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The FBI Investigates Mortgage Fraud!

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June 13, 2014

Richmond Man Sentenced to 27 Months in Prison for Defrauding Relatives of $244,000

On June 11, 2014, Marvin Solis was sentenced to 27 months in prison and ordered to pay restitution for an investment fraud scheme he perpetrated against his relatives, announced U.S. Attorney Melinda Haag, Office of the Special Inspector General for the Troubled Asset Relief Program, Special Agent in Charge Scott O’Briant, and FBI Special Agent in Charge David J. Johnson.

Solis, 30, of Richmond, California, pleaded guilty on January 29, 2014. According to the plea agreement, Solis admitted to defrauding his then-wife’s family members of approximately $244,000. The fraud, which stretched from September 2008 through March 2009, involved three parts. First, Solis solicited approximately $207,000 from several relatives of his wife, telling them that he would invest the money in real estate. Contrary to his promises, Solis spent the money that he received from them and lost it making risky commodities trades. He never invested their money in real estate. Second, he encouraged his victims to open credit card accounts to fund renovations of the properties he had promised to purchase for them. Instead, he ran up approximately $10,000 in charges on these credit cards. Third, he used the personal information of one of his victims, without the victim’s knowledge, to open a credit card account in the name of Solis’s company and then charged approximately $26,600 on the card, again without authorization.

Solis, was indicted by a federal grand jury on September 5, 2013, on two counts of wire fraud, in violation of 18 U.S.C. § 1343. He pleaded guilty to both of these counts.

The sentence was handed down by the Honorable Edward M. Chen, U.S. District Court Judge. Judge Chen also sentenced the defendant to a three year period of supervised release and restitution. The defendant will begin serving the sentence on August 11, 2014.

Benjamin Kingsley is the Assistant U.S. Attorney who is prosecuting the case, with the assistance of Mary Mallory and Rawaty Yim. The prosecution is the result of an investigation by SIGTARP and the FBI.

SEC Charges Four California Residents in $12 Million Insider Trading Scheme

The Securities and Exchange Commission today charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.
The SEC alleges that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, Calif. Khan used the confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results. Besides trading in his own brokerage account, Khan traded in his brother-in-law’s account as well as an account belonging to another acquaintance. Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information. The insider trading resulted in collective profits of more than $12 million.

The SEC further alleges that at the outset of the scheme, Chaganlal gave $17,000 to Khan for the purpose of insider trading in Ross securities using the brother-in-law’s account. They attempted to disguise the exchange by using two cashier’s checks for $8,500 purchased in the name of Chaganlal’s wife of a different surname. Khan later funneled $130,000 of the generated trading profits back to Chaganlal by using third-party intermediaries. For example, Khan wrote Akbari a check for $35,000, and Akbari in turn wrote two checks totaling $35,000 to Chaganlal’s wife. Another $75,000 was routed in a roundabout way to a title company so it could be credited at closing toward Chaganlal’s purchase of a newly-built home.

“Khan and Chaganlal took advantage of confidential company data to systematically trade in Ross securities and reap millions of dollars in profits,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office. “Even when insider traders try to conceal their profits and kickbacks by using other accounts and intermediaries, we’re committed to piecing together these widespread schemes and catching the perpetrators.”

According to the SEC’s complaint filed in federal court in San Francisco, Khan separately made approximately $450,000 in illicit profits by insider trading in stock options of software company Taleo Corporation ahead of its 2012 acquisition by Oracle Corporation. Khan began purchasing large numbers of options in Taleo six days before the merger announcement based on nonpublic information he received from an insider he knew at Oracle. Khan had never previously traded in Taleo securities.

The SEC alleges that the serial insider trading involving Ross securities began in August 2009 and continued until December 2012, when Chaganlal was terminated by the company. He had access to confidential sales figures on an internal webpage limited to a relatively small group of Ross employees. Chaganlal regularly communicated the confidential details to Khan so he could trade ahead of impending monthly sales announcements by Ross. Khan generated $5.4 million in profits in his own account, and $6 million in profits in his brother-in-law’s account. Khan’s supervisor Mendonsa made approximately $800,000 in insider trading profits based on the nonpublic information that Khan in turn tipped to him. Akbari made approximately $2,000 by insider trading on Khan’s illegal tips.

The SEC’s complaint names two relief defendants – Khan’s acquaintance Michael Koza and Khan’s brother-in-law Shahid Khan – for the purposes of recovering insider trading profits in their brokerage accounts through trades conducted by Khan. They each have agreed to settle the matter by paying the court the entire amount of insider trading profits remaining in their accounts, which total $240,741 for Shadid Khan and $31,713 for Koza.

The SEC’s complaint charges Saleem Khan, Chaganlal, Mendonsa, and Akbari with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits plus interest, and financial penalties. The complaint also seeks an officer-and-director bar against Chaganlal.

The SEC’s investigation, which is continuing, has been conducted by Victor Hong and Elena Ro. The case has been supervised by Steven Buchholz and Jina L. Choi of the Market Abuse Unit and San Francisco Regional Office as well as Joseph G. Sansone of the Market Abuse Unit. The SEC’s litigation will be led by Aaron Arnzen. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority.

June 12, 2014

Coalition Urges Dept. of Justice to Require More Transparency in Settlement with Bank of America

As the US Department of Justice reportedly negotiates an agreement with Bank of America over soured mortgage securities, the California Reinvestment Coalition is urging the DOJ to require the bank to disclose who is helped under the consumer relief provisions of a potential agreement- and who is not. CRC is calling on the DOJ to require BOA to publicly disclose homeowner race, ethnicity, and census tract level data for people who seek assistance under the reported $5 billion in homeowner relief which may be included in the settlement. Bank of America has already demonstrated that it can provide this type of information, since it did so in order to bid on a contract to provide banking services to the City of San Francisco in 2013.

Sharon Kinlaw, Executive Director of the Fair Housing Council of San Fernando Valley, states: “We’ve seen a number of mortgage settlements that were supposed to keep people in their homes- and yet, people are still being foreclosed on, especially in communities that were targeted for the worst loans. The DOJ should seize this historic opportunity to increase transparency and ensure equal access to any potential homeowner relief.”

