Code enforcement officers say they were not surprised by mortgage fraud arrests

While some were shocked to learn that a part-time Westhampton Beach businessman and a former Suffolk County legislator were accused of being involved in a $50 million mortgage fraud scheme targeting the East End, a select few said they were surprised that it took so long for authorities to start making arrests.

Former and current code enforcement officers with both Southampton Town and Westhampton Beach Village agreed that some of the warning signs of mortgage fraud—namely, the altering of names on deeds from individuals to corporations—were apparent long before investigators with the Suffolk County district attorney’s office began making arrests last month.

More specifically, code enforcement officers said they first began suspecting that something was amiss when Donald Clark MacPherson, the owner of at least a dozen homes throughout Southampton Town, all of which are now going into foreclosure, was cited for dozens of code violations on his properties and, for the most part, avoided paying fines by either suing the town or removing his name from the titles of his properties.

“He was up there as one [landlord] with the most amount of summons issued to him,” said Steve Frano, a former town code enforcement officer from Westhampton Beach, about his experiences with Mr. MacPherson and his many properties.

“I’m not surprised,” added Bridget Napoli, the code enforcement officer with Westhampton Beach Village, who has crossed paths with Mr. MacPherson several times over the past few years. “I’m just surprised that it took so long,” she added, referring to his arrest last month.

Southampton Town Code Enforcement officer David Betts, who said he is also familiar with the violations that have accumulated on properties owned by Mr. MacPherson, said he was not surprised to learn that Mr. MacPherson was one of five people arrested as part of an alleged multimillion-dollar mortgage fraud scheme.

“It didn’t take a rocket scientist to figure out there was something going on,” Mr. Betts said.

According to Ms. Napoli, Mr. MacPherson had been cited numerous times for violations at his houses on Dune Road and Bishop Place in Westhampton Beach, though he avoided paying fines by switching his name on the property’s title to that of a corporation or another person. She said he would complete that transaction without securing a new certificate of occupancy, which is a violation of the village code.

One of the maneuvers allegedly used by Mr. MacPherson, according to authorities and former code enforcement personnel, is that he would switch the name that was listed on a property’s title to a corporate name, such as 1768 Majors Path Co., 58 Shinnecock Hills Road Co., or 127 Highland Co., in order to delay—or possibly avoid—paying fines.

Town officials said they were unable to confirm the exact number of summonses that had been given to Mr. MacPherson, explaining that many of his properties are still listed under corporate names. Still, they said that he has been issued dozens of summonses for various violations, ranging from overcrowding to general safety issues.

Joseph Lombardo, a senior assistant town attorney, said there are anywhere between 20 and 50 summonses issued to Mr. MacPherson that are still active in the Southampton Town Justice Court system. Mr. Lombardo added that his count is a conservative estimate.

Mr. Frano, who served as a code enforcement officer for Southampton Town for 25 years prior to retiring in June 2007, said he had known Mr. MacPherson for the better part of that time. He added that he rarely saw Mr. MacPherson, whose primary residence is in Manhattan, in Southampton Town Justice Court to answer the summonses.

Mr. MacPherson, the owner of Magic’s Pub and the Sunset Cafe in Westhampton Beach, and George O. Guldi, an attorney and a former Suffolk County lawmaker who lives and works in Westhampton Beach, and three co-conspirators were all charged with felonies stemming from a mortgage fraud scheme that authorities said targeted 50 properties throughout Southampton Town and dates back to 2002.

Mr. MacPherson and Mr. Guldi, along with Ethan Ellner of Plainview and Dustin Dente of Roslyn, both attorneys, and Carrie Coakley of Manhattan, who is married to Mr. MacPherson, all pleaded not guilty to felony charges during their respective arraignments last month in Southampton Town Justice Court.

Patricia Weiss of Sag Harbor, one of Mr. MacPherson’s attorneys, did not return calls seeking comment.

Steven Wilutis of Miller Place, the attorney representing Mr. MacPherson in the mortgage fraud case, also did not return several calls left at his office over the past few weeks. At his client’s arraignment last month, Mr. Wilutis said that he had no comment concerning the code violations that had been accumulated by Mr. MacPherson.

Many of the properties that are owned by Mr. MacPherson—officials with the Suffolk County district attorney’s office have declined to say how many properties are still owned by him—have either fallen into disrepair or are plagued with violations, according to Southampton Town and Westhampton Beach Village code enforcement officers.

“My experience with Mr. MacPherson was negative,” Mr. Frano said, adding that Mr. MacPherson was heavily involved in the summer rental market on the East End. “I would get complaints from his neighbors, about how there would be 20, 30 people in a home, or with summer rentals, I would get a noise complaint.

