In a press release the US DOJ in Washington DC announced that the President of Douglas Development Corporation and two high level employees have been indicted by federal grand jury on conspiracy, bribery, fraud and tax evasion charges. One of the fraud charges relates to:

Fraud in a Mortgage Disbursement

Douglas Jemal, Norman Jemal and Blake Esherick are charged with engaging in a scheme to defraud a mortgage company, Mortgage Capital, Inc., by falsifying documents submitted to the mortgage company which resulted in the fraudulent release of $430,000 in loan proceeds directly to Douglas Jemal for his and Norman Jemal’s personal use and benefit, rather than to a third party vendor as required by the mortgage.

In announcing today’s indictment, United States Attorney Wainstein, FBI Assistant Director Mason, Inspector General Willoughby and IRS Special Agent in Charge Raven commended City Councilmember Jim Graham for uncovering evidence of possible favoritism by Lorusso toward certain contractors during City Council hearings held by the Councilmember in 2003. They also thanked the city government for the assistance and cooperation it provided throughout this investigation. Lastly, they praised the work of FBI Special Agents David McClelland and Thomas Chadwick; District of Columbia Inspector General Agent Larry Carr; Special Agents of the Internal Revenue Service, Criminal Investigation; legal assistant Lisa Robinson, and Assistant United States Attorney Mark H. Dubester, who will be prosecuting this matter.

An indictment is merely a formal charge that a defendant has committed a violation of criminal laws. Every defendant is presumed innocent until and unless found guilty.

Please click here to read the indictment
Please click here to read the full, 5 page, US DOJ press release which gives details of all of the charges.

United States Attorney Tom Colantuono and the Special Agent in Charge of the Northeast Field Office of the Department of Veterans Affairs (VA) Office of Inspector General, Criminal Investigations Division, Jeffrey G. Hughes, announced that Chief United States District Court Judge Steven McAuliffe sentenced Robert Mayer, a former employee of the VA Regional Loan Office in Manchester, New Hampshire to 63 months in prison earlier today.

While working for the VA, Mayer’s duties included hiring contractors to repair, maintain and sell residential properties the VA was required to purchase when veterans defaulted on mortgage loans that were partially guaranteed by the VA.

When he pleaded guilty to conspiracy and bribery charges last March, Mayer admitted that he dishonestly manipulated the VA’s contract award and payment procedures for four contractors to whom he awarded more than $4 million in contracts over a five-year period. One of the contractors, John Burke of 4 Cross Road in Derry, New Hampshire, received contracts worth more than $3 million from Mayer. In exchange for the contracts, Burke made numerous secret cash payments, totaling more than $100,000, to Mayer. Burke also renovated bathrooms, installed central air-conditioning, repaired and made improvements to Mayer’s residence at 4 Hidden Road in Salem, New Hampshire for free.

He also paid other individuals to repair and make improvements to Mayer’s home and a home that is owned by one of Mayer’s relatives. Mayer also used his authority as an employee of the VA to award government contracts to two other contractors, a plumber and an electrician, who helped Burke renovate the bathrooms and install central air-conditioning in Mayer’s home for free. A fourth contractor who received contracts from Mayer, regularly mowed Mayer’s lawn, installed a retaining wall along Mayer’s driveway, and occasionally plowed snow from the end of his driveway for free.

Mayer was also ordered to repay $419,400 .00 to the VA. He will be on supervised release for 3 years when he is released from prison. Burke has pleaded guilty to conspiracy and bribery charges. He will be sentenced by U.S. District Court Judge Paul Barbadoro next month.

A St Louis mortgage agent and two mortgage brokers from California have pleaded guilty to bribery charges, United States Attorney Catherine L. Hanaway announced today.

Hanaway commended the work performed on the case by the Federal Bureau of Investigation and Assistant United States Attorney Jeffrey Jensen, who is handling the case for the U.S. Attorney’s Office.

DEREK A. FENTON , 30, of the 200 block of Ashford Oaks Drive, Wentzville, Missouri; RICHARD MEHLINGER , 44 of Los Angeles, California; and TERRY GALE , 42, also of Los Angeles, California, each plead guilty to one felony count of bribery in connection with bank transactions. All three defendants appeared before United States District Judge Henry E. Autrey.

