Attorney General Announces Three New Mortgage Fraud Complaints – Disbarred Lawyer, Son Sued for Racketeering; Loan Modification Businesses Charged

TRENTON, NJ – March 12, 2009 – (RealEstateRama) — Continuing the state’s attack on mortgage fraud, Attorney General Anne Milgram announced today the filing of three new fraud lawsuits charging a total of 14 individual and corporate defendants.

“The lawsuits we announce today involve three separate complaints, but they share a common thread of greed, human callousness and disregard for the law,” said Attorney General Milgram. “In one way or another, each of the defendants in these complaints is charged with making money by selling false hope to trusting people during uncertain economic times.”

One of the state’s three complaints charges a disbarred lawyer, Martin Gendel of Montville, and his son, Seth Gendel of New York City, as well as their companies Casey Properties and Lee Alan LLP, with violating New Jersey’s Civil Racketeer Influenced and Corrupt Organizations (RICO) statute.

The suit charges the Gendels, along with six other defendants, with using deception — and the credit information of their unwitting victims – to obtain fraudulent mortgage loans and turn a profit via the sale of urban properties at grossly inflated prices. Casey Properties basically duped its victims into buying homes in Newark, Paterson, Irvington and East Orange that were the subject of bogus appraisals, then profited by taking fees out at closing from the inflated equity.

The defendants told investors Casey Properties would take care of all aspects of the sale, as well as property management — including finding tenants, collecting rents, paying the mortgages and making needed repairs. However, Casey never did maintain the homes or keep up the mortgage payments. In the end, victims had their credit ruined and were left responsible for dilapidated homes that had been foreclosed on and abandoned. At the same time, the municipalities were left to deal with dozens of nuisance properties. In some cases, tenants were left to live in squalor, without utilities, as conditions deteriorated and properties fell into foreclosure. Some renters ended up homeless when their houses were declared uninhabitable.

Altogether, Casey Properties is accused of persuading at least 32 investors to buy 63 properties that sold for a total of $18 million.

In the other two lawsuits announced today, two unrelated companies in South Jersey -– Hope Now Financial Services Corp. of Cherry Hill and New Hope Modifications of Bellmawr — are charged with selling loan modification services that never materialized, and with creating the false impression they were affiliated with a non-profit foreclosure prevention organization known as the Hope Now Alliance. Among other services, the Hope Now Alliance offers free credit counseling with federally-approved counselors.

As part of the actions announced today, Milgram said, the state has asked the court to shut down a Web site operated by Hope Now Financial. Since at least November 2008, Hope Now Financial has advertised loan modification services through a Web site at www.hopenowmod.com.

By posting a video, news articles and links to federal government press releases, the profit-seeking Hope Now Financial has falsely suggested an affiliation with the non-profit Hope Now Alliance, Milgram said. In fact, Milgram noted, there is no connection. Moreover, Hope Now Financial is accused in the state’s lawsuit with charging significant fees for loan modification services that were never delivered.

To date, 23 consumers living in New Jersey and out of state have filed complaints against Hope Now Financial with either the Division of Consumer Affairs or the Better Business Bureau. The total amount of money paid by those victims to Hope Now Financial exceeds $29,000.

The third lawsuit announced today charges the Bellmawr-based New Hope Modifications with similar fraud for representing themselves as having an affiliation with the Hope Now Alliance, and for also selling loan modification services that were never provided. To date, the state has identified 80 victims of New Hope, and the total amount of money collected from those victims exceeds $98,000.

Like Hope Now Financial, New Hope Modifications is accused of victimizing New Jersey consumers and those living out of state.

“This kind of predatory activity is reprehensible, especially in this economic climate, and will not be tolerated,” said Department of Banking and Insurance Commissioner Steven M. Goldman. ”Struggling homeowners were led to believe these companies would help them, but instead the homeowners were exploited. Any individual or financial services organization that attempts to defraud consumers will be subjected to the maximum penalty the law allows.”

Among other things, each of the state’s three complaints asks the court to order a halt to the defendants’ business practices. The lawsuits also seek consumer restitution, imposition of the maximum civil penalties and a freezing of the defendants’ assets.

In its Casey Properties lawsuit, the state also asks that defendants be ordered to pay to repair or rehabilitate buildings that were allowed to deteriorate, and reimburse the cities of Newark, Paterson, Irvington and East Orange, as well as the state, for costs incurred in dealing with the dilapidation and foreclosure. The state also asks that the defendants pay “reasonable expenses” associated with relocating displaced tenants to clean, safe housing.

Details of the state’s three complaints are as follows:

Milgram v. Casey Properties, LLC: Filed in Superior Court in Passaic County, the state’s four-count complaint charges Casey Properties, headquartered in Totowa, and defendants Martin and Seth Gendel with running a scheme that involved soliciting people to “invest” in urban properties from 2005 through mid-2008. Victims of the Gendels did not actually put up money, but rather agreed to have properties purchased in their names in return for a share of the income generated by sale of those properties. The Gendels told victims, falsely, that they could not simply buy the properties themselves because New Jersey law limited the number of properties they could own. They assured victims Casey Properties would collect the rent, pay the mortgage and perform maintenance on houses purchased in their names. However, the houses were left to deteriorate, mortgage payments were not kept up and the properties ended up foreclosed on and abandoned. One victim, a retired school counselor living on a fixed income, was left with ruined credit and two abandoned properties -– one in Newark and one in Paterson — that were so damaged she was unable to sell them. Among other things, the defendants are accused of submitting phony mortgage applications to enable her to qualify for loans she would not have otherwise obtained, and of forging her signature on various documents.

