Fraud Trial Opens With Oz-Like Yarn

A storm struck New Haven, throwing houses up into the air. In the storm’s wake, people’s lives were ruined, and a cast of characters emerged: a Cowardly Lion, a Tin Man, a Scarecrow, and, behind a curtain, a wizard pulling strings.

That’s the way defense attorney Don Cretella described an alleged mortgage fraud conspiracy that hit homes throughout struggling New Haven neighborhoods.

Cretella offered the ​“Wizard Of Oz” analogy during opening statements as he sought to pull the curtain in a federal courtroom in Hartford on Wednesday morning and reveal a conspiracy.

His client, Rab Nawaz, is one of six on trial, charged with taking part in a housing scheme that allegedly cheated private lenders and the U.S. government out of millions of dollars and left a trail of blight in New Haven’s Fair Haven, Dixwell and Newhallville neighborhoods.

Government prosecutors say a group of 15 conspirators falsely inflated the cost of homes, took out government-backed mortgages with trumped-up loan applications, bought the homes for their actual prices, pocketed the difference, and let the homes fall into foreclosure. The conspirators allegedly pulled the scheme on numerous homes in New Haven and surrounding towns, defrauding lenders of over $3.2 million.

Several members of the ring, including alleged mastermind Syed Babar, have already pleaded guilty to their roles in the operation.

But six defendants claim innocence and opted for a trial.

In addition to Nawaz, the six include New Haven rabbi and attorney David Avigdor, former New Haven Alderman and state Rep. Morris Olmer, New Haven landlord Marshall Asmar, West Haven appraiser and police commissioner Thomas Gallagher, and Florida real estate developer Wendy Werner.

Presentation of evidence began Wednesday in a second-floor courtroom in the Ribicoff Federal Building on Main Street in Hartford.

Opening statements during the first day provided a glimpse of the strategies to be deployed during the trial, expected to last several weeks. Federal prosecutors will rely heavily on the testimony and audio recordings of 28-year-old Kennith Perkins. The Groton man is an admitted co-conspirator who wore a wire to help the FBI take down the ring. 

Lawyers for the six defendants will attack Perkins’ credibility, and positioning their respective clients as unwitting dupes in a scheme overseen only by Babar.

Perkins is expected to spend Thursday under direct examination by federal prosecutors.

Accusations

The courtroom of Chief Judge Alvin W. Thompson was awash with lawyers and clients at 9:30 a.m. Wednesday. On the defense side, six defendants and 10 lawyers sat at tables arranged in a horseshoe. On the prosecution side, three Assistant U.S. Attorneys sat with an agent from the Department of Housing and Urban Development (HUD). They were backed by a couple of paralegals and an FBI agent.

The jurors and alternates — six men and nine women — were sworn in at 9:35 p.m. After 40 minutes of jury instructions, Assistant U.S. Attorney Liam Brennan offered the opening statement for the prosecution. Using the 17 computer monitors in the wood-paneled courtroom, Brennan led jurors through a PowerPoint-style presentation, beginning with an image of 211 Lloyd St. He used the house to begin weaving a web of conspiracy allegations involving nearly all the defendants in the room.

Here’s what Brennan said happened:

In 2009, Asmar bought 2011 Lloyd St. from a bank for $16,000. In December 2009, Alicia Martineau — an admitted ​“straw buyer” — claimed to have purchased the house from Asmar for $160,000, 10 times the original price. The home was appraised by Gallagher; he stated in his appraisal that the home had been completely gutted and rehabbed. Martineau prepared her loan application with the help of Olmer. She stated that she worked for a company called ​“Home Catering” and that she planned to live in the house. The papers were signed by Avigdor. Asmar took $144,000 from the sale.

As it turned out, nearly every aspect of the transaction was a fiction. The house at 211 Lloyd St. even looked different in photos from how it did in reality with its boarded-up doors and windows. No work had been done on the house. Home Catering didn’t exist. Martineau never saw the inside of the house; she didn’t even get a key. She never paid $160,000.

“What she did get was $10,000 in a black plastic bag,” Brennan said.

Brennan then described some of the alleged actions of each of the defendants in the room, pointing them out for the jury as he did so:

Asmar allegedly kicked $50,000 from the sale to another fake company, in a scheme repeated with over 25 homes.

Werner allegedly sold three homes for $800,000, pocketed $400,000, then ​“funneled” the rest to Babar by way of a fake company.

Nawaz, Babar’s uncle, allegedly was the fraudulent seller on three homes. His home address and phone number were also listed for a fake painting company.

Gallagher was allegedly the source of fake appraisals, often ​“prettying-up photos” of homes. He was paid $5,000 to $10,000 for the appraisals.

Olmer allegedly prepared the false documents. He and Asmar would sometimes allegedly continue to collect rent off of properties that had already been sold.

Avigdor allegedly worked with Olmer to funnel money to the conspirators.

All the defendants are charged with conspiring to defraud, to commit wire fraud, and to make false statements. Nawaz faces the additional charge of obstruction of justice for allegedly trying to convince Perkins to lie to investigators.

Those charges will be proven with the help of audio recordings created by Perkins, Brennan said.

“You’ll see how these pieces of the puzzle fit together,” he said to the jury. ​“All the defendants were willing and knowledgeable participants in this sophisticated form of theft. … The government will ask you to return the only verdict that justice requires — Guilty on all counts.”

Preparing Dorothy

Following Brennan’s statement, and a failed motion for a mistrial, six defense attorneys gave opening statements. Several sought to complicate the neat portrait painted by the government, or urge jurors not to leap to guilt by association. Others sought to direct attention to Babar and to seed doubts about the Perkins’ testimony and cooperation with prosecutors. Werner’s lawyer, A. Ryan McGuigan, said his client doesn’t even know any of the other defendants.

Nawaz’s attorney, Cretella, went literary.

Wearing a bright gold tie with a dark navy suit, Cretella told the jury that seeing the photo of 211 Lloyd St. reminded him of the Wizard of Oz. In the story, a big storm comes up, lifts houses up in the air, and in the crash that follows, ​“ruins people’s lives,” he said.

“But the analogy doesn’t stop there,” he continued. ​“There are characters.”

The Tin Man had no heart; that’s Perkins, Cretella said. The lion was cowardly; that’s ​“Mr. Russo,” another figure in the case, Cretella said. And the Scarecrow is his client, Nawaz, the lawyer said.

It’s not that Nawaz doesn’t have a brain, but that he ​“doesn’t have knowledge,” he said. Nawaz had no criminal intent.

Cretella predicted Nawaz will be referred to as a ​“straw man.” He asked jurors to think ​“Scarecrow” whenever they hear ​“straw man.”

The government will try to push Babar into the background, Cretella said. ​“Don’t pay attention to the man behind the curtain.” Babar is the Wizard of Oz, he said.

“Everything went through his hands.” No one else knew what was going on, Cretella said.

And Dorothy?

“That’s us. Me and you,” Cretella said to the jury. The government, he concluded, will lead the way down the Yellow Brick Road.

Previous coverage of this case:

• ​“Partying” MySpacer Lined Up Scam Homebuyers
• ​“Straw Buyer” Pleads Guilty
• Neighbors, Taxpayers Left With The Tab
• FBI Arrests Police Commissioner, Slumlord, Rabbi
• One Last Gambit Falls Short
• Was He In ​“Custody”?
• Is Slum Landlord Helping The FBI?
• Feds Snag Poverty Landlord