Federal authorities are investigating whether several Washington-area real estate investors and brokers falsified documents to obtain millions of dollars in government-guaranteed mortgages for more than 250 rental properties in low-income areas of the District.
The alleged wide-ranging scheme is said to include fraudulent mortgage loan applications, falsified real estate settlement statements and appraisals that inflated the value of some of the properties, according to FBI affidavits made public here yesterday in U.S. District Court.
So far, the affidavits said, more than 100 of the mortgages have gone into default, leaving the government liable for at least $5 million. The mortgages are guaranteed by the Federal Housing Administration.
It is unclear whether the FHA has yet reimbursed the two Prince George's County mortgage companies -- Guaranty Mortgage Corp. of Greenbelt, and Marathon Mortgage Corp. of Suitland and Lanham -- which made all of the loans.
The subjects of the probe, according to the affidavits, include Jack Spicer and Marvin D. Gitelson, who are major investors in D.C. rental properties; Richie Gaylen, a broker who heads United Properties in Northwest Washington; and Michael J. Friedman, a Rockville attorney who handles real estate settlements.
Spicer declined to comment. The other persons named in affidavits could not be reached.
FBI agents seized 20 boxes of documents during day-long searches Thursday of the offices of Spicer, Gaylen and Friedman, according to court documents filed after the search warrants were executed.
U.S. Attorney Joseph E. diGenova confirmed yesterday that the matter will be presented to a federal grand jury, but he declined further comment other than to say that there have been no arrests or indictments stemming from the probe.
Affidavits outlining the probe signed by investigators for the FBI and the U.S. Department of Housing and Urban Development were presented Wednesday to obtain the search warrants from U.S. magistrates, but they were kept secret until the searches had been completed.
The affidavits said the central figure in the alleged scheme has been Spicer, 43, of Potomac, who is president of Spicer Real Estate Inc., of 1447 Pennsylvania Ave., SE, and a principal of Buy Four Inc., a real estate investment firm in Silver Spring.
Federal officials alleged in the affidavits that Spicer would arrange to sell properties he owned. He then would obtain FHA-backed mortgages for the purchasers, who in most cases did not make the downpayments required by law, according to the affidavits.
The sale prices recorded on settlement sheets were higher than the actual prices paid, increasing the amount of mortgage money obtained in the transaction, according to the affidavits. As the seller, Spicer received the mortgage money, the affidavits said.
Gitelson, 50, who also lives in Potomac, made similar arrangements, the affidavits said, through a real estate firm he heads called Bancies Inc., at 7600 Georgia Ave., NW.
The affidavits say a loan officer at Guaranty who processed the allegedly fraudulent mortgage loan application documents and submitted them to FHA is related to an official of Spicer Real Estate.
Marathon Mortgage, the affidavits say, provided the financing for most of the properties that Gitelson sold with fraudulent loan application documents.
In some cases, the affadvits say, investigators found that purchasers fraudulently declared that they lived in a property and made only a small downpayment.
Under FHA rules, purchasers who intend to rent out the properties they buy must make a cash downpayment equal to at least 15 to 20 percent of the property's appraised value, while owners who intend to occupy the property must put down at least 3 to 5 percent in cash.
The affidavits say that, according to government records, many of the appraisals for the properties involved were done by an appraiser for the Veterans Administration, who is related to a business associate of both Spicer and Gitelson.
According to the affidavits, Gaylen, whose United Properties is at 5010 Wisconsin Ave., NW, found buyers for many of the properties. Most of the settlements in which allegedly fraudulent documents were produced were handled by Friedman or by United Title and Escrow., Inc., whose offices were once located adjacent to Spicer's real estate office on Capitol Hill.
The title company is now located at 5008 Connecticut Ave., NW. Friedman, 42, has his office at 121 Congressional Lane, Rockville.
The affidavits say the allegations are based on a review of FHA records and on interviews with Robert D. Hauck, a former accountant for Spicer, and with Jack Paddock, Spicer's office manager.