By JODI SOKOLOWSKI
Buffalo Law Journal

A Long Island investment company that allegedly defrauded investors in real estate transactions has been shuttered through a court order obtained by the state Attorney General's office.

The order is said to be the first of its kind in the region, according to the AG's office.

According to court documents, East Coast Capital LLC and its operator, Norman Dansker, bought more than 50 residential properties and had investors provide mortgages that exceeded the distressed properties' market value.

Investigators said Dansker told investors that the company sold the properties to contractors for rehabilitation and that they would receive a high return from the resale of the renovated property. East Coast Capital, based in Syosset, then provided short-term bridge loans to the contractors with the investors' money, based on the supposed worth of the property, the AG's office said.

The company is said to have paid nearly $1.1 million for 53 properties in the Buffalo area, then received private investor mortgages totaling more than $2.9 million.

Ponzi schemes, in which investors are paid returns out of funds from subsequent investors, are similar to pyramid schemes, and both are illegal under the state's general business law.

In this case, none of the investors was paid from the proceeds of the flipping, according to a spokesman for Attorney General Andrew Cuomo.

"Investors in today's tough economic times must be ever vigilant to not fall victim to get-rich-quick scams like this," Cuomo said in a prepared statement.

The company and Dansker may not purchase investment property nor issue, promote or sell securities in the state unless they post a $1 million performance bond. They also have a monetary judgment against them for more than $3 million in restitution to be paid to the defrauded investors.

Legal actions are still pending against consulting firm IMA Equities Inc. and its owner, Moshe Freidlander, as well as JD Realty & Management Inc. owners Elizabeth Doucette and her children, Joshua Doucette and Jessica Doucette.

More than 40 of the properties owned by either East Coast Capital or Jessica Doucette were cited for building-code violations. Doucette failed to appear at multiple court appearances and was briefly imprisoned last year.

Buffalo Mayor Byron Brown's Anti-Flipping Task Force, which brought the case to the AG's office, and Hilbert College's economic crime investigation program were recognized for their help in the investigation.

Anti-Flipping Task Force member Kathleen Lynch said Doucette's housing-court cases and real estate transactions between East Coast Capital and Doucette were the red flags.

"We were looking for patterns of flipping, and this struck us immediately," said the Western New York Law Center staff attorney.

She said the center and the task force will continue "to look for patterns and practices that negatively impact Buffalo's neighborhoods" as well as alert the AG's office, which has the authority to prosecute these cases.

"Such cases remain a top priority for the office," said Cuomo spokesman John Milgrim.