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11 are charged in $10.6 million loan-fraud scam

Email|Print|Single Page| Text size + By Kimberly Blanton
Globe Staff / May 17, 2008

The Justice Department yesterday charged two Boston lawyers, seven mortgage brokers, and two others with fraudulently obtaining more than $10.6 million in loans using straw buyers or stolen identities to purchase 21 properties in the Boston area.

Federal officials said it is the biggest mortgage fraud in Massachusetts since the 1980s. During the height of the housing boom in 2005 and 2006, the lawyers and brokers allegedly falsified information about borrowers and inflated the purchase price of homes by as much as $250,000 to fool mortgage lenders and banks into loaning them more money, according to the charges filed yesterday in US District Court in Boston.

The ring netted about $1.7 million in profit.

In several cases, authorities said, the lawyers and brokers would have straw buyers use stolen identities to purchase properties and borrow funds.

Many of the buyers apparently did little to repay the loans. At least 14 of the 21 properties involved have been seized by lenders, according to county deed records. The properties are in Brockton, Quincy, Cohasset, and the Boston neighborhoods of Dorchester, Hyde Park, Jamaica Plain, Mattapan, and South Boston.

Nine individuals were charged in federal court yesterday afternoon, after agents from the FBI and other law enforcement agencies fanned out at 6 a.m. to arrest them. They were unable to locate two defendants.

The nine arrested pleaded not guilty to the charges. Two are lawyers in their 50s; most of the others are in their 20s or early 30s.

US Attorney Michael Sullivan, who brought the case, said that the victims of these schemes included not only lenders and the people whose identities were stolen, but entire neighborhoods that are seeing housing values plummet because so many homes are in foreclosure.

The loans were obtained during a frenzied period in real estate markets, when regulators have since determined many lenders were in such a rush to make loans that they used sloppy procedures and failed to scrutinize mortgage applicants. Prosecutors did not make any claims against the lenders in these transactions, nor did they explain how the defendants were able to get inflated loans.

Two Boston lawyers, Eric L. Levine, 55, of Brookline and J. Daniel Lindley, 59, of Jamaica Plain were involved in all the transactions, according to court papers. Levine also owned one property involved, a two-family on Estrella Street in Jamaica Plain. Levine's law license was suspended in 2003, and the suspension was extended in 2004 for four years.

Levine and Lindley were each charged yesterday with one count of conspiracy, 41 counts of wire fraud, and 19 counts of money laundering. If convicted, they face jail sentences of five to 20 years and fines of up to $1 million. Both worked out of an office at 8 Winter St. in Boston, which was also the address of various shell companies allegedly used in the scheme.

Seven of those charged worked for New England Merchants Corp. in Arlington: Ernst Appolon, Ralph Appolon, Daniel Appolon, Andre Junior Lamerique, Widner LaMarre, Jermaine Blake, and Samuel Jean-Louis. The remaining defendants are Latoya Haltiwanger, a broker with Topdot Mortgage, and Quincy resident Jean Noriscat. Daniel Appolon and Jean-Louis have not been arrested. Prosecutors did not disclose penalties for these defendants.

New England Merchants, a broker and lender, was shut down in October by the Massachusetts Division of Banks on charges that the firm processed fraudulent subprime loan applications.

In this case, the government alleged the lawyers and brokers were similarly falsifying loan documents, but not for legitimate borrowers.

For a property on Coleman Street in Dorchester, for example, prosecutors say Lamerique allegedly recruited a straw buyer and Ernst Appolon negotiated a $450,000 sale price with the seller in June 2005. Appolon and Lamerique then submitted applications in the straw buyer's name for two mortgages totaling $540,000 to Credit Suisse, which wired the funds into Lindley's bank account, and the funds were split up among the other parties involved, the government said.

The court documents identify the straw buyers only by initials, in this case, "R.R.," and said the mortgage application said she lived in Mattapan when "in fact she was a resident of Florida."

Suffolk County deeds records identify a Renata Richardson as the purchaser of the Coleman Street property. Phone records list a Renata Richardson at various Florida addresses. She could not be reached for comment, and has not been charged. Prosecutors did not charge any of the straw buyers and did not explain why.

After a fire at the Coleman Street property a year later, Levine and Lamerique collected $266,827 in insurance proceeds and divided the money among the four involved in the scheme, the government said.

Most of the cases were simpler: The defendants borrowed more money than the agreed upon sale price, paid the seller, and pocketed the extra money, the government said.

In March 2006, a property in the oceanfront community of Cohasset was purchased for $385,000, but the mortgage from New Century Mortgage in California was for $635,000 - $250,000 more than the sale price.

In court, US Magistrate Judge Leo Sorokin released Levine and Lindley on $200,000 bond each. Haltiwanger, a Los Angeles resident, was released on $75,000 bond.

But the judge agreed to hold the other defendants in custody until a hearing on Wednesday, after Assistant US Attorney Victor Wild argued they are flight risks. Wild did not elaborate, but other officials said some of the defendants were Caribbean immigrants.

Boston lawyer Elliot Weinstein, who was in court to represent Ernst Appolon, questioned why the Justice Department agreed to release the lawyers, who are white, while detaining the other defendants, who are black.

"It's outrageous that the government would release the two lead white men and seek to hold in detention the men of color," he said.

Kimberly Blanton can be reached at blanton@globe.com.

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