Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes

Relying on the secrecy of limited liability companies, white-collar thieves are targeting pockets of New York City for fraudulent deed transfers, leaving the victims groping for redress. 
for the New York Times, published on Nov 7, 2015

Partially paralyzed and reliant on a wheelchair, Ozella Campbell spends a lot of time watching television. It was under those circumstances in February 2014 that she saw a commercial urging her to call, a company that offered to buy houses in as-is condition, in cash, and to close the purchase within seven days.
She called the toll-free number and within hours, she said, a well-spoken young man appeared at her brownstone, a longtime family home in Bedford-Stuyvesant, a Brooklyn neighborhood in the throes of transformation.
The next day, the man’s associate arrived.
“He said, ‘You don’t have to pay any more bills,’” said Ms. Campbell, who was $1,000 behind on her electric bill at the time.
A third man, named Alex, ostensibly the boss, arrived next. He promised, Ms. Campbell said, to pay her delinquent mortgage, provide for her housing for two years, and pay her $43,800. He also hired a lawyer for her. All she had to do was sign over the deed to her house.

More than a year later, Ms. Campbell, 75, is in limbo. Her former home at 679 Jefferson Avenue is owned by an entity called Jefferson Holding LLC and she is left with her delinquent $529,000 mortgage.

“He lied,” she said tearfully of Alex in an interview at the illegally converted garage in Canarsie, Brooklyn, where she lives for now. “He said, ‘Don’t worry, Mrs. Campbell, we’re going to take care of you.’  ”
Ms. Campbell never learned Alex’s surname. And when her relatives tried to find Jefferson Holding LLC at its Great Neck, N.Y., address, there was no company there by that name.

Hard to Crack

In Bedford-Stuyvesant and other pockets of the city, white-collar criminals are employing a variety of schemes to snatch properties from their owners. Often, they use the secrecy afforded to shell companies to rent out vacated properties until they are caught or sell them to third parties. Victims are left groping for redress, unable to identify their predators or even, in some cases, to prove a crime has been committed.
Attention lately has focused on the growing use of shell companies to buy prized real estate in Manhattan and other glittering destinations for global wealth. But the stealthy practice of deed theft illustrates another way that limited liability company law used to create such entities has been twisted and stretched to conceal the ownership of real estate. This is particularly true in Brooklyn neighborhoods where profits in the hundreds of thousands of dollars from quick turnaround sales have become common.
“Sham LLCs are a huge problem in terms of their lack of transparency, in terms of who is behind the property and who is behind these schemes,” said Jennifer Sinton, a lawyer with South Brooklyn Legal Services, which is representing Ms. Campbell in an effort to reclaim her home.
A review by The New York Times of several dozen cases, and interviews with lawyers, prosecutors and others knowledgeable about fraudulent deed transfers, suggest they are accelerating even as officials struggle to address them. The city’s Department of Finance said it was investigating 120 cases, many of them hard to crack because of the role played by LLCs, officials said. Underscoring the rising alarm over the problem, the state attorney general, Eric T. Schneiderman, and the Brooklyn borough president, Eric L. Adams, held a forum last month to warn property owners about it.
Deed thieves often scan legal notices for mortgages in arrears, typically targeting properties like Ms. Campbell’s that are in poor repair or abandoned. Vulnerable homeowners — including older and disabled adults — are sometimes tricked into signing over their properties, while believing they are getting financial relief.
In other cases, signatures are simply forged on deeds. The thieves, meanwhile, hide behind inscrutable mazes of limited liability companies, rented post office boxes and fake addresses.
Coming amid waves of gentrification, the reports of deed theft have helped feed the unease felt in neighborhoods where longtime residents — blacks and Hispanics, the poor and middle class — are increasingly being priced out. A report last year by the Lawyers’ Committee for Civil Rights Under Law and the Center for NYC Neighborhoods found that the schemes disproportionately affected black and Hispanic homeowners.
When LLCs are taken to court, those behind them often remain a step ahead — and impossible to find. “They’re shell companies,” said Jomo Gamal Thomas, a lawyer who has represented several deed fraud victims. “There’s no guarantee you’ll get your money back.”
The Shell Game

