Leader of $66 Million Mortgage Fraud Scheme Sentenced to 97 Months in Prison

The United States Attorney’s Office for the Southern District of New York reports that Gerard Canino, the president and owner of First Class Equities (“FCE”), was sentenced on May 22, 2013 in Manhattan federal court to 97 months in prison for his participation in a $66 million mortgage fraud scheme. Canino pled guilty in April 2012 to conspiracy to commit wire fraud and bank fraud in connection with the scheme, and was sentenced by U.S. District Judge Robert P. Patterson.

According to the indictment previously filed in Manhattan federal court, as well as statements made in public proceedings: FCE was a mortgage brokerage firm with offices located in Oceanside and Old Westbury New York. From 2004 to 2009, Canino and FCE engaged in a massive mortgage fraud scheme. As part of the scheme, Canino and his co-conspirators arranged home sales between “straw buyers” – persons who posed as home buyers, but who had no intention of living in, or paying for, the mortgaged properties – and homeowners, often people in financial distress, who were willing to sell their homes. Canino and others recruited straw buyers, many of whom were paid by Canino and his co-conspirators. At his direction, the FCE loan officers obtained mortgage loans for the sham deals by submitting fraudulent applications to banks and lenders, using fraudulent representations about the straw buyers’ net worth, employment, income, and plans to live in the properties. After approving the loans, the lenders sent the mortgage proceeds to their attorneys and the attorneys submitted false statements to the lenders about how they were distributing the loan proceeds. They then distributed the loan proceeds – typically tens of thousands of dollars per transaction – among themselves and other members of the conspiracy.

In addition to his prison term, Canino, 51, of Merrick, New York, was sentenced to three years of supervised release. He was also ordered to forfeit the proceeds of the offense to the government and make full restitution to the victims of his crime. Canino’s co-conspirators in the scheme included, among others, the FCE loan officers Ian Katz, Omar Guzman, James Vignola, Henry Richards, and Robert Thornton; the real estate attorneys Neal Sultzer, Michael Raphan, Michael Schlussel, Jacquelyn Todaro, Kevin Hymowitz, and Dennis Berkowsky; the real estate title agent Michael Charles; and other individuals, including Ralph Delgiorno, Deborah Lazarou and Pandora Bacon. Each of these defendants pleaded guilty, with the exception of Raphan, who was convicted after trial

The investigation was led by the Federal Bureau of Investigation in conjunction with President Barack Obama’s Financial Fraud Enforcement Task Force, which consists of federal agencies, including IRS-Criminal Investigation, the U.S. Attorney’s Office and state and local partners.