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A young entrepreneur who struck it rich in New Haven real estate in his early 20s only to land in federal investigators’ crosshairs admitted to a judge that he broke the law — as Part II of a massive mortgage fraud case begins to take center stage.
Menachem Joseph “Yossi” Levitin made the guilty plea Thursday afternoon in U.S. District Court in Bridgeport. He copped to committing mail fraud, wire fraud and bank fraud.
He faces up to 30 years in jail and $20 million in fines for helping arrange to bilk lenders out of $10 million while leaving a trail of rundown New Haven properties.
As part of Thursday’s plea deal, Levitin will give up ownership in 19 properties and forfeit about $160,000.
The feds arrested him in 2010. They seized 51 of his properties — properties he and allies bought with the proceeds from alleged mortgage scams on 40 other properties perpetrated between October 2006 and November 2008.
However, since then Levitin has remained in business as the feds have continued building a case against his alleged co-conspirators, two of whom were subsequently indicted last October. Read about that — and the impact the scams had on neighborhoods like Newhallville and Fair Haven — in this story. (Levitin is pictured above in 2008 before the fall, when he encountered an upset neighborhood organizer on Batter Terrace.)
“Yossi has learned a very valuable lesson,” his attorney, Willie Dow, told the Independent Friday. “He has accepted full responsibility for anything he’s done that’s wrong. And he’s learned the age-old lesson that pursuit of money is the root of all evil. He has reaffirmed the value system in which he was raised.”
A New Haven Realtor, Charles Lesser, also pleaded guilty to the same charges in the case Thursday. Lesser, who’s 30, acted as a broker in “at least 20 fraudulent transactions” connected to at least $2.8 million in lender losses, according to the government.
How long Levitin and Lesser might have to spend in jail may depend on whether, and to what extent, they have been cooperating with the federal investigation. Levitin’s case, and those of the others indicted, will come before U.S. District Court Judge Janet Hall. Hall is scheduled to sentence Levitin on Sept. 26.
Which means months of waiting — and pressure — in the meantime. Levitin is believed to face enormous pressure, both from government prosecutors making cases against other targets, and from the tight-knit New Haven Chasidic community in which he was raised.
This the second of two related massive fraud cases that came into public view in 2010. The first led to guilty pleas and some prison sentences for a ring of prominent business people, lawyers, and brokers, including New Haven’s longest-serving pulpit rabbi and a former West Haven police commissioner. The case led to some of the most compelling white-collar courtroom drama in recent memory. (Read about that here, here and here; a full directory of stories appears at the bottom of this story.)
Levitin’s is just one of a slew of real estate mini-empires accumulated in rundown New Haven neighborhoods over the past decade. At least some of that empire-building, it turns out, was accomplished through fraud — pocketing inflated mortgages while leaving buildings to rot.
The Government’s Version
According to the federal complaint in the Levitin case, he and his partners ran two alleged scams, according to the feds: “seller assistance scams” and “short sale scams.”
Here’s how the former allegedly worked: Levitin found owners eager to unload rundown properties. He allegedly acted as a middleman — agreeing on a sales price; finding a buyer; arranging for the appraisal. He got an appraiser to prepare an appraisal document for $30,000 to $145,000 more than the value of the house. He allegedly had a sale document drawn up to reflect the higher, pretend price. The fraudulent documents, plus fake leases and rent payment records, were used to obtain mortgages at the inflated price. The alleged schemers allegedly pocketed the difference between the real sales price and the inflated price.
Meanwhile, the new owner wouldn’t pay the mortgage. The lender would foreclose; it wouldn’t be able to sell the house for the inflated value of the mortgage.
That problem — a house with a mortgage higher than its value — has plagued properties throughout New Haven neighborhoods, leaving them empty and deteriorating. The situation opened the door for another scam the Levitin crew allegedly undertook: the short sales. Levitin would allegedly step in and offer to take the property off the lender’s hands for less money than the mortgage was worth. The lender, wishing to cut its losses, would agree, unaware that Levitin had allegedly orchestrated the whole deal.
The schemers also allegedly used false leases with phantom tenants to obtain the inflated mortgages. Levitin is charged with rounding up the imaginary tenants from “two paid-for database services that derive their information from credit reports.” Investigators reported that the supposed tenants never paid electric bills, despite leases saying they would, or ever lived at the addresses.
Much of the case is built around secret recordings and other information provided by an unidentified undercover “cooperating witness” who allegedly bought properties through Levitin.
Among the properties the feds technically seized in the case: 25 – 29 Batter Terrace; 141 County St.; 363 Ellsworth Ave.; 265 James St.; 122 – 4 Plymouth St.; 115 Clay St.; 270 Davenport Ave.; 280 Davenport Ave; 205 – 7 Dover St.; 279 – 81 Norton St.; 378 – 80 Orchard St.; 95 Pardee St.; 41 Sheffield; 334 – 336 Sherman Ave; 443 Valley St.; 89 Hazel St.; 161 Edgewood Ave; 81 – 3 Beers St.; 19 – 21 Norton St.
Previous coverage of this case:
• 1 Mortgage Fraud Ring Down, Feds Turn To 2nd
• FBI Arrests Police Commissioner, Slumlord, Rabbi
• They Met On Foreclosure Way
Previous coverage of Part I of the federal mortgage-fraud investigation:
• Rabbi Spared Prison In Mortgage Fraud Case
• Rabbi Pleads Guilty
• Mortgage Fraud Mastermind Gets 10 Years
• “Big Liberal” Gets 5 Years For Ripping Off Poor
• White-Collar Criminals Sent To Slammer
• Judge Baffled By Two Morris Olmers
• Feds Will Retry Avigdor
• 4 Convicted In Fraud Scam; Mistrial For Rabbi
• Jury Can’t Agree In Scam Trial
• Avigdor’s Final Plea: Follow The Money
• Claire: The Rabbi Is Kosher
• Wednesday The Rabbi Took The Stand
• Straw Buyer Lured Into A Wild Ride
• After Big Fish Plead, Smaller Fry Point Fingers
• Slum-Photo Doctor Makes A Call
• What Happened At Goodfellas Didn’t Stay At Goodfellas
• Fraud Trial Opens With Oz-Like Yarn
• “Partying” MySpacer Lined Up Scam Homebuyers
• “Straw Buyer” Pleads Guilty
• Neighbors, Taxpayers Left With The Tab
• FBI Arrests Police Commissioner, Slumlord, Rabbi
• One Last Gambit Falls Short
• Was He In “Custody”?
• Is Slum Landlord Helping The FBI?
• Feds Snag Poverty Landlord
• Police Commissioner Pleads