Attorney Admits Participation in Mortgage Scam

Allison Tussey —  March 3, 2011 — 2 Comments

Richard Novak, 47, Middletown, Connecticut, pleaded guilty before Chief United States District Judge Alvin W. Thompson in Hartford to one count of making a false statement on a federal mortgage loan document.

This matter stems from an investigation into an extensive mortgage fraud scheme headed by Syed Babar and others during which participants obtained residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals.

According to court documents and statements made in court, Novak acted as the attorney representing the seller of a residence located at 97 Bradford Avenue, East Haven, Connecticut. Novak also had power of attorney for the seller and had previously lived at the residence. In connection with the closing for the property, which occurred on approximately June 4, 2008, Novak knowingly signed a HUD-1 Settlement Statement that contained several false statements, including an overstatement of the amount required to pay off a second lien on the property, a representation that the buyer had paid a $22,000 deposit when no deposit was ever paid, a representation that $48,345.62 was owed to “Sheda Telle Construction” for an “outstanding invoice” when there was no outstanding invoice, and a representation that $6,140 of the seller’s funds would be used to pay off “GE Money Bank for PMSI in appliances” when no such payoff was owed.

The 97 Bradford Street property eventually went into foreclosure and the lender suffered a loss of more than $120,000.

Judge Thompson has scheduled sentencing for June 6, 2011, at which time Novak faces a maximum term of imprisonment of five years.

On February 1, 2011, Babar pleaded guilty to multiple federal charges related to his leadership of this extensive mortgage fraud scheme, which has caused losses in excess of $3.2 million to lenders. He awaits sentencing.

David B. Fein, United States Attorney for the District of Connecticut, announced the guilty plea. 

This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development – Office of Inspector General, and is being prosecuted by Assistant United States Attorneys Eric J. Glover, Susan Wines and Liam Brennan.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

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Allison Tussey

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2 responses to Attorney Admits Participation in Mortgage Scam

  1. I originally gave him $15,000.00. As time went on he asked for, and received additional property and money totaling $22,500.00 all the while claiming the money was being held in an escrow account and an accounting would be given at various stages. I have documentation of phone calls, some recorded, over 30 emails and letters asking for, but never receiving an accounting of how he spent my money or even if any is left.
    I also agreed to pay him a fee of $800.00 to do a closing on my house. At the day of the closing he had entered a fee of $2500.00. I asked for an explanation and was told that was his “adjusted fee”. There was also a fee from a “Bank” for $1200.00. I again asked for an explanation and was promised a revised “final” settlement sheet. I have emailed and written many times asking for this settlement sheet. To this day, he has failed to supply one and no accounting who or what the “Bank” was.
    The only accounting of any of the money was made by him under oath at a hearing with Trustee Ronald Chorches. He stated, when asked, that I had only paid him $4500.00. I had no knowledge prior to this hearing, that he would have made that false statement under oath. He had always told me that the cost could be as much as $15,000.00 for his fee for a bankruptcy.
    At the conclusion of the Trustee’s involvement in late 2010, Mr. Chorches, in my presence, asked for and received an agreement from Mr. Novak to join him in a law suit against the landlord of my business in order to protect the remaining inventory being held by the landlord. Those assets were estimated to have a resale value of $200,000. 00. Mr. Chorches has told me that Mr. Novak never followed through with his agreed participation even though Mr. Novak had told me that part of the $15,000.00 would go to pay expenses for court proceeding against my former landlord. Having no money to hire another attorney, I lost the ability to protect the inventory and the total value of my company because I had given Mr. Novak all the money that I had left. He left me broke.
    He has avoided my emails and phone calls over the last two years. One period lasted 7 months. He even blocked my emails. When I considered bringing legal action against him in late 2011, he sent me an email telling me that he had legal representation. Because he would not answer phone messages, I called his attorney only to be told that in fact he was not being represented by him at that time. I then drove to his home in Ct. from my home in Delaware with a specific appointment time given by him by email only to arrive, after driving 6 hours, to find him not at home and avoiding even my emails asking where he was.
    In conclusion, I am asking the court to levy the most severe penalties available against Mr. Novak for the crimes he has plead to in your court, because I am convinced he is an habitual liar and a manipulative thief. He is a disgrace to the profession of the practice of law.

    Earl Roland Wilt

  2. Doreen M. Butler March 16, 2012 at 4:45 pm

    Attorney Novak should be disbarred from practicing law.
    I worked for this attorney for several years and can personally attest to his fraudulent, deceptive and immoral practice of law. As an employee, I was victimized in so many ways I am embarrassed and ashamed to admit.
    The worst and last scam involved “selling” him my condo which I could no longer afford because he did not pay me the salary agreed upon when I was hired. Desperate to stay in the home I raised my son in as a single mother – he obtained a mortgage through Countrywide Bank, in which he represented all parties in the transaction. I received NO FUNDS from the proceeds of the sale. The agreement was that I would pay him the mortgage, condo fees, etc. and he would then quit claim the property in my name in the event my financial situation did not improve and could no longer pay him. Needless to say, the property was never quit claimed to me, he filed Chapter 7 bankruptcy excluding the property as an exemption thereby allowing the lender to commence foreclosure proceedings.
    Long and short of this – I didn’t “sell” my home – I gave my home away!!!
    The loss of my home, the financial damage and emotional distress this attorney brought to my life are far too devastating for words.

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