Two former Massachusetts lawyers convicted of participating in a mortgage fraud scheme have lost their challenge before the U.S. Court of Appeals for the First Circuit.

On September 19, a unanimous panel, ruling in U.S. v. Appolon, affirmed the convictions of the former attorneys and of three nonlawyers.

One of the lawyers was Eric Levine of Brookline, whose license was suspended in 2003. In January 2011, he was sentenced to 12 years in prison, plus two years of supervised release, for orchestrating the fraud. The other was J. Daniel Lindley of Jamaica Plain, whose license was suspended in June 2010. He was sentenced in November 2010 to 72 months in prison and three years of supervised release.

The First Circuit heard their appeal last December.  

The three nonlawyers were convicted for conspiracy and wire fraud. In October 2010, recruiter Daniel Appolon was sentenced to 42 months in prison and three years of supervised release. That same month, real estate broker Ernst Appolon was sentenced to 120 months in prison and three years of supervised release. In November 2010, mortgage broker Latoya Haltiwanger was sentenced to 30 months in prison and three years of supervised release.

Senior Judge Kermit Lipez wrote the 54-page opinion, joined by judges Michael Boudin, and Juan Torruella.

According to the ruling, the convicted parties and co-conspirators used straw buyers to buy real estate, created false mortgage loan applications so the straw buyers could get financing for an artificially inflated purchase price, and kept the difference.

All of the loans went into default, and the lenders experienced huge losses on the deals because most of the properties went into foreclosure.

Lipez upheld the sufficiency of the evidence against Levine and Lindley, based on testimony in the case and the paper trail.

Part of Levine’s appeal was of a November 2010 denial by Judge George O’Toole Jr. of the District of Massachusetts of Levine’s motion to conduct an evidentiary hearing about an alleged conflict of interest. A romantic relationship between defense team member Melanie Abbruzzese, who was a paralegal at Boston-based Denner Pellegrino, and postal inspector Joseph McGonagle III, spawned separate cases.

Both were convicted for perjury and obstruction of justice. Abbruzzese was sentenced this March to one year and one day in prison, plus two years of supervised release. In May, McGonagle received the same sentence plus a $4,000 fine.

Lipez also upheld the 18-level enhancement for Levine that the district court added to his sentence for causing losses between $2.5 million and $7 million: “The district court’s intended loss formula was a reasonable proxy for culpability in the circumstances of this case.…Even if the deterioration of the Boston real estate market during the recent recession also played some macroeconomic role in that outcome, Levine and Ernst [Appolon] could reasonably have expected that they were contributing to the emergence of those poor market conditions.”

In addition, Lipez held that there’s no merit to Levine’s argument that the district court erred by imposing a four-level sentence enhancement because he helped organize the scheme, noting, “The evidence clearly establishes that Levine masterminded appellants’ scheme” by directing Lindley’s actions and the flow of money.

On Levine’s remaining claim, Lipez determined that he hadn’t shown how an evidentiary hearing or discovery would have likely produced any evidence that could have helped him establish a claim for relief.

With regard to Lindley, Lipez wrote that there was enough evidence to prove that he willfully blinded himself to the fraud: “A jury without experience in real estate closings could nevertheless infer that Lindley should have been alerted to a high probability of wrongdoing from the fact that multiple buyers purchased properties, signed occupancy affidavits declaring their intention to reside in those properties, and then turned around and bought new properties within the week. Second, the government did call witnesses to testify to the suspicious nature of certain less obvious red flags.”

Lipez then addressed Lindley’s claim that the government’s closing argument erroneously pegged the practice he inherited from Levine at “a quarter million dollars” when the government also argued that Lindley joined the scheme to stay on good terms with Levine so he could get the practice.

“That these figures necessarily were estimates, and perhaps were extrapolated from unusually busy periods in Levine’s professional career, does not negate the inference that Lindley was drawn to the scheme by the allure of ‘a quarter million dollars,’ or thereabouts,” Lipez wrote.

Dana Curhan, a Boston lawyer who represents Levine, said, “It’s a long decision and we’re trying to see what our options are right now.” Curhan also said “the main issue for us is the issue of the paralegal and the federal agent.”

Lindley’s lawyer, James Rehnquist, a litigation partner at Boston’s Goodwin Procter, did not respond to a request for comment. Robert Sheketoff, a Boston lawyer who also represented Lindley, declined to comment.

The Justice Department “is pleased with the court’s decision,” said spokeswoman Rebekah Carmichael in an email.

Sheri Qualters can be contacted at squalters@alm.com.