Feds bring charges in mortgage fraud scheme

Fourteen people connected to Long Island mortgage brokerage First Class Equities were charged Thursday in a $58 million mortgage fraud scheme involving more than 100 properties, federal prosecutors said.

The scam, operating from 2004 to 2009 out of offices in Oceanside and Old Westbury, deployed straw buyers to get lenders to shell out money to purchase distressed properties, and then diverted the money to their associates, officials said.

Federal prosecutors in Manhattan leveled the charges against First Class Equities owner Gerard Canino, 50, of Merrick, and nine other Long Islanders. Four others from Queens, Armonk, Newark, N.J., and Texas were also charged.

Manhattan U.S. Attorney Preet Bharara said the swindle, which operated on Long Island, New York City, and Westchester and Dutchess counties, left a trail of mortgage defaults and foreclosed properties in its wake.

"As alleged, this brazen and wide-ranging scheme defrauded banks and lenders of millions and enriched its participants," Bharara said in a statement. " . . . Mortgage fraud undermines the banking system and hurts hardworking homeowners."

Thirteen people arrested Thursday pleaded not guilty to charges of conspiracy, bank fraud and false statements during arraignments in federal court in Manhattan Thursday. A fourteenth person surrendered late Thursday and will be arraigned Friday, prosecutors said. They face up to 30 years in prison if convicted.

A phone number listed for First Class Equities -- also known as Thunder Funding and Mutual Capital, according to the indictment -- was disconnected. Canino didn't return a call, and his lawyer declined to comment.

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The conspirators allegedly recruited family members, including current and former spouses and parents friends and each other to serve as straw purchasers on various deals, paying them a fee.One man was paid $300,000 to act as a straw buyer on 10 different deals in 2006, prosecutors said.

Loan officers created false financial and employment information to send to lenders, and then the lawyers filed fake closing statements with the lenders while distributing the loan money to the conspirators, the indictment said.

Prosecutors also charged that the defendants resold some properties from the straw buyers to shell corporations to take out new fraudulent mortgages, or used some to get more money through home equity lines of credit.

Four Long Island attorneys were charged in the scheme -- Neal Sultzer, 61, of Plainview; Michael Raphan, 63, of Oceanside; Jacquelyn Todaro, 41, of Westbury, and Michael Schlussel, 50, of Merrick, who was identified as a disbarred lawyer.

Three loan officers from Long Island were charged: James Vignola, 31, of Freeport; Omar Guzman, 38, of East Quogue; and Robert Thornton, 64, of Merrick. Also charged were Michael Charles, 61, of Valley Stream, title company employee, and alleged straw buyer Ralph Delgiorno, 38, of Merrick.