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A lawyer who once decided who got to practice law in New Jersey admitted to a federal jury last week that he is a convicted felon unlikely to practice law again himself. Stanley Yacker, chairman of the state Board of Bar Examiners from 1989 to 1992, testified under a plea deal at the Newark, N.J. trial of two realtors charged with criminal wire fraud and conspiracy in a mortgage-flipping scheme. The realtors, Irene DiFeo and Donna Pepsny, of Monmouth County, are accused of inflating property values and defrauding homebuyers lured by promises of no money down and no closing costs. In his testimony on Tuesday and Wednesday, Yacker told how he betrayed his clients, homebuyers, by among other things allowing closings for more than the contract amounts and by not advising clients to get inspections on the properties. He also said he allowed buyers to be paid under false names from his trust account or through business entities to deceive lenders and got clients to sign forms that contained false numbers or blanks that would be filled in later. About a dozen people, including Yacker and his former secretary, Lorraine King, have entered guilty pleas. Yacker pleaded guilty on Jan. 15 before U.S. District Judge Alfred Wolin to 10 counts of wire fraud and one count of conspiracy to commit wire fraud. Yacker testified last week about his role in 15 to 20 transactions in 1995 and 1996, in which he represented people buying homes from developer William Kane, with Pepsny or DiFeo as the real estate broker. Yacker also testified that he served as the closing agent in more than 200 land-flipping deals in 1996 and 1997. Those deals involved straw buyers — people paid for the use of their names and credit histories to obtain financing on the properties in a scheme to inflate the property values. In pleading guilty, Yacker admitted preparing the joint venture agreements between investment company Capital Assets Property Management and Investment Co. of Red Bank and the straw buyers. King’s 1999 guilty plea admitted that she and Yacker backdated deeds to conceal that flipped properties were being sold before they were acquired and that they later removed documents from files to hide the flipping. Yacker also admitted on the stand to changing dates but denied it was done to defraud or deceive. Most of the testimony by the 64-year-old Matawan solo practitioner was about how he betrayed homebuyer clients. Though it was Kane who was paying Yacker’s standard fee of $650 for representing the buyers, Yacker acknowledged that his duty of loyalty lay with his clients and that he repeatedly breached that duty. He told of how he failed to properly advise his clients or protect their interests when they were surprised at closing with prices inflated above the contract amounts and second mortgages. Yacker also never advised clients to get home inspections. Many buyers later discovered problems with the houses that required costly repairs, and some even lost their homes after defaulting on the mortgages. As the buyer’s attorney, Yacker was responsible for the HUD-1 forms, required under the federal Real Estate Settlement Procedures Act, for recording the money that changes hands at a closing, Yacker stated. But he allowed Kane to fill in false amounts, and he signed and got clients to sign forms with false numbers or blanks that would be filled in later with false amounts, he testified. As Yacker explained, buyers were not able or willing to make down payments or pay closing costs, yet could not borrow the full purchase price. The inflated purchase prices and second mortgages enabled buyers to obtain full financing so the sales could go forward, Yacker stated. Yacker also issued escrow letters to lenders falsely stating he was holding money from the buyers toward the purchase prices and solicited fake “gift letters” from clients to make it appear that buyers’ relatives had given them money toward buying the house. Yacker also got clients to write out checks to creditors to create the appearance that the debts had been paid off, as the lenders required, he testified. The checks were not sent to the creditors, however, and would usually have bounced if they were. At one closing, where Yacker asked about changed numbers on behalf of an upset client, DiFeo told him to stop asking so many questions, according to Yacker. DiFeo also said that Terry Finkelstein, another lawyer who was involved with some Kane deals, would not be asking those questions, Yacker stated. Finkelstein says he has not been contacted by government investigators. Yacker said he took DiFeo’s words as a threat that he would lose the work if he did not stop talking. His reaction: “I stopped asking the questions … I didn’t want to make waves.” Yacker said he told buyers the second mortgages were there to show where the rest of the money, above the original purchase price, was coming from. He admitted he did not advise them that if they strenuously objected to the second mortgage, Kane was likely to drop it, reduce it, or agree not to enforce it. He said he thought it was Pepsny’s husband Richard who prepared the second mortgages. Richard Pepsny was Kane’s lawyer in almost every instance, Yacker testified. Now a Middletown solo practitioner, Pepsny was then practicing with Michael Alfieri, a Matawan, N.J., solo practitioner. Alfieri owned Selective Finance Ltd., a Matawan mortgage company involved in the deals. Former Selective loan officer Vincent Applegate pleaded guilty to the scam last fall and also testified at trial. Buyers sometimes got part of the excess loan money, paid in checks issued from Yacker’s trust account under false names or through business entities to deceive lenders, he also admitted. According to Yacker’s testimony, he stopped doing the work in 1997 after Kane “invaded” his trust account by almost $90,000 and checks started bouncing. “I don’t know how it happened,” he said. Soon after, the FBI contacted him and asked to see his files. On cross-examination, DiFeo’s lawyer, Darren Gelber, and Pepsny’s lawyer, Jerome Ballarotto, attacked Yacker’s testimony as motivated by his desire to avoid jail. Yacker faces up to 51 months in prison for the crimes. Under a Jan. 11 deal, prosecutors will seek a lighter sentence if Yacker provides “substantial assistance” in the case. Ballarotto, a Trenton, N.J., solo practitioner, pointed out that whether Yacker has done his part under the plea deal is within the sole discretion of the assistant U.S. attorney prosecuting the case, Alain Leibman. Gelber, a partner with Woodbridge, N.J.’s Wilentz, Goldman & Spitzer, noted that it was not until the day Yacker was to go on trial that he changed his plea to guilty. Yacker denied those accusations, calling it his moral and ethical duty to cooperate with the prosecution. Asked by Wolin why he would commit fraud for the “relatively modest compensation” of $650 per deal, Yacker referred to “a series of rationalizations” and a belief that he was acting in the best interest of the client. He then said it is now clear to him that was not the case and that he came to “worry more about the fee than the interest of the client.” Yacker told the jury that his 16-year-law partnership with Louis Granata dissolved in January 1996 because one of them — Yacker didn’t specify who — was not pulling his weight. He described himself as practicing alone for the first time and uncertain of his economic future. If that testimony was offered to explain why he succumbed to the lure of doing dirty deals, it did not account for why Yacker began working on those deals months earlier, in the spring of 1995, while still a partner with Granata. Granata says Yacker was the one not pulling his weight and that he was unaware at the time of Yacker’s fraudulent deals. One of those deals also came across his desk through Alfieri, but Granata turned it down because “Alfieri wanted to control the way that monies went through my trust account,” he says. Granata is now a partner with Granata, Wernik & Zaccardi in Matawan. Alfieri declines comment. Finkelstein, an East Brunswick, N.J., solo practitioner, says DiFeo referred four Kane deals to him. Unlike Yacker, who represented people buying homes from Kane, Finkelstein helped Kane acquire properties. Finkelstein says the deals he worked on were “clean,” and when he found out about the scam in the newspaper, he “felt used.” He went back and reviewed the files to be sure there was not “something I should have seen that I did not” and was relieved to find nothing, he says. The supreme court temporarily suspended Yacker on Feb. 18, pending the outcome of the criminal case. Office of Attorney Ethics director David Johnson says the office has an investigation file on Yacker but will not act further until after sentencing, scheduled for May 14.

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