Two Involved in Mortgage Fraud Scheme Sentenced

U.S. Attorney for the District of Connecticut David B. Fein announced Thursday that a former New London real estate agent and an Uncasville woman, implicated in a southeastern Connecticut mortgage fraud scheme, have been sentenced and ordered to pay more than $2 million in restitution.

The sentences

According to a statement issued by Fein, Michael Russo, 47, was sentenced to 21 months of imprisonment, followed by two years of supervised release.  In December of 2010 he pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. He was a licensed real estate sales agent who worked with Guzman, Maurizio Lancia, William Athan and others at Elizabeth Athan Realty in New London and Broad Street Investment Group in New London.  During the conspiracy, Russo sought out residential properties to be bought and sold and recruited three individuals to act as buyers.

Prosecutors said he knew that the mortgage loan applications and supporting documentation submitted to lenders in connection with these real estate transactions contained many false statements, including false representations that the buyers were going to make the properties their primary residences. The individuals that Russo recruited received cash payments for acting as property buyers, and he sometimes received kickbacks from them.  The eight properties ultimately ended up in foreclosure, resulting in losses to lenders totaling more than $1.7 million.

Russo was ordered to forfeit $65,000, and to pay restitution in the amount of $1,523,091.11.

Melissa Valentin, 28, of Uncasville, was sentenced to 18 months incarceration, (the last 9 months of which she must spend in home confinement) and two years supervised release. 

On Aug. 30, Valentin pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. Prosecutors said that between June 2004 and August 2006, she purchased several houses in the New London area by providing false information on mortgage loan applications.  Some of the properties were resold during the conspiracy and others ended up in foreclosure.  For her role, she received approximately $15,676. She has been ordered to pay restitution in the amount of $622,993.

The scheme

According to court documents and statements made in court, from approximately 2004 to 2007, Jose Guzman and others used mortgage brokerage, property management and home improvement companies to arrange for individuals (“buyers”) to purchase real estate, primarily residential housing properties located in New London County, by obtaining funding from various mortgage companies and mortgage originators after submitting false information on the buyers’ mortgage loan applications.  The fraudulent information included information regarding income, assets, employment, rent history, as well as the buyers’ intention to make the properties their primary residence.  The buyers were compensated for participating in the scheme.

The government believes that more than 200 fraudulent mortgages were funded through this mortgage fraud scheme, causing more than $9 million in losses to lenders.

The investigation and subsequent convictions 

Sixteen individuals, including Guzman, Lancia and Athan have been convicted of various charges stemming from this scheme.  On April 3, 2012, Lancia was sentenced to 27 months of imprisonment.  Guzman and Athan await sentencing.

This case has been investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General.  The case is being prosecuted by Assistant United States Attorneys Michael S. McGarry and David T. Huang.

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.  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 team

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.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.