Paul Bass Photo
From his front porch, James Edwards could see that a fire had driven the tenants out of the house next door. He knew the building’s owners had fishy dealings with tenants. He didn’t know what the FBI said it found out — that an elaborate conspiracy involving prominent local people milked the property and left the government with the bill.
Edwards (pictured) lives next door to 88 Hazel St. (also pictured) in the Newhallville neighborhood. The house was one of 35 bought under false pretenses and used as the basis for fraudulent mortgages that went into conspirators’ pockets rather than into the buildings, according to the government.
“I noticed the guy [that tenants] paid the rent to didn’t own the house,” and tenants had to put water and sewer bills in their own names, Edwards said. “Some mice live there now. That’s about it.”
Last week the FBI arrested a police commissioner, a former state representative, a rabbi, and others for allegedly cooking that scheme. It was one of three similar schemes the feds revealed at a press conference in New Haven. Some of those arrested claimed they did nothing wrong. Read about that here.
This week a federal grand jury in the case issued a new indictment with more information on how the alleged scheme worked, and whom it hurt.
In the scheme involving properties like 88 Hazel, the conspirators allegedly found “straw buyers” for rundown homes. They apparently worked with the sellers to pretend that the buyer was purchasing the homes for one price — then actually sold them for less. They allegedly doctored appraisals and other documents to make it look like the higher prices were paid. Then they allegedly used those documents to obtain mortgages based on the higher prices, and split the difference among themselves. Meanwhile, the straw buyers never paid on the mortgages. So the houses were left to fester and get foreclosed upon by the hoodwinked lenders.
The new indictment released this week focuses in part on how this scheme bilked taxpayers. Some of the mortgages were made by the federal Department of Housing and Urban Development (HUD), mortgages to help people with low- and moderate-incomes buy homes. That money never served that purpose in these cases.
Most of the properties are in struggling neighborhoods like Fair Haven and Newhallville, and on streets like Lloyd and Starr, where the fate of one house can push a block toward blight or toward renewal. The feds looked at streets that another agency in town has been spending a lot of time on — a foreclosure-prevention team called ROOF. ROOF has been trying to keep the foreclosure crisis from spreading on those streets and to put distressed properties in responsible hands.
“These are the same streets that already had a lot of foreclosures. This only adds to the number of vacancies,” ROOF chief Eva Heintzelman said. “It definitely pushes them past the tipping point. It makes it only that much harder to bring these streets back.”
Furthermore, some of the alleged scammers’ $10 million in ill-gotten loans were insured by the Federal Housing Administration. The feds estimate that lenders overall lost $3 to $4 million of that $10 million. So taxpayers are now on the hook for some portion of that $3 to $4 million, the portion that came from FHA-insured loans. The feds didn’t detail how much of that $3 to $4 million was from FHA loans.
But they did detail how some of those FHA-insured transactions took place. Three of them occurred in Newhallville, one in Fair Haven. The federal indictment, land records, and visits to the properties highlight some of how the alleged schemes played out on the ground.
88 Hazel
According to land records, a man named Asmar Marshall of Milford sold the property at 88 Hazel St. in October 2008 to Nicolas Wilson of Groton for $180,000. The new owner then obtained a mortgage for $177,655 from American Southwest Mortgage Company of Oklahoma City.
A multicultural crew of alleged co-conspirators had fingerprints on these transactions.
The alleged mastermind was a New London man named Syed “Ali” “Asad” Babar, the government indictment charges. He’d allegedly recruit the pretend buyers in cases like this. West Haven Police Commissioner Thomas Gallagher, an appraiser by trade (and former grand marshal of the New Haven St. Patrick’s Day Parade), would allegedly draw up phony appraisals to reflect the higher purchase price. The team would also submit fake documents pretending that a company called Sheda Telle Construction LLC was renovating the house; Babar formed the company, which allegedly didn’t otherwise exist beyond having a bank account. Former New Haven State Rep. Morris Olmer, who no longer has a license to practice law, would handle the closings; an attorney with whom he shared an office, Rabbi David Avigdor, would sometimes sign the closing documents, as he did in the case of 88 Hazel. The fake buyer would get cash, and never have anything to do with the property.
Avigdor would allegedly prepare a form for HUD to obtain mortgages designed for low-income buyers. He would sign a statement saying the proceeds of the sales went to the sellers or to Sheda Telle Construction, or that the money would be used for renovations that actually never took place, according to the indictment. Meanwhile, the loan proceeds would go into an IOLTA (Interest-Only Lawyers’ Trust Account) controlled by Avigdor, who would then send the money to the Sheda Telle account. (Avigdor has been advised not to speak publicly, but did say he did nothing wrong. Olmer said that he had a legal right to handle closings as a notary, and that he had no idea Sheda Telle was a sham.)
In the case of 88 Hazel, Avigdor wired $76,591.09 to Sheda Telle, according to the indictment.
Meanwhile, the two-story circa-1900 house become more rundown, not improved. Neighbor Edwards said the tenants told him that the landlord they dealt with told them that utilities normally handled by owners had to be put in their own names. Over the winter a fire damaged the building; since then it’s been boarded up, he said.
