Mortgage Daily

Published On: July 10, 2009
Wholesalers Defrauded on $100 Million13 indicted in mortgage fraud scheme at AFG

July 10, 2009

By MortgageDaily.com staff

AFG Financial was a wholesale customer of New Century Mortgage, Countrywide Home Loans and Wells Fargo Bank. Loans originated by the mortgage broker had no problems with first-payment defaults, and it wasn’t facing repurchase demands.

But AFG was just a sham.

It was created solely to defraud wholesale lenders, according to a 122-page indictment filed in New York’s state supreme court this week by Manhattan District Attorney Robert M. Morgenthau.

The Long Island mortgage brokerage was established in 2004 by Aaron Hand, Eugene Culbreath and Eric Shields. Hand allegedly oversaw the criminal operation.

“He participated in, directed, supervised, and aided nearly every mortgage fraud transaction engaged in,” the indictment said of Hand.

The indictment named 13 individuals as defendants. Another 12 defendants have already waived indictment and pleaded guilty. Among the defendants are mortgage brokers, attorneys, bank employees and appraisers.

In all, the district attorney alleges that more than $100 million in fraudulent loans were brokered by AFG. In addition to Countrywide, New Century and Wells — the defrauded institutions include American Brokers Conduit, Bank of America, GreenPoint Mortgage Funding, Saxon Mortgage Corp. and SunTrust Mortgage.

The indictment lays out an elaborate scheme where distressed borrowers and properties in the New York City area were targeted. Straw buyers with good credit but limited assets and income were deceived into submitting fraudulent applications, while an assistant bank branch manager at BoA and a wholesale account executive who worked at both Countywide and New Century were bribed.

The scheme, which operated between June 2004 and April 2009, was orchestrated from meetings at gentlemen’s clubs, the indictment alleges.

Once the bogus loans were closed, a minimal number of payments would be made — avoiding early payment default repurchases and helping to mask the scheme. The fraudulent payments enabled artificially high ratings for mortgage-backed securities where the loans ended up.

The company allegedly destroyed criminal evidence and failed to comply with regulatory reporting requirements — delaying the discovery of the scheme.

The illegally earned proceeds were allegedly funneled through a web of personal and shell company bank accounts.

The scheme was broken up following a continuing 10-month investigation.

Defendant List

Indicted Defendants Convicted Defendants
AFG FINANCIAL GROUP INC. MARIA ALBERTINA
AARON HAND EDMOND BEROOKHIM
EUGENE CULBREATH CHRISTOPHER CARR
ERIC SHIELDS PATRICK KUHL
MATTHEW MCDERMOTT FRED LAX
MARC ZIROGIANNIS STEPHEN MARTINI
KENNETH LAW FRANK MIALE
KATHLEEN SCANLON GIOVANNI MUNIVE
JEFFREY PHELAN JENNIFER SCHIFF
JERRY STRKLJA WAYNE SISMAN
MARILYN MATEO SHARON THOMPSON
DARLITA BOSTIC SALVATORE TRAPANI
ALLYSON HINDS
RAJMOHAN AUTAR


THE PEOPLE OF THE STATE OF NEW YORK -against- AFG FINANCIAL GROUP, INC., AARON HAND, EUGENE CULBREATH, ERIC SHIELDS, MATTHEW MCDERMOTT, MARC ZIROGIANNIS, KENNETH LAW, KATHLEEN SCANLON, JEFFREY PHELAN, JERRY STRKLJA, MARILYN MATEO, DARLITA BOSTIC, ALLYSON HINDS, and RAJMOHAN AUTAR, Defendants.
(Supreme Court of the State of New York County of New York).


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