A.G. Schneiderman Announces Prison Sentence For Attorney Who Ran Million-Dollar Mortgage Fraud Scheme

Defendant Theresa Sanders Sentenced To Up To 7 Years in Prison, Ordered to Pay Over $500,000 in Restitution, And Must Surrender Law License

Schneiderman: Anyone Who Seeks To Exploit New York Families Will Be Brought To Justice

SYRACUSE, NY- Attorney General Eric T. Schneiderman today announced the sentencing of licensed attorney Theresa Sanders, 56, of Fabius, New York, to 2 1/3 to 7 years in state prison. Sanders pleaded guilty earlier this year for her role in a million-dollar mortgage fraud ring that operated in the Syracuse area for years, preying upon both first-time home buyers and institutional lenders.

“This ring preyed on hard-working New Yorkers who were merely trying to fulfill their dreams of buying a first home,” said Attorney General Eric Schneiderman. “Today’s sentencing sends a strong message: anyone who seeks to exploit New York families for their own benefit and profit will be brought to justice.”

New York State Police Superintendent Joseph A. D'Amico said, "This case has brought to justice individuals who defrauded mortgage companies and victimized unsuspecting third parties looking to own their own homes. For years, the actions of these defendants hurt homeowners, businesses, and our economy. We will remain vigilant in our pursuit of criminals who prey on others for their own financial gain. I thank the New York State Attorney General's Office, the New York State Department of Financial Services, the U.S. Department of Housing and Urban Development Office of the Inspector General, and the Internal Revenue Service, Criminal Investigations Division for their continued partnerships." 

Sanders was sentenced today in Onondaga County Court before the Honorable Anthony F. Aloi 0n her pleas of guilty to Residential Mortgage Fraud in the Second Degree and Grand Larceny in the Second Degree, both Class C felonies. In addition to serving up to 7 years in prison, Sanders must also pay $586,761 in restitution and must forfeit her license to practice law in the State of New York.

Sanders was the leader of a mortgage fraud ring that operated for years and netted more than $1 million by preying upon first-time home buyers and institutional mortgage lenders. Sanders purchased dozens of dilapidated homes in and around the City of Syracuse from the U.S. Department of Housing and Urban Development.

Shortly after purchasing the properties, Sanders ordered an appraisal, frequently prepared by co-defendant Steven Essig, which valued the property significantly higher than her recent purchase price. Sanders then took mortgages out on each of the homes, usually in the names of her family members. In order to obtain these mortgages, Sanders completed and submitted false and fraudulent loan applications to financial lenders. At the time the resulting mortgages closed, the lending institutions wired funds to an account controlled by Sanders.

Sanders then advertised the homes as rent-to-own opportunities, seeking out first-time home buyers with low credit, who were now offered the chance to own their own homes with no down payments and no closing costs. Sanders promised to work to improve their credit and that after one year of renting the property, they could obtain first-purchase mortgages to buy the homes they inhabited.

In anticipation of the sale of each property to a tenant, Sanders obtained a second appraisal, typically from Essig, which was higher than the previous appraisal she had ordered. The inflated appraised values enabled Sanders to apply for refinance amounts to financial lenders that were significantly higher than the actual values of the properties.

At the closings, buyers were surprised to learn that they would carry not one mortgage, but two -- the second, which was not previously disclosed to them, was controlled by the defendants and varied in amounts up to more than $18,000. Believing they had no choice, buyers acquiesced to the "second mortgages" in hopes that they would be able to move forward as new homeowners.

To prevent discovery of their crimes, the defendants used a variety of excuses to withhold from the buyers the deeds to the properties, which caused the buyers to suffer numerous further hardships stemming from their difficulties in demonstrating that they were the rightful owners of the properties.

Sanders is the first of five co-defendants to be sentenced for their respective roles in the mortgage fraud scheme. In October 2013, Paul Sakowski, the property manager of the homes purchased by Sanders, pleaded guilty to Scheme to Defraud in the First Degree, a Class E felony. He is scheduled to be sentenced to five years probation. Also in October 2013, Michelle Powers, an attorney who conducted the closings for the refinance loans, pleaded guilty to Scheme to Defraud in the First Degree, a Class E felony. She is scheduled to be sentenced to six months of incarceration and a period of five years probation. In March 2014, Tracie Clark, the processor of the refinance loans, pleaded guilty to Residential Mortgage Fraud in the Second Degree, a Class C felony. She is scheduled to be sentenced to 1 to 3 years in state prison. Last week, appraiser Steven Essig pleaded guilty to Falsifying Business Records in the First Degree, a Class E felony. He is scheduled to be sentenced to five years probation.

The Attorney General thanks the following partners for their valuable assistance in this case: the New York State Department of Financial Services; the New York State Police; the U.S. Department of Housing and Urban Development, Office of the Inspector General; the U.S. Internal Revenue Service, Criminal Investigations Division; and the Columbus, Ohio Division of Police.

The case was investigated by New York State Department of Financial Services, Criminal Investigations Bureau Investigators Jack Massaro and Robert Tarwacki, New York State Police Investigator Kevin Buttenschon, HUD-OIG Assistant Special Agent-in-Charge Heather Yannello, and Office of the Attorney General Investigators Andrea Buttenschon, Scott Petucci, David Buske, and Joel Cordone, under the supervision of Supervising Investigator Richard Doyle, Deputy Chief Investigator Antoine Karam, and Chief Investigator Dominick Zarrella.

The case is being handled by Assistant Attorney General Andrew J. Tarkowski of the Criminal Enforcement and Financial Crimes Bureau. The Bureau is led by Bureau Chief Gary Fishman and Deputy Chiefs Stephanie Swenton and Meryl Lutsky. The Division of Criminal Justice is led by Executive Deputy Attorney General Kelly Donovan.