Investigator Exclusive: Cleveland Heights made it easier for mortgage fraud masterminds

12:54 PM, Jan 7, 2010   |    comments
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"As soon as the snow started to melt, my roof started to leak," she said.

Fish bought her home from Uri Gofman. He is accused of being the mastermind behind the biggest mortgage fraud case in the country, involving nearly 500 local homes.

More than three quarters of them ended up in foreclosure.

But when Fish called the City of Cleveland Heights to complain about Gofman in early 2007, Housing Manager Rick Wagner told her not to say a thing.

Fish said Wagner warned her that it could ruin the FBI's case against Gofman.

"I was supposed to just step back," Fish said.

Yet, during this entire time, the City of Cleveland Heights made it easier for Gofman to buy or sell homes in the city. That allowed even more houses to go into foreclosure, dragging down property values in the process and putting average homeowners at risk.

Channel 3 News found that Wagner -- who began working with the FBI in 2006 -- waived escrow requirements for Gofman on nearly two dozen homes.

Included in those was a house on Kildare Road, where authorities announced charges in the case last summer.

Realtor Tony Viola, who is accused of working with Gofman in the mortgage fraud scheme, said the city's escrow requirements are supposed to insure that the seller or buyer of a home with housing code violations makes the required repairs.

"The whole point of putting money in escrow is to create urgency on the part of people with money in escrow to fix the houses correctly," Viola said.

But in Gofman's case, he simply had to fax over bank statements, proving he had money to fix them up, records show.

"It's an enormous difference between putting real hard dollars -- $30,000 or $40,000 or $50,000 in cash -- in escrow to fix violations versus faxing a letter to the city saying waive the escrow," Viola said.

In fact, Gofman told Channel 3 News the waivers let him buy "significantly more" homes than (he) could have done otherwise" because his money wasn't tied up in escrow.

It's also unusual for cities to waive escrow.

A survey of 15 cities found that seven of them require escrow if a house has code violations. Only two of the seven cities waive it, as long as funds are available in the bank.

Wagner said he had no choice in waiving Gofman's escrow. He said the city's law allows for escrow to be waived if the person can show there are sufficient funds in the bank.

"The money to do the repairs was not a problem, or getting the repairs done hasn't been a problem," Wagner said. "It's what he did with the houses and every house he bought and sold ended up in foreclosure.

The FBI and the Cuyahoga County Prosecutor's Office declined to comment.

Brynna Fish and other Cleveland Heights residents wondered if more could have been done to protect city homeowners.

"It obviously put a lot of homeowners, like myself, in jeopardy," she said.

Wagner also says his hands were tied when he helped sell his relative's home to Gofman while Gofman was under FBI investigation.

He tried to sell the home, which was owned by his wife's aunt, to several re-habbers, as well as to the city of Highland Heights, before it was purchased by Gofman, Wagner said.

"We have fair housing laws. We have everything else," Wagner said. "Maybe something was up. What am I going to tell my wife's aunt? Don't sell it to him because we don't like him...or we don't know what he's up to?" 


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