Three real estate investors, two mortgage brokers and a disbarred attorney have been indicted for allegedly participating in a complex scheme to defraud homeowners and mortgage lenders in the Boston area, authorities announced Tuesday.
The six defendants are charged with larceny and making false or exaggerated statements.
State Attorney General Martha Coakley, who announced the indictments at a news conference, said the scheme netted more than $2 million in proceeds.
Those charged were: Joshua Brown, 29, of Brockton; Brian Frank, 32, of New Hartford, N.Y.; and John Sweetland, 28, of Yorba Linda, Calif., all identified as real estate investors. Mortgage brokers Linda Defeo, 28, of Springfield, and Brian Arrington, 39, of Boston, were also charged.
Former attorney Bruce Namenson, 47, of Walpole, was also charged. In unrelated cases, Namenson was disbarred in 2008 for converting clients' money for his own use and sentenced to five years in prison after pleading guilty to motor vehicle insurance fraud.
Authorities allege that Brown, Frank and Sweetland, of Boston Equity Investments, used inflated property appraisals and other fraudulent documents to obtain approximately $12.5 million in loans from more than a dozen financial lending institutions to purchase 26 multifamily homes.
They allegedly arranged for the sellers to receive much less money for the sales than the maximum amount of financing that BEI was able to get from the lenders in the homebuyers' names. At closings, BEI would pocket the difference, which was usually between $50,000 and $100,000, and sometimes as much as $150,000, Coakley said.
Coakley said that after the homebuyers purchased the properties, BEI did not fulfill its promises to renovate and resell the properties. She said almost all of the homes were foreclosed at a great loss to the homebuyers and lenders.
"It is a Ponzi scheme to the extent that promises were made to investors that if they bought into these two- or three-family homes, they would then get monies back, they would be assisted by BEI," Coakley said.
Frank's attorney, Les Lewis, said Frank was "totally taken by surprise" by the indictment.
"He had no idea because all of this took place approximately three years or more ago, and he was not aware that there was anything in the offing," Lewis said. "He voluntarily waived extradition because he wants to return to Boston and take care of this matter forthwith."
Namenson, the disbarred attorney, is accused of telling the lenders that he was using the borrowers' money to purchase title insurance when he did not, then retaining the borrowers' premiums for himself.
Attorneys for Brown, Arrington and Frank did not immediately return calls seeking comment. It could not immediately be determined if the other three defendants had retained lawyers. All six defendants are expected to be arraigned in Suffolk Superior Court on Jan. 6.
Coakley, who is running for the U.S. Senate seat held by the late U.S. Sen. Edward Kennedy, said her office began an investigation in April 2008 after receiving complaints from homebuyers.