On July 10, 2007 a superseding indictment was issued in the case. It added over two dozen new counts charging some of the defendants with committing mortgage fraud in the purchase of a block of ten rent-regulated condominium apartments at 243 West 98th Street, on the Upper West Side of Manhattan. Specifically, the Indictment alleges that certain defendants obtained millions of dollars in loan proceeds from sub-prime lenders by submitting fraudulent loan documents containing false information and material omissions regarding the fact that the apartments were subject to New York’s rent regulation laws, the borrower’s intent to live in the apartment as a primary residence, the borrower’s employment and income, and the fair market value of the apartments, among other things.

It also added three new defendants to the original 23:
GALINA ZHIGUN, owner of the mortgage brokerage AGA Capital NY, Inc.
GARRI ZHIGUN
MARYANN FURMAN a.k.a “Marina”

Resources:
United States Attorney Press Release
Superseding indictment

On July 12, 2007 the United States Attorney for Southern New York announced the arrest of Brooklyn attorney Alexander Kaplan. The press release stated that KAPLAN participated in a scheme to commit mortgage fraud in the purchase of a block of ten rent-regulated condominium apartments at 243 West 98th Street (“the Apartments”) in the Upper West Side of Manhattan. On two separate days in January 2006, KAPLAN served as the attorney for the buyers and the lenders in the closings of the Apartments. KAPLAN conspired with others to obtain mortgages, based on false statements and material omissions, to finance the purchase of the Apartments.

Specifically, with respect to seven of the ten Apartments, certain sub-prime lenders were falsely told, in mortgage applications and supporting documents, that the buyers intended to live in the Apartments as a “primary residence.” With respect to the remaining three Apartments, certain sub-prime lenders were falsely told that the Apartments were to be used as “investment properties” that earned approximately $6500 a month in rent from tenants. None of the documents submitted to the sub-prime lenders disclosed that:

(1) certain buyers were seeking loans to purchase more than one Apartment as a “primary residence;”
(2) each of the Apartments was already occupied by a tenant and, therefore, not suitable for a primary residence;
(3) the Apartments were subject to rent regulation laws that precluded the buyer from charging $6500 in rent. In addition, the sellers and the buyers were all related in some respect either by blood or by marriage — to each other. None of the sub-prime lenders were informed of the fact that the sale was not an “arms-length” transaction.

As attorney for the buyers and the lenders, KAPLAN attended the closings, and submitted to the lenders signed and completed documents, including loan application documents, on which the buyers indicated whether the property was to be a “primary residence” or an “investment property,” as well as other documents that reflected whether the buyer intended to occupy the property.

Resources:
United States Attorney Press release
Criminal Complaint filed against Kaplan

MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that MAURICE McDOWALL was sentenced yesterday by United States District Judge ROBERT P. PATTERSON to ten years in prison for his participation in a wideranging home foreclosure rescue scheme, which defrauded homeowners who were facing foreclosure and banks and other lenders who made mortgage and home equity loans. According to the Indictment to which McDOWALL pleaded guilty in June 2008, other documents filed in this and related cases, and statements made in Manhattan federal court:

From November 2003 through April 2005, McDOWALL engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, were in foreclosure or facing foreclosure, by offering them a plan to “save” their homes. The plan included the refinancing of the homeowners’ debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to “sell” their homes to third parties, or “straw buyers,” who would apply for loans to be used to “save” the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to pay off the homeowners’ old debt and make one year’s worth of payments on the new loans. The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit. Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

In furtherance of the scheme, McDOWALL submitted loan applications to various banks and lending institutions on the straw buyer’s behalf. In submitting these applications, the defendants regularly used documents containing false or misleading information, including information concerning the straw buyer’s income, assets, and existing debt, to improve the straw buyer’s credit-worthiness. In addition to false statements concerning the straw buyers’ financial profile, the defendants
misrepresented to lenders that the straw buyers intended to reside in the property that would secure each mortgage or loan, when, in fact, the properties were already occupied by the distressed homeowners.