Each defendant now faces a maximum penalty of thirty years in prison and/or fines up to $1,000,000. Restitution is mandatory. Fenton is scheduled to be sentenced on October 27, 2005. Mehlinger and Gale are scheduled to be sentenced on November 3, 2005.
According to the facts filed with the court, between November 2002 and June 2004, Fenton was employed by CitiMortgage, Inc., in O’Fallon, Missouri. Fenton was the primary contact at CitiMortgage, Inc. for several mortgage brokers who were located throughout the United States. In the typical scheme, Fenton would allow these brokers to back-date their loan commitments so that the brokers’ clients would receive more favorable terms from CitiMortgage, Inc. In exchange for the more favorable terms, Fenton accepted bribe payments from several of these mortgage brokers.

Richard Mehlinger and Terry Gale were employed by Delta Home Loans, Inc., doing business as Windsor Funding Group, located in Los Angeles, California. Fenton caused CitiMortgage, Inc., to make 41 loans from CitiMortgage, Inc. for approximately $19,992,700 on terms more favorable than permitted by CitiMortgage. In exchange, between November 1, 2002, and December 31, 2003, Mehlinger and Gale paid Fenton a total of approximately $47,651 in approximately 20 separate payments. CitiMortgage, Inc. lost a net total of approximately $403,043 on these loans.

Apart from Mehlinger and Gale, Fenton accepted smaller cash payments and other gifts as bribes from other mortgage brokers. The total bribe payments received by Fenton was more than $70,000.

Acting United States Attorney Kathleen M. Mehltretter announced today that Jose Cipolla, age 47, of 60 Kaye Park Terrace, Rochester, New York, has pleaded guilty to perjury in front of United States District Court Judge Charles J. Siragusa, in violation of 18 U.S.C. §1623, which carries a maximum sentence of 5 years imprisonment, a $250,000 fine, or both.

Assistant U.S. Attorney Richard A. Resnick, who is handling the case, stated that the defendant was the owner of Mardell Construction located 2316 Lyell Avenue, Rochester, New York. During the years 2002 through 2004, the defendant provided kickbacks in amounts approximately equal to 2 to 5 percent of the contract amount to City of Rochester rehabilitation specialists. The defendant provided these kickbacks in order to insure that he received projects from the City of Rochester which were funded by the Department of Housing and Urban Development.

The rehabilitation specialists to whom the defendant provided kickbacks included Mark Stedman, David Lippa and Steven Young. The kickbacks were generally paid in cash. Many of the kickbacks paid to David Lippa were disguised as a loan the defendant was purportedly repaying to David Lippa. Further, on one occasion the defendant paid the Volunteers of America the amount of $5,000 in connection with a mobile home purchased by Mark Stedman. Please click on the names in red to read our other stories on this case.

On March 8, 2005, the defendant testified in the federal grand jury impaneled in October 2004 in Rochester, New York in the Western District of New York. The defendant testified in connection with an investigation regarding whether City of

Rochester rehabilitation specialists were receiving kickbacks from contractors to steer EACH and LEAD program projects. In the grand jury, the defendant testified that while he had paid kickbacks to Mark Stedman and Steve Young, he had not paid kickbacks to David Lippa. However, the defendant knew at the time of his testimony in the grand jury that he had in fact paid substantial kickbacks to David Lippa and that such information was substantial to the government’s investigation of David Lippa.

US DOJ Press Release - April 12, 2005

United States Attorney Michael A. Battle announced today that Mark Stedman, age 47, of 622 Whittier Road, Spencerport, New York, has pleaded guilty in front of United States District Court Judge Charles J. Siragusa to mail fraud, in violation of 18 U.S.C. §666, which carries a maximum sentence of 10 years imprisonment, a $250,000 fine, or both.

Click here to read the Criminal Information

Assistant U.S. Attorney Richard A. Resnick, who is handling the case, stated that Stedman was a rehabilitation specialist for the City of Rochester, and he was responsible for writing specifications for the rehabilitation of privately owned housing within the City.

The homeowners must first qualify for a grant program administered by the city and funded by HUD. The homeowner then has to select four construction companies to bid on the project and one of these companies has to be minority owned. These grants range between $10,000 and $30,000 per project and the homeowner may qualify for more than one type of grant.

Stedman admitted to receiving bribes from various contractors in return for steering contracts to the contractors during the years 2002 through 2004. Stedman would steer the contracts to the contractors by telling the contractors the amount of the lowest bid. The contractors would then bid a lower amount than the lowest bid in order to win the bid. After the contractors were awarded the project, the contractors would pay Stedman between 2 and 5 percent pf the contract amount.