Kevin Stein, Associate Director at the California Reinvestment Coalition, explains: “Over half of the housing counselors we recently surveyed believe that communities of color and homeowners with limited English proficiency receive worse outcomes when they seek help to avoid foreclosure from their mortgage servicer. Our concerns were reaffirmed by a February 2014 GAO report that analyzed nonpublic data from the federal Home Affordable Modification Program (HAMP). The GAO found statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for re-default for homeowners who are protected by fair lending laws.”

Divya Rao, CRC’s Legal Fellow adds: “The GAO analyzed nonpublic data from four mortgage servicers to reach its conclusions, and the GAO did not disclose the names of these four servicers. We believe the public has a right to know, so we are submitting a Freedom of Information Act request to the Department of the Treasury today. We are asking the US Treasury Department to identify which four banks provided the data, and to disclose any steps the Department has taken to address the potential fair lending violations identified in the GAO report.”

June 11, 2014

Chicago-Area Attorney Charged After SEC Exam Spots Fraud in Real Estate Investment Offering

The Securities and Exchange Commission today charged the founder of an investment advisory firm located in suburban Chicago with defrauding investors in connection with a real estate venture for which his firm offered securities.
After an SEC examination of Kenilworth Asset Management LLC detected potential misconduct that was referred to the agency’s Enforcement Division, the ensuing investigation found that Robert C. Acri misled clients in the offer and sale of promissory notes issued for the redevelopment of a retail shopping center near Hammond, Ind. Despite saying the investments would specifically be used for this project and secured by a security interest in real estate, Acri misappropriated $41,250 of the proceeds for other uses and took no action to ensure that a security interest was recorded. Acri failed to disclose several other material facts to investors, including a primary purpose behind the investment offer – Kenilworth was attempting to rescue money that other Acri clients had previously invested in the developer of the same real estate project. Acri also concealed from investors that Kenilworth was to receive a five percent commission on each sale of notes.

Acri, a licensed attorney who lives in Winnetka, Ill., agreed to settle the SEC’s charges by disgorging the misappropriated investor funds and undisclosed commissions plus interest and an additional penalty for a total of approximately $115,000 in monetary sanctions. Acri also agreed to cease and desist from violations of the antifraud provisions of the federal securities laws and to be barred from the securities industry, from participating in penny stock offerings, and from appearing before the SEC as an attorney on behalf of any entity regulated by the agency. Acri resigned from Kenilworth in August 2012.

“Acri wasn’t honest with his clients and hid serious conflicts of interest from them while blatantly disregarding his fiduciary duty as an investment adviser,” said Robert J. Burson, senior associate regional director of the SEC’s Chicago office.

According to the SEC’s order instituting a settled administrative proceeding, Acri controlled Kenilworth’s bank accounts, hired employees, and made significant decisions about the firm’s policies, practices, and investment offers to clients. In early 2011, Acri decided to raise funds from Kenilworth clients for the Hammond, Ind., project when the project’s developer Praedium Development Corporation was unable to obtain financing from banks and other traditional lenders. As part of this effort, Praedium created a new entity Prairie Common Holdings LLC to issue the notes. One of Acri’s primary purposes for selling Prairie’s notes to Kenilworth clients was to give other Kenilworth clients who had invested in Praedium through a private fund several years earlier a chance to recover their money from that investment. Praedium had previously defaulted on a half-million-dollar loan from the private fund.

The SEC’s order finds that Acri purposely failed to disclose significant facts and conflicts of interest when offering the promissory notes to clients, who were not told about the prior loan or that Praedium and an affiliate had been delinquent in the payment of its mortgage, property taxes, and some contractor invoices. In fact, Acri did not even disclose that Praedium was the developer behind the Prairie project or that one of Praedium’s owners was having personal financial difficulties and was Acri’s personal friend.

According to the SEC’s order, Acri misappropriated $41,250 from the client funds that were supposed to be used to develop the Hammond, Ind. Project. Acri instead used that money to repay other clients and former clients, pay an individual to purportedly seek a loan for Praedium, and toward a settlement in a separate lawsuit that had been brought against him. Acri also did not inform investors about the $13,750 that Kenilworth received in commissions for selling the promissory notes.

The SEC’s investigation was conducted by James J. Thibodeau and Sruthi Koneru of the Chicago Regional Office and supervised by James A. Davidson. The examination that led to the investigation was conducted by Teresa A. Tyson, Matthew D. Harris, Gena M. Kusiak, and Erik J. Lillya of the Chicago Regional Office and supervised by Louis A. Gracia.

Loan Broker And Attorney Plead Guilty To Defrauding Investors Of More Than $1 Million And To Obstructing Judicial Proceedings

Baltimore, Maryland – Mervyn A. Phelan, Sr., age 74, of Newport Beach, California, and Gregory E. Grantham, age 56, of Oceanside, California, pleaded guilty late yesterday to a wire fraud conspiracy, wire fraud and obstruction of justice.

The guilty pleas were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation; and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office.

Phelan operated a small company called IAG Underwriters, LLC that maintained an office in Newport Beach, California. IAGU was in the business of underwriting loan applications submitted by real estate developers and then locating project financing from banks and other financial entities. Grantham, an attorney, held the position of IAGU’s general counsel on a part-time basis as a contract employee.

According to their plea agreements and court documents, between mid-2010 and August 2011, Phelan and Grantham became involved in a fraudulent scheme carried out by Patrick McCloskey and Brian McCloskey, who both resided in Baltimore County. McCloskey owned a real estate development business known as the McCloskey Group, LLC, while Belzner, a home builder, began working with McCloskey in late 2008 or early 2009. Phelan and IAGU began working with the McCloskey Group trying to locate sources of financing for its projects in about 2009.

