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Three local families to recoup losses from mortgage scammers


Several local families who lost their homes in a mortgage scam during the peak of the housing crisis will soon be getting at least some of their lost funds back after state officials reached a settlement with the alleged participants in the fraud.

The operation was active between 2006 and 2008, and the people who ran it posted fake advertisements offering foreclosure rescue only to steal money and property deeds from 14 Long Island homeowners, including three in Riverhead Town.

John Lehman, one of the victims, told ABC-7 News last Thursday he was crushed to lose his Wading River house in the scam.

“It meant everything. That’s where all three of my kids grew up,” he said. “You know, they lost all their friends, people they went to school with. We had to relocate.”

Mr. Lehman did not return multiple calls from a News-Review reporter.

Two other area homes fell prey to the scam — one in Riverhead and one in Calverton — and the attorney general’s office declined to provide contact information for those victims.

On Friday, New York State Attorney General Eric Schneiderman announced a settlement of over $400,000 with the alleged participants. Happauge’s Barry Zornberg, a disbarred attorney, agreed to pay $340,000; Cory Covert, a Happauge attorney licensed to practice in New York, agreed to pay $67,500; and Baldwin mortgage broker Leonie Neufville agreed to pay $10,000 and accepted a five-year ban on acting as a broker.

Mr. Schneiderman has also received a default judgment against Kenneth Kiefer of Bethpage and the late John Rutigliano, formerly of Medford, who were principals in Empire Property Solutions, the company that posted the advertisements. The attorney general is working to convert that judgment into a monetary settlement.

“This shameful scam re-victimized families already suffering from the collapse of the housing market,” Mr. Schneiderman said in the Friday release. He also announced that all of the money from the settlement will be used to compensate the victims of the scam.

To conduct their fraud, Empire Property Solutions placed advertisements saying they would help local homeowners refinance during the housing collapse through a “sale-leaseback” program. They told residents to hand over titles to their property for a year, during which they could build up credit and remain in their homes by paying rent to Empire Property. After a year, the residents believed, they would regain ownership of their homes.

However — with the help of the attorneys and brokers also named in the settlement — the alleged scammers did not use that rent to pay down mortgages, causing homeowners to face foreclosure and eventually, in some cases, eviction.

“We went to do a refinance and by the time we walked out, we didn’t own our house anymore,” Mr. Lehman told ABC-7.

He told the news outlet the punishment should be harsher for those who caused him extreme stress and the loss of a home.

“[They] should be sentenced a year for every night that I’ve stayed awake worrying about where my kids were going to live,” Mr. Lehman said.

The case does not end with the state, though. The federal government has also brought a criminal investigation against the partners involved in the fraud, according to the attorney general’s press release.

Mr. Rutigliano and Mr. Kiefer were indicted by the U.S. Attorney’s Office on charges of conspiracy to commit wire fraud. Mr. Zornberg was also indicted for lying to federal investigators.

Mr. Kiefer pleaded guilty and is awaiting sentencing, while Mr. Zornberg agreed to a plea deal and will pay $1.3 million in compensation to victims of the fraud. The indictment against Mr. Rutigliano was dismissed because he is deceased.

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Photo: New York State Attorney General Eric Schneiderman said a mortgage scheme took the homes of three local families. (Credit: Attorney General’s Office)