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PrintA federal grand jury has indicted a North Hills real estate trader and a mortgage broker with whom he did business, the outgrowth of a wide-ranging scam that became a window into the collapse of the subprime loan market.
James C. Platts, a one-time Pine home developer currently living at a federal halfway house after a 30-month prison term for tax evasion, and Deean Haggerty, a former broker with S&P Mortgage of Warrendale, were accused of arranging fraudulent mortgages for unqualified buyers. In carrying out the scheme, the grand jury said, they were assisted by a Cranberry lawyer identified in the document only as "BJF."
The Post-Gazette, in a series of articles it did three years ago, identified a Cranberry lawyer, Bernard J. Flugher, as providing legal services for Mr. Platts.
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The stories revealed how Mr. Platts had floated millions of dollars in questionable mortgages using inflated income claims, then filed conflicting loan forms with the federal Department of Housing and Urban Development that showed one sale price to satisfy the previous mortgage and a higher one, much of the proceeds going to his firm.
In one instance, the Post-Gazette discovered that Mr. Platts, working through Mr. Haggerty's mortgage brokerage, had completed a false statement of income for a mentally challenged West View couple who could not read.
That mortgage later was "atomized" as part of a series of investments in which subprime mortgage debts were rolled into investment packages that later combined to bring down the brokerage Bear Stearns when tens of thousands of borrowers of such high-interest home loans defaulted. The collapse of Bear Stearns ushered in a wider implosion in the investment markets and is thought to have hastened the recession that has stalled the U.S. economy for the past three years.
Neither Mr. Platts nor Mr. Haggerty could be reached for comment Wednesday. Mr. Flugher did not return a telephone call requesting comment.
While the West View sale was not part of Wednesday's indictment, three others were: the sale of 101 Governor Drive, Allison Park; 225 Herbst Road, Coraopolis; and 3005 Pyramid Ave., Brentwood.
In each case, the defendants are accused of arranging a fraudulent loan application through S&P Mortgage, then causing fraudulent loan materials to be transmitted across state lines.
A fourth count also charges Mr. Platts with a count of money laundering for submitting a check for $13,751.92 payable "to attorney BJF's law offices."
The charges match a pattern described three years ago when Mr. Platts and his associates were first mentioned in the Post-Gazette. He would locate properties in or close to mortgage default, arrange a buyer who often earned little or sometimes no money, then, using Mr. Haggerty's office, submitted inflated or occasionally fictitious income statements. In several instances, he deposited money into a prospective homebuyer's bank account, as he did in the West View home sale to produce the illusion the person had savings. In some instances, according to the indictment, he would generate fraudulent documents showing the purchaser had been paying rent for several years. He is accused of doing just that in the case of 101 Governor Drive, one of the three properties named in the indictment.
The indictment also mentions Mr. Platts's use of "lis pendens" -- a sort of lien used to tie up a property's title. In many closings, Mr. Platts would list the settlement of these liens as the explanation for tens of thousands of dollars in money taken as part of the deal.
Wednesday's indictment grew out of a referral by Pennsylvania Attorney General Tom Corbett, who slammed shut Mr. Platts' business with a massive civil action, then referred the case to the U.S. attorney's office.
The case became part of a state-federal mortgage fraud joint task force investigation.
A spokeswoman for U.S. Attorney David J. Hickton said Wednesday that the federal office would decline comment.
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