“Usually, we did not make things better after the violations,” Mr. Frano continued. “He would fight them in court.”

Mr. Frano and several other town officials are listed as defendants in a federal lawsuit that was filed by Mr. MacPherson about a year ago in U.S. District Court for the Eastern District of New York in Central Islip. The lawsuit, which the town is trying to have dismissed, challenges the constitutionality of how code enforcement officials enforced the town code.

“The town has moved to dismiss it because it has no legal merit,” said Dan Adams, a town attorney. “It’s baseless on several alternative grounds.”

Additionally, Mr. MacPherson filed a second lawsuit against Southampton Town that challenges the constitutionality of its rental law. In that case, Mr. MacPherson is suing Mr. Frano, the Southampton Town Board, current Town Justices Deborah Kooperstein, Edward Burke and Barbara Wilson, and former Town Justice Thomas DeMayo. In fact, new Town Justice Andrea Schiavoni is the only judge available to preside over Mr. MacPherson’s and Mr. Guldi’s mortgage fraud case because the others had to recuse themselves due to the federal lawsuit.

The town is also trying to get that suit dismissed by the courts.

In addition to suing Southampton Town, a move that some characterize as another smokescreen to further delay the paying of summonses, Mr. MacPherson would often criticize Southampton Town and Westhampton Beach code enforcement officials on his blog, hamptonspolitics.blogspot.com. In a number of blog entries posted last year, Mr. MacPherson wrote that town code enforcement officials specifically target landlords who rent properties to immigrants.

In a January 26, 2009, blog entry regarding Southampton Town’s finances, Mr. MacPherson writes that “racists” have operated town code enforcement personnel, a town department he likens to a “badly trained police force.”

Calls to the Soho Journal, Mr. MacPherson’s quarterly arts publication that covers the downtown Manhattan neighborhood, were not returned. No one picked up the telephone at Magic’s Pub on Main Street in Westhampton Beach, one of two businesses Mr. MacPherson owns in the village. Mr. MacPherson is also the owner of the Westhampton Seabreeze Motel on Montauk Highway in Westhampton.

Mr. Lombardo explained that Southampton Town filed three Suffolk County Supreme Court actions against Mr. MacPherson about a year ago. Those actions involve overcrowding and numerous town code violations at three of Mr. MacPherson’s homes in North Sea. Currently, the town has secured a temporary restraining order against Mr. MacPherson, which means that he is now prohibited from renting those homes to tenants.

“We wanted to keep people from living there until they’re returned to the condition they’re certificated for,” Mr. Lombardo explained, stating that the certificates of occupancy for those homes allow only one family. He added that those homes were used by multiple families last winter and spring.

The town is now trying to secure a preliminary injunction that would continue to prevent anyone from living in those homes. Ultimately, Mr. Lombardo is hopeful that Suffolk County Supreme Court will force Mr. MacPherson to comply with the town code. “We’re not trying to put him out of business,” Mr. Lombardo added.

He explained that the homes in North Sea had several safety violations. He explained that kitchens, stairways and basement apartments were illegally installed in some of the homes. On the second floor of one of he homes, there was a stove powered by a propane tank, Mr. Lombardo said.

Mr. Betts explained that Mr. MacPherson never secured rental permits for the North Sea homes, adding that pools at several of the homes were so green from algae that anyone falling in would not be visible.

Mr. MacPherson’s properties in Westhampton Beach, which fall under the jurisdiction of the village code enforcement, also have been cited for numerous violations, including a broken garage door and other violations regarding improper certificates of occupancy, according to village records.

While Mr. MacPherson was never cited for serious violations in Westhampton Beach, one of his homes, located on Dune Road in the village, is uninhabitable, according to village officials. Ms. Napoli said she issued a violation to Mr. MacPherson last year because the garage door on that home was broken and left open. Several months went by until Mr. MacPherson finally fixed the garage. Westhampton Beach Building Inspector Paul Houlihan observed that the garage was fixed shortly after Mr. Guldi was sued in late February by Wachovia Federal Savings Bank, which is accusing the former county legislator of mortgage fraud.

Mr. MacPherson also flipped deeds—a term that refers to changing the name on a deed to either a corporation or another person—on his homes in Westhampton Beach, Ms. Napoli said. She said Ms. MacPherson flipped the deeds to avoid paying summonses. She added that a new certificate of occupancy was required every time a property owner changes the listed owner on a deed—and those were rarely, if ever, secured by Mr. MacPherson.

“There are still issues going on with him now,” Mr. Frano said, referring to Mr. MacPherson’s properties in Southampton Town. “But to make him more responsible, that’s something the courts will have to do.”