Beginning in 2009 and continuing through June 2011, Belzner and McCloskey persuaded a series of private money lenders to loan them funds to establish that the McCloskey Group had additional reserves of liquidity that would supposedly help it obtain loans it was seeking in connection with real estate development projects through IAGU. Belzner and McCloskey falsely represented that the funds would be maintained in an escrow account under the control of Kevin Sniffen, a licensed attorney and escrow agent in Baltimore County; that the funds would not be used for any other purpose; and that the money would be returned to the lender, either upon the funding of the loan or after a specified period of time. In return for this temporary use of the lender ‘s funds, Belzner and McCloskey promised to pay substantial fees or interest. In fact, once the lenders transferred their funds into the escrow accounts, Belzner directed McCloskey to remove those funds from the escrow accounts without the knowledge or permission of the lenders. Belzner and McCloskey then used the majority of the stolen funds to pay for their personal and business expenses. The total losses resulting from the scheme were approximately $20 million. Belzner, McCloskey, and Sniffen have all previously entered guilty pleas in connection with their role in the scheme.

Beginning in about the late summer of 2010, Phelan and Grantham co-operated with Belzner and McCloskey in their scheme to defraud by (1) making false representations to help persuade private lenders and investment partnerships to loan sums of money to the McCloskey Group for the purposes of meeting “liquidity” requirements imposed by IAGU or various prospective lenders and to place these funds in an escrow account controlled by Kevin Sniffen; and by (2) making false representations to dissuade previous escrow account lenders from demanding the return of their funds when the original time period established for the loan expired without the McCloskey Group obtaining financing for the project in question. In particular, Phelan and Grantham repeatedly advised various escrow account lenders that funding on a particular project was imminent when they knew this was not the case, and in one case represented that they were now holding millions of dollars in escrow funds tendered by one group of lenders when this was not true.

While Phelan and Grantham admitted that they made false statements to escrow account lenders during the scheme at Belzner’s and McCloskey’s behest, they asserted that for most of the time period in question, they did not know that Belzner and McCloskey had previously stolen the escrow account funds. Under his plea agreement, however, Grantham admitted that he was criminally responsible for the loss of $1.2 million funds suffered by an investment entity named Murcielago, LLC in June 2011. As part of his plea agreement, Phelan admitted that he was criminally responsible for the loss of more than $2.5 million in escrow funds and pled guilty to a count charging him with making false representations about the control of $4.350 million in escrow funds to an escrow account lender in November 2011. The government continues to maintain that Phelan and Grantham shared criminal responsibility for the loss of over $20 million in escrow funds. The Court will consider evidence and make a finding on this issue at the defendants’ respective sentencings.

Phelan and Grantham also pleaded guilty to obstructing grand jury proceedings from September to December, 2012. During the summer and fall of 2012, a grand jury sitting in the District of Maryland was continuing the investigation of the fraud scheme. By this time, Belzner had already been indicted for conspiracy to commit wire fraud and this fact was publicly known. On September 26, 2012, FBI agents served Grantham and Phelan with grand jury subpoenas which called for the production of documents relating to the scheme. Thereafter, Phelan and Grantham agreed that they would not produce certain responsive records that were then on their computers or in their possession, because those particular records would reveal their cooperation with and assistance to Belzner and McCloskey in providing false information to the escrow account lenders and their counsel. The records that Phelan and Grantham were willing to produce were provided to the FBI on November 19, 2012; incriminating records were not produced or were deleted from their computers and compact discs.

Phelan and Grantham face a maximum sentence of 20 years in prison each on each charge of conspiracy and wire fraud, as well as a maximum sentence of five years in prison for obstruction of justice. U.S. District Judge James K. Bredar has scheduled sentencing for Phelan and Grantham on September 8 and 15, 2014, respectively.

Patrick J. Belzner, a/k/a “Patrick McCloskey,” age 45, of Glen Arm, Maryland, Brian McCloskey, age 42, of Baltimore and Kevin Sniffen, age 52, of Phoenix, Maryland have each pleaded guilty to their roles in the conspiracy and are awaiting sentencing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit

United States Attorney Rod J. Rosenstein praised the FBI and IRS – Criminal Investigation Division for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorneys Jefferson M. Gray and Kathleen O. Gavin, who are prosecuting the case.

June 6, 2014

Two Local Businessmen Plead Guilty to Multiple Federal Fraud Charges Involving Elderly Victims in St. Louis

Robert Palmer and Mark Driver pled guilty late Thursday to defrauding numerous elderly victims of approximately $3,000,000, beginning in 2004 and continuing through 2010.

According to the indictment, Princeton Partnership LLC was an insurance brokerage business involved in the sale of life insurance products. Princeton operated out of offices in the Hill area of St. Louis at 1928 Marconi Street (also known as 5149 Daggett Avenue). Palmer and Driver both ran the day to day operations of Princeton, solicited customers, marketed the company’s services, and had financial oversight of the company with authorization over the company’s two operating bank accounts. Palmer and Driver solicited Princeton customers with the false promises that they would invest the customers’ funds in suitable investments including but not limited to real estate, stocks, and life insurance annuities. Examples of those victims include:

During 2004, Palmer solicited several members of a family who had received funds upon the death of their elderly aunt with the false representation that Princeton would place those funds in a real estate investment for the benefit of those customers. Based upon his false representations, the family members transferred some or all of those funds to Princeton.

In 2005, Palmer solicited funds from an elderly individual and her family with the false representation that they would place those funds in a real estate investment for her benefit. Based on those representations, the family transferred her funds to Princeton.

During 2006 through 2010, Palmer solicited investment funds from two elderly sisters with the false representations that Princeton would make suitable investments with those funds. They transferred their funds and control of their stock holdings to Princeton and, later Palmer and Driver sold and liquidated the stocks and persuaded one of the sisters to liquidate a life insurance policy as well and transfer the funds to Princeton.

During 2007 through 2009, Driver solicited investment funds from an elderly woman who transferred her funds as well as control of her stock holdings to Princeton.

In 2006, an elderly woman was solicited by Driver to invest her personally held funds in a series of life insurance annuities through Princeton. Princeton used her funds to purchase four life insurance annuities. As a further part of the scheme, during in or about 2008 and 2009, at Driver’s direction she liquidated three of her life insurance annuities and provided those funds to Princeton based upon the false representations of the funds would be placed in suitable investments for her benefit.

