A Palm Harbor man who said he could help clients buy houses is convicted of defrauding 300 people.
By AARON SHAROCKMAN
Published March 30, 2004
PALM HARBOR - Eric Lersch was out of work and living at his mother-in-law's house when he turned to a businessman who promised help.
Steven Mueffelman said Lersch could own the four-bedroom home he always wanted, even with poor credit. For $3,800, Mueffelman said, his company would buy the home for Lersch, then sell it to him later, when he could afford it.
Mueffelman called it "home ownership guaranteed."
Federal prosecutors said it was a lie.
Last week, a U.S. District Court jury in Boston convicted Mueffelman of defrauding 300 low-income and credit-damaged consumers nationwide by saying he could help them purchase a home. As many as 30 of the victims were from Florida, and at least seven were from Pinellas County.
Mueffelman, 59, of Palm Harbor faces up to 65 years in prison and a $3.25-million fine. Sentencing is scheduled June 23 in a Boston courtroom.
Prosecutors argued during the 21-day trial that during 1996 and 1997, Mueffelman swindled more than $1.2-million from would-be home buyers who couldn't obtain a mortgage from a traditional lender.
"There was no basis for Mueffelman to guarantee home ownership," said Peter A. Mullin, the assistant U.S. attorney who prosecuted the case. "He was essentially spending most of the money as it came in and had no ability to make refunds to people if they didn't get people into a house."
For $3,800, Mueffelman promised to make Lersch, 44, a Palm Harbor homeowner.
Lersch was looking to leave his mother-in-law's home in 1997 when he saw a flier that advertised a home ownership program for people with poor credit.
Here's how it was supposed to work:
Lersch and other customers paid an advance fee equal to a month's gross income to Mueffelman's company, Commonwealth Capital Funding Corp.
In return, the company would purchase a home for them for 94 percent of the market value. It would later resell the home for 100 percent of the market value, with 100 percent financing.
But after paying his $3,800, things turned sour, and Lersch asked for his money back.
Mueffelman refused.
"That was everything that my wife and I had saved toward a house to buy, rent or whatever," Lersch said.
Later, Lersch could not believe he was far from alone. In all, Mueffelman pulled a similar scam on at least 300 people in six states.
Lersch testified in Boston this month that Mueffelman made promises he never kept. He's happy the jury agreed.
"Here we are, trying to get back on track, and here this guy walks away with our money," said Lersch, who now sells seafood and lives in a quiet neighborhood in Palm Harbor. "Someone like this, you know what, if you don't stand up and stop someone, he's going to set up shop next door."
Mueffelman argued in court that it's not a crime to have a failing business, according to Mullin. Mueffelman said his business was operating in good faith, trying to find lenders to get such people as Lersch a home.
They just fell on tough times.
"He would claim that his program was evolving," Mullin said. "He would claim that he had lenders in nonprofits in place to do the program in Florida. But he certainly knew that a lot of people had paid a lot of money and had not gotten anything out of it."
Of Mueffelman's 300 clients nationwide, only 17 were placed in houses, according to U.S. attorneys. The rest, like Lersch, received nothing more than false promises and unmatched expectations. Most haven't gotten their money back.
Over the course of 11 months starting in 1996, Mueffelman and partner John S. Lombardi swindled more than $1.2-million from credit-damaged home buyers. Only $45,000 has been returned. Mueffelman spent the money on sales commissions and payments to himself and Lombardi. They both filed for bankruptcy in 1998 in Tampa federal court.
Mueffelman, who once lived in an East Lake house, now lives in a Palm Harbor apartment.
When reached there Monday, Mueffelman declined to comment.
Lombardi, 63, who now lives in Bourne, Mass., has spent time in Largo and Tarpon Springs. Currently, there is a warrant for his arrest in Pinellas County for his role in the scam.
Pinellas-Pasco State Attorney Bernie McCabe said his office will determine whether to bring Lombardi to Palm Harbor to face those charges. Lombardi already pleaded guilty to fraud charges in federal court last November, testified against Mueffelman and faces prison time.
"We would have to determine whether it's worth it," McCabe said. "I don't bring people down from Massachusetts to put them on probation."
Mueffelman pleaded no contest to fraud charges in a Pinellas County court in 2001 that alleged he took more than $17,000 from seven Pinellas County residents as part of the scam. In that case Mueffelman was sentenced to 18 months probation and served 10 months.
He was also ordered to pay back the money he took, including Lersch's $3,800.
