Short-sale fraud ends in guilty verdict for New York business owner

A New York jury returned a guilty verdict in a fraud case involving manipulated distressed short sales that helped create losses in the millions for government insurers and lenders. 

A federal jury in Brooklyn convicted Avraham Tarshish of conspiracy to commit wire and bank fraud and other related counts. An owner of companies Exclusive Homes Realty Group, Inc., Exclusive Homes NY and Homeowners Solutions Group, Tarshish and four collaborators conspired to mislead mortgage lenders into approving short sales of homes belonging to distressed homeowners at artificially depressed prices. Tarshish was also listed as an employee of another business involved in the fraud, My Ideal Property. 

Alleged crimes took place in a seven-year period following the Great Financial Crisis between 2012 and 2019, with prosecutors presenting evidence in 11 transactions. In a short sale, lenders and servicers approve a transaction where the homeowner sells their property for less than what they owe. In the agreement, the lender usually forgives the remaining loan balance. Many of the loans involved were sponsored by the Federal Housing Administration or insured by government-sponsored enterprises Fannie Mae and Freddie Mac. 

"The defendant and his co-conspirators corrupted a process meant to assist homeowners facing foreclosure. By undermining the integrity of this process, Fannie Mae, Freddie Mac and other lenders were deprived of millions of dollars," said Robert Manchak, special agent-in-charge of the Federal Housing Finance Agency, Office of Inspector General for its Northeast Region. 

"Tarshish and other co-conspirators engaged in a $2.4 million scheme to cause FHA-insured mortgage lenders to approve short-sale transactions at fraudulently depressed prices by misrepresenting material information for his own enrichment," added Vicky Vazquez, special agent-in-charge for the corresponding office at the U.S. Department of Housing and Urban Development. 

Among allegations lodged against Tarshish and his accomplices were payments made to homeowners facing foreclosure that locked them into short selling to them, and the failure to then properly market properties as required. Properties were purchased by companies the perpetrators controlled, thereby preventing potential competitive bids for the distressed units. 

To further suppress perceived values, they also placed falsified liens on the homes involved and intentionally damaged properties. Tarshish and co-conspirators then made renovations and flipped the homes to sell for amounts well above the short-sale value, all while hiding evidence of payments made to the original owners or the transfer of the properties at higher prices. 

Many of the homes involved were located in economically challenged communities in Brooklyn, whose residents have faced surging housing costs in recent years.    

"Short-sale mortgage fraud not only harms lending intuitions, it also depresses real estate values throughout our neighborhoods and prevents community members from gaining fair access to housing," said Breon Peace, U.S. Attorney for the Eastern District of New York 

Federal lawmakers first indicted Tarshish and his accomplices, Iskyo Aronov, Michael Konstantinovskiy, Tomer Dafna and Michael Herskowitz in 2019. Tarshish's co-conspirators had previously pleaded guilty to some of the counts against them. A judge denied a motion to dismiss the case earlier this year. 

At sentencing, Tarshish faces a potential maximum term of 30 years in prison. Aronov, Konstantinovskiy and Dafna face a similar 30-year sentence. Herskowitz, meanwhile, could serve five years in prison.