McDOWALL, who directed the daily operations of the scheme, obtained more than eighty home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans. The defendants’ profit consisted of the difference between the value of the new and old loans; they also earned at least $1.4 million in fees.

McDOWALL, 50, was sentenced to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release. In addition, Judge PATTERSON ordered McDOWALL to forfeit $2.5 million and indicated that restitution would be determined at a later date.

Of the five other defendants charged in United States v. Maurice McDowall, et al.: ALEKSANDER LIPKIN, MARINA DUBIN, and KERRI CLARKE have pleaded guilty and await sentencing; and ANDREA MOORE and MICHAEL IRVING await trial, which is scheduled for October 20, 2008, before Judge PATTERSON. As to the defendants awaiting trial, the charges are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Mr. GARCIA praised the work of the Federal Bureau of Investigation, New York City Police Department, and U.S.

In the following press release Michael J. Garcia, the United States Attorney for the Southern District of New York, announced that GARRI ZHIGUN and his mother GALINA ZHIGUN, operators of mortgage brokerage firm AGA Capital NY, Inc. (“AGA Capital”), and MARYANN FURMAN, an employee of AGA Capital, pleaded guilty today in Manhattan federal court to participating in a multimillion-dollar subprime mortgage fraud scheme. According to the Indictment, other documents filed in the case, and statements made during the guilty plea proceedings:

From 2004 to 2006, AGA Capital was a mortgage brokerage firm with various office locations in Brooklyn, New York, which in late 2006, changed its name to Lending Universe Corporation (“Lending Universe”). GALINA ZHIGUN was the record owner and registered broker of AGA Capital, FURMAN was the office manager of AGA Capital, and GARRI ZHIGUN supervised the operations of AGA Capital.

From 2004 through January 2007, GARRI ZHIGUN, GALINA ZHIGUN and FURMAN participated with others, including a lawyer, loan account officers, real estate appraisers, and straw buyers, in a scheme to defraud various subprime banks and lending institutions. During the course of the fraudulent scheme, AGA Capital earned several million dollars in commission fees for brokering hundreds of home mortgages and home equity loans with a total face value of at least $200 million dollars.

The scheme involved submitting to subprime lenders loan applications and supporting documents, which contained false information and material omissions, in order to induce the lenders to make loans that otherwise would not have been funded.
As part of the scheme, GARRI ZHIGUN, GALINA ZHIGUN and FURMAN purchased a block of ten rent-regulated condominium
apartments at 243 West 98th Street, on the Upper West Side of Manhattan (“the Apartments”). With respect to seven of the ten
Apartments, subprime lenders were falsely told in mortgage applications and supporting documents that the buyers intended to live in the Apartments as a “primary residence.” With respect to the remaining three Apartments, subprime lenders were falsely told that the Apartments were to be used as “investment properties” that earned approximately $6500 a month in rent from tenants. None of the documents submitted to the subprime lenders disclosed that: (1) certain buyers were seeking loans to purchase more than one Apartment as a “primary residence;” (2) each of the Apartments was already occupied by a tenant and therefore not suitable for a primary residence; or (3) the Apartments were subject to rent regulation laws that precluded the buyer from charging $6500 in rent.

Twenty-six other individuals were charged in connection with this scheme. Eight have pleaded guilty. Six are scheduled to go to trial on November 17, 2008, and the remaining nine defendants are scheduled to go to trial on January 19, 2009. As to the defendants awaiting trial, the charges are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

GARRI ZHIGUN, 31, pleaded guilty to one count of conspiracy to commit mail, wire and bank fraud. He faces a maximum sentence of thirty years in prison, a fine of the greater of $1,000,000 or twice the gross pecuniary gain or loss resulting from the crime, and an order to pay restitution to the victims of his crime. GARRI ZHIGUN also agreed to forfeit a total of $2,500,000.