Make that somewhat boarded up. In April, city Building Official Andy Rizzo sent an “unsafe notice order” to the owner of record, after inspector John Raffone found that the property was “open to trespass” because of “unsecured windows and/or doors.” A month later Rizzo tried reaching the previous owner of record, Marshall Asmar, the same way.
On Wednesday some of the doors were still open, leading to wrecked rooms empty except for old cans, boxes, and piles of wood. (See above photo.) Emptied 24-ounce Keystone Ice beer cans littered the grounds, still in their paper bags.
Edwards, a construction worker, said he’d like to buy the place. “I’d like to rehab it and rent it out,” he said.
211 Lloyd
You can still see and smell remnants of a fire in the basement of 211 Lloyd. You can see the charred wood, as well as wires hanging loosely all over the place.
You’ll find two fuse boxes there, too, for the first and second floors. Missing is a box for the third floor.
That posed a problem for Darrell, a barber who moved into the combined second-and-third-floor apartment last October with his wife and four children. It turned out the third floor has no electricity. It had no heat all winter. So the whole family spent the winter huddled into the bedroom and living room on the second floor.
Darrell’s cousin, an electrician, looked at the basement. He said it would cost $10,000 to put in a fuse box and fix all the fire hazards. Darrell said he reported to the apparent landlord, who brought his own electrician, who said the same thing. The landlord promised to make the repairs and never did, Darrell said. Meanwhile, Darrell kept paying rent until three weeks ago, when the FBI visited him looking for receipts and a copy of the lease. The landlord hasn’t shown up again.
That landlord’s name, by the way, doesn’t show up on land records for sale of 211 Lloyd. Records show a man named Marshall Asmar of Milford buying the house for $16,000 in December of 2008, then flipping it the following year to a West Haven woman for an alleged $160,000, who then obtained a $157,102 mortgage in her name. The application for that FHA-insured loan included an appraisal for Gallagher that “fraudulently represented that the property had been ‘totally gutted’ and ‘totally rehabilitated,’” according to the federal indictment.
Just under $50,000 from the FHA-insured loan went straight the black hole of the Sheda Telle Construction account, according to the federal indictment.
The application also falsely stated that the West Haven woman would live in the house and worked at a company called “Home Catering Restaurant, LLC,” according to the indictment. Neither was true. (The woman couldn’t be located for comment.)
Avigdor allegedly claimed in HUD paperwork that the seller would receive $144,763.42 from the sale, with no mention in this case of Sheda Telle Construction. In fact, the seller got $93,000 while $49,375 went into the Sheda Telle account, according to the indictment.
The property subsequently went into foreclosure.
Darrell’s wondering if he’ll get any of his money back. He paid $900 a month in rent, plus $1,800 in security. He also wonders who’s going to show up next to collect rent. And if the electricity will ever be turned on for the third floor. Meanwhile, now that the weather’s warmer, he has run an extension cord up to the 3rd floor to light a single light bulb so his kids can sleep there.
The house at 433 Shelton Ave. is also being foreclosed on after a similar set of transactions. (A neighbor named Al is pictured hanging out on the front porch. He said he doesn’t live there but knows someone who does. He wasn’t sure of the name of the person.) For that property, Avigdor allegedly told HUD the seller was receiving $215,625.15 from the sale. Instead, the seller got $148,355.33, while $67,493.04 went to Sheda Telle, according to the feds, on its way to other hands.
And at nearby 243 Starr St., $73,240.82 of $161,420.96 from an FHA-insured transaction that was supposedly going to the “seller” went to Sheda Tell, according to the feds.
Besides the scent of alleged crime, the scent of burnt wood lingers at a number of these houses. As at 211 Lloyd and 88 Hazel, the scars of a fire remain visible at 57 Bassett St., another property ravaged by the alleged scam crew (although not with an FHA-insured mortgage). Neighbors say the building (pictured) has been empty for months since a fire there. Wednesday you could walk right through the front door of the trashed property. City records show that the building is in foreclosure, and that the Regional Water Authority also has a lien on the property for unpaid bills — meaning ratepayers have to make up that slack, too. In trying to track down the true owner, creditors have pursued both a man named Jesse Browning, the owner of record, as well as the Branford man who is listed as having “sold” him the property, Saleem Mohammed, still referred to as “owner of the equity of redemption.”
Riddles
As these cases make their way through court, the feds still have pieces to fill in. Little has been said about why sellers agreed to enter into these agreements, risk being arrested, and have their credit destroyed (if it wasn’t already).
Little is known about the identities of two cooperating witnesses, who surreptitiously recorded allegedly incriminating conversations with the arrestees; one of these witnesses, according to the indictment, formed Sheda Telle along with alleged mastermind Syed Babar.
Much remains to be known about the roles of the alleged mastermind’s alleged accomplices. Did they really know that Sheda Telle was a scam? Morris Olmer, for one, said he didn’t.
And is all that burnt wood just a coincidence, a result of neglect?
Another outstanding riddle: What does the term “Sheda Telle” mean?
The Independent asked a series of people knowledgeable about the Hebrew and Yiddish languages; some agreed the words have a Yiddish sound to them, but no one could come up with a definite translation. “Telle” could be related to the Hebrew word for “hill,” and “Sheda” for bureau.
“We can’t answer at this time,” said Tom Carson, spokesman for the U.S. Attorney’s office, when asked for a translation. Any guesses? Feel free to post them in the comments section below.