It's not easy for Angel and Mark Sullivan to pick their most bizarre experience since turning to DeMarco REI Inc. in Philadelphia for help refinancing their mortgage in late 2007, when they were in danger of losing their house.
It is a strong set of choices:
Seeing their Moorestown house, where Mark has spent his entire life, for rent on Craigslist, even though they still lived there.
Rushing home to find workers hired by DeMarco REI ripping down their wallpaper in the living room.
Anthony J. DeMarco III, who ran DeMarco REI, showing up in his blue-and-gray pajamas to close what the Sullivans thought was a refinancing, after the couple had become wary of the deal.
"They were trying to make us feel guilty for dragging him out there," Mark Sullivan said, referring to DeMarco's employees at the closing table. They kept saying, "I hope he's not upset, because he's a UFC cage fighting champion," Sullivan recalled.
Two weeks later, when the Sullivans received a bill from DeMarco demanding monthly rent of $3,200 - two thirds more than the $1,900 monthly mortgage payment they were originally struggling with - they knew they'd been had.
If charges last month against DeMarco are true, he was anything but the answer to problems confronting the Sullivans and homeowners like them battling to keep their properties. He was the engineer of a scam that took advantage of them.
DeMarco's scheme worked like this: He found financially distressed homeowners through public-foreclosure filings and offered to buy their houses, while allowing them to remain in the house, paying rent, until they recovered financially and could buy the house back.
"It sounded so good, because I wanted to hold my house," said Andre Bullard, 48, a mechanic and truck driver who owned a house in Bensalem until falling into DeMarco's trap in 2008.
Any difference between the sales price and what was owed to the original lender - more than $100,000 in Bullard's case - would supposedly go into escrow for a rent reserve. The reality was, authorities say, that DeMarco pocketed that money, as well as any rent that was paid.
Key to DeMarco's scheme were third-party buyers, also called straw buyers, who were paid to allow DeMarco REI use of their names and credit profiles to get loans for the houses. They were attracted by ads in The Inquirer and elsewhere promising that they could "make $5,000 to $20,000 in 30 to 60 days," with no investment.
In the Sullivans' case, what they thought was a refinancing was really a sale for $450,000 to DeMarco's father-in-law, Simon Tsepenyuk, who acted as the straw buyer.
The price was far more than the Sullivans needed to pay the $263,229 they owed on their mortgage, plus $6,663 in settlement costs. But the Sullivans never saw the $180,000 they were owed.
Instead, the U.S. attorney in Philadelphia alleged in an indictment last month, DeMarco kept that money, as well as proceeds from the sales of at least 113 additional houses in a foreclosure-rescue scheme that netted him $11 million.
The scheme operated from mid-2006 into 2009, but most of the $31 million in new, fraudulent mortgages from 19 banks, including three that were subsequently closed by the Federal Deposit Insurance Corp. (FDIC), were obtained in 2007 and 2008, when banks were in the jaws of a fierce financial crisis sparked by sloppy mortgage lending.
The U.S. Attorney's Office, as part of its civil lawsuit against DeMarco REI, plans to set up a mediation program between the original homeowners and the new lenders to help as many of DeMarco's victims as possible regain ownership, though some may have lost their houses anyway. A federal court hearing on the matter is scheduled for Wednesday in Philadelphia.
It will not be an easy fix. A dozen of the victims' houses have been repossessed by lenders. Four others have been sold by DeMarco's stand-in buyers before foreclosure. Neither of the two banks that made the largest number of loans to DeMarco's stand-in buyers, Bank of America Corp. and JPMorgan Chase & Co., would comment.
DeMarco, meanwhile, considered a flight risk if allowed to post bail, is being held in federal prison until trial. His attorney, Christopher D. Warren, did not return calls.
In the indictment and other court documents, prosecutors said DeMarco, 31, who was born in Pennsylvania but grew up in rural northwestern Montana, used the proceeds from his scheme not just to operate DeMarco REI, but also to drive a Bentley and live for a time in the Residences at the Ritz-Carlton in Center City, among other extravagances.
Asked to describe DeMarco, Leonard J. Mucci III, of Havertown, who worked briefly for DeMarco in 2009, said: "Picture a 30-year-old that has lots of cash and never grew up."
Mucci said DeMarco bragged about spending $13,000 at the Bleu Martini in Old City for his 30th birthday party in February 2009.
For a December court hearing, DeMarco, a heavyset man with a full dark-brown beard and a thick head of hair, had swapped $500 jeans for a green prison jumpsuit.
DeMarco's 47 straw buyers have not been charged, but have paid a price. They have had their credit ruined because of foreclosures on the houses they bought. At least three filed for bankruptcy. One committed suicide over the affair, his mother said.
Biana Tsepenyuk, who married DeMarco in June 2007, was the straw buyer in three early deals, in June and July of 2006. Tsepenyuk; her father, Simon; and Lyuba Tsepenyuk, who has the same address as Simon in Langhorne, were straw buyers 11 times.
Biana Tsepenyuk, who has not been charged or named in the civil suit, was regularly at the company's offices - with her tiny dog, a Pomeranian, until she and DeMarco split up in the fall of 2008.
"Every time I went in there, she was in there," said Charlie King, a locksmith who changed locks for DeMarco, until a falling out over $4,400 in unpaid bills.
Biana Tsepenyuk has since reinvented herself as the Philly Fashionista, sharing fashion and beauty tips on a website and at events, including one scheduled for Friday at the Pyramid Club in Philadelphia, where she will give a talk titled: "Fashion Tips to Help Reveal the Stylish & Sophisticated You."
Despite the suspicions of King and the Sullivans that Tsepenyuk, who signed for her father on certain documents, had to know about the fraud, her attorney, Greg Prosmushkin, said "Biana had no idea of the fraud her husband was committing."
Angel and Mark Sullivan do not understand how the bank and the title company - IndyMac Bank and Garden State Land Title L.L.C., in their case - failed to see the fraud. Mark Sullivan asks: "The bank didn't think it was funny that we sold a house and they weren't giving us the proceeds, they sent it to somebody else?"
