Tuesday, June 21, 2011

Alexander Kaplan, Esq., Sentenced To 46 months In Prison For Mortgage Fraud Scheme

Real Estate Lawyer Sentenced in Manhattan Federal Court to 46 Months in Prison for His Role in a Multimillion-Dollar Mortgage Fraud Scheme

U.S. Attorney’s Office June 21, 2011
* Southern District of New York (212) 637-2600

Press Release

PREET BHARARA, the United States Attorney for the Southern District of New York (pictured above), announced that ALEXANDER KAPLAN, formerly a Brooklyn-based real estate lawyer and the owner of a title insurance company, was sentenced on Friday, June 17, 2011, in Manhattan federal court to 46 months in prison by United States District Judge RICHARD J. HOLWELL for his role in a multimillion dollar mortgage fraud scheme. KAPLAN was convicted, on February 6, 2009, of eighteen counts of mortgage fraud after a two-week jury trial.

According to the evidence presented at trial and statements made in court:

From late 2004 through January 2007, KAPLAN and his coconspirators obtained hundreds of mortgage and home equity loans by submitting loan applications and supporting documents to various lenders that contained false information about, among other things, the prospective borrower’s employment, income, and intent to reside in the property in question, as well as the fair market value of the property.

The fraud also involved paying individuals who fit a certain financial profile to act as phony purchasers, or “straw buyers,” of the target properties. KAPLAN’s co-conspirators then prepared and submitted false and misleading information concerning the straw buyers’ current residences, employment, income, assets, and existing debt. False documentation, such as bank statements and proof of income, were also created and submitted to the lenders.
In addition, KAPLAN and his co-conspirators sought mortgages and home equity loans at values that were in excess of properties’ actual sale prices and, therefore, the properties’ true market values. To support applications for loans in excess of the properties’ market values, they procured artificially inflated appraisals of the market value of the target properties. Using these false appraisals, KAPLAN’s co-conspirators received mortgages and other loans in excess of the actual sale price of the properties securing the loans. The difference between the appraised value of the property and the property’s actual sale price represented, in part, the profits from the scheme.

KAPLAN’s role in the scheme largely centered on the purchase of a block of ten rent-regulated condominium apartments at 243 West 98 Street, on the Upper West Side of Manhattan th (“the Apartments“). Over the course of two separate days in January 2006, KAPLAN served as the attorney for the buyers and the banks in the closings of the Apartments. He conspired with others to obtain mortgages, based on false statements and material omissions, to finance 100 percent of the purchase price of the Apartments.

In his capacity as the buyers’ attorney and bank attorney, KAPLAN presided over the closings, and obtained signed and completed false documents, including, among other things, loan application documents, on which each of the buyers indicated that the Apartment was to be a “primary residence,” and false affidavits stating that the buyers intended to occupy the Apartments. He submitted these fraudulent documents to the lenders.

Almost all of the Apartments were then resold, or “flipped,” to straw-buyers within a matter of months after their initial purchases. The purported sales prices for each of the flips was almost twice the initial purchase price, and KAPLAN’s co-conspirators obtained almost $13 million in additional loans on the Apartments by submitting false information and documents to various lenders. KAPLAN served as both the buyer’s and seller’s attorney for each of these flips, drafting sham contracts of sale and other necessary documentation. He also served as the attorney for the banks at the closings of certain loans obtained in connection with the flips of the Apartments.

In addition to the prison term, Judge HOLWELL sentenced KAPLAN, 36, of Brooklyn, New York, to three years of supervised release.

Mr. BHARARA praised the efforts of the Federal Bureau of Investigation, the New York City Police Department, and the United States Bureau of Immigration and Customs Enforcement. He also thanked the New York State Attorney General’s Office for its outstanding work in the investigation.

This case is being prosecuted by the Office’s Organized Crime Unit. Assistant United States Attorneys AVI WEITZMAN and KATHERINE R. GOLDSTEIN are in charge of the prosecution.