Most or all of the funds transferred to Palmer, Driver, and Princeton by the numerous victims were used by Palmer and Driver for their own personal uses and the general operating expenses of Princeton. Palmer and Driver also engaged in Ponzi-type transactions where they used some funds provided by new customers to pay old customers who falsely believed they were receiving the returns on their purported investments.

In all cases, Palmer and Driver obtained approximately $3,000,000 from Princeton customers based upon their false representations, which they used for their own personal use and for the expenses of their company Princeton.

Palmer, 45, Kansas City, Missouri, and Driver, 50, St. Louis, pled guilty to all charges contained in the indictment, including two felony counts of mail fraud and two felony counts of wire fraud, before United States District Judge Rodney Sippel. Sentencings have been set for September 12, 2014.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and/or fines up to $250,000. In determining the actual sentences, a judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.

This case was investigated by the Federal Bureau of Investigation and the Postal Inspection Service, with assistance of the Missouri Secretary of State’s Office. Assistant United States Attorney Hal Goldsmith is handling the case for the U.S. Attorney’s Office.

Posted By: Ralph Roberts @ 12:49 pm | | Comments (0) | Trackback |
Filed under: Bank Fraud,Loan Fraud,Real Estate Fraud,Wire Fraud

June 3, 2014

SEC Charges Albany, N.Y.-Based Investment Adviser With Defrauding Clients

The Securities and Exchange Commission today filed an emergency enforcement action to halt an ongoing fraud by an investment adviser based in Albany, N.Y., who is charged with lying to clients about the success of their investments while stealing their money for his personal use.
The SEC alleges that Scott Valente and his firm The ELIV Group LLC have fraudulently raised more than $8.8 million from approximately 80 clients by falsely claiming they achieve consistent and outsized positive returns among other misrepresentations about the safety of the investments. ELIV Group has in fact earned no positive results at all, instead sustaining consistent investment losses for the past three years. Meanwhile, Valente has been making substantial cash withdrawals of client funds and spending their money on his home improvements and mortgage payments as well as jewelry and a vacation condominium. Valente’s unsuccessful trading strategies and misappropriations have severely diluted the amount of client funds on hand at ELIV Group, and the SEC is seeking an asset freeze to halt the fraud as Valente continues to solicit new clients with his false claims. ELIV Group has offices in Albany and Warwick, N.Y.

“Valente used his one-man advisory firm to fraudulently lure unsuspecting investors in the Albany and Warwick communities to invest millions of dollars with him as advisory clients,” said Andrew M. Calamari, director of the SEC’s New York Regional Office. “He said all the right things to make investors believe he was making the right investments and taking the right precautions with their money, but he was merely telling blatant false tales about the safety and success of the investments.”

Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York office, added, “Beyond the lies to his clients regarding his investment performance, Valente’s abuse of his fiduciary obligations included the theft of at least $2.66 million in client funds for personal spending, including hefty credit card bills, a vacation home, and jewelry.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Valente misleadingly told his clients that he has a 30-year record of investing experience “dedicated to the highest standards of service” and that he founded ELIV Group after leaving the “corporate financial industry” upon concluding there “had to be a better way for clients to achieve financial independence.” What he failed to disclose was that he twice filed for bankruptcy and started ELIV Group only after the Financial Industry Regulatory Authority (FINRA) permanently expelled him from the broker-dealer industry in 2009 for engaging in serial misconduct against numerous customers.

The SEC alleges that Valente and ELIV Group attracted clients by falsely assuring them that the principal amount of their investments was fully liquid and “guaranteed” because it was backed by a large money market fund. Client funds were in fact never guaranteed or backed by any money market funds, and the majority of ELIV Group’s investments were in highly illiquid investments in privately-held companies. Valente and ELIV Group also assured clients that the firm’s books and records were audited independently. However, ELIV Group never had an auditor, and the firm sent clients monthly investment reports in which they actually inflated the monthly returns, assets under management, and client account values.

The SEC’s complaint charges Valente and ELIV with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking a temporary restraining order to freeze their assets and prohibit Valente and ELIV from committing further violations of the federal securities laws. The SEC seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest and pay financial penalties.

The SEC’s investigation, which is continuing, has been conducted by Gerald Gross, Richard Primoff, and Barry O’Connell of the New York Regional Office. The inquiry that led to the investigation was conducted by Richard Heaphy, Yvette Panetta, Dee-Ann DiSalvo, and Edward Cody of the New York Regional Office. The SEC appreciates the assistance of the Federal Bureau of Investigation.

May 30, 2014

Real Estate Agent Sentenced to Five Years in Prison for Conspiracy to Defraud Investors and Lenders

The United States Attorney’s Office for the Middle District of Pennsylvania announced the sentencing yesterday of Andrew Brosnac, age 48, of Mansfield, Texas. Brosnac, a real estate agent and investment consultant, pled guilty to conspiracy to commit bank fraud and wire fraud in connection with the sale and leaseback of businesses in Pennsylvania, New York, West Virginia, North Carolina, South Carolina, Alabama, South Dakota, California, Oregon, and Wyoming.

According to United States Attorney Peter Smith, between 2006 and 2008 Brosnac and co-conspirator Samuel Pearson, age 47, Hanover, York County, Pennsylvania, admitted using a group of companies to buy Jiffy Lube stores, automotive service businesses, convenience store/gas stations, and other commercial properties, then selling them to investors in Pennsylvania and California. The investment properties included a Jiffy Lube store in Sayre, Bradford County, Pennsylvania.

In pleading guilty, Brosnac admitted arranging funding from banks and credit unions for investors to purchase the properties and then used other companies controlled by him and Pearson to lease and operate the properties for investors. Brosnac also admitted that he and Pearson provided investors and lenders with false and fraudulent financial information concerning the investment properties which induced loans and investments totaling approximately $19 million. In the plea agreement, Brosnac agreed that he received approximately $2.4 million in commissions and consulting fees from the sales of the properties.

