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2010-09-22 06:59:46
By JENNIFER PELTZ, Associated Press Writer Jennifer Peltz, Associated Press
Writer Tue Sep 21, 9:20 pm ET
NEW YORK Two men convicted of leading a $100 million mortgage fraud were
sentenced Tuesday to prison in a scheme that amassed a cast of corrupt mortgage
brokers and lawyers to dupe sellers and buyers and pocket money that banks lent
people to buy real estate.
AFG Financial Group Inc. President Aaron Hand was sentenced in Manhattan to 8 1
/3 to 25 years in prison. CEO Eric Shields got 5 1/2 to 16 years behind bars.
The ranges reflect the possibility of time off for good behavior.
The Garden City, N.Y.-based mortgage brokerage house was a hub of fraud,
prosecutors said, with spokes that reached into many corners of the mortgage
business: corrupt appraisers who inflated property values, bank employees who
signed off on buyers' forged bank statements, lawyers who supposedly
represented buyers but were actually in league with AFG Financial and more.
"Crime was the business of AFG," Manhattan District Attorney Cyrus R. Vance
said Tuesday. For Hand, Shields and others, he said, "it was literally their
job."
The scam left sellers empty-handed, buyers with ruined credit, homes in
foreclosure and investors with worthless investment products linked to the bad
mortgages, prosecutors said.
Hand, 39, and Shields, 45, were convicted in July of charges including
enterprise corruption, the state's version of racketeering.
Shields denies knowing anything about the scam and plans to appeal, said his
lawyer, Michael G. Santangelo. Shields, of Media, Pa., held the company's
mortgage broker license but wasn't there day-to-day, and some witnesses
testified that they were told to keep certain documents away from him when he
was there, Santangelo said.
"There was evidence that, we believe, strongly supports his contention that he
is innocent," the attorney said.
A voice mailbox for Hand's lawyer wasn't accepting messages Tuesday, and no one
immediately responded to a message left on a cell phone for his firm. Hand is
from Oyster Bay Cove, N.Y.
At least 25 other people also have been convicted or pleaded guilty in the
complex scam surrounding AFG Financial Group Inc., which is separate from
Cincinnati-based American Financial Group Inc., an insurance holding company
that goes by AFG.
AFG Financial Group found real estate owned by people in financial trouble and
then found straw buyers who had good credit but needed cash to front for
the purchase of the property, prosecutors said.
The buyers usually didn't know they were getting into sham transactions,
prosecutors said. Instead, they were told the deals were investment
opportunities that would help people save their homes, earn investors a healthy
return and cost the buyers nothing but their signatures.
The conspirators would strike a deal to buy and then get a bank to finance the
purchase, with the help of inflated property appraisals, phony loan
qualification packages and forged W-2 forms, pay statements and bank documents.
In one case, the group doctored paperwork to pass off an overgrown, vacant
Bronx lot as a two-family house to get a $500,000 mortgage, prosecutors said.
Once the deals closed, lawyers who were in on the fraud put the mortgage money
in escrow accounts. Then they and their accomplices simply took the money,
without paying the seller or anyone else, prosecutors said.
The straw buyers were left with bad credit and no investment return, and the
lender foreclosed on the seller's property and took ownership.
In some cases, the banks had already sold investments based on the worthless
mortgages.