May 9, 2009— -- Peter Dawson was a mini-Bernie Madoff -- on the surface, a charming family man with a big house, on the make in working class neighborhoods of Long Island, N.Y. Now, he has been sentenced to state prison for at least five years for running an elaborate mortgage scam.
Dawson admitted he ran a Ponzi scheme: He convinced his clients to take equity out of their homes and invest it in his hedge fund. But that "hedge fund" didn't actually exist, he said, and he pocketed the money. When he had to, he paid off old investors with new investors' money.
During the housing boom, Dawson took advantage of desperate homeowners, eager-to-lend banks and lax regulations to steal millions.
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"You just get as much money as possible out of the house," he said in a videotaped deposition obtained exclusively by ABC News. "Whatever you can I guess justify, get approved."
Like Madoff, his victims described him as smart and affable, and he was well-known in his community. Many of Dawson's more than 50 victims came from his lifelong congregation.
"Being active in the church, people came to me," Dawson said.
When Mark Arocho, a Long Island electrician and married father of four, met Dawson in 2004, he was bedridden with lupus and way behind on his mortgage and other bills, Arocho told ABC News.
But in those days of easy lending, Dawson helped Arocho refinance his four bedroom bungalow and take out a $100,000 home equity loan from soon-to-collapse Countrywide Home Loans.
"He had come to us, making false promises and making me believe that he actually cared," Arocho said, "when in fact all he cared about was getting his hands in my bank account." He was a "wolf in sheep's clothing."
Dawson not only stole the equity loan, but he left Arocho with a subprime mortgage that carried a huge adjustable interest rate now nearing 10 percent.
Arocho said everyone, including Countrywide, should have known that he could not afford this mortgage.
"The documentation I provided, the statements that I made, all revolved around the fact that I can't afford what I have now," Arocho said.
Arocho now faces imminent foreclosure and an uncertain financial future.
Too Many at Fault for Questionable Loans
In an emotional confession, Dawson admitted that "there's no question about it, that I was wrong." But he said the mortgage banks, brokers and lawyers, who he claims witnessed some of his shenanigans, "could have stopped the madness so early on."
For example, Dawson claimed that they did nothing as he illegally double-endorsed client checks so he could deposit them into his personal account.
"The money was coming from these people's homes or assets and going into my accounts. It was never brought up by the bank, the attorneys, the closers, the mortgage broker, no one questioned it," Dawson said.
"The mortgage market was going gangbusters. [The banks] didn't care if people could pay these loans because as soon as they got the loans they made their fees and they sold the loans to others on Wall Street," Arocho's lawyer, Jacob Zamansky of Zamansky & Associates LLC, told ABC News.
Zamansky is representing a group of Dawson's victims now suing brokers and mortgage banks who they claim assisted in the fraud.
"Without the other companies, Dawson could not have done this scheme. He wouldn't have been able to get money from people's homes," said Zamansky. "Money was just being thrown at people without any checks, without any verification."
Months after the Bernie Madoff scandal, the Commodity Futures Trading Commission (CFTC) says federal regulators are now uncovering such a record-high number of financial scams that it's "ponzimonium out there."
In a rather colorful statement, CFTC Commissioner Bart Chilton says Ponzi schemes are "drying up like late summer cow pies" now that investors are more vigilant about these scams. Plus, many investors now also want or need more access to their investments.
"Redemptions are really a buzz kill for Ponzi scam operators," he stated.
In 2008, the CFTC prosecuted 13 such scams, but in just the first few months of 2009 the agency has already filed 22 cases. The agency says almost $1 billion has been scammed from investors in these cases, hurting over 7,600 people, numbers that Chilton calls "mind-boggling."
Dawson, who will face at least five years in state jail, said he carries "a tremendous guilt" and has "accepted the responsibilities" of what he did.
That's little comfort to Arocho, who said he was sentenced to financial hell.
"We are living in constant fear that someone's going to knock on the door from the sheriff's office and kick me and my wife and the four children out on the street, put a lock on the door and say seized," he said.
Matt Jaffe contributed to this report.