NEW YORK (Reuters)
- New York prosecutors on Wednesday said 13 people and a mortgage origination company have been indicted on charges of running
a multimillion-dollar real-estate fraud that cheated lenders through sham sales.
The defendants include
employees at the Long Island, New York-based mortgage company AFG Financial Group Inc, several attorneys and other defendants,
according to Manhattan District Attorney Robert Morgenthau.
scheme ran from 2004 until this year, though most of the activity occurred from mid-2005 to 2007 at the height of the U.S.
home lending boom, Morgenthau said.
"This is a major
oversight by federal oversight bodies," said Morgenthau. "If there was any legitimate side (to the company), it
was by accident."
The indictment charges the defendants
with 19 fraudulent mortgage transactions totaling more than $12 million, but Morgenthau said the scheme probably involved
more than $100 million.
Lawyers for the defendants could
not immediately be reached for comment.
Another dozen defendants
who also participated in the purported scheme have already waived indictment and pleaded guilty, Morgenthau's office said.
The investigation is continuing, and Morgenthau said the size of the scheme could eventually
total $200 million.
One lawyer accused of engaging in fraudulent
transactions was involved in transactions adding up to more than $100 million, Morgenthau said.
Lenders who were victimized in transactions made by that one lawyer included New Century
Mortgage Corp, WaMu/Long Beach Mortgage Co, Countrywide Financial, First Franklin Financial Corp and Mortgage Network USA
Morgenthau said AFG located distressed residential
properties throughout the New York City area, and engaged in a fraudulent scheme to steal millions from lending banks using
Money would be put up by banks and straw buyers,
but the money would not be repaid and the homes would be foreclosed.
"One of the morals of this case is, there's no free lunch. People with distressed mortgages wanted to be
bailed out," Morgenthau said of the victims.
reporting by Martha Graybow; Editing by Steve Orlofsky)