Mortgage scam exposed by Times to air Thursday on CNBC

CASHIERS, N.C. — A $50 million North Carolina mortgage scam run by Florida residents will be featured next week on CNBC's American Greed. The program, produced by Kurtis Productions of Chicago, will air at 10 p.m. Thursday.

The mortgage fraud was disclosed in a series of stories published in the Tampa Bay Times in 2008 and 2009.

Seven Florida residents, including two Hillsborough County businessmen, were sentenced to federal prison after they were convicted by a Miami jury in 2014.

The scheme involved 85 "straw buyers,'' mostly from Florida, who pretended to buy lots at exaggerated prices and obtained million-dollar construction loans from SunTrust, Bank of America, Wachovia and other banks. The straw buyers, identified by prosecutors as "unindicted co-conspirators'', were not charged. A number of them became witnesses against the developers.

Federal prosecutors said the group got approval for more than $72 million in loans, but the banks did not disburse the final $22 million because officials at SunTrust became suspicious of the number of loans approved for the area by the same loan officer.

A SunTrust official who investigated the loans discovered there was no water, sewer or electricity available to serve the development.

Domenic Rabuffo, a Miami resident, was accused of orchestrating the scheme. He used straw buyers from Florida and mortgages from a half-dozen banks to raise more than $50 million in loans that were not repaid. Rabuffo was sentenced to 27 years in prison.

He was convicted of a similar mortgage fraud in New York and entered a federal witness protection program in the 1990s before moving to Florida.

Rabuffo's ex-wife, Mae Rabuffo, of Fort Lauderdale, was sentenced to 14 years for participating in the scam and receiving more than a million dollars for personal expenses that included charter jet services and a $151,000 car.

Raymond Olivier, a Land O'Lakes engineer, and Curtis Allen Davis, owner of a Tampa mortgage investment company, were sentenced to 20 years in prison for helping Rabuffo recruit straw buyers and run the operation.

Victor Vidal, a SunTrust bank officer from Miami, Diane Hayduk, Rabuffo's secretary, and Lazaro Jesus Perez, a Miami accountant, entered guilty pleas and cooperated with prosecutors. They received sentences of up to five years.

The banks have since foreclosed on most of the lots and sold many of them for a fraction of the loan values to a Nevada corporation that has not completed the development.

Partially constructed houses have become an eyesore for neighbors who were forced to pay increased taxes after property appraisers relied on the exaggerated values listed in deeds.

The straw buyers paid no money for the lots on Big Ridge Road, about 12 miles north of Cashiers. Deeds recorded in Jackson County falsely indicated each buyer had paid $650,000 for 1-acre lots. That price far exceeds the value of other land transactions in the area.

In a 2008 interview with a Times reporter, Rabuffo admitted that residents of the area called him "the mountain mobster,'' but said it was because he was Italian. One of his employees told prosecutors Rabuffo liked for people to believe he was a mobster because it intimidated them.

Follow trends affecting the local economy

Subscribe to our free Business by the Bay newsletter

We’ll break down the latest business and consumer news and insights you need to know every Wednesday.

Loading...

You’re all signed up!

Want more of our free, weekly newsletters in your inbox? Let’s get started.

Explore all your options

Years ago, Rabuffo's New York business partner, a financial consultant named Irwin Schiff, was shot twice in the head by a lone gunman who entered an Italian restaurant through a side door that was usually locked. Three members of the Genovese crime family were indicted for the 1987 murder.

Rabuffo would not talk about Schiff when asked about his New York days by the Times. Schiff was a co-defendant in the New York mortgage fraud scheme that involved $49 million in fraudulent loans on equipment that was never purchased.