Albany Times Union on Attorney Actions in Fraud Cases

Fraud cases in region test responsibilities of lawyers
Defendants who say they trusted attorneys raise issue of prosecutorial double standard

The Albany Times Union by BRENDAN J. LYONS - October 26, 2008

ALBANY — Nine years ago, Mark Slagen fell into financial troubles after the house he shared with his wife, Ann, burned and left them homeless as their insurance coverage ran short. Slagen, a former police officer and state Inspector General's Office investigator, said an acquaintance introduced them to a mortgage broker, Anthony Andersen, who pledged to help them refinance their way out of trouble. Slagen would later regret the introduction, which would lead to his being convicted in a felony mortgage fraud scheme. He cooperated with the FBI and that effort, according to federal prosecutors, helped force Andersen to plead guilty. Andersen's corrupt deals relied on the work of other licensed professionals, including at least one attorney, James Blendell of Latham, who records show served as the closing agent for many of Andersen's bad deals. Like other Capital Region attorneys embroiled in the paperwork of mortgage fraud scandals, Blendell was reported to state disciplinary authorities, but never accused of wrongdoing. Attorneys for Slagen and other people caught up and convicted in the fraud schemes have accused the Justice Department of selective prosecutions.

It all unfolded in early 2001 when Andersen convinced him to "flip" two real estate properties in Troy and Rensselaer, court records show. It was a crime that involved falsely inflating the value of the homes so the broker, Andersen, could pocket the profits of a mortgage set up to fail. It was, according to the FBI, a classic mortgage fraud scheme. ''Slagen's responsibilities would be to appear at the closings and sign some paperwork, and that he would be compensated,'' according to his plea agreement. Looking back, Slagen, who pleaded guilty to a felony but was sentenced to probation because he cooperated with the FBI, said he felt duped by Andersen and Blendell, who was never implicated in any of the crimes for which Slagen and Andersen both were convicted. Court records and public documents filed in Rensselaer County indicate Blendell handled numerous real estate closings that were part of Andersen's sprawling mortgage fraud scheme. Andersen, of Holyoke, Mass., and his wife, Lisa Andersen, both pleaded guilty to fraud-related charges and await sentencing.

Prosecutors did not identify Blendell in court documents by name. Donald T. Kinsella, Slagen's attorney, questioned why his client was singled out when Blendell and at least seven other so-called ''straw purchasers'' in the case, including a police detective, were not charged. ''For some inexplicable reason, the government chose not to prosecute other individuals who were complicit with Mr. Andersen in the far-ranging scheme in which Mr. Slagen was but a limited participant,'' Kinsella wrote in a memo to the judge prior to his client's sentencing. ''Mr. Slagen has provided information to the New York state authorities in this matter, and we expect that at least one professional will be facing sanctions from New York state authorities.'' Blendell did not respond to requests for comment.

Slagen said he questioned Blendell whether his two property deals were legal. ''I brought in a copy of the Public Officer's Law and put it on his desk,'' Slagen said. ''He said to me this is completely legitimate.'' It isn't the only case in which allegations of a prosecutorial double standard have emerged. Berne Watkins, a Glenmont businessman, partly blames his former business attorney, Michael Kornstein of Albany, for his conviction on fraud charges related to a massive property deal that involved former Urban League Director Aaron Dare, who is in prison for his role. Watkins, 71, is scheduled to report to federal prison later this month to begin a 9-month sentence for his guilty plea last year in the $8.5 million real estate scheme. The crimes centered on the sale of three large rental properties Watkins owned in Albany and Schenectady.

At Watkins' sentencing last summer, his defense attorney questioned why others in the deal were not prosecuted. Kinsella, without naming Kornstein, noted that the attorney had approved a series of phony promissory notes that served as a basis for the federal charges against Dare and Watkins. There are no allegations Kornstein knew the notes were phony. ''There were others in the case who could've been prosecuted who weren't: an attorney who drafted the documents, including the phony notes,'' Kinsella told a judge. ''I'm not a real estate attorney, but the first time I saw them, just looking at them, they were, obviously, bogus.'' Kornstein declined to comment. ''I trusted my lawyer and if he knew there was something wrong with the documents he should have told me,'' Watkins said. ''I created no words in any of those things.'' Watkins said that after he pleaded guilty and agreed to cooperate, he met with an assistant U.S. Attorney to talk about Kornstein's role. ''The meeting lasted 10 minutes,'' Watkins said. ''He hardly asked a question.''