Federal Jury Finds Lender Fraud: Awards $1 Million in Damages

June 3, 2011, Brooklyn, NY—South Brooklyn Legal Services (a program of
Legal Services NYC) this week celebrates a major victory on behalf of a
group of clients after a jury trial in the Eastern District of New York.
The suit, Barkley v. United Homes, and five consolidated cases, alleged
that Yaron Hershco, a Brooklyn developer, and his companies operating
under the United Homes trade name, conspired with mortgage bankers,
attorneys, and other real estate professionals to target minorities for
fraudulent sales of homes that were overpriced and in poor condition.
The plaintiffs prevailed and the jury returned with a verdict awarding
the clients over $1 million for fraud, conspiracy to commit fraud, and
deceptive practices, including punitive damages awards against Yaron
Hershco, the United Homes companies, Olympia Mortgage Corporation,
Alliance Mortgage Banking Corporation, and attorney Benjamin Turner.

Read coverage: "Eight Brooklyn Homeowners Win Fraud Case Against Yaron Herscho's United Homes,"The Real Deal Online, June 7, 2011

The jury also found that the United Homes entities were essentially
Yaron Hershco’s alter ego, and permitted the plaintiffs to pierce the
corporate veil, thus clearing the way for Hershco to be held liable for
the actions of his corporations and employees and agents.

The
plaintiffs in the case were targeted for a fraudulent property-flipping
scheme orchestrated by Hershco’s companies known as a “one stop shop,”
in which the real estate office targeted minority first-time home buyers
and convinced them that it could provide wall-to-wall services,
including arranging for financing and lawyers for the buyers. Last year,
a Judge denied the defendants' motions for summary judgment and
rejected all of their arguments, finding substantial evidence of racial
targeting and fraudulent misrepresentations.

The victory, achieved by SBLS and attorneys from AARP Litigation
Foundation and Cowan Liebowitz & Latman PC, marks one of the first
times that a federal jury has considered these types of homes sales
practices – which included steering LS-NYC’s clients to homes that were
in terrible condition, over-appraising those homes, promising repairs
that were never made, and providing costly, subprime lending products. 
“Property-flipping schemes targeted at low-income minority communities
have had devastating effects on individual families and their
communities,” said Meghan Faux, Director of SBLS’s Foreclosure
Prevention Project. “We are grateful for this verdict which sends a
clear message that these fraudulent schemes are illegal and will not be
tolerated.”