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Apr 1, 2009 11:47 AMPublication: The Southampton Press

More details unveiled in $50 million mortgage fraud scheme

Apr 1, 2009 11:47 AM

A phony title history, an individual willing to sell his name and credit history for $10,000, and a duped mortgage lender. That was all it took to start what eventually evolved into a seven-year-long, $50 million mortgage fraud scam devised by four individuals, including a former Suffolk County legislator from Westhampton Beach, according to authorities.

Prosecutors explained that former county legislator and current attorney George O. Guldi, part-time Westhampton Beach resident Donald Clark MacPherson, and co-conspirators Ethan Ellner of Plainview and Dustin Dente of Roslyn, both attorneys, used a complex system of straw buyers, false titles and fraudulent deeds to secure more than $50 million worth of mortgages on about 50 homes throughout Southampton Town dating back to 2002. A straw buyer is a person who sells his or her name and credit history so another party can illegally obtain a mortgage.

The four men along with Mr. MacPherson’s wife, Carrie Coakley of Manhattan, were all charged with various felony counts during their arraignment on March 25 in Southampton Town Justice Court. All pleaded not guilty to counts of grand larceny and scheme to defraud, posted bail and are due back in court later this spring.

Authorities are alleging that the mortgage fraud scheme dates back to 2002 though, as of this week, investigators were still unwilling to disclose how they first learned about the plot. Robert Clifford, a spokesman for Suffolk County District Attorney Thomas Spota, said the investigation was ongoing and that more arrests are expected in the near future. Mr. Clifford declined to elaborate further.

The attorneys representing Mr. Guldi and Mr. MacPherson—two of the four alleged masterminds behind the mortgage fraud scheme, according to Mr. Spota—stated this week that their clients are innocent and will be vindicated of all the charges.

“We’re looking forward to prevailing in court,” said Katherine Huang of Manhattan, one of Mr. Guldi’s attorneys.

She explained that Mr. Guldi, who served as a county legislator representing the entire South Fork from 1993 until 2003, is still challenging the legality of Mr. Spota’s February raid of his Mill Road office. “If a court says that the basis for the search warrant is illegal, whatever is searched and seized can’t be used against Guldi,” Ms. Huang said.

Mr. Guldi is also a defendant in a second mortgage fraud lawsuit that was filed by Wachovia Federal Savings Bank in late February. In that lawsuit, Mr. Guldi is accused of pocketing $1.8 million from the bank after it granted a mortgage to another person, who later informed authorities that his identity had been stolen, to purchase a home in Water Mill that was previously owned by Mr. Guldi’s late father.

Mr. MacPherson’s attorney, Steven Wilutis of Miller Place, also said his client is innocent, noting that Mr. MacPherson first began to think that he was the subject of an investigation when his Manhattan offices were raided earlier this year by the New York City Police Department, at the request of District Attorney Spota’s office. “My client maintains his innocence,” Mr. Wilutis said.

Mr. MacPherson, who owns Magic’s Pub and the Sunset Cafe in Westhampton Beach Village, stated his innocence while exiting Southampton Town Justice Court last week with his wife, who, according to authorities, served as one of the straw buyers. She was charged with a felony count of scheme to defraud. “I pled not guilty because I’m not guilty,” Mr. MacPherson said at the time.

According to records, there are now 12 foreclosure actions pending in Suffolk County Supreme Court on properties owned by either Mr. MacPherson or one of his corporations. Most of those homes are located in Shinnecock Hills and North Sea. Mr. Clifford declined to confirm or deny if any of those properties were involved in the alleged mortgage scheme.

Documents filed last week in Southampton Town Justice Court by the Suffolk County DA’s office state that Mr. Guldi and Mr. MacPherson used straw purchasers, whom they paid between $5,000 and $10,000 each, to secure mortgages on several dozen houses throughout Southampton Town. The court complaint states that the two men recruited many of their straw buyers at Mr. MacPherson’s bondage and sadomasochistic sex club, Arena Studios, located on Broome Street in Manhattan.

Once they were recruited, the income of the straw purchasers would be falsely inflated in order to secure the mortgages, the complaint notes. Many of the purchasers were listed on the loan application forms as being employed by one of Mr. MacPherson’s businesses: The Soho Journal, an arts publication; Maximum Restraint Films Ltd., a film company based at Arena Studios; or the Hamptons Consulting Group, a corporation based at the Seabreeze Motel on Seabreeze Avenue in Westhampton Beach.

Mr. Spota declined to identify the names or the exact number of straw buyers used in the mortgage fraud scheme, though he did state that he expects their arrests to be announced in the near future. Ms. Coakley was the only straw buyer identified during last week’s press conference. Mr. Spota said that several of the straw buyers, in some instances, had their incomes falsely inflated to show that they were making more than $500,000 a year so that they could obtain large mortgages.

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Remember when bankers were the most careful and conservative people in town ? You could count on them to check out documents like titles very carefully indeed, and not just accept any piece of paper being waved around. And if their careful analysis of your income and expenses found you worthy of a mortgage, you didn't even have to worry yourself whether you could repay it. Like getting into Harvard, they wouldn't have accepted you if you couldn't do the work. !
Well those grey suited ...more
By Sag (54), Sag harbor on Apr 1, 09 4:43 PM
They haven't named the title agency yet, why not? If this agency is licensed by the underwriter wouldn;t the underwiter be on the hook. Also seems like there would have to be more players involved..........................
By mrtog (7), wading river on Apr 3, 09 7:38 AM
Where did the half million bucks in mortgage tax from thes mortgages go? Probably into the Town's General Surplus Fund. Oh, what a tangled web we weave...........Town residents, get ready to dig deeper into your pockets to pay more in taxes for supporting the greedy lifestyles of these dirtbags for 6-7 years. I agree with mortog, there's definitely many more players involved, most likely a mortgage broker and/or banker.
By lol@hb (20), hampton bays on Apr 3, 09 9:58 AM
Spota will keep pulling up rocks. Watch the lizards hiding under them run!
By we could run this town! (129), wonderful Wainscott on Apr 3, 09 3:42 PM