Friday, December 19, 2014

Finally, a sentencing nears in four-year-old $14M fraud case

More than four years ago, federal prosecutors charged a group of "unscrupulous predators" in a sophisticated scheme that generated $14.6 million in fraudulent loans and caused dozens of homeowners on the brink of foreclosure to lose their homes.

But, even though the prosecutors were able to get guilty pleas, the group has still not been sentenced as their case became bogged down in court.

Now, finally, the sentencing is scheduled for March.

The case has its genesis in the 2009 federal indictment of Edward G. McCusker and John Alford Bariana, owners of Axxium Mortgage, Inc., McCusker’s wife, Jacqueline, and Jeffrey A. Bennett and Stephen G. Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C.

After interminable delays, the McCuskers were set to be sentenced this week - two years after they were found guilty by a jury in June 2011 on multiple counts of fraud, conspiracy and money laundering. 

The delays were caused amid a flurry of 372 filings — motions, memorandums and orders — over the four years.

The McCuskers are eligible for 240 years in prison, fines of up to $3.25 million and possible forfeiture of the proceeds of the fraudulent scheme which is alleged to be approximately $14.6 million. Federal sentencing guidelines, however, suggest maximum prison terms of between 20 and 30 years.

Bennett and Bariana previously pleaded guilty. Doherty, whose sentencing hearing concluded Wednesday, was also awaiting sentencing.

But the McCuskers and Doherty will remain free for at least another three weeks.

Though presiding U.S. District Judge Mary McLaughlin said Tuesday she had hoped to wrap everything up by Friday, a slew of defense motions immediately jeopardized that timeline. Snow brought by a nor'easter closed the Federal Courthouse on Thursday and weather threatened to disrupt the courts today.

Punishment has been deferred until at least March 5 when McLaughlin says she will finally issue their sentences.

McLaughlin also requested that assistant U.S. Attorney Nancy Rue provide the judge with more information about the forfeiture procedure. The government has asked that the defendants be required to pay about $944,000.

The complicated fraud scheme - which operated during the peak of the housing bubble between 2004 and 2006 - included at least 35 mortgage loans that involved false documents and "straw purchases" of properties belonging to financially distressed homeowners.

Working as middle men and women in complex mortgage transfer deals, members of the group lied to those on both ends of the deal, prosecutors said. Ed McCusker promised the desperate homeowners he would solve their financial problems, then members of the group lied to the homeowners about the chance to repurchase their homes. The group also lied to lenders about who was purchasing the homes and the credit worthiness and incomes of those straw purchasers, prosecutors said.

Announcing the indictment in 2009, then-U.S. Attorney Michael Levy denounced the schemers as "unscrupulous predators looking to cash in on the misfortune of others.”

"This sort of fraudulent activity not only preys on desperate homeowners, it weakens our financial institutions, destroys neighborhoods by leaving properties abandoned, and devalues the homes of innocent neighbors," Levy said.

The FBI's top Philadelphia agent at the time, Janice K. Fedarcyk, called the alleged crimes "particularly despicable."

The sentencing hearings for McCuskers and Doherty were originally scheduled for Jan. 27-31, but McLaughlin granted a delay in sentencing "with reluctance," according to a court order Dec. 18, which cited "the vacation schedule of one defendant's counsel and the request by the other defendants for more time to respond to the presentence reports when they are issued."

Rue, the assistant U.S. Attorney prosecuting the case, declined to comment when asked Tuesday about the length of time to which this case has stretched.

As for the weeklong schedule of sentencing hearings, Rue said, "That's what this court has decided."

 


Contact Brian X. McCrone at 215-854-2267 or bmccrone@philly.com. Follow @brianxmccrone on Twitter.

Contact the Breaking News Desk at 215-854-2443; BreakingNewsDesk@philly.com. Follow @phillynews on Twitter.

Brian X. McCrone and Sam Wood PHILLY.COM
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