White-Collar Crime

Closing Lawyer Gets 7 Years in $431K Mortgage Fraud; His Counsel Says He Earned Only His Legal Fee

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A 46-year-old New Jersey real estate lawyer has been sentenced to a seven-year prison term and ordered to pay a $150,000 fine and $42,404 restitution for his role in a multidefendant mortgage fraud case.

Paul DiGiacomo pleaded guilty in May in Morristown Superior Court to second-degree money-laundering of stolen funds through his trust account, the Madison Eagle reports.

Apologizing the the court at sentencing on Thursday, DiGiacomo blamed the bad economy and his need to support his family, and noted that he is likely to be disbarred. His counsel, Vincent Basile, argued for a five-year term and questioned the amount of the fine, pointing out that DiGiacomo didn’t instigate the scheme and saying that he had profited only through his legal fee. (The amount isn’t give in the article.)

However, the judge said others hit hard by the downturn in the real estate market hadn’t turned to crime and reduced by only one year the eight-year term and $150,000 fine sought by the prosecution.

A press release from the state attorney general’s office describes a complex scheme in which six individuals—including a mortgage broker, real estate agent and title company employees—worked together to arrange a short assignment of the $477,000 mortgage on a home in Newark whose owner had fallen behind on payments.

With DiGiacomo’s alleged help in negotiating with the holder of the mortgage, the group arranged a $220,000 short assignment of the $477,000 mortgage to a bogus property management company it controlled, the press release recounts. Meanwhile, the group arranged a purported “sale” of the same property to a dead man at an inflated price of $539,000.

It then applied for a $431,200 mortgage loan from another lender on the purported $539,000 sale, which was supported by a dossier of faked documents showing claimed bank and employment records for the dead buyer. Falsified closing documents purported to show that the original $477,000 mortgage had been paid in full at closing.

A live person posed as the “buyer” at the closing of the $431,200 mortgage. The seller’s purported signature was forged, and she was never told of the closing.

After paying off the $220,000 owed to the mortgage holder on the short assignment at the closing of the $431,200 mortgage, DiGiacomo reportedly wired the balance remaining at the conclusion of the transaction to a bank account controlled by two defendants.

“Home sales typically involve various professionals, including real estate agents, attorneys, title agents and mortgage brokers, who are responsible for providing multiple layers of review and oversight to prevent fraud,” said Attorney General Jeffrey S. Chiesa. “In this case, however, we had dishonest operators in every one of those roles, leading the unsuspecting lender to provide a $431,200 mortgage loan to a dead man. We will continue to work diligently to uncover such mortgage fraud schemes and send those responsible to prison.”

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