Attorney Admits Diverting Closing Funds & Filing False Settlement Statements

admin —  September 21, 2012 — Leave a comment

Maeble L. Hairston, 57, Red Bank, New Jersey, a lawyer, pleaded guilty to conspiring with others to steal over $1 million from lenders by filing fraudulent mortgage applications, diverting mortgage proceeds and falsifying settlement statements.

Hairston conspired with others in a scheme to falsify mortgage loan applications to cause banks to provide loans to unqualified straw purchasers for homes whose values were grossly inflated. The co-conspirators would then steal loan proceeds by diverting them at closing. In pleading guilty, Hairston admitted that, while serving as settlement agent for four real estate closings involving a total of $1,051,804 in loans, she diverted loan proceeds to other members of the conspiracy and covered up the thefts by submitting fraudulent HUD settlement statements.

In pleading guilty, Hairston also admitted that she was part of a conspiracy in which co-conspirators would purchase discounted homes at sheriff’s sales or “short sales” ““ pre-foreclosure sales where the mortgage holder agrees to permit the home to be sold for less than the amount due on the loan ““ and would then sell the home at an inflated price to a straw purchaser.  The straw purchasers were told that they could obtain real estate with no money down as investment properties, and receive rental income from the properties.

The investigation to date has revealed that the co-conspirators submitted fraudulent mortgage applications and settlement statements in connection with sales of eight properties and a total of about $2,215,339 in mortgage loans.  Hairston admitted that she defrauded lenders in connection with four loans totaling $1,051,804: (1) a $255,983 loan for a home in Irvington, New Jersey made on July 28, 2008, (2) a $338,751 loan for a home in Newark, New Jersey on September 16, 2009, (3) a $177,848 loan for a home in Newark, New Jersey, on July 13, 2010, and (4) a $286,222 loan for a home in Newark, Jersey on November 13, 2008.

Members of the conspiracy falsified information about employment, earnings and bank account balances on mortgage applications so that the straw purchasers could obtain loans for which they were not qualified.  They submitted false supporting documents, including bank statements and employment verification.  The lenders were thereby induced to issue FHA insured mortgages based on the inflated price of the property for the straw purchase, and were not told of the prior discounted purchase of the property in the sheriff’s sale or short sale.  The conspirators would often use the loan proceeds to simultaneously make the initial discounted purchase. Hairston, or another settlement agent, would then divert additional proceeds to co-conspirators and file fraudulent HUD settlement statements indicating that the borrower made any required payments at closing and that the loan proceeds were properly disbursed.  A majority of the homes ultimately fell into foreclosure.

Previously, one of the straw purchasers, a former employee of the Essex County Division of Welfare, pleaded guilty to falsifying employment records in order to qualify for a loan to buy a home in Newark, New JerseyIjeoma Okoh, 34, Newark, New Jersey,  was sentenced to two years of probation on January 24, 2011, and was required to forfeit her public position and her interest in the home. Okoh pleaded guilty to issuing a false financial statement, a third-degree crime.  She admitted that she submitted fraudulent documents regarding her employment and salary to deceive Bank of America into loaning her $357,050 to purchase a property on Sixth Avenue in Newark, New Jersey.

It is expected that charges will be filed against additional defendants in the ongoing investigation.

Hairston pleaded guilty to second-degree racketeering before Superior Court Judge Thomas V. Manahan in Morris County.  Under the plea agreement, the state will recommend that Hairston be sentenced to five to seven years in state prison.  She must forfeit her license to practice law in New Jersey and any other state where she is licensed.

Attorney General Jeffrey S. Chiesa made the announcement.

This attorney, who took an oath to uphold the law, instead conspired in a criminal scheme to steal over $1 million from lenders by filing fraudulent mortgage applications and diverting loan proceeds,” said Attorney General Chiesa.  “The financial institutions have been unable to recoup their loans, because they were based on home values that were grossly inflated as part of the scheme.  The defendant is now facing a substantial prison sentence.”

Con artists will always view mortgage loans and real estate closings as prime territory for their criminal activities because of the large sums of money changing hands,” said Stephen J. Taylor, Director of the Division of Criminal Justice. “I commend the Essex County Inspector General for aggressively pursuing this investigation after uncovering an initial instance of fraud involving a home buyer who worked for the county.  That woman previously pleaded guilty.”

One month after taking office in January 2003, Essex County Executive DiVincenzo mandated swift attention by the Office of Inspector General to any reports of official misconduct by county employees,” said Essex County Inspector General Dominick Scaglione. “Upon the determination by OIG Lead Case Investigator Michael McGaughran that a county employee may have been a part of an extensive mortgage fraud scheme, we commenced a comprehensive investigation, with valuable assistance from state and federal law enforcement partners. These conspirators enriched themselves in a sustained scheme through the presentation of patently fraudulent documents to any institution or agency able to produce funding for their personal financial gain, without regard for the law or the detriment of innocent parties to these transactions. We anticipate additional charges.”

Judge Manahan scheduled sentencing for Hairston for December 7, 2012.

Supervising Deputy Attorney General Mark Eliades, Chief of the Gangs & Organized Crime Bureau, took the guilty plea for the Division of Criminal Justice.  The charge is the result of an ongoing investigation led by the Essex County Inspector General’s Office.

The investigation has been led by Investigator Michael McGaughran of the Essex County Inspector General’s Office, under the supervision of Inspector General Dominick Scaglione.  Supervising Deputy Attorney General Eliades has coordinated the investigation and prosecution for the Division of Criminal Justice (DCJ). They have been assisted by detectives of the DCJ Gangs & Organized Crime Bureau and Sgt. Louis Matirko of the DCJ Financial & Computer Crimes Bureau, as well as Special Agent Tanya Chavez of the U.S. Department of Housing and Urban Development’s Inspector General’s Office.

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