The Florida Attorney General's Office today sued 10 companies and 15 individuals for their alleged roles in a major mortgage fraud scheme first reported by the St. Petersburg Times last year.
In number of defendants, the case may be the largest mortgage fraud case ever filed in the United States, the office said.
According to the lawsuit filed in Orlando, the ring obtained more than $37-million in mortgages for at least 60 home purchases and siphoned off more than $6-million of the proceeds for their own use. Approximately 50 of the houses later went into foreclosure.
"In this particular situation, the economy is the victim,'' Attorney General Bill McCollum said. "This group of individuals systematically defrauded banks and mortgage lenders, stealing millions for their own personal use and leaving a gaping hole in the system.''
Starting in July 2005 and continuing through at least January 2007, three of the ring's leaders allegedly defrauded lenders by recruiting "straw buyers'' with good credit and using them to create false applications to buy homes throughout Central Florida.
The lawsuit, filed by the Attorney General's Mortgage Fraud Task Force, claims the ring conspired with Realtors to artificially inflate purchase prices, thus enabling them to obtain larger mortgage loans.
Among those named in the suit is Allen Boyarsky, 51, a former mortgage company executive who was involved in several questionable transactions with Realtor Lori Polin, one of ReMax's top agents in 2006.
As the Times reported last November, an anonymous letter sent to ReMax's Denver headquarters and to many of her fellow agents alleged that Polin had artificially boosted the prices of nine homes in Tampa and North Pinellas.
Most of the houses were mortgaged for far more than the actual sales price, with the buyer or a third party pocketing the difference.
Today's lawsuit does not name Polin, 49, as a defendant though the suit says Boyarsky asked her to inflate the prices of certain properties listed for sale with Re/Max Mutual Realty Inc., the Clearwater firm she was working for at the time.
In one case, the suit says, Polin originally listed an Oldsmar home for $649,900, then increased the listing price to $725,000. It was placed under contract by Jeannette Lugo, who had been paid $10,000 to be the straw buyer.
The sellers of the property did not receive the increased sales price, which instead went to a trucking company whose owner got $100,000 from the loan proceeds at closing.
The suit says Boyarsky and co-defendant Marcus Habeeb of American Heritage Mortgage Group prepared a loan application for Lugo that falsely indicated she made $17,800 a month as a "senior executive partner" for an investment firm. Lugo, also a defendant in the suit, actually worked for Sprint as a customer service representative.
The Oldsmar house went into foreclosure in January and is now on the market for $351,900 even though it sold for $725,000 to Lugo two years ago.
None of the defendants could immediately be reached for comment. Polin, who now works for a Re/Max office in Tampa, told the Times in 2007 that she was an "innocent victim'' who had been duped by Boyarsky.
Polin is not named as a defendant because real estate agents are exempted from the Deceptive and Unfair Trade Practices Act under which the others are being sued. However, the Attorney General's office said there may be a separate investigation by the state Department of Business and Professional Regulation, which oversees the real estate industry.
A criminal investigation of the alleged fraud ring is also underway.
Habeeb, another defendant in the suit, told the Times last year that he was closing his mortgage business in Florida "because all you got is fraud going on.''