By Jared Chausow
By Katie Toth
By Elizabeth Flock
By Albert Samaha
By Anna Merlan
By Jon Campbell
By Jon Campbell
By Albert Samaha
And that's what the multimillion-dollar scam against the U.S. Department of Housing and Development was all about. Prosecutors have arrested and charged 16 people, accusing them of cooking up a clever scheme to illegally obtain federally guaranteed 203(k) loans by using nonprofit organizations as fronts to inflate prices and purchase as many as 450 brownstones, most of them in Harlem and Brooklyn.
Among the prominent nonprofits in the scam, prosecutors contend, was Word of Life Ministries. No one connected with the church has been charged, but court documents allege that Word of Life received kickbacks of up to $10,000 per building from secret investors who illegally wound up with the proceeds of the taxpayer-backed loans.
Nowhere in the lengthy court filings do prosecutors from either the Manhattan D.A.'s office or the Eastern District U.S. Attorney's office mince words. Nowhere do they say Word of Life was an innocent pawn in the scheme.
Anastasi declined to be interviewed by the Voice, but his attorney, Lee Hymowitz, insists that the church was hoodwinked by attorney Andrew "Drew" Graynor and mortgage banker Michael Fox, two Long Islanders who prosecutors say were at the very center of the scam. Fox has been charged; Graynor hasn't.
"Involved we were," Hymowitz says of Word of Life. "We obviously bought the properties. Unfortunately, the church was duped by its previous attorney and by the mortgage banker."
Hymowitz argues that Word of Life "unfortunately was hooked into this. It's terrible, but it's not anything we intended to cause trouble with."
Trouble, however, was caused. The 203(k) program is designed to help people on the lower end of the income scaleeither by themselves or with the aid of nonprofit groupsbecome homeowners in their neighborhoods.
But the scam has hurt the very neighborhoods that the program intended to help. Among the buildings that HUD says are in default because of the scam, 19 in Harlem are owned by Word of Life.
The crafty property flips among the nonprofits, including Word of Life and investors such as Long Islander Frank Boccagna, grossly inflated the real value of the buildings and put them farther out of reach of ordinary people. In many cases, tenants in buildings taken over by the scamsters found that rehab was the last thing on the mind of the schemers. Part of the scheme was for the investors to take responsibility for managing the properties, but many of the tenants in the buildings say they have suffered without basics like heat and hot water.
Mortgage banks that bought the allegedly illegal loans are claiming their federally insured money. HUD and city officials have vowed to reclaim the buildings from the scrap heap and redo them into legitimate deals.
Hymowitz insists that Word of Life will clean up its own mess. "Part of the whole scam was the management of the buildings," he says. "Boccagna was the management company. We have a new management company and we've been dealing with them to straighten things out."
As for the vow by HUD, and powerful nonprofit groups like the Reverend Calvin Butts's Abyssinian Development Company, to take over all the buildings as they emerge from foreclosure, Hymowitz says that won't happen with Word of Life's buildings. "With most of our properties," he says, "we've worked out a separate deal with the banks, like M&T Mortgage."
Word of Life's buildings won't wind up in default, he says.
Prosecutors say their investigation is continuing and more arrests are expected, but neither leader of the two most prominent legitimate church groups in the scam has been charged. Only Gennie Phillips of Helpline Soul Rescue Ministry is completely in the clear: She died in the middle of the probe.
Anastasi, however, is alive, and Word of Life, says Hymowitz, has not been given what he calls a "clean bill of health" by prosecutors.
"After all their investigation, they've elected not to prosecute," he says. "Allegations may be one thing, but the ability to prosecute is something else. At this particular point, they don't have any specific evidence.
"Trust me. It was a grueling process. They had the intention of prosecuting us. It wasn't a flip decision. There just was not enough to prosecute."
And Anastasi, a stocky fellow whose looks and voice could get him work on The Sopranos, still has his day job, preaching a version of the prosperity gospel to his congregationa group that reflects Freeport's diversity: about two-thirds African American or Hispanic and one-third non-Hispanic white.
It's possible that these kind and sincere people, who greet strangers in a low-key, friendly way, would be crushed by the details of the court documents.
Anastasi's message during the January 14 service includes an acknowledgement that everybody on earth is a sinner. That, like the rest of the service, has a Pentecostal flavor, spiced with electrified live music, some sweet soul singing, tambourines, and altar calls to Christ.
The ritual of passing the collection plate provides a striking contrast to the way the church is portrayed in court documents.
