17 charged in Nassau $20M mortgage fraud

Authorities said Wednesday they arrested 17 people in what they called Nassau's "largest takedown" of a mortgage-fraud scam, which duped homeowners, banks and the county out of $20 million.

The ring -- which included lawyers, real-estate and mortgage brokers, bank employees, an appraiser, a financial consultant and a U.S. postal worker -- fraudulently bought 29 homes in the past six years, then let them fall into foreclosure, Nassau County District Attorney Kathleen Rice said. They did so by using fake buyers and by impersonating buyers and sellers, she said.

"I think that whoever did this has no heart, has no feelings, because they damaged an entire family," said Celso Enrique Benalcazar, 49, a Bronx handyman whose identity, prosecutors say, was stolen when two homes were purchased in his name. "Now I wonder, what is going to happen to me next?"

Ringleaders James R. Sweet, 43, and Dwayne Benjamin, 44, a U.S. postal worker, both of Westbury, began with a simpler form of the scheme by paying fake buyers $10,000 to obtain mortgages for more than the negotiated sales price, and pocketing the difference, Rice said.

Then, Rice said, they recruited friends and family to steal identities and impersonate buyers and sellers, which allowed them to keep the entire proceeds of the mortgage. "At these closings, everything was fake except for the money that was stolen," Rice said.

The ring defrauded Nassau out of $80,000 in subsidized rent payments for tenants who leased five fraudulently obtained homes, Rice said. "We have seen families put out on the streets, houses boarded up and entire neighborhoods reduced to virtual ghost towns," she said. "And if those struggles aren't bad enough, here are two men . . . doing whatever is necessary to destroy even more lives."

Her office, with help from state investigators, charged ring members under the Organized Crime Control Act, the state counterpart to the federal racketeering statute.

The sellers of homes bought by straw-buyers face no charges because they were unaware the ring received mortgages that exceeded their asking prices or there isn't enough evidence to show they knew, said Abigail Margulies, chief of Rice's real-estate crimes unit.

Many suspects or their attorneys could not be reached. But several defense attorneys said their clients did not knowingly participate in a fraud. Robert Del Gross, Sweet's lawyer, declined to comment. Benjamin hasn't retained a lawyer.

Suspects bought the same West Hempstead home twice over two weeks in 2005, taking out a $390,000 mortgage each time, Rice said. The second mortgage was obtained because scammers allegedly realized they could buy it again before the Nassau County Clerk's Office recorded the first sale.

Rice said her office will talk to the county clerk's office on what can be done to prevent the same property from being sold several times within weeks because of a lag in recording deeds. Except for three defendants, all face up to 25 years in prison on charges ranging from violating the state organized crime law to money laundering and conspiracy.

Newsday staff writer Bart Jones contributed to this story.