Real estate firm chief and ex-associate charged in $1M ‘short sale’ mortgage-fraud scheme
Posted Apr 14, 2014 11:10 AM CDT
By Martha Neil
Two New York lawyers have been charged with bilking owners and lenders of $1 million in a short-sale scheme they allegedly operated while working at the a Long Island real estate firm.
However, an attorney representing one of the defendants, Kenneth Schwartz, says his 64-year-old client wasn't aware of the scheme at the time it was ongoing. The attorney says Schwartz fired the other defendant, Helene Stetch, in 2010 when irregularities (including forged checks) came to his attention, reports Newsday.
"This is a case where a rather prominent lawyer has a quite extensive real estate law practice, and hired a lawyer who, unbeknownst to him, was manufacturing sham real estate transactions," said defense attorney Richard Rehbock, who represents Schwartz.
In fact, Rehbock said, "It was Mr. Schwartz who went to the police when he uncovered this problem."
The newspaper said it tried without success to reach Stetch's lawyer on Friday.
Both Schwartz and Stetch, 50, pleaded not guilty at their Thursday arraignment. They are charged with multiple counts of grand larceny and criminal possession of stolen property.
Stetch is accused of representing five struggling homeowners in "short sale" negotiations with mortgage lenders, and then conducting the sales as if the lenders had approved accepting less than the full principal balance at closing when the lenders actually had not done so, explains a press release by the Queens District Attorney's Office.
Even after the closings, Stetch "continued short sale negotiations–ranging from a few months to more than a year–with the lien holders as if no sale had yet occurred," the release states.
Schwartz, whose Carle Place law firm acted as settlement agent in at-issue real estate transactions, is accused of signing some of the attorney trust account checks that were used to disburse funds from closings. He and Stetch were the only signatories on the attorney trust account, the DA's office says.
Settlement statements incorrectly showed that some of the properties were not mortgaged, and money that was supposed to be used to pay off mortgages at closing in short sales and purchase title insurance was diverted, the DA's office says.