Deutsche Bank agreed to pay a $202.3 million penalty to settle the government’s civil lawsuit accusing it of mortgage fraud, U.S Attorney Preet Bharara announced today. The suit was filed last week. The bank admitted to government allegations that its MortgageIT unit defrauded the Federal Housing Administration and the Department of Housing and Urban Development for more than a decade. [more]

Sheldrake President Christopher Daly and the Riverhouse

Executives of the development firm behind the Riverhouse condominium in Battery Park City pleaded guilty to fraudulently obtaining $2.2 million from the project’s lender, according to U.S. Attorney for the Southern District of New York Preet Bharara. Sheldrake Organization President Christopher Daly and the firm’s director of asset management, Michael Abreu, submitted duplicate invoices to the project’s unmade lender to obtain additional funds to support the construction of the $573 million Battery Park City project. [more]

From left: developer Aaron Malinsky, Carnasie Plaza and Sen. Carl Kruger

Federal prosecutors agreed to drop a multi-count indictment against real estate developer Aaron Malinsky, who was charged earlier this year with paying about a half-million dollars in bribes to state Sen. Carl Kruger.

Malinsky, founder of Manhattan-based PA Associates, was charged in March with bribing Kruger in connection with several real estate projects linked to his firm, including Canarsie Plaza, a big-box retail project on Avenue D in Brooklyn.

Malinsky and lobbyist Richard Lipsky were later accused in an 11-count indictment of committing mail and wire fraud, allegedly funneling hundreds of thousands in bribes to Kruger through Michael Turano, a gynecologist who was a companion of Kruger’s. [more]

A Manhattan jury found New York City and Westchester County attorney Louis Cherico guilty of bank fraud and money laundering for his part in a fraudulent scheme involving Westchester real estate, LoHud.com reported.

Cherico conspired with four others, all of whom were already sentenced to between 12 and 51 months in prison for their parts in the scheme, to obtain mortgage loans on the purchase of several multi-million dollar Westchester homes in 2002.

The group submitted false documents to obtain mortgage loans that sometimes exceeded the purchase price of the properties. [more]

From left: Related CEO Stephen Ross, Greek shipping executive Vasilis Bacolitsas and the Brompton

Lawyers for Related Cos., the developer of the Upper East Side’s Brompton condominium , asked the U.S. Circuit Court yesterday to overturn a lower court ruling under the Interstate Land Sales Full Disclosure Act that critics charge would stifle new condo development by forcing sponsors to record sales contracts with city agencies even before a building is constructed.

In September 2010, Related, led by billionaire Stephen Ross, lost a closely watched ILSA case from Greek shipping executive Vasilis Bacolitsas and his wife, Sofia Nicolaudou, one of several buyers that filed suit in 2009 to get their escrow deposits returned at the building, at 205 East 85th Street, after the real estate market crashed. [more]

Brian MaddenBrian Madden, president and co-founder of title insurer Liberty Title Agency, was sentenced to 20 months in prison for misappropriating and embezzling escrow and other client funds from Liberty Title and two other insurance agencies he controlled, the office of the U.S. Attorney for the Southern District of New York announced today.

Beginning when the real estate market was crashing in 2008, Madden took about $2.2 million from Liberty Title. To support these withdrawals, Madden paid current client debts with new funds he collected from other clients. – Adam Fusfeld [more]

Manhattan U.S. Attorney Preet Bharara has announced charges against a former chaplain and Satmar rabbi with the New York City Department of Corrections with the largest individual case of tenant fraud ever discovered by the Department of Investigations.

Bharara’s office charged Leib Glanz and his brother Menashe Glanz each with one count of conspiracy to commit theft of federal funds and one count of theft of federal funds in connection with a $200,000 Brooklyn housing fraud scheme.

“As alleged in the complaint, Leib and Menashe Glanz engaged in a years-long subterfuge to take criminal advantage of federal housing subsidies,” Bharara said. “Especially in these trying economic times, we cannot tolerate stealing from the public.” — Katherine Clarke [more]

Manhattan U.S. Attorney Preet Bharara has announced charges against 14 defendants in a $58 million mortgage fraud scheme involving Long Island-based mortgage broker First Class Equities.

Bharara’s office filed a five-count indictment against Gerard Canino, the owner and president of First Class, five of the company’s loan officers, four attorneys with links to the company and one disbarred lawyer, all for their part in a mortgage fraud scheme involving 100 home mortgage loans.

“This brazen and wide-ranging scheme defrauded banks and lenders of millions and enriched its participants, including real estate professionals who took advantage of their inside knowledge of the system to fleece it,” Bharara said. -– Katherine Clarke [more]

William Friedland, vice president at Friedland Properties, the Melar and Costas Kondylis, founder of Costas Kondylis & Partners

Developer Friedland Properties and architecture firm Costas Kondylis & Partners have finally settled all charges with the federal government relating to the Melar, a rental building at 250 West 93rd Street that came under fire for violations of the federal Fair Housing Act, according to an announcement from U.S. Attorney Preet Bharara’s office.
Negotiations between the developers and federal authorities have been ongoing since last year. The government’s initial complaint, filed in October 2010, alleges that Friedland and Kondylis had failed to create public areas in the building, which is between Broadway and West End Avenue, that were readily accessible to residents with disabilities, as well as set light switches and other outlets in easy to reach locations or provide kitchens and bathrooms that were accessible to disabled persons. [more]

The United States government has sued Deutsche Bank AG and one of its mortgage subsidiaries for civil mortgage fraud, seeking hundreds of millions of dollars in damages, several U.S. authorities announced today.

The complaint (below in full) centers on Deutsche Bank’s MortgageIT, which it acquired in January 2007. According to the complaint, MortgageIT issued more than $5 billion in Federal Housing Administration-backed loans between 1999 and 2009, many of which were not eligible for FHA insurance and should never have been endorsed. It alleges that MortgageIT, which repeatedly lied in order to obtain approval as an FHA lender, turned a blind eye to the wrongful endorsements because they were making substantial profits off of resales on those FHA-insured loans.

The government said those loans have already cost upwards of $386 million in FHA insurance claims — a sum that is expected to rise as more and more MortgageIT loans default in the coming years.

In a statement, Deutsche Bank played down its role in the allegedly questionable activities of MortgageIT. “Close to 90 percent of the activity covered by the US Department of Justice allegations happened prior to Deutsche Bank’s acquisition of MortgageIT,” a bank spokesperson said. “When Deutsche Bank acquired MortgageIT in 2007, it was a Federal Housing Authority lender that had been operating within the oversight of the Department of Housing and Urban Development for nearly a decade. We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair, and we intend to defend against the action vigorously.”

The plaintiffs, however, did not mince words in statements about the allegations. “MortgageIT and Deutsche Bank ignored every type of red flag and breached every duty of due diligence before underwriting thousands of federally insured mortgages,” said Manhattan U.S. Attorney Preet Bharara. “While the homes the defendants issued loans for may have been built on solid ground, the defendants’ lending practices were built on quicksand. Ultimately, prudence was trumped by profit, and good faith took a back seat to good fees.” TRD

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