Felony guilty pleas have been entered by a Buffalo landlord and a civil court order has been issued directing the payment of hundreds of thousands of dollars in relation to his role in a mortgage fraud scheme.

Robert Palano, 51, formerly of Clarence, pleaded guilty to Grand Larceny in the Third Degree, a class D felony, and Scheme to Defraud in the First Degree, a class E felony. He faces 2 1/2 to seven years imprisonment.

In related civil actions, Palano agreed to pay $1.5 million in restitution and penalties and to be permanently barred from owning investment properties in Buffalo. Michael Heigel, Palano’s real estate appraiser, also agreed to pay $55,000 in restitution.

A 15-month civil investigation revealed that, between 1998 and 2002, Palano fraudulently obtained more than $4 million dollars in mortgage loans on 104 rental properties he owned on the East Side of Buffalo. After pocketing the loan proceeds, Palano absconded to Florida, leaving at least ten lenders with defaulted loans secured by properties worth far less than the debt, and tenants being evicted through foreclosures.

The investigation revealed that Palano used Heigel to do all of his appraisals which were grossly inflated over the true market value.

The charges in the criminal case arise out of a series of 29 fraudulent loan applications submitted by Palano between March and November 2002 to GMAC Mortgage Corporation. According to legal documents, Palano lied on the applications when he declared that he was not at that time a party to any civil litigation. In fact, Palano was then the defendant in an unrelated mortgage fraud case brought by The Associates First Capital Mortgage Corporation.

By December 2003, Palano had defaulted on all 104 loans and as a result, lenders were left holding collateral that was inadequate to pay off the balance. The consequent foreclosures resulted in the eviction of dozens of families from the rental properties and caused further blight of the neighborhoods as boarded up houses were left vacant for months.