To carry out their scheme, federal prosecutors said, the conspirators allegedly often conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties. For example, a conspirator would purchase a property from a homeowner. That same day, the conspirator would sell the property to a straw purchaser at an inflated value. The conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the conspirator had occurred over 60 days prior to the sale from the conspirator to the straw purchaser.

As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loan. In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.

At approximately the time of the closings of the properties, the conspirators diverted for their own use the portion of the loan proceeds that exceeded the actual value of the properties.

“In an elaborate scheme between brokers, appraisers, straw buyers, and others, it is alleged that these defendants conspired to shake down and defraud banks,” FBI Assistant Director-in-Charge George Venizelos stated. The scheme not only victimized those institutions, but millions of consumers who either paid higher rates or could not get a loan.”

Adjavehoude, Baker, Bayfield, and Bell were arrested and were arraigned June 25 before United States Magistrate Judge Lois Bloom at the United States Courthouse in Brooklyn. The defendants face penalties of up to 30 years in prison if convicted.