Three real estate investors, two local mortgage brokers and a former local attorney have been indicted for allegedly using fraudulent documents to defraud homeowners and mortgage lenders in real estate transactions involving 26 distressed properties in Greater Boston.
Real estate investors Joshua Brown, 29, of Brockton; Brian Frank, 32, of New Hartford, N.Y.; John Sweetland, 28, of Yorba Linda, Calif.; mortgage brokers Linda Defeo, 28, of Springfield; Brian Arrington, 39, of Boston; and former attorney Bruce Namenson, 47, of Walpole were indicited Monday by a Suffolk County grand jury.
Brown, Frank and Sweetland fraudulently obtained approximately $12.5 million in loans from more than 12 financial lending institutions to purchase multi-family homes, from which they made approximately $2 million dollars in proceeds, authorities said.
Brown operated Boston Equity Investments (BEI) in Boston, while Frank operated Freedom Equity Investments (FEI) in Hillsborough, N.J. Authorities said FEI recruited people interested in investing in multi-family homes through BEI. These investors unknowingly assisted BEI commit this fraud, according to authorities. BEI advertised itself as a real estate investment company, although BEI and its employees were not licensed real estate brokers. BEI advertised online and at real estate conventions in several states, according to Attorney General Martha Coakley’s office.
Sweetland operated Boston Investment Marketing (BIM), another BEI recruitment wing in Canton, which would identify potential investors. Brown, Frank and Sweetland would approach the property owners and convince them to give BEI an "option" to sell these properties at prices below the current list price.
BEI simultaneously recruited homebuyers to buy the same properties as "investments," promising them that in return for their purchasing properties through BEI, BEI would renovate, rent and resell the properties. BEI told the homebuyers their investments would help revitalize neighborhoods in Greater Boston. BEI allegedly acquired inflated property appraisals for the sellers’ properties. The appraisals were consistently well above the list prices that the sellers could not sell the homes for, according to state officials.
BEI allegedly obtained false purchase and sale agreements between the homebuyers and sellers. Unbeknownst to the homebuyers and lenders, BEI arranged for the sellers to receive much less money for the property sales than the maximum amount of financing that BEI was able to fraudulently extract from the lenders in the homebuyers’ names. At the home sale closings, BEI would pocket the difference, which was usually between $50,000 and $100,000 and sometimes as much as $150,000, according to state officials.
Brown, Frank and Sweetland conspired with mortgage brokers Defeo and Arrington to submit loan applications to financial lending institutions with false information in order to secure 100 percent financing for the homebuyers’ purchases, the attorney general’s office said. Authorities believe that BEI, with Arrington’s assistance, inflated borrowers’ incomes and savings, misrepresented where and for how long the borrowers had been employed (if the borrowers were employed at all), and falsely stated that the borrowers intended to use the properties as primary residences instead of as investment properties (many of the borrowers lived out of state).
BEI also allegedly deposited money into some of the homebuyers’ bank accounts to make it appear as if they qualified for mortgage loans. Defeo and Arrington allegedly rushed the homebuyers through the loan application process and told them that they did not have to disclose all of their debts to the lenders.
After the homebuyers purchased the properties, BEI intentionally did not fulfill the promises it made, including renovating and reselling the properties, according to authorities. The homebuyers and lenders were left with properties not worth the loans the borrowers obtained to purchase the properties. The homebuyers’ credit was ruined, and they were severely financially injured. Almost all of the homes were foreclosed at a great loss to the homebuyers and lenders, according to Coakley.
The lenders required the homebuyers bring cash, sometimes tens of thousands of dollars, to the real estate closings. Former attorney Bruce Namenson, in conspiracy with BEI, misrepresented on closing settlement statements that the home buyers brought cash to the closings. Instead Namenson sent a business associate to several states to obtain homebuyers’ signatures on documents critical to the real estate closings. He allegedly notarized the documents claiming that the homebuyers had signed the documents in his presence in Massachusetts.
Brown and Frank were both charged with 78 counts of larceny over $250, 26 counts of making or publishing false or exaggerated statements and two counts of attempting to make or publish a false or exaggerated statement.
Sweetland was charged with 33 counts of larceny over $250, 11 counts of making or publishing false or exaggerated statements and three counts of attempting to make or publish a false or exaggerated statement.
Arrington was charged with 24 counts of larceny over $250, attempted larceny over $250 and 13 counts of making a false or exaggerated statement.
Defeo was charged with 10 counts of larceny over $250, six counts of making a false or exaggerated statement and attempted larceny over $250.
Namenson was charged with 18 counts of larceny over $250, nine counts of making or publishing false or exaggerated statements and four counts of false written reports by public officer or employee.
Brown was arrested yesterday morning, arraigned in South Boston District Court and released on $75,000 bail. Frank was arrested on Saturday in New York and is being brought back to Massachusetts. Defeo, Arrington and Namenson have been summoned to appear in Suffolk Superior Court on Jan. 6, when all defendants are expected to be arraigned. A warrant has been issued for Sweetland’s arrest, and authorities are actively searching for him and believe him to be in southern California.