Mortgage Fraud: 02-09-09 Alexander Kaplan, Guilty

Posted on February 9, 2009
by alaskakid
LINK

LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, announced that attorney ALEXANDER KAPLAN was found guilty today of participating in a multimillion-dollar mortgage fraud scheme. KAPLAN was found guilty, after a two-week jury trial in Manhattan federal court, on all eighteen counts in the Indictment against him. According to the evidence at trial, statements made in open court, and the Indictment:

From late 2004 through January 2007, KAPLAN and his coconspirators, using phony purchasers, or “straw buyers,” obtained hundreds of mortgage and home equity loans by submitting to various lenders loan applications and supporting documents that contained false information about, among other things, the prospective borrower’s employment, income and assets, and intent to reside in the property in question, as well as the fair market value of the property.

In addition, KAPLAN and his co-conspirators, using artificially inflated appraisals, sought and obtained mortgages and home equity loans at values that were in excess of properties’ actual sale prices and, thus, the properties’ true market values. The difference between the appraised value and actual sale price of the property represented, in the part, the profits from the scheme.

KAPLAN participated in the scheme by acting as a lawyer for the straw buyers and providing misleading and false information to the lenders. As shown at trial, concerning a block of ten rent-regulated condominium apartments at 243 West 98 th Street, on the Upper West Side of Manhattan (“the Apartments”), KAPLAN served as the attorney for the buyers and the banks in the closings of sales of the Apartments, supported by 100% financing. None of the documents submitted to the lenders in these transactions disclosed that: (1) certain buyers were seeking loans to purchase more than one Apartment as a “primary residence;” (2) each of the Apartments was already occupied by a tenant, and therefore not suitable for a primary residence; or (3) the Apartments were subject to rent regulation laws that precluded the buyer from charging the reported rents.

KAPLAN presided over the closings, and obtained for submission to the lender signed and completed false documents, including, among other things, loan application documents, on which each of the buyers indicated that the Apartment was to be a “primary residence,” and false affidavits stating that the buyers intended to occupy the Apartments.

Almost all of the Apartments were then resold, or “flipped,” to straw buyers within a matter of months. The purported sales prices for each of the flips was almost twice the initial purchase price, and KAPLAN’s co-conspirators obtained almost $13 million in additional loans on the Apartments by submitting false information and documents to the lenders.

KAPLAN served as both the buyer’s and seller’s attorney in connection with the flip transactions, drafting sham contracts of sale and other documentation. KAPLAN also served as the attorney for the banks in connection with certain of the flip transactions, and distributed a portion of the loan proceeds to his co-conspirators.

KAPLAN, of Brooklyn, New York, was found guilty of one count of conspiracy to commit bank, wire, and mail fraud; six counts of bank fraud; eight counts of wire fraud; and three counts of mail fraud. The conspiracy count carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense. Each of the substantive bank, wire, and mail fraud counts carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense.

KAPLAN is scheduled to be sentenced by United States District Judge RICHARD J. HOLWELL on May 1, 2009.

Of the 26 other defendants originally charged with KAPLAN in United States v. Aleksander Lipkin, et al., 25 have pleaded guilty. The case against JOHN CIAFALO remains pending.

Mr. DASSIN praised the investigative work of the Federal Bureau of Investigation, New York City Police Department, and Department of Homeland Security’s U.S. Immigration and Customs Enforcement.

Assistant United States Attorneys JONATHAN B. NEW, KATHERINE R. GOLDSTEIN, and AVI WEITZMAN are in charge of the prosecution.

The charges and allegations contained in the Indictment against CIAFALO are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

N.Y. Attorney Convicted of Mortgage Fraud
Mark Hamblett All Articles
New York Law Journal
February 09, 2009

The bogus world of a Brooklyn, N.Y., attorney who built a profitable business on title insurance while earning high fees on real estate closings came crashing down on Friday as a federal jury convicted him in a subprime mortgage scam.

Alexander M. Kaplan, 34, of Lerner & Kaplan, sat stoically at the defense table while a jury of 10 women and two men pronounced him guilty on all 18 counts in an indictment charging him with conspiracy and bank, mail and wire fraud.

Kaplan, who testified in his own defense, is scheduled to be sentenced May 1 by Southern District Judge Richard Holwell.

The verdict was a victory for Assistant U.S. Attorneys Avi Weitzman and Jonathan New, who persuaded the jury that Kaplan played a pivotal role in a wide-ranging conspiracy that ripped off lenders of millions of dollars.

Kaplan's role, they proved, was to keep lenders in the dark by representing the bank, the buyer and the seller in transactions where mortgage brokers, particularly lead actor Alexander Lipkin, would use the identities of innocent straw buyers to obtain huge loans on properties. Sometimes, they would flip the properties within weeks using even more phony documents.

