A Marblehead attorney has been indicted for allegedly attempting to retrieve more than $1.3 million in mortgage funds in connection with a sophisticated mortgage fraud scheme.
Authorities said Leon Gelfgatt, 49, used false documents to create the appearance that mortgages on several Massachusetts properties which were scheduled for impending sale had been transferred to a fake company he created. Gelfgatt allegedly did this to obtain the payoff funds sent by real estate closing attorneys when the properties were sold.
In November 2009, Attorney General Martha Coakley’s office began investigating Gelfgatt after being tipped off by Wainwright Bank & Trust Co. According to authorities, between August and November 2009, Gelfgatt allegedly identified and targeted 14 high-end properties which were scheduled for an imminent sale.
He then recorded 17 forged mortgage assignments at the registries of deeds in Suffolk, Norfolk and Middlesex counties. These false mortgage assignments appeared to transfer the mortgage from the correct mortgage company to either Baylor Holdings Ltd., or Puren Ventures Inc., which were inactive corporations being offered for sale on the Internet. Gelfgatt created an elaborate system of email addresses, phone numbers and electronic fax numbers to give the impression that these were functioning and legitimate businesses, authorities said.
Gelfgatt then waited for attorneys responsible for clearing the title to the properties to reach out to these sham companies to request a "payoff statement," or a document used by mortgage companies to state the precise amount necessary to pay a mortgage in full.
Authorities allege that on two occasions Gelfgatt, in the guise of Baylor Holdings Ltd., provided these closing attorneys with false payoff statements. The payoff statements instructed the closing attorneys to overnight the funds required to pay off the mortgages to an office address in Boston. Gelfgatt was arrested after he attempted to retrieve these payoff funds.
"We allege that Mr. Gelfgatt used his knowledge of the real estate industry to use forged documents in an attempt to divert mortgage payoff proceeds from home sales to himself," Coakley said. "As a result of the efforts of investigators with the Massachusetts State Police and attorney general’s office, Mr. Gelfgatt’s alleged scheme was uncovered before he was able to succeed in his plans."
Gelfgatt is charged with 17 counts of forgery, 17 counts of uttering a forged instrument and three counts of attempted larceny. Gelfgatt was arrested on Dec. 17, 2009 and was arraigned the next day in Cambridge District Court. He pleaded not guilty and was released on $30,000 cash bail.
A grand jury returned indictments against Gelfgatt Tuesday. He will be arraigned in Middlesex, Suffolk, Norfolk and Essex County Superior Courts at a later date.
