Owner of American Home Recovery Found Guilty in Connection with a Mortgage Modification Scheme That Preyed on Distressed Homeowners

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Isaak Khafizov, a former owner of American Home Recovery (AHR), a mortgage loan modification business, was found guilty today in Manhattan federal court of conspiracy, mail fraud, and wire fraud in connection with a scheme to defraud distressed homeowners and lenders. Khafizov was convicted after a 10-day jury trial presided over by U.S. District Judge George B. Daniels. He was remanded into the custody of the U.S. Marshals following his conviction.

Manhattan U.S. Attorney Preet Bharara said, “Isaak Khafizov dangled false promises of relief to distressed homeowners who were trying to keep their homes, but instead, he repeatedly victimized them by stealing their money and forcing many of them into foreclosure. He will now face justice for the fraud that he committed against vulnerable and needy homeowners all over the country.”

According to the superseding indictment filed in Manhattan federal court, other court documents, and statements made during court proceedings:

In or about the spring of 2008, Isaak Khafizov, Jaimie Cassuto, and David Cassuto founded American Home Recovery (AHR), a mortgage modification business that operated in Manhattan. As shown at trial, from the spring of 2008 through the summer of 2009, Khafizov used AHR to commit a systematic fraud that preyed on distressed homeowners. Khafizov and AHR’s salespeople fraudulently induced distressed homeowners all over the United States to pay AHR thousands of dollars in up-front fees by falsely promising the homeowners that: (1) AHR could get them better interest rates and lower monthly fees, all within a short timeframe; (2) AHR would return the up-front fees if it did not succeed in getting the homeowners the mortgage modifications they desired; (3) the homeowners had been “pre-approved” for mortgage modifications by their lenders; (4) AHR was affiliated with government agencies and programs established by the Economic Stimulus Act of 2008; (5) AHR possessed special expertise in mortgage modifications, and (6) AHR had special relationships with lenders. After receiving up-front fees from the distressed homeowners, Khafizov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. On the rare occasions when Khafizov succeeded in getting a homeowner a mortgage modification, he typically did so by coaching the homeowner to lie about his or her income and assets on forms submitted to the mortgage-lender.

Because Khafizov and AHR did not do the work they had promised and because Khafizov specifically directed the distressed homeowners to stop paying their mortgages and to pay AHR its fees instead, many of AHR’s clients wound up in foreclosure. All told, Khafizov and AHR defrauded hundreds of customers across the country out of hundreds of thousands of dollars in fees.

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Khafizov, 25 of Queens, New York, was convicted of one count of conspiracy to commit mail and wire fraud, one count of mail fraud, and two counts of wire fraud. He faces a total maximum sentence of 80 years in prison and is due to be sentenced by Judge Daniels on September 6, 2012.

Jaime Cassuto and David Cassuto each pled guilty to multiple counts of fraud on April 2, 2012.

Mr. Bharara praised the Federal Bureau of Investigation and the Special Inspector General of the Troubled Asset Relief Program for their work on this case, which was initially brought as part of Operation Stolen Dreams, a series of investigations conducted by the U.S. Attorney’s Office and federal, state, and local agencies.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys NIKETH VELAMOOR and NICOLE FRIEDLANDER are in charge of this prosecution.