BOSTON (Legal Newsline) - Indictments against three real estate investors, two mortgage brokers and a former local attorney resulting from a scheme to defraud homeowners and mortgage lenders in real estate transactions involving two distressed properties were handed down by a Suffolk County Grand Jury.
The indictments name real estate investors Joshua Brown, Brian Frank and John Sweetland, mortgage brokers Linda Defeo and Brian Arrington, and former attorney Bruce Namenson.
Brown, Frank and Sweetland were alleged to have fraudulently obtained approximately $12.5 million in loans from more than a dozen financial institutions. The loans were then used to purchase multi-family homes, which made approximately $2 million in proceeds.
An investigation was begun into the defendants activities in April 2008 following complaints from homebuyers. Brown was discovered to be operating Boston Equity Investments in Boston. Neither BEI nor its employees were licensed real estate brokers, but it advertised itself as a real estate investment company online and at real estate conventions in several states. Frank was discovered to be operating Freedom Equity Investments in Hillsborough, N.J.
Authorities allege that Freedom Equity Investments recruited potential multifamily home investors through Boston Equity Investments, unknowingly assisting BEI in committing its fraud. Sweetland operated Boston Investment Marketing in Canton, which also recruited for BEI by identifying potential investors.
Brown, Frank and Sweetland would allegedly identify owners of multi-family properties that had bee on the market for long periods of time. The property owners would be approached and convinced to give an "option" to BEI to sell the property at a price below its list price. At the same time, BEI would recruit homebuyers to purchase the same properties as "investments," promising that in return for purchasing the property, BEI would renovate, rent and resell it.
Inflated property appraisals were also acquired by BEI that were consistently above the list prices that sellers could not sell the homes for.
False purchase and sale agreements would then be obtained by BEI between the homebuyers and sellers, authorities allege. BEI, unbeknownst to the homebuyers and lenders, would arrange for the sellers to receive far less money for the property sales than the maximum amount of financing that BEI was able to fraudulently extract from the lenders in the homebuyers' names. At home closings, BEI would pocket the difference from the sale amount, which usually amounted to between $50,000 and $100,000.
Over the course of the investigation, it was also discovered that Brown, Frank and Sweetland conspired with mortgage brokers Linda Defeo and Brian Arrington. The mortgage brokers would submit loan applications to financial lending instutions that contained false information to secure 100 percent financing for the homebuyers' purchases.
Authorities allege that, with Arrington's assistance, BEI inflated incomes and savings of borrowers, misrepresented where and for how long the borrowers had been employed if they were employed at all, and falsely stated that the borrowers were planning on using the properties as a primary residence instead of as investment properties. Money was also allegedly deposited into some homebuyers' bank accounts by BEI to give the illusion that they qualified for mortgage loans.
In some instances, Defeo and Arrington allegedly aided homebuyers in acquiring mortgage loans without disclosing the homebuyers' new debts to lenders, which was a misrepresentation of the extent of the homebuyers' debts on their loan applications. The homebuyers would then be rushed through the loan application process by Defeo and Arrington and told that they did not have to disclose all of their debts to the lenders.
At closings, homebuyers were told by lenders to bring as much as tens of thousands of dollars in cash. Former attorney Bruce Namenson, working in conjunction with BEI, misrepresented on closing settlement statements that the home buyers brought cash to the closings despite the knowledge that the borrowers did not.
Namen son is also alleged to have sent a business associate to several states to obtain signatures from homebuyers on documents critical to real estate closings. The documents were then allegedly notarized by Namenson, who claimed the documents had been signed in his presence in Massachusetts.
Lenders required that Namenson purchase title insurance for the closings and he represented to lenders that he was using borrowers' money to do so. Authorities believe that title insurance was never purchased by Namenson and that the borrowers' premiums were retained by Namenson.
After a property was purchased, authorities allege, BEI intentionally failed to fulfill the promises it made to renovate and resell the properties. Homebuyers and lenders were then left with properties that were not worth the loans obtained to purchase them, ruined credit and severe financial ruin. Almost all of the homes were eventually foreclosed.
Indictments were returned by a Suffolk County Grand Jury against all six defendants, who are expected to be arraigned on January 6.