By Julie Manganis
MARBLEHEAD — A lawyer from Marblehead is being held on $1 million cash bail following his arrest in what prosecutors call a sophisticated mortgage hijacking scheme.
Leon Gelfgatt, 49, was arrested by state police in Boston yesterday morning as he was attempting to pick up $1.3 million in mortgage payoff checks, according to a spokesman for the attorney general's office.
Gelfgatt pleaded not guilty at his arraignment in Cambridge District Court to charges of attempted larceny and uttering.
Prosecutors in Attorney General Martha Coakley's corruption and fraud division and state police are continuing to investigate, and more charges may be filed.
During Gelfgatt's arraignment, a prosecutor described the scheme, in which Gelfgatt set up a phony company. Gelfgatt, who is also a licensed real estate broker, then identified properties that were under agreement and about to be sold.
He allegedly created false documents showing that the phony company he had set up was the new mortgage holder on the properties that were about to be sold. He would file those documents at the Registry of Deeds for that county prior to the real estate closing.
Part of the job of a real estate closing attorney is to ensure that the company that holds any mortgages on a property being sold is paid off from the proceeds of the sale.
Prosecutors say Gelfgatt's actions would cause those closing attorneys to deliver the mortgage payoff checks to his sham company rather than to the rightful mortgage holder, usually a bank or finance company.
Prosecutors say the fraudulent documents, or "mortgage assignments," have been recorded at several registries of deeds in Massachusetts.
Harry Pierre, a spokesman for Coakley's office, said he could not say whether any of the properties were in Essex County.
But investigators believe Gelfgatt may have reassigned "numerous" other mortgages in Massachusetts and are continuing to investigate.
Gelfgatt's attorney, Ron Stone, did not return a call yesterday afternoon.
Gelfgatt has been licensed to practice law in Massachusetts since 1998 and had an office at 92 State St. in downtown Boston, according to the Board of Bar Overseers, which is expected to take action on his license shortly.
Judge Roanne Sragow set bail at $1 million cash and ordered that if Gelfgatt posts that bail, he must surrender his Russian passport and wear an electronic monitoring ankle bracelet.
He is due back in court Jan. 20 for a probable cause hearing.