Judge Yvette Kane sentenced Brosnac to five years in prison, followed by a period of three years’ supervised release, and a special assessment of $100, and ordered Brosnac to pay to victim investors and lenders restitution totaling $2,409,924.04 representing the commissions and consulting fees that he received as a result of the offense. Under the federal Sentencing Guidelines, the advisory imprisonment range was 60 months, which is also the maximum statutory term of imprisonment.

Pearson, operator of Peanut Oil, was charged separately with conspiracy to commit bank and wire fraud in a criminal onformation filed in March 2011 and pled guilty in April 2011 pursuant to a plea agreement. He is awaiting sentencing before Senior U.S. District Court Judge William C. Caldwell.

The investigation was conducted by the Federal Bureau of Investigation. The case was prosecuted by Assistant United States Attorney George J. Rocktashel.

May 21, 2014

Raleigh Real Estate Broker Sentenced for Role in Mortgage Fraud Scheme

On May 21, 2014, in Raleigh, North Carolina, Mark Henry Tkac was sentenced to 42 months in prison, five years of supervised release and ordered to pay $1,612,612 in restitution. On May 24, 2012, Tkac pleaded guilty to conspiracy to commit mail, wire, and bank fraud. Between August 2006 and May 2008, Tkac was a licensed real estate broker who worked in the Wake County area. Tkac participated with others, including developer David Lewis Johnson, developer Arthur Lee Barnes, mortgage broker Mark Thomas Bowe, and attorney Jeffrey Scott Taggart, in a real estate flipping scheme which defrauded various banks and lenders. Johnson, Barnes, Taggart, and Bowe were previously sentenced to prison for their roles in the scheme. Tkac participated in the conspiracy first by acting as a straw buyer, and later recruiting others to serve as straw buyers for Johnson and Barnes. Tkac, Johnson, and Barnes arranged for straw buyers to execute a contract to purchase a home for an inflated price. Tkac, Johnson, and Barnes then directed the straw buyers to attorney Taggart to close the transactions. Taggart prepared false HUD-1 settlement statements for execution by the straw buyers as a part of the real estate closing and loan funding process. Taggart then caused the false HUD-1 settlement statements to be transmitted via mail and wire to banks and mortgage lenders, including FDIC regulated financial institutions, under the pretense that they reflected the economic truth of the underlying transaction. However, the HUD-1 settlement statements prepared by Taggart as a part of the scheme routinely contained false statements that were material to the lenders’ funding decisions including the existence and degree of the buyer’s down payment, as well as kickbacks to the buyers and other conspirators. Tkac and other conspirators generally received several thousand dollars in kickbacks from each fraudulent transaction closed by Taggart. Ultimately, borrowers defaulted on many of the transactions brokered by Tkac, resulting in substantial losses to various banks and lenders.h

May 16, 2014

Grosse Ile Businessman Sentenced to 7.5 Years for Fraud

On Fri., May 16, Judge Avern Cohn sentenced Grosse Ile real estate agent Richard Dean Woolsey to 90 months in federal prison and to afterwards serve an additional three years of supervised release.

Woolsey was convicted on charges of wire fraud and conspiracy in October 2013 in the Eastern District of Michigan U.S. District Court. The court ruled that the damages were greater than $2.5 million but less than $7 million. A separate hearing was ordered 90 days from the sentencing to arrange restitution for the defrauded.

The court accused Woolsey of defrauding mortgage lenders through a variety of tactics, including overvaluing properties for sale and doctoring buyers’ credit scores and incomes to make them appear more attractive to lenders. Woolsey ran his operation through ReMax Experts and The Valuation Group, an appraisal service he owned.

According to the FBI press release, Special Agent in Charge Paul M. Abbate stated, “As reflected in the investigation of Mr. Woolsey’s criminal activity and his sentence today, the FBI takes mortgage fraud very seriously. These crimes, particularly those as egregious as Mr. Woolsey’s, not only negatively impact real estate markets, banks, and the financial industry, but hurt our entire community. The FBI will continue to aggressively investigate these crimes.”

May 14, 2014

Grand Rapids Man Sentenced in Mortgage Fraud Case

On May 14, 2014, in Grand Rapids, Michigan, Seamus Dillon, of Ada, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $755,693 in restitution. Dillon pleaded guilty to conspiracy to commit mortgage fraud. According to court documents, during 2007, Dillon and others defrauded a bank in connection with a mortgage using a series of false statements. Dillon and his cohorts obtained approximately $850,000 which they used for their own purposes.

Posted By: Ralph Roberts @ 3:15 pm | | Comments (0) | Trackback |
Filed under: Michigan,Mortgage Fraud,Mortgage Fraud Conspiracy,Mortgage Fraud Scheme

California Woman Sentenced for Mortgage Fraud Scheme

On May 14, 2014, Pensacola, Florida, Andrea Lorraine Avery, of Los Angeles, California, was sentenced to 84 months in prison and ordered to pay $10,323,369 in restitution to the FDIC as Receiver for Washington Mutual, GMAC Mortgage, SunTrust Mortgage, Wells Fargo Bank, USBank, and others. Avery pleaded guilty in December 2013 to conspiracy to commit fraud, mail fraud affecting a financial institution, and conspiracy to commit money laundering. According to court documents, beginning in 2005 and continuing through 2008, Avery and others entered into contracts to purchase 24 residences located in Florida, Georgia, Louisiana, Texas, and California. Thereafter, fraudulent loan applications were submitted to financial institutions to fund the purchases. In the loan applications, Avery and other borrowers made false statements to the lenders, which included providing false names and social security numbers; overstating the borrower’s income and assets; and falsely stating the earnest money deposit was not borrowed. In support of the loans, Avery and other borrowers submitted fraudulent supporting documents to the lenders. Approximately $16 million in loans were issued by the lenders in connection with the fraudulent scheme. Avery and her company received more than $3.5 million in kickbacks as a result of the scheme.