GALINA ZHIGUN, 54, pleaded guilty to one count of bank fraud. She faces a maximum sentence of thirty years in prison, a
fine of the greater of $1,000,000 or twice the gross pecuniary gain or loss resulting from the crime, and an order to pay
restitution to the victims of his crime. GALINA ZHIGUN also agreed to forfeit a total of $1,000,000.

MARYANN FURMAN, 30, pleaded guilty to one count of wire fraud. She faces a maximum sentence of thirty years in prison, a
fine of the greater of $1,000,000 or twice the gross pecuniary gain or loss resulting from the crime, and an order to pay
restitution to the victims of her crime. FURMAN also agreed to forfeit a total of $1,000,000.

Sentencing for GARRI ZHIGUN, GALINA ZHIGUN, and MARYANN FURMAN is scheduled for JANUARY 5, 2009.

Mr. GARCIA praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and United States Department of Homeland Security’s Immigration and Customs Enforcement. Assistant United States Attorneys KATHERINE R. GOLDSTEIN, JONATHAN B. NEW and AVI WEITZMAN are in charge of the prosecution.

In the following press release Lev L. Dassin, the Acting United States Attorney for the Southern District of New York, announced on February 6, 2009 that attorney ALEXANDER KAPLAN was found guilty today of participating in a multimillion-dollar mortgage fraud scheme. KAPLAN was found guilty, after a two-week jury trial in Manhattan federal court, on all eighteen counts in the Indictment [1mb] against him.

According to the evidence at trial, statements made in open court, and the Indictment: From late 2004 through January 2007, KAPLAN and his coconspirators, using phony purchasers, or “straw buyers,” obtained hundreds of mortgage and home equity loans by submitting to various lenders loan applications and supporting documents that contained false information about, among other things, the prospective borrower’s employment, income and assets, and intent to reside in the property in question, as well as the fair market value of the property.

In addition, KAPLAN and his co-conspirators, using artificially inflated appraisals, sought and obtained mortgages and home equity loans at values that were in excess of properties’ actual sale prices and, thus, the properties’ true market values. The difference between the appraised value and actual sale price of the property represented, in the part, the profits from the scheme.

KAPLAN participated in the scheme by acting as a lawyer for the straw buyers and providing misleading and false information to the lenders. As shown at trial, concerning a block of ten rent-regulated condominium apartments at 243 West 98th Street, on the Upper West Side of Manhattan (“the Apartments”), KAPLAN served as the attorney for the buyers and the banks in the closings of sales of the Apartments, supported by 100% financing. None of the documents submitted to the lenders in these transactions disclosed that: (1) certain buyers were seeking loans to purchase more than one Apartment as a “primary residence;” (2) each of the Apartments was already occupied by a tenant, and therefore not suitable for a primary residence; or (3) the Apartments were subject to rent regulation laws that precluded the buyer from charging the reported rents.

KAPLAN presided over the closings, and obtained for submission to the lender signed and completed false documents, including, among other things, loan application documents, on which each of the buyers indicated that the Apartment was to be a “primary residence,” and false affidavits stating that the buyers intended to occupy the Apartments. Almost all of the Apartments were then resold, or “flipped,” to straw buyers within a matter of months. The purported sales prices for each of the flips was almost twice the
initial purchase price, and KAPLAN’s co-conspirators obtained almost $13 million in additional loans on the Apartments by submitting false information and documents to the lenders.

KAPLAN served as both the buyer’s and seller’s attorney in connection with the flip transactions, drafting sham contracts of sale and other documentation. KAPLAN also served as the attorney for the banks in connection with certain of the flip transactions, and distributed a portion of the loan proceeds to his co-conspirators.

