Attorney to Challenge Office Raid After Arrest in Mortgage Scam Tied to Dominatrix Club

Vesselin Mitev

New York Law Journal

Now that a lawyer has been arrested in connection with a bizarre real estate fraud that allegedly recruited straw buyers at a dominatrix club, he has standing to challenge the warrant that authorized a raid on his law office last month, his attorney said Thursday.

It is "dangerous precedent to allow a prosecutor to do this in an adversarial system to a lawyer," said Kathy B. Huang, the Manhattan attorney representing George O. Guldi, 55, a former Democratic legislator and Westhampton Beach, N.Y., solo practitioner.

The warrant and the methods used to obtain it are "all subject to challenge in open court," she said, adding that her client "plans to vigorously contest the charges."

Last month, a Suffolk County, N.Y., judge denied an application to quash a warrant that resulted in the removal of 49 boxes of files from Guldi's offices. The district attorney returned most of the files, but investigators retained 19 boxes.

New York Supreme Court Justice Jerry Garguilo, who signed the warrant, ruled that Guldi's application was not ripe because he had not yet been arrested.

On Wednesday, Guldi was among seven people -- three of them lawyers -- charged by Suffolk County District Attorney Thomas J. Spota in connection with an alleged mortgage scam operating in the East End of Long Island and in Manhattan that fraudulently obtained more than $50 million in mortgages on dozens of homes.

Robert Clifford, a spokesman for Spota, declined to comment on whether any evidence seized in the raid on Guldi's offices led to his eventual arrest or would be used in his prosecution.

In addition to Guldi, the attorneys arrested were Ethan E. Ellner, 54, of Ronkokoma, N.Y., who runs a title company out of Stony Brook, N.Y., and Dustin J. Dente of Roslyn, N.Y.

Others charged were the publisher of the SoHo Journal, Donald MacPherson, 65, and his wife, Carrie Coakley; Gary Small, 41; and Victor Jinete, 34.

According to court documents filed by Huang and co-counsel John F. Diffley, the SoHo Journal also had published a Web site entry announcing that Guldi was considering re-entering politics one day before Guldi's offices were raided.

"Suspiciously, the offices of the SoHo Journal were, likewise, raided by [authorities] after the announcement that Guldi was putting in his bid to run," the documents allege.

Spota said Wednesday in a news release that the SoHo publication "promoted Hamptons rental properties fraudulently purchased and used as summer rentals by the defendants."

According to Spota, the defendants used straw buyers, some of whom were solicited at Arena Studios, a Manhattan dominatrix club, to obtain fraudulent mortgages by filling out phony applications claiming substantial incomes.

Spota added that the defendants also engaged in "mortgage stacking" and "title washing," techniques that enabled them to acquire multiple mortgages through the use of bogus title reports stating that no first mortgage existed on the properties in question.

The district attorney said the defendants "repeatedly ignored" their obligation to pay off existing mortgages, instead funneling the money into their personal accounts to finance their businesses and lifestyles.

The district attorney said one of the homes involved in the scam originally belonged to Guldi's father, with an outstanding mortgage of $1.5 million that went into foreclosure in 2005. However, the defendants allegedly washed the title and obtained a new $1.8 million mortgage, with the proceeds flowing into accounts controlled by Ellner, Guldi and Dente.

A woman answering the phone at Ellner's office said, "We have no comment" before hanging up.

Miller Place, N.Y., attorney Steven Wilutis, who represents MacPherson, did not return calls for comment. Dente could not be reached for comment.

The defendants face multiple charges of grand larceny and scheme to defraud, and attempted mortgage fraud. They all pleaded not guilty and have been released on bail.

Spota said the investigation was conducted by a mortgage fraud unit he established in June 2008. To date, the unit has been responsible for 34 arrests.