Some schemes are particularly brazen, with thieves forging homeowners’ signatures and filing fraudulent deeds with the city to register transfers. Among the telltale signs of forgery, according to Toby M. Cohen, a Brooklyn lawyer who has represented clients attempting to reclaim stolen properties: “a deed transferred for no consideration to an LLC or a corporation and scribbled signatures you can’t read.”LLCs formed in many states and offshore jurisdictions can shield their owners’ names, but secrecy was not originally their central purpose.
A limited liability company is a legal entity similar to a corporation — though with a less formal structure and no requirement for annual meetings or the keeping of minutes — that protects an owner’s individual assets in case of litigation. Initially established in the energy industry in the 1970s to avoid the payment of personal and corporate taxes, LLCs have more recently become instruments for buying real estate, making a once-transparent real-property market ever more opaque.
In a series of articles in February, The Times examined how Manhattan’s luxury condominium boom had been fueled by international investors buying properties through limited liability companies. More than half of such residences are now bought through LLCs.
A look behind the limited liability facades of one signature development, the Time Warner Center, found that a number of buyers had faced government inquiries around the world. A system of developers, condominium boards, real estate brokers and lawyers aid and abet the secrecy, The Times found.
Saying he had been motivated in part by The Times’s findings, New York’s finance commissioner, Jacques Jiha, began last spring to require that all members of LLCs be disclosed to the city for tax auditing purposes when deeds were transferred. Mr. Jiha said that wealthy residents might be able to use a “veil of secrecy” to evade city taxes by claiming to live elsewhere. While the new rules went beyond what many jurisdictions require, experts called them imperfect, because some LLC members are nominees, meaning the true owners remain hidden.
Mayor Bill de Blasio’s administration is sponsoring legislation in Albany intended to prevent deed theft. The bill’s provisions include a requirement that notaries public be fingerprinted. But the city recently removed a provision that would compel additional disclosure of LLC ownership in real estate transactions. While real estate interests had objected to the requirement, Sonia Alleyne, a spokeswoman for the Finance Department, said that was not why it was dropped. Instead, she said, city officials believed the new requirements imposed by Mr. Jiha had begun to work.
At the same time, investigators have been working to crack down on fraudulent deed transfers. Beyond the 120 cases under investigation, the Finance Department is aware of another 167 cases that appear suspicious, according to Joseph Fucito, the New York sheriff, the agency that investigates allegations of deed fraud. Indictments have been handed up in all five boroughs, with 16 arrests since July 2014.
But lawyers who have represented deed fraud victims said the sheer volume of such cases, which some estimate to be in the thousands, and the difficulty of tracking down the perpetrators, had overwhelmed law enforcement agencies.
Even so, in May, Preet Bharara, the United States attorney in Manhattan, announced the indictment of three men accused of tricking people into signing over properties in the Bronx, Brooklyn and Queens.
The men’s company, Homeowner Assistance Services of New York, relied on telemarketers to promote their alleged scheme. Among those who received a call were Roy and Iris Jones.

The Purloined Property

Mr. and Ms. Jones have owned a multiunit building on Fulton Street in Brooklyn since 1999. An appraisal they commissioned put its value at $2.8 million. The couple used to operate an upholstery shop in the building. Since closing the shop, they have rented the property to tenants.
In 2014, JPMorgan Chase & Company, their mortgage lender, told them they owed $182,000 in back payments, an amount they disputed. After learning of the dispute, apparently from public documents, Homeowner Assistance Services of New York called the Joneses, offering to work it out, partially through a refinancing.
In an interview, Mr. Jones, 75, said officials with the company had offered the couple a loan at favorable terms, and even provided door-to-door car service to their offices in Hollis, Queens, to sign the paperwork.

“Two months later, a friend called us and said, ‘Why are you selling the place?’  ” Mr. Jones said. The property had been transferred to an entity called Metro Development Group LLC without their knowledge, he said. Instead of a refinancing, the couple learned, the documents had conveyed ownership of the property — for no money — without resolving their dispute with JPMorgan Chase.
Mario Alvarenga, one of the three men indicted in May, was among those with whom Mr. and Ms. Jones dealt. All three men have pleaded not guilty. A lawsuit filed by Mr. and Ms. Jones in an attempt to reclaim their property named Mr. Alvarenga — vice president of Homeowner Assistance Services — as a defendant.
The Joneses have also filed a complaint with the Brooklyn district attorney’s office. But litigation, already costly for individual property owners, can be particularly difficult when the owners of LLCs are hard to find.
Consider the three-story house at 851 Lincoln Place in Crown Heights, Brooklyn.
Gordon Tracey, a hospital maintenance worker, said he bought the property in 2000 as an investment, then had difficulty making his mortgage payments. In 2014, when he needed money for the burial of a cousin in Jamaica, Mr. Tracey said he was approached by a man he knew only as Sam from a company called Lincoln Holdings NY LLC.
Sam offered Mr. Tracey $500 just to meet, then later said he would pay him $30,000, negotiate with the lender to reduce his past-due mortgage, resell the property and pay him $245,000 when the deal was completed, according to a lawsuit filed in State Supreme Court in Brooklyn.
Then, Mr. Tracey said, his signature was forged on documents transferring the deed to Lincoln Holdings NY, which brought in tenants and collected rent but never paid off the mortgage. (Mr. Tracey said he had received the promised $30,000.)
Three months after reaching an agreement with Sam, Mr. Tracey said, he realized that the Lincoln Holdings NY letterhead did not have an address or a phone number. Hoping to speak with Sam, Mr. Tracey said he sat outside what he believed to be his Brooklyn building for hours, but never succeeded in making contact with Sam or Lincoln Holdings NY.
“I worked so hard for that place,” said Mr. Tracey, 64. “It’s a model block. It’s a very nice house.”
A reporter visited the address of Lincoln Holdings NY at 694 Myrtle Avenue, Suite 166, in Williamsburg, Brooklyn, and found it to be a commercial mailing and shipping center. Suite 166 is not a suite at all, but a rented mailbox. The men operating the mailing center declined to identify Box 166’s owners.
A Brooklyn lawyer for Lincoln Holdings NY in the pending lawsuit, Avi Rosengarten, declined to identify his clients. In court papers, Lincoln Holdings NY has denied the allegations.

