Federal authorities arrested 11 people — including Lower Township Public Defender Seth A. Fuscellaro and a real estate agent — in Cape May County, on Thursday as part of a $15 million mortgage fraud scheme involving condominium units in the Wildwoods as well as other locations in New Jersey and Naples, Fla.

Agents with the Federal Bureau of Investigation arrested Fuscellaro in Municipal Court. Fuscellaro, 39, of Wildwood Crest, was escorted out in handcuffs for his alleged role in the scheme. Angela L. Celli, a real estate agent with Century 21 Alliance in North Wildwood, also was arrested.

The indictment, returned by a federal grand jury on Tuesday, alleges a conspiracy that used phony documents and “straw buyers” to purchase condominiums at inflated prices in a saturated market. The conspirators used fraudulent loan applications and unqualified buyers to make money on the deals, paid at the expense of lending companies that backed the purchases.

The federal investigation began in 2008 but the first case of alleged fraud dates to 2006.

All 11 defendants have been charged with wire fraud and five of them also were charged with conspiracy to commit money laundering. There were numerous other “co-conspirators” listed in court documents who were not charged but supplied information to authorities.

One has been charged with attempted murder in a plot hatched in Ocean County but carried out in the woods of Alabama. A straw buyer, who had received a subpoena to testify in the case, was shot multiple times but survived.

“Members of this scheme were willing to launder money, and even to kill, in order to get their hands on the profits and cover their tracks,” said U.S. Attorney Paul J. Fishman.

“This case illustrates not only the seriousness of mortgage fraud, but also our focus on eliminating the criminal element from our markets to protect the health of our wider economy.”

The indictment alleges that Fuscellaro and Celli helped negotiate deals for condominiums in the Wildwoods.

“Defendants Angela L. Celli and Seth A. Fuscellaro helped conceal the true sales price of certain properties through inflated sales contracts and sale and finder fee agreements,” states the indictment.

Both have been charged with wire fraud, which Fishman said carries a maximum penalty of 30 years in prison and a $1 million fine. Five of the 11 also have been charged with money laundering, which carries a 10-year prison term and $250,000 fine.

Fuscellaro’s law partner, David DeWeese, of the Wildwood firm Stagliano, DeWeese & Fuscellaro, said his partner has been under investigation for about 18 months. DeWeese said law partner Ron Stagliano also has been under investigation and FBI agents have talked to him about the cases.

“I fully cooperated with the FBI all along. It’s very unfortunate circumstances,” said DeWeese, a former municipal court judge here who ran for state senate last year against incumbent Jeff Van Drew, D-Cape May, Cumberland, Atlantic, and lost a close race.

DeWeese said he did not work on the real estate deals but said his partners represented developers in deals that he said involved buyers who were not qualified.

DeWeese said was surprised Fuscellaro was arrested in such a public way given that his attorney had been talking with federal authorities for more than one year.

“It may have been to scare somebody or get some publicity. There’s got to be a reason they did it the way they did it,” DeWeese said.

DeWeese said the law firm is splitting up on Sept. 1.

“Ron is retiring on Sept. 1 and me and Seth are splitting up,” DeWeese said.

Stagliano, who was not named in the indictment, could not be reached for comment.

Fuscellaro, a Philadelphia native, has only served as the municipal public defender in Lower Township for about two months, replacing J. Christopher Gibson when he became a Superior Court judge. Township Manager Mike Voll said the township is requesting his immediate resignation.

“The township is extremely disappointed that the federal investigation was not disclosed at the time he applied for the position, which likely would have led the township to consider another choice,” Voll said.

The indictment portrays an elaborate conspiracy targeting financially distressed oceanfront condominium projects. The owners of the projects are only listed in the indictments by their initials but the list includes two major projects in Wildwood Crest and two in North Wildwood.

The conspirators could show an elevated sale price, on paper, that was much higher than the owner’s real price and then get a loan for the higher amount. Authorities said they paid the straw purchasers for their part in the scheme. False documents including W-2s, pay stubs, bank statements, retirement accounts and cancelled rent checks were allegedly created to make the purchasers look more credit worthy. The purchasers never had to pay a deposit, closing costs, or make a mortgage payment.

The purchasers, who had good credit ratings but did not have the financial resources to buy the units, were essentially paid for use of their name. Documents show one purchaser received $17,000 for his part in the scheme.

The mortgage brokers allegedly knew information was false and prepared loan applications with inflated incomes, false bank account balances, fake sales contract deposits and other fictitious assets. The loans were usually transferred by wire into accounts controlled by the alleged conspirators.

On July 30, 2008, federal authorities issued a subpoena to a straw purchaser identified in court papers only by the initials L.B. Defendant Kinard J. Henson allegedly plotted to kill the purchaser, with the talks talking place in Ocean County, to prevent any testimony. Authorities said he supplied a gun to a man identified by the initials R.S. The purchaser was shot multiple times in a wooded area near Mobile, Ala. but survived.

While most of the alleged conspirators were arrested on Thursday, authorities said Henson was already in federal custody in Alabama.

Eight of the defendants, including Fuscellaro, had their initial court appearance Thursday afternoon in U.S. District Court in Camden before Judge Ann Marie Donio and pleaded not guilty. Donio set bail at $50,000 each and ordered them to surrender passports and submit to drug testing. Celli was arrested in Massachusetts, where she now lives, and is scheduled to make her first appearance before Judge Donio on July 25 at 1:30 p.m.

The case will be handled by Assistant U.S. Attorney Matthew T. Smith and Attorney in Charge R. Stephen Stigall of the U.S. Attorney’s Office in Camden. Fishman credited the FBI and IRS offices in Newark for their roles in the case.

Contact Richard Degener:

609-463-6711