Gloucester County Man Arrested, Charged in Alleged Mortgage Foreclosure Rescue, Real Estate Ponzi Scheme

A Gloucester County, New Jersey man is charged with scamming distressed homeowners into giving him their houses and then soliciting fake real estate investments from private investors—secured by those same properties—that netted him more than $3 million in illicit profits, U.S. Attorney Paul J. Fishman announced.

Randy Poulson, 42, of Woolwich Township, New Jersey—the owner and operator of Equity Capital Investments LLC—was arrested this morning by special agents of the Philadelphia FBI. Poulson was arrested on a complaint charging him with mail fraud, which alleges the business he operated was actually a multi-million-dollar Ponzi scheme. Poulson is scheduled for an initial appearance and bail hearing this afternoon before U.S. Magistrate Judge Anne Marie Donio in Camden federal court.

According to the complaint unsealed today:

Poulson engaged in a two-pronged scheme. First, he promised to pay the mortgages of distressed homeowners facing foreclosure if they sold their homes to him—for no other compensation. Using this method, Poulson obtained the deeds to more than 25 distressed homeowners’ residences, causing them to vacate the homes so renters could move in. Poulson then stopped making the monthly mortgage payments, causing those mortgages to go into foreclosure without the distressed homeowners’ knowledge.

In the second prong of the scheme, Poulson successfully solicited more than 50 private investors into his companies—including Equity Capital Investments, which purportedly bought and sold real estate. Poulson explained to the investors that their money would be used to acquire and rehabilitate properties, which Poulson claimed he would rent out and then sell for a 10 to 20 percent return on the investment. In order to give the impression that Equity Capital Investments was a legitimate business, Poulson provided investors with fake mortgages and promissory notes for residential properties he claimed to be purchasing, renting, and reselling. In support of the scheme, Poulson gave three weekend-long seminars, numerous speeches at monthly dinners and various, private tutorial sessions purporting to teach real estate investing tips to individuals who paid fees to attend. Poulson was the former president of the South Jersey Real Estate Investment Club.

The properties for which Poulson solicited private investments were the properties he acquired from the distressed homeowners. In reality, Poulson spent the investments on personal expenses and to partially repay previous investors in Ponzi-scheme fashion. Poulson spent some of the investors’ money on Ray’s Pizza, Acme, Exxon/Mobil, Jos. A. Bank, DirecTV, Hollywood Grooming, Kiddie Garden, Philadelphia Union tickets, American Express, Studio 122 (a hair salon), The Disney Store, Toys ‘R Us, Wawa, and rent-to-own payments on a personal beach house located in Ventnor, New Jersey.

The investigation to date has uncovered more than $3 million in investor losses as a result of Poulson’s schemes.

The mail fraud count which with Poulson is charged carries a maximum potential penalty of 20 years in prison and a $250,000 fine or twice the gain or loss from the offense.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia, for the investigation leading to today’s complaint.

The government is represented by Attorney in Charge R. Stephen Stigall of the U.S. Attorney’s Office Criminal Division in Camden.

The charge and allegations contained in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.

May 12, 2014

Missouri Real Estate Agent and Conspirators Sentenced in Mortgage Fraud Scheme

On May 12, 2014, in Kansas City, Missouri, Leann Raejeana Turner, of Blue Springs, was sentenced to 36 months in prison and ordered to pay $4,912,040 in restitution. Turner pleaded guilty on May 30, 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. Turner is one of nine defendants who participated in an $11 million mortgage fraud scheme from early 2005 to Aug. 4, 2006. According to court documents, Turner was a real estate agent working for a series of real estate companies. Mortgage lenders made loans of approximately $11,092,886 on 16 residential properties in Missouri. From that total, buyers received approximately $2,006,845 from the loan proceeds in illegal secret kickbacks. The scheme resulted in a financial loss to mortgage lenders of nearly $5 million. The scheme involved buying and selling homes at inflated prices, obtaining mortgage loans at the inflated prices, then kicking back $100,000 of the excess loan proceeds to each of the home buyers without the lenders’ knowledge. Carole L. Colson, a real estate agent, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $2,291,110 in restitution. Bruce Q. Williams, a loan officer, was sentenced to 12 months and one day in prison and ordered to pay $3,443,123 in restitution. Anthony E. Hicks, a loan officer, was sentenced to 10 months in prison and ordered to pay $953,958 in restitution. Linda Joyce Henry Johnson, of Corona, California, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $228,744 in restitution. Several others in this scheme await sentencing.

May 8, 2014

Real Estate Developer Pleads Guilty in $50 Million Securities Fraud Scheme

A commercial real estate developer pleaded guilty to his role in a $50 million securities fraud scheme, announced Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California.

Bradley Holcom, 55, entered his plea before United States District Judge Cathy Ann Bencivengo in San Diego, admitting that he committed wire fraud in connection with the sale of approximately $50 million worth of promissory notes that he sold to investors located throughout the United States.

According to court documents, Holcom solicited investors to provide funds for commercial and residential development through an investment program he operated called the Trust Deed Investment Program. Holcom falsely told investors who purchased notes through the Trust Deed Investment Program that they would receive a lien on a specific piece of property he was developing and that the lien would enable them to take priority over any other potential liens or interests in the property.

However, Holcom admitted that he never provided investors with a lien in the property he was purportedly developing and instead conveyed to investors a lesser interest that did not allow them to foreclose on the property to protect their investment. In addition, while he promised investors that their purported lien would be in first position, he subsequently solicited investments for properties that he knew were already encumbered by first position liens. Holcom also sold properties that were supposedly serving as security for investors without informing investors that the property they had financed for development was sold. In 2008 and 2009, he continued to solicit investors for new funds by making misrepresentations about his true financial condition and the manner in which he was using investor money.

As part of his plea, Holcom admitted that his conduct caused approximately $50 million in losses to over 50 victims. Sentencing is scheduled for July 25, 2014.

