empty and deteriorating. The situation opened the door for another scam the Levitin crew allegedly undertook: the short sales.

    Levitin would allegedly step in and offer to take the property off the lender’s hands for less money than the mortgage was worth. The lender, wishing to cut its losses, would agree, unaware that Levitin had allegedly orchestrated the whole deal.
  • Much of the case is built around secret recordings and other information provided by an unidentified undercovercooperating witness” who allegedly bought properties through Levitin.
For the story, see Scammer Pleads Guilty.

(1) Another example of squealing schemers abandoning a 'sinking conspiratorial ship', winning the race to the prosecutor's office and seeking to take down fellow co-conspirators by 'throwing them under the bus' to score a better break on a plea deal. As noted by one learned Federal judge in referring to the not-uncommon 'race to the prosecutor's office' that breaks out among participants in an 'about-to-fall-apart' criminal conspiracy:

  • "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

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