KAPLAN, of Brooklyn, New York, was found guilty of one count of conspiracy to commit bank, wire, and mail fraud; six counts of bank fraud; eight counts of wire fraud; and three counts of mail fraud. The conspiracy count carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense. Each of the substantive bank, wire, and mail fraud counts carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense.

KAPLAN is scheduled to be sentenced by United States District Judge RICHARD J. HOLWELL on May 1, 2009.

Of the 26 other defendants originally charged with KAPLAN in United States v. Aleksander Lipkin, et al., 25 have pleaded guilty. The case against JOHN CIAFALO remains pending.

LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, announced that ALEKSANDER LIPKIN, a/k/a “Alex,” GARRI ZHIGUN, GALINA ZHIGUN, JOSEPH PAPERNY, FAINA PETROVSKAYA, JOHN GELIN, TOMER SINAI, and DANIEL MIKHLIN were each sentenced by United States District Judge
RICHARD J. HOLWELL in Manhattan federal court for their roles in a multimillion-dollar, sub-prime mortgage fraud scheme, as charged in United States v. Aleksander Lipkin, et al., S2 06 Cr. 1179. LIPKIN was sentenced to 110 months in prison for his role as a leader of the mortgage fraud scheme as well as his involvement in another foreclosure rescue scheme charged in United States v. Maurice McDowall, et al..

Of the 27 defendants charged in United States v. Aleksander Lipkin, et al., 25 pleaded guilty; one of the defendants — Alexander Kaplan — was found guilty following a jury trial and is scheduled to be sentenced on September 10, 2009.

In addition to the 110-month prison term, Lipkin, 30, was sentenced to five years’ supervised release. Judge HOLWELL also sentenced LIPKIN to a concurrent term of 110 months’ in prison for his role in a separate mortgage foreclosure rescue scheme to which LIPKIN pleaded guilty in United States v. Maurice
McDowall, et al., 07 Cr. 1054. LIPKIN was also ordered to forfeit $7 million and pay approximately $11.6 million in restitution.

GARRI ZHIGUN and JOSEPH PAPERNY were sentenced by Judge HOLWELL on May 28, 2009. GARRI ZHIGUN, 32, supervised the operations of AGA Capital and was LIPKIN’s business partner, as described above. GARRI ZHIGUN was sentenced to 100 months in prison, three years’ supervised release, and was ordered to forfeit $2.5 million and pay approximately $11.6 million in restitution. JOSEPH PAPERNY, 36, was a mortgage broker and was sentenced to 30 months in prison, three years’ supervised release, and was also ordered to forfeit $1 million and pay approximately $11.6 million in restitution.

GALINA ZHIGUN and FAINA PETROVSKAYA were sentenced by Judge HOLWELL on May 21, 2009. GALINA ZHIGUN, 55, was the record owner and registered broker of AGA Capital and was sentenced to 38 months in prison and three years’ supervised release. In addition, GALINA ZHIGUN was ordered to pay a fine of $7,500, forfeit $1 million, and pay $1 million in restitution.

PETROVSKAYA, 36, was a loan processor and was sentenced to time served, 30 months’ supervised release with six months of home confinement, and was also ordered to pay a fine of $2,000.

JOHN GELIN, TOMER SINAI, and DANIEL MIKHLIN were sentenced by JUDGE HOLWELL on May 20, 2009. JOHN GELIN, 41, was one of the investors who recruited and used straw buyers to purchase real estate and created fake bank statements and other fraudulent documents to submit to lenders. GELIN was sentenced to 36 months in prison, three years’ supervised release and was ordered to forfeit $1 million and pay approximately $11.6 million in restitution. SINAI, 31, was a licensed real estate appraiser who inflated appraisals for the defendants. SINAI was sentenced to 9 months in prison, three years’ supervised release, and was ordered to forfeit $70,000. MIKHLIN, 32, was a mortgage broker and was sentenced to 27 months in prison, three years’ supervised release, and was ordered to forfeit $240,000 and pay approximately $11.6 million in restitution.