In addition to the Gendels, defendants include Francis T. “Frank” Memmo, of Medford, a mortgage solicitor; Kelly Kotzker, of Evesham, a loan processor; Damien Figueroa of Oak Ridge, an attorney who acted as a closing agent for both Casey Properties and the Gendels’ victims; Edward Evans, of Fair Lawn, an attorney who also acted as a closing agent; Nicholas Manzi, of Totowa, an attorney who acted as a closing agent, and Robert B. “Barry” McBriar, a real estate appraiser who surrendered his license in October 2008 in connection with the conduct charged in the lawsuit.

The Casey Properties lawsuit charges defendants with a “pattern of racketeering activity” as defined by the New Jersey civil RICO statute.

Included in the civil RICO count are such predicate acts as theft by deception, falsifying records and issuing false financial statements, as well as accepting commissions on phony mortgage loans, forging documents and collecting rent monies that were to go toward mortgage payments, but keeping the funds instead.

Other charges in the Casey Properties suit include violating the Consumer Fraud Act by making false promises and engaging in unconscionable commercial practices. The complaint also includes a charge of creating and maintaining a nuisance by operating a scheme that resulted in dozens of run-down and uninhabitable properties, including many damaged by fire and/or flooding.

Milgram v. Hope Now Financial Services: Filed in Superior Court in Camden County, the state’s three-count complaint charges Hope Now Financial with violation of the Consumer Fraud Act by, among other things, making numerous misrepresentations and false promises, and with violation of state advertising regulations. The complaint charges that Hope Now Financial placed content on its Web site designed to deceive consumers into believing it was affiliated with the Hope Now Alliance, a legitimate non-profit organization that provides credit counseling and free foreclosure prevention.

The lawsuit also charges that Hope Now Financial charged already-distressed consumers thousands of dollars in upfront fees for loan modification services, but failed to provide any such services. Ultimately, the lawsuit charges, consumers fell further behind on their mortgage payments, making the threat of foreclosure more likely. In addition, the state charges that Hope Now Financial failed to provide refunds to consumers who requested them upon realizing they were receiving no services for their money. Among Hope Now’s victims were a husband and wife from Eagleswood Township, Ocean County, who had more than $2,800 billed to their credit card by the defendants, received no loan modification services, and ultimately confronted foreclosure after they stopped paying their mortgage on the advice of a company representative.

Milgram v. New Hope Property LLC d/b/a New Hope Modifications: Filed in Superior Court in Camden County, the state’s four-count complaint charges New Hope with violating the Consumer Fraud Act, state advertising regulations and the Debt Adjustment and Credit Counseling Act. In addition to New Hope, Donna Fisher and Brian Mammoccio, identified as registered agents of the business in New Jersey, are named as individual defendants. Both Fisher and Mammoccio reside in Mullica Hill, Gloucester County.

According to the state’s lawsuit, New Hope has engaged since 2007 in unlicensed debt adjustment in New Jersey, including mortgage loan modification services, and has falsely represented that it has affiliations with government programs including the Hope Now Alliance. The state charges that, through its Web site, and through agreements with other businesses that provide leads, the unlicensed New Hope has sold loan modification help to distressed homeowners, failed to deliver on its promises of mortgage loan assistance, and failed to provide refunds once consumers realized they were getting nothing for their money. In one case a Linden, Union County, woman facing foreclosure had a total of $1,500 electronically drawn from her bank account to cover the “fee” she owed New Hope, but received no loan modification help in return.

With the lawsuits announced today, the state has filed a total of eight mortgage fraud complaints since last June naming 87 individual and corporate defendants. Milgram noted that the fraud schemes charged in those complaints have run the gamut, and have included those aimed at victims seeking to own investment properties, those hopeful of improving their living situations via “rent-to-own” opportunities and, more recently, in keeping with the societal trend, property owners in need of foreclosure rescue assistance.

The Attorney General urged any member of the public who has been a victim of mortgage-related fraud to report it by calling the Division of Consumer Affairs. New Jersey residents can call the toll-free hotline at 1-800-242-5846. Consumers from out of state can call 973-504-6200. Those seeking to file a complaint can also visit the Division’s Web site at www.njconsumeraffairs.gov . Milgram also reminded homeowners facing foreclosure that free help may be available to them through the state’s foreclosure mediation program. She urged distressed homeowners to explore what help is available through the program by calling the toll-free hotline number at 1-888-989-5277 or visiting the Web site at www.NJForeclosureMediation.org. Through the foreclosure mediation program, qualified homeowners who are in danger of losing their homes can receive help from housing counselors, attorneys and a neutral mediator to resolve loan delinquencies.

Attorney General Milgram thanked Deputy Attorney General Megan Lewis, Chief of the Division of Law’s Affirmative Litigation Section, Deputy Attorney General Jim Michael of the Affirmative Litigation Section; Deputy Attorney General Lisa D. Kutlin of the Affirmative Litigation Section; Assistant Attorney General James J. Savage of the Consumer Affairs Practice Group; Deputy Attorney General Lorraine Rak, Chief of the Division of Law’s Consumer Fraud Prosecution Section; Deputy Attorney General Nicholas Kant of the Consumer Fraud Prosecution Section; Deputy Attorney General Raymond Chance, Chief of the Division of Law’s Banking and Insurance Section, Deputy Attorney General Gregory McHugh of the Division of Law’s Banking and Insurance Section, Supervising Investigator Jennifer Micco, Investigator Joseph Iasso and Investigator Jared O’Cone of the Division of Consumer Affairs, for their hard work on the mortgage fraud cases announced today.

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For Further Information:
Lee Moore
609-292-4791