Further, the City of Rochester participates in a federally funded emergency grant program known as the “EACH program”. Under the EACH program, emergency grants ranging up to approximately $7,000 are given to qualifying homeowners for emergency housing repairs, such as a new furnace or roof. The defendant was the rehabilitation specialist for the City of Rochester who was primarily responsible for managing and finding contractors to bid and complete the EACH program projects.

Under the EACH program, the defendant was required to solicit bids from three different contractors and award the project to the lowest bidder. However, during the years 2002 through 2004, the defendant steered EACH program projects to nine contractors in connection with a prearranged agreement.

Specifically, the contracts were awarded as follows: (1) The defendant would solicit a bid from a contractor. The contractor knew that the project would be awarded to him or her if they wanted the project because they knew that the defendant would not be soliciting bids from other contractors, as was required.

(2) The contractor would then submit a bid to the defendant and also obtain two other “courtesy bids”. Courtesy bids were bids that the contractors would request other contractors to submit to the defendant. These other bids would be in amounts greater than the bid submitted by the contractor who had the prearranged agreement with the defendant. Courtesy bids were a common practice among contractors bidding on City of Rochester funded projects.

(3) After receiving the low bid and the two courtesy bids, the defendant would award the contract to the contractor, and in return, the contractor would pay the defendant a cash kickback from the money the contractor received after completing the project.

(4) Due to the fact that the contractor knew that he or she was the only “real” bidder on the project, and that the bidding process was rigged and would not be competitive, as required, the contractor knew that he or she could bid a higher amount than he or she would have otherwise had the process been a competitive bidding process. Thus, the contractor would receive more money for a project under the prearranged agreement the contractor had with the defendant. Further, the contractors advised that they would include in their bid, if possible, the amount that they were required to kickback to the defendant. Consequently, the City of Rochester and HUD were defrauded in that more money was paid to the contractor than should have been paid for the EACH program projects.

(5) The contractors provided kickbacks in amounts approximately equal to 2 to 5 percent of the contract amount.

The EACH program administered by the City of Rochester is funded by HUD. HUD provides the City of Rochester each year with funds well in excess of $10,000 to fund the EACH program.

US DOJ Press Release – March 21, 2005

ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and PASQUALE J. D’AMURO, Assistant Director-in-Charge, Federal Bureau of Investigation, New York, today announced that EDWARD REICH, a former vice-president of the New York State Bar Association, and a former president of the Brooklyn Bar Association and chairman of its Judicial Screening Committee, pleaded guilty this morning to conspiracy to accept bribes in his capacity as a court-appointed referee of foreclosure sales at the Brooklyn Courthouse of the New York State Supreme Court.

Read the indictment by clicking here

REICH stated during the plea proceedings that in 2002 and 2003, he accepted five separate cash bribes in his capacity as a court-appointed referee at the sales of three foreclosed properties in public auctions that he conducted on the steps of the Brooklyn Courthouse of the New York State Supreme Court. REICH admitted that in exchange for two $2,000 bribes, he lowered the purchase price of two properties by a total of $65,000 from their winning bids at auction. He also admitted that in exchange for the third payment of $500, he called a law firm representing the bank that held the mortgage on one of the properties and requested an adjournment of the winning bidder’s closing. REICH admitted that in exchange for a fourth payment of $1,000, he permitted purchasers to proceed with their purchases even though they did not pay him the required ten percent deposit. Finally, REICH admitted that in exchange for a fifth payment of $5,000, he called the aforementioned law firm, falsely informed them that he had not received any deposit money, and then attempted to persuade the law firm that they should re-auction the property without pursuing the purchasers in civil litigation.

In addition, REICH admitting filing an affidavit with the United States District Court during pre-trial proceedings that contained materially false information and agreed that his sentence should reflect this obstruction of justice.

REICH is a former director of the New York State Trial Lawyers Association, a former member of the American Bar Association’s House of Delegates, and a former member of the New York State Grievance Committee for the Second and Eleventh Judicial Districts.

“Today’s guilty plea established that no one can hold himself above the law, regardless of his position within the bar,” stated United States Attorney MAUSKOPF. “When Edward Reich was a court-appointed referee, he did not merely sell foreclosed properties, he sold out justice itself. We will continue to vigorously investigate and prosecute courthouse corruption.”

FBI Assistant Director-in-Charge D’AMURO stated, “A court-appointed referee entrusted to act impartially in foreclosure auctions was essentially willing to put his integrity on the auction block to line his pockets. For participants in the court system to have faith in its fundamental fairness, we must — and we will — be vigorous in rooting out corruption.”

REICH’S sentencing has been scheduled for June 24, 2005.