An Amateur Sleuth

Two years ago, shaken by a series of break-ins, Susan Green moved out of her rowhouse in Bedford-Stuyvesant. The house, she said, was also facing foreclosure after falling into disrepair amid her financial and personal setbacks, including a back injury that kept her from working temporarily.
Last year, she was astounded to learn from a neighbor that the deed to her former home had been transferred to an entity she had never heard of, Greene Throop LLC.
When she looked at the documents filed with the city transferring the property’s ownership, she realized her signature had been forged.
Ms. Green, 47, who now works at a radio station, tried to track down Greene Throop LLC. Its address was of no help: it was her house’s address, 689 Greene Avenue.
She went to the Brooklyn office of a lawyer listed as an authorized signatory of Greene Throop LLC: Mr. Rosengarten, the same lawyer who represents Lincoln Holdings NY.
In a telephone interview, Mr. Rosengarten confirmed that he was involved in preparing paperwork for the transfer of Ms. Green’s house. Asked about Ms. Green’s visit, Mr. Rosengarten said a woman had appeared with identification showing that she was Susan Green; he said he now believed she was a different Susan Green posing as the owner.
Ms. Green said she demanded that Mr. Rosengarten rescind the deed transfer.
Instead, he supplied her with the phone number and the address, on Harrison Avenue in Brooklyn, of a man named Moshe, whom Mr. Rosengarten described as an investor in the property.
Contacted by phone, Moshe, who would not give his last name, confirmed that he was an investor, but said the property had been purchased legally. He promised to meet with a reporter, but never set up a meeting despite two attempts to do so.

Ms. Green said she now hoped to get the deed back somehow so she could arrange a sale and erase a debt that had reached nearly $1 million.
“We’re hoping by the grace of God that they’ll do the right thing and return it,” she said.

A Criminal Case

Ms. Campbell, who had taken over her Bedford-Stuyvesant house from her husband’s aunt, carrying on a multidecade family tradition in the neighborhood, is now, for all practical purposes, homeless.
In October 2014, before padlocking her house, Alex — the man who had promised to pay off her delinquent mortgage and find her a new place to live — arranged for her to move to the unheated garage in Canarsie that had been illegally converted into an apartment.
Last month, workers from the Buildings Department came to tell Ms. Campbell the apartment was too dangerous to inhabit. She is still there, waiting for the city to find her a safe place to live. In the meantime, she may soon be called as a witness in a criminal case.
Teresa Russo, an investigator for the city Sheriff’s Department who was looking into Ms. Campbell’s complaints, realized that the Alex Ms. Campbell had been dealing with was the same man involved in another, similar case. His real name is Arash Noghreh.
Mr. Noghreh, of Great Neck, had also signed some of the documents on behalf of Jefferson Holding LLC, the shell company that wound up with Ms. Campbell’s home. In August, he was indicted in Brooklyn on charges of grand larceny and filing false documents with the city. He pleaded not guilty.
In court papers, his lawyer, Roger L. Stavis, said the allegations against his client were “demonstrably false and flatly contradicted by the testimony before the grand jury.” In an interview, Mr. Stavis said Mr. Noghreh had made payments to Ms. Campbell exceeding $40,000, as promised.
Mr. Stavis argued in a motion that the charge of filing fraudulent documents should be dismissed.
“The documents in question were submitted by and on behalf of the corporate entity, Jefferson Holding, LLC,” the motion said. “That corporate entity is not a named defendant in the indictment. The evidence was insufficient to establish that this defendant, Arash Noghreh, ‘presented’ those documents for filing, or even that he caused any documents to be filed. For that reason the counts must be dismissed.”
The charge remains pending.

ADDENDUM: September 1, 2016
After this article was published, there were further developments in the case against Alex Noghreh. Two felony charges against Mr. Noghreh were dismissed, and he pleaded guilty to a misdemeanor. As part of a plea agreement, he agreed to return two houses to the original owners.

by Stephanie Saul