This case was investigated by the FBI’s Phoenix Division-Yuma Resident Agency. The case is being prosecuted by Trial Attorney Henry P. Van Dyck and Deputy Chief Daniel Braun of the Criminal Division’s Fraud Section and by Assistant United States Attorney Mark Pletcher of the United States Attorney’s Office for the Southern District of California. The Department appreciates the substantial assistance of the U.S. Securities and Exchange Commission.

May 6, 2014

Long Island Mortgage Banker and Five Others Indicted in $30 Million Bank Fraud Conspiracy

Earlier today, an indictment was unsealed charging six men with carrying out a $30 million bank fraud conspiracy by fraudulently inflating the prices of homes for sale and then obtaining mortgages that far exceeded the true collateral value of properties in Nassau and Suffolk Counties. Through his mortgage banking company, defendant Aaron Wider and his co-conspirators allegedly then re-sold these “toxic” mortgages to banks and other investors in the secondary mortgage market, causing millions in losses when the loans went into foreclosure. Four of the defendants were arrested this morning and will be presented for arraignment later today at the United States Courthouse in Central Islip, New York, before United State Magistrate Judge Gary R. Brown. Of the remaining two defendants, one was taken into custody in Florida, while another is scheduled to surrender to federal agents tomorrow in Central Islip.

The indictment and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.

“The conduct charged in the indictment is a prime example of the type of corrupt mortgage-lending practices that preceded the bursting of the real estate bubble, the loss of faith in securitized mortgage obligations, and the financial collapse of 2007 and 2008,” stated United States Attorney Lynch. “Instead of using their skills in banking, the law, and investing to assist individuals pursuing the American Dream, the defendants cooked up a sophisticated scheme that defrauded lenders and then fed toxic debt to the investigating public at large in the secondary mortgage market. I would like to thank the investigators at the Nassau County District Attorney’s Office and New York State Department of Financial Services for their invaluable assistance in this investigation.”

FBI Assistant Director in Charge Venizelos said, “As alleged in the indictment, during the height of the real estate boom, these defendants devised a scheme to turn a profit at the expense of unsuspecting lenders, investors, and members of the public. Mortgage fraud poses a threat to our financial systems and to our economy. This case should send a clear message to all individuals who try to game our financial market: you will be identified and held accountable for your criminal acts. The FBI, along with our law enforcement partners, will continue to investigate those who orchestrate and participate in various mortgage fraud schemes in order to protect the public against those who seek to damage our economy.”

According to the indictment and other court filings, between 2003 and 2008, defendant Aaron Wider operated a New York State licensed mortgage bank in Garden City, New York, called HTFC Corp., which issued residential mortgages to borrowers. HTFC did not possess assets to fund these loans but relied on funding from other banks and financial institutions, commonly known as “warehouse lenders.” The warehouse lenders relied on Wider and HTFC to ensure that home buyers were able to pay the mortgages and that the market value of the homes fully collateralized the loans.

Instead, Wider and the co-defendants allegedly engineered a complex series of same-day sham transactions, or “flips,” to artificially inflate the prices of homes. Then, they lied to the warehouse lenders to obtain mortgage funding that was 80 percent more than the actual value of the homes. Wider and co-defendants Manjeet Bawa, John Petiton, and Joseph Ferrara contracted to buy homes in Nassau and Suffolk Counties from innocent sellers at market prices. The defendants then submitted fraudulent loan applications to the warehouse lenders that nearly doubled the true sales prices of the homes. The defendants also inflated their personal assets and concealed significant liabilities to get loan approval.

At each closing, Petiton, an attorney admitted to practice in New York State, oversaw the actual sales to innocent sellers and simultaneously created sham trusts into which title to the properties was transferred for no money. He and the co-conspirators then immediately transferred title back to the co-defendants at nearly double the price to create a false paper trail documenting the artificially inflated prices. Meanwhile, real estate appraiser Joseph Mirando prepared false appraisal reports to justify the inflated prices, while HTFC closing attorney Eric Finger concealed the far lower, true sales price for properties by lying on federal-mandated settlement forms. Finger received wire transfers of funds from the warehouse lenders and, after paying the innocent third-party sellers, disbursed the surplus money fraudulently obtained in the mortgages to his fellow co-conspirators.

HTFC sold each of its mortgages in the secondary market. On paper, the loans appeared to be attractive investments because HTFC’s mortgages carried high rates of return that were supposedly fully collateralized by the market value of homes and the assets and incomes of the borrowers or mortgagors. Upon buying mortgages from HTFC, the secondary market bank paid off the warehouse lenders and then either collected the principal and interest or bundled them into mortgage-backed securities that were sold to pension funds, hedge funds, and other investors seeking relatively secure, high-yield investments. When HTFCs mortgages went into foreclosure beginning in 2007 and 2008, the secondary market investors discovered that the actual value of the collateral was 80 percent less than the amount borrowed for each home.

The charges in the indictment are merely allegations, and the defendants presumed innocent unless and until proven guilty. If convicted, the defendants face up to 30 years’ imprisonment. The indictment unsealed today also seeks to forfeit 19 residential properties traced to the bank fraud or up to $30 million in a money judgment.

The case is being prosecuted by Assistant U.S. Attorney James Miskiewicz.


MANJEET BAWA, age 46, Dix Hills, New York

JOSEPH FERRARA, age 70, Long Beach, New York

ERIC FINGER, age 48, Miami, Florida

JOSEPH MIRANDO, age 54, Centereach, NY

JOHN PETITON age 68, Garden City, New York

AARON WIDER age 50, Copiague, New York

April 28, 2014

Sacramento Real Estate Professional Pleads Guilty to Mortgage Fraud Offenses

Licensed real estate agent Manuel Herrera, 34, of Sacramento, pleaded guilty today to conspiring to commit wire fraud in connection with a mortgage fraud scheme, United States Attorney Benjamin B. Wagner announced.

