fraud

Fraud cases raise questions about the work of attorneys whose clients later faced criminal charges

(Times Union (Albany, NY) Via Acquire Media NewsEdge) Oct. 26–SARATOGA SPRINGS — The money was supposed to come from overseas: a $100 million deal to finance a ski resort in Utah.

The wealthy investor on the other end of the telephone line listened closely to three men from Saratoga County, including an attorney, who cast themselves as international financiers with access to billions.

The investor, Brent Ferrin, who lives in Park City, Utah, was skeptical. The men making the pitch were speaking in garbled sentences about Latvian banks, Patriot Act restrictions and shadowy European bank executives who, it would turn out, actually lived in Las Vegas.

But Ferrin played along. He questioned why the paper work for a major international loan was being handled by a “personal injury lawyer” from Saratoga Springs.

The attorney, John M. Hogan Jr., jumped in to defend himself.

“Let me tell you why,” Hogan said. “Because I, I am tenacious. I don’t let go of things when I get my hands onto them. I was for, did they say I was an accountant before I was a lawyer? … And did they tell you that ah, I don’t like to lose and that I’m a bulldog? That’s what people call me.”

Unbeknownst to Hogan and his partners in the deal, Ferrin was recording every word for the FBI.

It wasn’t the first time Hogan, 73, a member of a longtime Saratoga Springs law firm, played a role, knowingly or not, in a questionable loan deal, court records show. But like several upstate New York attorneys who figured in recent federal investigations of real estate and mortgage fraud, Hogan was not charged.

Indeed, a months-long Times Union examination has uncovered instances in which federal authorities investigated the roles of lawyers and other licensed professionals embroiled in schemes involving mortgage or bank fraud, without bringing charges.

It comes as other lawyers and their clients, who have been prosecuted in upstate federal courts, are accusing the Justice Department of being selective in its prosecutions and of failing to pursue potential conspirators due to a mix of whimsical decision-making and limited law enforcement resources.

As the U.S. economy is reeling in the wake of years of sloppy mortgage lending, the government’s decision to limit its prosecutions has exposed a gap in law enforcement priorities. It also highlights a shift in focus by the FBI and Justice Department toward combating terrorism and child pornography.

In June, that issue bubbled up in a federal courtroom in Albany as U.S. District Judge Gary L. Sharpe sentenced two men, Thomas Disonell and Matthew Kupic, to prison for a series of mortgage fraud crimes that could have put them behind bars for much longer than the 24 months they received. Sharpe reacted strongly as the government sought to credit the men for cooperation that was never used to prosecute anyone else.

“This case caused me to crack an eyebrow,” Sharpe declared on the bench that day. “How can they do what they did without the complicity of the lawyers that are involved in the closing? … I’m not oblivious to the fact that the criminal cases filed with the FBI as the investigating agency is almost nil compared to what they were before 9/11. I know where their resources are. And I’m not attacking that one iota. … But I happen to know that the amount of time and energy invested in white-collar fraud in criminal investigations is not what it was prior to 9/11.”

Andrew T. Baxter, acting U.S. attorney for New York’s Northern District, while declining to comment on any specific case, said it is not a matter of being selective. He said that “attorney-client privilege can make it more difficult to gather evidence.”

“In investigating a fraudulent scheme, a key issue as to every subject is the strength of the evidence of the knowledge of the fraudulent nature of relevant transactions and the criminal intent of those involved,” Baxter said. “The fact that a subject of an investigation is a lawyer or licensed professional may affect our ability to prove knowledge and intent.”

Still, the Saratoga County case and others like it have exposed a trend in which people accused of federal fraud-related charges turned to attorneys and other professionals who, unwittingly or not, allegedly helped them complete their crimes.

In 2005, a year after Ferrin recorded his telephone conversation with Hogan, two other men on the conference call that day, Philip Rechnitzer of Clifton Park and Ronald Persaud of Saratoga Springs, were indicted by a federal grand jury in Albany. The indictment accused them of bilking Ferrin and other investors of more than $1.6 million. Persaud’s wife, Indranie, his ex-wife, Esther, and their son, Shawn, a student at Albany Law School, also were indicted.

The charges allege numerous investors lost money while seeking financing for high-end development projects like theme parks, Caribbean resorts and even a Lake George hotel.

The investors have testified in federal court they believed they were dealing with high-powered financiers who had access to billions of dollars in overseas funding, and not a husband-and-wife team from upstate New York who were having financial troubles.

