From Peter Y. Hong:


From 2000 to 2003, the group pumped up home appraisals and arranged straw purchases of houses in Beverly Hills, Bel-Air and other neighborhoods. After obtaining seven-figure mortgages on many of the properties, the agents and co-conspirators defaulted on the loans, taking millions with them and leaving the banks with houses worth far less than their inflated purchase prices.

Authorities alleged the fraud ring secured $142 million in bogus loans from Lehman Bros. Bank and another lender. The group bought relatively inexpensive houses in high-priced areas, then used trumped-up appraisals to take out mortgages worth far more than the properties — sometimes nearly double the prices the ring paid for the properties.

A Bel-Air house the group acquired for $735,000, for instance, was resold to a straw buyer for $2.37 million with a $1.42-million mortgage.

The ring performed 81 such transactions, authorities said.

Babajian and Grasso allegedly made millions of dollars through the deals, prosecutors said, and Grasso got his own Beverly Hills home with no money down. Rizk received hundreds of thousands of dollars in inflated appraisal fees, prosecutors said.

Susan Yu, another of Babajian’s attorneys, said the evidence showed that Babajian was out of the office recruiting agents or working on other home sales deals during the period in which the fraud allegedly occurred.

“He was a target because of his name,” Yu said.

Babajian has represented Barbra Streisand, Bruce Willis, Warren Beatty, Lee Iacocca and many others in home sales deals, Mesereau said.

Grasso faces maximum sentences totaling 515 years. Rizk’s sentences could total 425 years. Sentencing is scheduled for Jan. 29.

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