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N.Y. Attorney Convicted of Mortgage Fraud
New York Law Journal
February 09, 2009
The bogus world of a Brooklyn, N.Y., attorney who built a profitable business on title insurance while earning high fees on real estate closings came crashing down on Friday as a federal jury convicted him in a subprime mortgage scam.
Alexander M. Kaplan, 34, of Lerner & Kaplan, sat stoically at the defense table while a jury of 10 women and two men pronounced him guilty on all 18 counts in an indictment charging him with conspiracy and bank, mail and wire fraud.
Kaplan, who testified in his own defense, is scheduled to be sentenced May 1 by Southern District Judge Richard Holwell.
The verdict was a victory for Assistant U.S. Attorneys Avi Weitzman and Jonathan New, who persuaded the jury that Kaplan played a pivotal role in a wide-ranging conspiracy that ripped off lenders of millions of dollars.
Kaplan's role, they proved, was to keep lenders in the dark by representing the bank, the buyer and the seller in transactions where mortgage brokers, particularly lead actor Alexander Lipkin, would use the identities of innocent straw buyers to obtain huge loans on properties. Sometimes, they would flip the properties within weeks using even more phony documents.
Weitzman told the jury during summations in the two-week trial that Kaplan was "a liar and fraudster," who "engaged in a massive fraud that was perpetrated by all these people.
"He did so by telling lies to banks over and over again. He lied about who the real purchasers were and he lied about the amount of money he disbursed from the loan proceeds," Weitzman said. "His lies were all intended to protect his criminal partners and to make sure the real estate transactions looked legitimate."
Kaplan was one of 27 people indicted in the conspiracy. All of the other defendants except one have pleaded guilty, including Lipkin who admitted to guilt in two schemes in June 2008. He has yet to be sentenced.
The first was part of a foreclosure "rescue scheme" whereby Lipkin induced distressed homeowners to transfer the deeds in their homes to straw buyers who would supposedly "save" their homes and promise to return the deed to the homeowners.
In the end, Lipkin and his cohorts, using the straw buyers, would take out millions of dollars in loans on the property. They would then default on those loans, leaving both the banks and the straw buyers damaged.
The second scheme concerned subprime mortgages. Lipkin and others submitted applications for millions of dollars to lenders using fraudulent documents, a scheme that cost the lenders more than $4.5 million.
Kaplan, the prosecutors said, was one of several dirty lawyers who helped facilitate these plots, including the signature scam in the indictment: the purchase of a block of apartments at 243 West 98th Street in Manhattan where Lipkin and several others, including Kaplan, never disclosed to the bank that the units were occupied and under rent control. Some tenants were paying as little as $393 a month.
Kaplan made between $850 to $1,100 in fees per closing and much more in title fees, Weitzman said, and he made "tens of thousands" in fees on the West 98th Street deal.
AN UPHILL BATTLE
Defense lawyer Diarmuid White of White & White in Manhattan, was faced with an uphill battle. It did not help when his client took the witness stand and was unable to remember key details, claimed paralegals handled a good deal of the work, and conceded he did not file income taxes in 2006 and then blamed his accountant.
White's strategy was to portray Kaplan as an ambitious young attorney who was trying to build a "mill" and who let things get away from him through sloppy business practices and mismanagement.
"No question he did not act as diligently as he should have," White told the jury during opening statements, asking why Kaplan "would risk everything -- his law career, his business, everything, to willingly participate in such a conspiracy?"
Kaplan, admitted to the bar in 1999 after graduating from New York Law School, started with a small firm practicing immigration, matrimonial and real estate law. After working for another real estate firm in Brooklyn, he and partner Garry Lerner, who is his cousin, started their own practice focusing on real estate.
Kaplan got his foot in the door by becoming the closing agent for one bank. He soon became the agent for another six banks and, at the peak of his practice, did closings for as many as 60 banks.
By 2004, he was doing as many as 10 closings a day, employing teams of paralegals to handle most of the transactions.
In the same building as Lerner & Kaplan on E. 12th Street in Brooklyn, Kaplan built a thriving 10-employee title company, Executive Settlement Services.
"Why send this out? Why not have a title company that I control and all the fees that it generates?" White said to the jury during opening arguments. "Now that's good business, but it's not so good for a lawyer because there is a potential conflict of interest."
There were ethical lapses, he said, and Kaplan "spread himself too thin" because "he couldn't possibly oversee every transaction."
In his summation, White did not mince words, saying Lerner & Kaplan was "run poorly, not well supervised, not managed properly."
"There was too much emphasis on growing the business," he said. "The practice was a mess."
White said that Lipkin, "the ringleader," lied to everyone along the way, the banks, the straw buyers, the other defendants and Kaplan, whom he played for a dummy.
"He was a fool, a total fool," White said. "He was ripe for Lipkin to manipulate and that's what happened. He was duped."
But Weitzman and New convinced the jury that it was impossible for Kaplan to sign off on one document after another on the closings, particularly the West 98th Street property, without knowing, or at least consciously avoiding, the truth.
Weitzman compared Kaplan to the three monkeys who hear no evil, see no evil and speak no evil.
"Essentially, Kaplan's defense is 'I didn't see nothing. I didn't hear nothing,'" he said.
Kaplan faces a potential sentence of upwards of 30 years and a fine of $1 million, but is expected to receive much less under the U.S. Sentencing Guidelines.
