House-flipping scheme that hit Buffalo is shut down by Cuomo
An investment company that operated a house-flipping scheme that targeted Buffalo and cost investors millions of dollars was shut down Wednesday by State Attorney General Andrew Cuomo.
Long Island-based East Coast Capital and its operator, Norman Dansker, are banned from purchasing investment properties in the state and must pay more than $3 million in restitution to investors who were defrauded, according to Cuomo.
“This company engaged in a scheme that swindled millions of dollars from unsuspecting investors at the expense of Buffalo neighborhoods,” Cuomo said in a written statement.
“My office shut Dansker down to prevent him from preying on more investors, and this case sends a clear message to those who try to illegally capitalize on urban blight,” he added.
The order is the result of the area’s first major house-flipping lawsuit against an investment company, officials said.
Illegal flipping involves buying real estate cheaply and then selling it at an inflated price without making repairs. Often, the property is bought and sold by out-of-towners.
According to court documents, Dansker and others defrauded unknowing investors through an elaborate scheme involving more than 50 properties throughout the City of Buffalo.
In the scheme, high returns are paid to investors from other investors instead of through actual profits from the real estate venture. In addition, investors were duped by promises of high returns if they invested in distressed real estate by providing mortgages that grossly exceeded the market value.
Actions are pending against other parties involved in the scheme, including IMA Equities consulting firm and its owner, Moshe Freidlander; the owners of JD Realty & Management, siblings Jessica and Joshua Doucette, and their mother, Elizabeth Doucette. East Coast told investors that Jessica Doucette, a college student, would rehabilitate many of the properties.
Court documents indicated East Coast paid $1 million for 53 properties in the Buffalo area, then received $2.9 million in private investor mortgages. The firm then transferred the properties to Jessica Doucette, who defaulted on the grossly inflated mortgages.
Meanwhile, the investment company paid Doucette almost $700,000 for taking the properties off its hands. In the end, East Coast Capital obtained hundreds of thousands of dollars while investors lost large sums of money because the values of the collateral properties were well below the mortgage amounts.
More than 40 properties owned by either East Coast or Jessica Doucette were cited for various building code violations. Last year, Doucette failed to appear at multiple court appearances regarding the violations and was briefly imprisoned in the Erie County Holding Center.
The case was brought to the attention of Cuomo’s office by Buffalo’s Anti-Flipping Task Force.
“Norman Dansker and his company have no place in our community,” said task force Coordinator Kathleen Lynch. “And we are relieved that he is no longer permitted to do business in the state.
Reader Comments
Click To View and Add Comments