State charges five with mortgage fraud
State investigators yesterday said they broke up a mortgage fraud ring that involved bank employees creating fictitious or inflated account balances that allowed unqualified borrowers to improperly obtain home loans.
Four of the five charged with 106 counts of falsifying documents, conspiracy, aiding in the misconduct of bank employees, and commercial bribery were arrested and arraigned yesterday. The fifth is scheduled to be arraigned in July.
Authorities said the scheme involved mortgage broker Erik Tancun, who worked for Direct Finance in Hanover, and his assistant, Martha Sass, providing blank account verification forms to Steven Stapleton, who worked at Citizens Bank and Cambridge Savings Bank, and Thomas Itemere, who worked for Bank of America.
Stapleton and Itemere allegedly then either created fictitious accounts with large balances or exaggerated the amounts held in the borrower's account. Authorities also alleged that Itemere and Stapleton included their names and direct telephone numbers on the forms so mortgage lenders would call them for further verification.
Altogether, the team worked together to get approval for 40 to 60 mortgage loan applications the authorities believe were used for a foreclosure rescue scheme that involved straw buyers.
"They corrupted the process," said Attorney General Martha Coakley, who revealed the results of an 11-month investigation yesterday. "And they had all the financial incentive to do so."
Tancun, Stapleton, and Kenneth Garabedian of Worcester, all pleaded not guilty in Middlesex Superior Court, while Itemere, of Worcester pleaded not guilty in Worcester Superior Court. Sass of Marshfield will be arraigned on July 22 in Middlesex Superior Court. Grand juries in both counties handed up indictments against the five on Thursday.
The most serious charges are for falsifying or exaggerating statements, which carries jail time of up to 10 years.
Lawyers for Tancun, Stapleton, and Itemere said their clients were innocent and will prove so in court. A lawyer for Sass could not be reached.
Court documents said Garabedian introduced Tancun to Stapleton and Itemere. .
"My client operates a lawful business and was not involved in any criminal activity," Elliot Weinstein, the defense lawyer for Garabedian, said. "Once all the information . . . and documentation comes out it will support his claim of innocence."
In normal loan practice, mortgage brokers send blank verification of deposit forms to the applicant's bank. That bank would complete the form by verifying the assets in the borrower's account, and then return the form to the broker, who would include it in the application package for prospective lenders.
No charges were brought against the banks. Coakley said all four financial institutions worked with authorities.
"We are victims as well," said Jeffrey Denner, the lawyer for Direct Finance. "We are witnesses and have fully cooperated with the investigation. We want a just and speedy resolution of this matter."
Cambridge Savings Bank, which initially reported suspicious activity involving an employee to authorities, said the bank suffered no financial loss.
Angel Jennings can be reached at ajennings@globe.com.