"We're going to continue to worship with our tithes and offerings," Anastasi intones to about 700 people in the church's cavernous auditorium, adding quietly, "Can you sense the presence of the Lord here?"
He calls upon an assistant to read Psalms 116:12: "What shall I render unto the Lord for all his benefits toward me?" The flock, told by Anastasi to be quick and orderly, walks down to the front and deposits checks and cash-filled envelopes into big blue buckets that are carried backstage by the ushers.
That doesn't make Word of Life different from just about any other church or synagogue. Some of the wounded people and politicians of Harlem and Brooklyn have referred to the nonprofits pinpointed in the scheme as "shams" and illegitimate. And one of the entities in the scandal, St. Stephen's, is believed to be nothing more than a name and a mail drop trading on the name of a legit church in California. But Word of Life is a going concern, as real as any other church.
Anastasi conducts services in an old movie theater on the faded main street of downtown Freeport, a town of 40,000 on Long Island's South Shore. Word of Life runs a drug-rehab program and provides marriage counseling. People walk around town testifying that the church has helped save their lives. While church leaders pitch their evangelizing trips abroad, many congregants travel to private, interior places during the lengthy Sunday service and work on themselves.
The church operates ministries in struggling areas where home ownership is often just a dream; it has satellite churches in Far Rockaway, the Bronx, Brooklyn, and Harlem. Anastasi has gone international, planting churches in the Congo and Antigua, but he tries to be a strong political force closer to home. His January 14 sermon includes an announcement from the pulpit supporting mayoral candidate Jack Arias. "Jack, please stand up," Anastasi says, adding to his flock, "I think he has the most qualified credentials to be mayor."
Local politics isn't a new interest of Anastasi's. Thanks to his "impetus,"a Freeport chapter of the Christian Coalition was founded in 1996, according to The New York Times. Claiming a membership of about 150, Anastasi sent letters to three mayoral candidates, offering support if they promoted a "spiritual agenda," which the Times said required "taking a Christian stand on abortion, homosexuality, gay and lesbian rights" and "actively" supporting "new laws that will take back what Satan has stolen." The Times said the last reference was to issues like "prayer in schools."
Word of Life's believers would have a difficult time with some of the details as laid out by prosecutors in the HUD case:
"As a result, in part, of the fraudulently completed appraisal reports that were ordered by [Copozzi]," the criminal complaint says, "the nonprofits were able to obtain federally guaranteed mortgages. . . . "
Boccagna told investigators, according to court documents, that Graynor hooked him up with Word of Life in mid-1997 and they started making deals with Fox.
A source close to the investigation tells the Voice that the nonprofits were induced to participate by being told that they wouldn't have to do rehab of the brownstones or manage them as rentals or sell them. Boccagna and other investors agreed to handle all of that in return for their keeping most of the money. Such management deals aren't necessarily illegal, say investigators, but control of the projects by the investors is forbidden. The alleged coverup of the investors' role resulted in numerous charges of filing false documents against most of the defendants.
In late 1998, a year after Boccagna started making deals with Word of Life, he was introduced to officials of Family Preservation Center, another Long Island nonprofit, and they started doing deals with Graynor and Fox, prosecutors contend. Soon, other lawyers, other investors, and other nonprofits joined in.
And the future looked bright, according to the federal complaint against Beth Coppozi: "CW-1 indicated that the agreement was that, if the properties were successfully rehabilitated and re-sold, the CW-1 and Word of Life would split the profits."
Rehab work was done on some of the properties, but insiders say the renovation work required by the terms of the 203(k) program was never completed on any of the properties.
As it turned out, the most powerless victims of the scam brought it tumbling down. An illegal eviction of tenants at a Harlem building in March 1999 roused the suspicions of housing activists at the West Side SRO Law Project, a tenant-rights group, and city and federal investigators started sniffing around. (See "HUD: The Horror Movie," January 16; "Seduced and Abandoned," January 23.)
Probes began on several fronts; a civil suit was filed by Attorney General Eliot Spitzer against Helpline and some others in the alleged scam, and criminal charges against others were filed late last year. Because the rehab work was not completed, and people running the property deals became strapped for cash, properties began careening toward foreclosure.
Some of the buildings were vacant, but others had tenants who discovered that their landlords weren't paying the bills.
However, one home Word of Life purchased with money from the 203(k) program for low-income earners is not likely to go into foreclosure. It's a house on Ocean Avenue in Freeport near Word of Life's church: the residence of Pastor Anastasi and his wife, Michele.
Spit-Shining a Scandal
The Chilly Victims of the HUD Housing Scam Listen to Some Hot Air
by Ward Harkavy