Weitzman told the jury during summations in the two-week trial that Kaplan was "a liar and fraudster," who "engaged in a massive fraud that was perpetrated by all these people.

"He did so by telling lies to banks over and over again. He lied about who the real purchasers were and he lied about the amount of money he disbursed from the loan proceeds," Weitzman said. "His lies were all intended to protect his criminal partners and to make sure the real estate transactions looked legitimate."

Kaplan was one of 27 people indicted in the conspiracy. All of the other defendants except one have pleaded guilty, including Lipkin who admitted to guilt in two schemes in June 2008. He has yet to be sentenced.

The first was part of a foreclosure "rescue scheme" whereby Lipkin induced distressed homeowners to transfer the deeds in their homes to straw buyers who would supposedly "save" their homes and promise to return the deed to the homeowners.

In the end, Lipkin and his cohorts, using the straw buyers, would take out millions of dollars in loans on the property. They would then default on those loans, leaving both the banks and the straw buyers damaged.

The second scheme concerned subprime mortgages. Lipkin and others submitted applications for millions of dollars to lenders using fraudulent documents, a scheme that cost the lenders more than $4.5 million.

Kaplan, the prosecutors said, was one of several dirty lawyers who helped facilitate these plots, including the signature scam in the indictment: the purchase of a block of apartments at 243 West 98th Street in Manhattan where Lipkin and several others, including Kaplan, never disclosed to the bank that the units were occupied and under rent control. Some tenants were paying as little as $393 a month.

Kaplan made between $850 to $1,100 in fees per closing and much more in title fees, Weitzman said, and he made "tens of thousands" in fees on the West 98th Street deal.

AN UPHILL BATTLE

Defense lawyer Diarmuid White of White & White in Manhattan, was faced with an uphill battle. It did not help when his client took the witness stand and was unable to remember key details, claimed paralegals handled a good deal of the work, and conceded he did not file income taxes in 2006 and then blamed his accountant.

White's strategy was to portray Kaplan as an ambitious young attorney who was trying to build a "mill" and who let things get away from him through sloppy business practices and mismanagement.

"No question he did not act as diligently as he should have," White told the jury during opening statements, asking why Kaplan "would risk everything -- his law career, his business, everything, to willingly participate in such a conspiracy?"

Kaplan, admitted to the bar in 1999 after graduating from New York Law School, started with a small firm practicing immigration, matrimonial and real estate law. After working for another real estate firm in Brooklyn, he and partner Garry Lerner, who is his cousin, started their own practice focusing on real estate.

Kaplan got his foot in the door by becoming the closing agent for one bank. He soon became the agent for another six banks and, at the peak of his practice, did closings for as many as 60 banks.

By 2004, he was doing as many as 10 closings a day, employing teams of paralegals to handle most of the transactions.

In the  same building as Lerner & Kaplan on E. 12th Street in Brooklyn, Kaplan built a thriving 10-employee title company, Executive Settlement Services.

"Why send this out? Why not have a title company that I control and all the fees that it generates?" White said to the jury during opening arguments. "Now that's good business, but it's not so good for a lawyer because there is a potential conflict of interest."

There were ethical lapses, he said, and Kaplan "spread himself too thin" because "he couldn't possibly oversee every transaction."

In his summation, White did not mince words, saying Lerner & Kaplan was "run poorly, not well supervised, not managed properly."

"There was too much emphasis on growing the business," he said. "The practice was a mess."

White said that Lipkin, "the ringleader," lied to everyone along the way, the banks, the straw buyers, the other defendants and Kaplan, whom he played for a dummy.

"He was a fool, a total fool," White said. "He was ripe for Lipkin to manipulate and that's what happened. He was duped."

But Weitzman and New convinced the jury that it was impossible for Kaplan to sign off on one document after another on the closings, particularly the West 98th Street property, without knowing, or at least consciously avoiding, the truth.

Weitzman compared Kaplan to the three monkeys who hear no evil, see no evil and speak no evil.

"Essentially, Kaplan's defense is 'I didn't see nothing. I didn't hear nothing,'" he said.

Kaplan faces a potential sentence of upwards of 30 years and a fine of $1 million, but is expected to receive much less under the U.S. Sentencing Guidelines.

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