David Saks: June 2011

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West Haven Connecticut Man Sentenced to Five Years in Federal Prison for Role in Mortgage Fraud Scheme

West Haven Man Sentenced to Five Years in Federal Prison for Role in Mortgage Fraud Scheme

David B. Fein, United States Attorney for the District of Connecticut, today announced that THOMAS GALLAGHER, 68, of West Haven, was sentenced yesterday, June 7, by Chief United States District Judge Alvin W. Thompson in Hartford to 60 months of imprisonment, followed by three years of supervised release, for his participation in an extensive mortgage fraud conspiracy that defrauded lenders of approximately $4 million.

"This is an appropriate sentence for a defendant who played a critical role in a mortgage fraud scheme that defrauded lenders of millions of dollars and left abandoned homes throughout Connecticut," state U.S. Attorney Fein. "The U.S. Attorney's Office, FBI, HUD-OIG and all the members of the Connecticut Mortgage Fraud Task Force are committed to investigating and prosecuting individuals responsible for these crimes in order to restore confidence in our housing and financial markets."

According to court documents, statements made in court and the evidence disclosed during the trial, between approximately August 2006 and May 2010, Syed Babar of New London led a mortgage fraud scheme during which participants obtained approximately $10 million in residential real estate loans, including loans insured by the FHA, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. As part of the scheme, Babar arranged for straw buyers to purchase houses they did not intend to occupy at fraudulently inflated prices and to apply for loans in the amount of the fraudulently inflated prices. The loans were supported by fraudulent appraisals and a variety of fraudulent information about the buyer, including information about his or her occupation, income, assets, liabilities, and intention to occupy the house as a primary residence. Babar and his co-conspirators also created a fictitious construction company called "Sheda Telle Construction, LLC"-which trial testimony revealed means "ring the bell and run" in Babar's native language-in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. Babar and his co-conspirators then split the fraud proceeds generated from the scheme.

GALLAGHER, who operated Autumn Appraisals, LLC, in West Haven, created fraudulently inflated property appraisals in exchange for payments, often in cash, of thousands of dollars per home. The payments were well beyond the basic appraisal fee of about $375 that was disclosed in appraisals and on federal mortgage documents. In order to support the fraudulently inflated sale prices, GALLAGHER represented to the lenders that certain properties were "totally" or "recently renovated," and in good condition with no need for any repairs. However, some of the homes had no sheetrock or plumbing, were charred by fire, had holes in the walls, had no thermostat, or had electrical wires hanging out of the walls. In certain cases, where a picture could reveal conditions inconsistent with his written descriptions, GALLAGHER provided the lenders with digitally-altered photographs instead of ones that showed the true state of the properties. At times, GALLAGHER also falsified the sale history of a property.

The investigation revealed that GALLAGHER was involved in 29 fraudulent real estate transactions that defrauded lenders of approximately $4 million.

On March 21, 2011, GALLAGHER pleaded guilty to one count of making a false statement to the government in connection with an FHA-insured loan.

On February 1, 2011, Babar pleaded guilty to multiple federal charges related to his leadership of this extensive mortgage fraud scheme. He awaits sentencing.

This matter 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 Eric J. Glover and Susan Wines and Special Assistant United States Attorney 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 is focusing 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 e-mail 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.

This case was brought in coordination with the President's Financial Fraud Enforcement Task Force, which was established to wage an aggressive and coordinated effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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

Courtesy FBI

David Saks

Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • June 08 2011 09:08PM
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