In 2004, at a time when Esther Persaud was claiming to be the managing director of at least three overseas banks, she listed her job as an office manager and stated she had $50 cash on hand when she filed for bankruptcy in Albany. Ronald Persaud, whom prosecutors have cast as the ringleader, also filed for bankruptcy that year, claiming assets of under $11,000. It took place at a time when federal prosecutors say he was fabricating official-looking European bank notes purported to be worth billions of dollars and using those, often with local lawyers at his side, to convince investors to give him money to secure multimillion-dollar loans.

Defense attorneys in the case say lawyers were integral in the deals. As the ongoing trial of Ronald and Esther Persaud opened two weeks ago, their criminal attorneys cast blame on at least five business attorneys, including Hogan. Their pitch to the jury in Albany is that lawyers approved documents and wire transfers, and handed over the fraudulent bank notes to investors. The only attorney charged in connection with the scheme was William Tessitore, who lost his law license and pleaded guilty to bank fraud Aug. 11, admitting he looted $624,000 from his escrow accounts.

Prosecutors agree that the presence of attorneys is exactly why many victims fell for the scheme, but they have been silent on whether any of the other attorneys violated any laws. In their trial briefs and other court filings in the Persaud case, they make clear that “the subject fraud was advanced through the assistance of attorneys” and “attorney accounts were used to receive alleged wire fraud proceeds.”

According to court records in the case, and the testimony of witnesses at Persaud’s trial, Hogan played a key role. He served as a point of contact for duped investors and attended at least one purported “closing” for a loan in Zurich, Switzerland, that never took place.

Also, Hogan’s law firm helped Ronald and Esther Persaud file for bankruptcy in 2004. Early that year, Ronald Persaud listed assets of less than $11,000 and his job as a “mortgage consultant” while months later he was posing as an overseas banker during conversations with Hogan and investors. The bankruptcy documents make no mention of Persaud’s purported work as an international financier.

“Hogan, by virtue of his law license and his status as a member in good standing of the bar, gave the outward appearance of legitimacy to the fraud conspiracy,” according to a government memorandum filed in Persaud’s case.

Still, court records and an FBI document shared with the Times Union show Hogan wasn’t the only attorney who aided — if unwittingly — in the alleged crimes of Rechnitzer and Persaud.

Anthony Ianniello, a well-known real estate lawyer in Clifton Park, handled the closing on a mortgage in which Persaud’s wife, Indranie, a $40,000-a-year postal worker, sharply inflated her income on loan documents so her husband could secretly obtain an $890,000 home in Saratoga Springs. Ianniello also set up a partnership through which Persaud purchased a $135,000 Porsche coupe a year after filing for bankruptcy, and with the proceeds of his alleged crimes, according to the indictment.

There is no indication that Ianniello knew Indranie Persaud was committing mortgage fraud. Ianniello declined to comment.

But the Porsche deal raised suspicions of authorities. A state motor vehicle investigator who examined the Porsche transaction, and Ianniello’s files, concluded in a government report that “the unsatisfactory and illogical explanations provided by the attorney, lead him to the conclusion that the Porsche transaction was ‘classic money laundering to hide an asset,’ ” according to a memo filed in court by the U.S. Attorney’s Office. Ianniello was never charged.

Last year, Ianniello was called in for an interview with the FBI and federal prosecutors. He appeared alone. An FBI report detailing Ianniello’s responses to questions indicates he gave carefully worded answers about his dealings with the Persauds, for whom he had handled dozens of real estate transactions. The FBI report indicates Ianniello said he was unaware Ronald Persaud and his wife had laundered money through Ianniello’s private attorney escrow accounts.

“He also did not know why money would be transferred from Latvia,” the FBI report states. “Ianiello advised that he never dreamed there was a Latvian bank involved. … He did not recall his staff telling him about these transfers. … He stated that he was busy and preoccupied.”

Both Ianniello and Hogan are listed as witnesses by the government in the ongoing trial of Ronald, Esther and Shawn Persaud in U.S. District Court in Albany. It’s unclear whether they will testify.

During a conference in court Thursday, U.S. District Judge Thomas J. McAvoy asked prosecutors whether Hogan would be able to testify this week. The judge told the attorneys that based on what has transpired in the courtroom, including new information that Hogan was allegedly a member of the board of directors of at least one of the shell banks controlled by the Persauds in Scandinavia, that Hogan could put himself in legal jeopardy by testifying.

“He’s in danger,” McAvoy told the attorneys, referring to Hogan.

Assistant U.S. Attorney Thomas A. Capezza responded that the government had not offered Hogan an immunity deal.

“We will have backup witnesses in the event something happens with John Hogan,” Capezza told the judge.