Sales Representative Pleads Guilty In Connection With Multi-Million Dollar Mortgage Modification Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JONATHAN LYONS, a former sales representative at a company purporting to provide mortgage modification services, pled guilty yesterday in Manhattan federal court for his role in a multimillion-dollar scheme that victimized more than 500 financially struggling homeowners across the country. LYONS, who was arrested in October 2013, pled guilty before U.S. District Judge George B. Daniels.
Manhattan U.S. Attorney Preet Bharara said: “Through his plea, Jonathan Lyons acknowledged his role in a multimillion dollar scheme that targeted and victimized hundreds of desperate, financially vulnerable homeowners weighed down by debt. We thank our partners, including the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, and the New York State Office of the Attorney General for their role in bringing Lyons to justice.”
According to the allegations contained in the Indictment and related Informations, the plea agreements, and statements made in court proceedings:
From approximately January 2009 to June 2011, LYONS and his co-conspirators perpetrated a scheme to defraud homeowners who were in danger of losing their homes because they could not afford to pay their residential mortgages. Through a company located in Long Island, New York (“Company-1”), and its successor companies (the “Mortgage Modification Companies”), LYONS, his co-conspirators, and other employees falsely promised to help financially struggling residential mortgage holders refinance their mortgages for lower interest rates and monthly payments. Despite the defendants’ claims, however, the Mortgage Modification Companies delivered little or no service to their customers, diverting most, if not all, of the customers’ payments to the Mortgage Modification Companies’ owners and employees rather than using those funds to assist customers in procuring mortgage modifications. Through their scheme, the Mortgage Modification Companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.
The Mortgage Modification Companies charged customers thousands of dollars in up-front fees—in violation of New York State law—and made fraudulent claims about the companies’ services, including that the Mortgage Modification Companies guaranteed that they would either: (i) secure a mortgage modification that would result in a significant reduction in the customer’s interest rate and/or monthly payments; or (ii) provide the customer’s money back. Through the Mortgage Modification Companies, the defendants and other employees also falsely claimed to be affiliated with the federal government’s Home Affordable Modification Program (“HAMP”), a federally-funded mortgage assistance program that is part of the Troubled Asset Relief Program and is available to homeowners free of charge.
The Mortgage Modification Companies targeted homeowners who had fallen behind, or were in danger of falling behind, in making mortgage payments on their homes. LYONS and two other company sales representatives, AREN GOLDFADEN and DARRELL KEYS, spoke to hundreds of struggling homeowners on behalf of the Mortgage Modification Companies, repeatedly making materially false or misleading representations to convince these prospective clients to pay upfront fees to the companies. The false or misleading representations included that the Mortgage Modification Companies were associated with HAMP; that a mortgage modification was guaranteed and would take only approximately thirty to sixty days; and that the Mortgage Modification Companies would issue a full refund of the upfront fee to any client whose mortgage was not successfully modified in the stated time period. ANTHONY BLACKWELL, who held himself out as an attorney for the Mortgage Modification Companies, despite not having a valid law license for most of the relevant period, and ANGEL GONZALEZ, a sales manager who was involved in training sales representatives, instructed the companies’ sales representatives on how to lie to customers and routinely refused to provide refunds to customers despite the fact that those customers did not obtain mortgage modifications as promised.
BLACKWELL and GONZALEZ also personally met with and spoke directly to customers and told similar lies. They sought to cover up their fraudulent scheme by, among other things, directing sales representatives to assuage customers by falsely claiming that work was being done on the customer’s behalf and that the company just needed more time to obtain a mortgage modification, when, in fact, little or no work was being done to provide a mortgage modification to the customers.
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LYONS, 53, of Rockville Center, New York, pled guilty to one count of conspiracy to commit wire fraud, and faces a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. LYONS is scheduled to be sentenced on by Judge Daniels on January 7, 2016.
BLACKWELL, GOLDFADEN, GONZALEZ, and KEYS also each pled guilty to one count of conspiracy to commit wire fraud. BLACKWELL, 49, of Manhattan, New York, pled guilty before Judge Daniels on July 8, 2015, and is scheduled to be sentenced on November 5, 2015. GOLDFADEN, 38, of East Rockaway, pled guilty before Judge Daniels on June 1, 2015, and is scheduled to be sentenced on October 15, 2015. GONZALEZ, 33, of Rosedale, New York, pled guilty before Judge Daniels on March 5, 2015. KEYS, 52, of Uniondale, New York, pled guilty before U.S. District Judge Robert W. Sweet on September 19, 2013.
In addition, a founder and co-owner of Company-1, SCOTT SCHREIBER, 32, of Brooklyn, New York, pled guilty for his role in the offense to one count of conspiracy to commit wire fraud and one count of wire fraud, before the late U.S. District Judge Robert P. Patterson on October 16, 2013. SCHREIBER’s case is now before U.S. District Judge Loretta A. Preska. Sentencing dates have not yet been set for GONZALEZ, KEYS or SCHREIBER.
Mr. Bharara praised the Special Inspector General for the Troubled Asset Relief Program and the Federal Bureau of Investigation for their outstanding work in the investigation. Mr. Bharara also thanked the New York State Office of the Attorney General for its assistance.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani are in charge of the case.