3 indicted in Fire Island mortgage fraud

A federal grand jury has indicted three Connecticut residents on mortgage fraud charges that include a Fire Island house. The indictment charges the fraud resulted in $500,000 in losses to financial institutions.

Charged in the 11-count indictment are Steven J. Kottage, 44, formerly of Weston currently in state custody on an unrelated charge, and Genaro R. Hathaway, 46, of Weston and Mary Ellen Durso, 53, of Milford.

The indictment alleges that Kottage and Hathaway, who are married, conspired to commit wire fraud in the sale of a house at 110 Cranberry Walk in the Fair Harbor community of Fire Island. The pair allegedly purchased and financed the home in Kottage's mother's name through Wells Fargo Home Mortgage.

Hathaway, a former lawyer, served as the closing attorney and subsequently purchased the home from the woman's estate using financing from H & R Block Home Mortgage. Rather than pay off the Wells Fargo mortgage the pair used the proceeds to pay off another real estate transaction.

The indictment further sets out a separate scheme in which Kottage, Hathaway and Durso conspired to commit bank fraud by filing a false mortgage loan application with Washington Mutual to refinance a condominium in Hillsboro Beach, Fla. Durso allowed herself to be used as the straw buyer so Kottage and Hathaway could receive the proceeds.

The alleged scam spanned June 2002 to December 2005, the indictment charges.

Kottage and Hathaway are each charged with two counts of conspiracy and two counts of wire fraud. While the trio is charged with bank fraud. Durso is charged with conspiracy and five counts of filing false tax returns. Hathaway also faces a tax evasion charge.

The indictment comes just two weeks after U.S. Attorney David Fein announced a statewide crackdown on financial fraud.

Assistant U.S. Attorney David Huang is prosecuting the case which was investigated by the FBI and IRS.