5 face charges in `flip' scheme

Federal grand jury brings city's first criminal indictments

$548,883 in mortgages

Prosecutors allege group profited from inflating house costs

March 09, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

In the first criminal prosecutions since a wave of property flipping began to sweep across Baltimore four years ago, a federal grand jury indicted five men yesterday in an alleged mortgage fraud scheme where houses were bought and quickly resold at inflated prices.

Charged with 14 counts of mail and wire fraud were Robert L. Beeman, a Wilmington Del., resident who flipped more than 100 Baltimore houses in recent years; G. Samson Ugorji, a real estate appraiser who has acknowledged doing 39 appraisals for Beeman; Michael M. Fishman and Scott R. Shinskie, principals in Macallan Funding Inc., which brokered the loans for many Beeman deals; and Robert C. Ness, an Owings Mills lawyer whose firm handled many Beeman settlements.

The indictment said a second settlement attorney, Robert L. Friedman, was part of the scheme, but he was not charged along with the five defendants. U.S. Attorney Lynne A. Battaglia would not say whether he had been charged or would be charged.

In 10 allegedly fraudulent transactions cited in the indictment, the mortgages totaled $548,883.

Yesterday's indictments are the culmination of an investigation begun by postal inspectors two years ago when a lawsuit was filed against the five people charged yesterday, along with Friedman and others.

Eventually, 82 Beeman buyers became plaintiffs in that suit. Andre Weitzman, their attorney, announced three weeks ago that an agreement to settle the case had been reached with most parties.

Other criminal investigations are under way, including probes by postal inspectors, the FBI and the inspector general of the Department of Housing and Urban Development.

Maryland Attorney General J. Joseph Curran Jr. is conductingcivil and criminal investigations.

In addition, two U.S. Senate subcommittees are looking at the situation and are planning to conduct hearings in the spring.

The investigations come in the wake of an epidemic that has seen more than 2,000 Baltimore properties bought and quickly resold in the past four years for price increases of at least 100 percent.

A Sun examination of more than 400 flips that did not involve Beeman showed that the price increases on dilapidated houses sometimes reached 1,000 percent. Often houses are bought and resold on the same day.

Numerous complaints

"It's very important that we prosecute these instances of mortgage fraud," said Battaglia.

She said she has received numerous complaints about flipping and mortgage fraud.

"People understand that flipping and mortgage fraud affect everyone who is concerned about the viability of Baltimore as a residential area," she said.

Attorneys for Beeman, Fishman and Shinskie had no comment.

Ness' attorney, Larry Nathans, said his client "is not guilty and we will vigorously defend him in court."

Ugorji's lawyer, Barry Pollack, a federal public defender, said: "Mr. Ugorji doesn't feel that he's done anything wrong, and we'll be fighting the charges."

Andrew Radding, who represents Friedman, refused to comment when asked whether his client was cooperating with prosecutors.

All about inflated prices

According to the indictment, the alleged scheme worked this way:

Beeman would buy an inner-city property at a low price and then sign a contract to sell it to a first-time homebuyer for a price "well above the amount" he had paid for it.

The buyer, with poor credit and modest income, would be told the house could be had for a cash outlay of only $500 down. Beeman would make cosmetic improvements.

Beeman would then send the buyer to Fishman and Shinskie at Macallan Funding, who would put together loan packages for the buyer to obtain a mortgage.

They would tell the lender that the sale price was about twice the amount on the contact signed by the buyer.

`Gross overstatement'

"Beeman and Shinskie, with the knowledge of Fishman, would create fraudulent sales contracts reflecting the higher sales price," and the three of them would send the fraudulent contract to the lender, knowing that the document "represented a gross overstatement of the value" of the house.

They did this, the indictment said, because lenders would provide only 60 percent to 70 percent of the contract price or the actual value of the house, whichever is lower.

And, it said, "lenders would often overlook low annual income, past credit problems, and other loan approval impediments [of the buyers] if there was sufficient value in the property to guarantee repayment of the loan in the event of default."

In one case described in the Beeman lawsuit, Yvonne Peaks signed a contract for $45,900 on 211 N. Montford Ave. and discovered only later that the lender received a contract that set the price at $83,000.

Her mortgage was $58,100.

Two months after Peaks settled in 1997, the city demolished the house when it began collapsing during demolition of the adjacent house.

Role of appraiser

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