According to court documents, Herrera served as a loan officer and later a branch manager at Delta Homes and Lending Inc., a real estate and mortgage lending company. Between October 2004 and May 2007, Herrera and his co-defendants conspired to obtain home loans from mortgage lenders based upon false and fraudulent loan applications and supporting documents that falsely represented the borrowers’ assets and income, liabilities and debts, employment status, and citizenship status. As part of the scheme, the defendants, including Herrera, provided money to borrowers in order to fraudulently inflate the borrowers’ assets and bank account balances. Once the defendants had secured the loans, the borrowers returned the money the defendants had provided for the scheme. The aggregate sales price of the homes involved in the conspiracy was in excess of $10 million. As a result of the defendants’ actions, mortgage lenders and others suffered losses of at least $4 million.

This case was the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorney Lee S. Bickley is prosecuting the case.

Herrera’s co-defendants, including Moctezuma Tovar, Ruben Rodriguez, and Jaime Mayorga, all licensed real estate agents residing in Sacramento; Sandra Hermosillo, of Woodland, formerly a loan officer; and Christian Parada Renteria, of Sacramento, formerly a loan officer have a trial date of April 21, 2015. Herrera’s co-defendant Jun Michael Dirain pleaded guilty on February 3, 2014, and is currently scheduled to be sentenced on July 7, 2014.

Herrera is scheduled for a status conference concerning sentencing in front of Judge William B. Shubb on July 7, 2014. Herrera faces a maximum statutory penalty of 30 years in prison and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables

April 23, 2014

SEC Charges Former Stock Promoter With Defrauding Investors in Florida Real Estate Venture

The Securities and Exchange Commission today filed fraud charges against a former Florida-based stock promoter currently serving a two-year prison sentence for lying to SEC investigators.
The SEC’s complaint filed in U.S. District Court in the Southern District of Florida alleges that Robert J. Vitale defrauded investors in a Florida real estate venture, sold unregistered securities, and acted as an unregistered broker-dealer. Vitale and his firm Realty Acquisitions & Trust Inc. raised at least $8.7 million from investors, including many senior citizens. Vitale allegedly told investors their funds were “100% protected” when they were not, and he claimed to be a financial expert with a business degree from Notre Dame when he never attended college after graduating from Notre Dame High School in West Haven, Conn.

The SEC alleges that although Vitale told investors his success rested on his “great honesty and integrity,” he failed to tell them that he was charged by the SEC in 2004 for participating in a pump-and-dump market manipulation scheme or that he later settled the charges and was barred from the brokerage industry as part of the settlement.

Vitale is now an inmate at the Federal Detention Center in Miami. He was sentenced in September 2013 after being convicted of obstruction of justice and providing false testimony in the SEC’s investigation that led to the charges filed today.

“We are gratified that the criminal authorities held Mr. Vitale responsible for his attempts to derail our investigation,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “His prison sentence and our determination to uncover and charge his underlying misconduct notwithstanding his obstruction show how seriously we and our law enforcement partners take our missions.”

The SEC is seeking the return of allegedly ill-gotten gains with interest, a monetary penalty, and a permanent injunction against Vitale. The SEC’s complaint also charges Coral Springs Investment Group Inc. as a relief defendant, alleging the company holds assets that came from defrauded investors that should be returned.

“Vitale hid the truth from investors just as he tried to hide his assets during our investigation,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “When individuals barred from the industry continue their wrongdoing, we pursue them aggressively and seek to return their ill-gotten gains to investors.”

The SEC’s investigation was conducted by James J. Bresnicky and J. Lee Buck II. The SEC appreciates the assistance of the Florida Office of the Attorney General in this matter.

April 22, 2014

California Man Sentenced to 54 Months for Mortgage and Investment Fraud

On April 22, 2014, in Sacramento, Calif., Johnny Eugene Grivette, Jr., of Magalia, was sentenced to 54 months in prison for his participation in a mortgage fraud scheme. Grivette pleaded guilty on July 10, 2012, to conspiracy to commit mail fraud and money laundering. According to the plea agreement, Grivette was manager of Advantage Financial Partners (AFP) of California, a company that bought residential properties at market prices and then sold them to straw buyers who were investors in a purported investment program. Once AFP bought the properties, it paid commissions to an appraiser who would appraise them for significantly higher than the true market value. This allowed the homes to be financed for the straw buyers at loan-to-value ratios significantly higher than the limits lenders authorized. If the straw buyers had to make down payments on the properties sold by AFP, the money was quickly reimbursed to them by AFP without the lenders’ knowledge.

Posted By: Ralph Roberts @ 3:17 pm | | Comments (0) | Trackback |
Filed under: California

April 17, 2014

Georgia Real Estate Investor Pleads Guilty to Charges Related to Bid Rigging and Fraud at Public Foreclose Auctions

A Georgia real estate investor pleaded guilty today to his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

Felony charges were filed on March 25, 2014, in the U.S. District Court for the Northern District of Georgia in Atlanta, against Mohamed Hanif Omar. According to court documents, from at least as early as September 1, 2009 until at least March 7, 2012, Omar conspired with others not to bid against one another and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Gwinnett County, Georgia. Omar was also charged with conspiring to commit mail fraud by fraudulently acquiring title to selected Gwinnett County properties sold at public auctions. Additionally, he was charged with making and receiving payoffs and diverting money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.

“Today’s guilty plea is the fourth in the Antitrust Division’s ongoing investigation into anticompetitive conduct at public real estate foreclosure auctions in Georgia,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division remains committed to working with its law enforcement partners to investigate and prosecute local cartels that harm distressed homeowners and lenders.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Gwinnett County public foreclosure auctions at non-competitive prices. When real estate properties are sold at the auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, the conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties and, in some cases, the defaulting homeowner.

“Today’s plea should further serve as an example for those who would consider exploiting the processes in place regarding public foreclosures,” said J. Britt Johnson, Special Agent in Charge of the FBI Atlanta Field Office. “The intent of the Sherman Act was to provide a level and competitive field within commerce and the FBI intends to enforce these types of violations.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime.

The investigation is being conducted by the Antitrust Division’s new Washington Criminal II Section and the FBI’s Atlanta Division, with the assistance of the Atlanta Field Office of the Housing and Urban Development Office of Inspector General and the U.S. Attorney’s Office for the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact the Antitrust Division at 404-331-7113, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, or visit

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit

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