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The FBI Investigates Mortgage Fraud!

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February 25, 2009

Fredric “Rick” Dryer Receives 132-year Prison Sentence for Real Estate Fraud

Fredric “Rick” Dryer, who was accused of scamming investors out of millions of dollars in a massive real estate fraud scheme, has been sentenced to prison for 132 years by a Denver, Colorado, district court judge.

The Sixty-year-old Dryer was convicted in July of 2008 on 43 felony counts including racketeering, securities fraud and theft. He was indicted in 2006 with two co-defendants–Richard Darrow and Jeffrey Dietz–for using his companies, Mile High Capital Group and Replacement Property Solutions, to cheat scores of investors out of their money.

In addition to the 132-year prison term, Dryer was ordered to pay $3,426,460.08 in restitution.

Denver Chief Deputy District Attorney Joe Morales and Deputy District Attorney Kandace Gerdes took Dryer to trial last summer. Morales argued for a lengthy prison term, asking the Court for justice on behalf of each victim. Dryer’s 132 year sentence ranks among the longest in Colorado for a white collar criminal.

Dryer’s co-defendants pleaded guilty earlier. Richard Darrow, age 43, pleaded guilty to violating the Colorado Organized Crime Control Act and was sentenced to a suspended 20-year prison term that requires 2 years in the Denver County Jail and 10 years of probation. He has also been ordered to pay $1,150,000 in restitution.

Jeffrey Dietz, age 39, pleaded guilty to securities fraud and was sentenced to 2 years of probation and ordered to pay $990,406 in restitution.

For more on this story, please read Bob Mook’s excellent article “Mile High Capital founder Dryer sentenced to 132 years” in the Denver Business Journal.

Posted By: Ralph Roberts @ 11:33 pm | | Comments (7) | Trackback |
Filed under: Colorado,Mile High Monday,Mortgage Fraud,Real Estate Fraud

February 20, 2009

John Nicolo, Constance Roeder, and David Finnman Setenced for Real Estate Fraud

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John Nicolo, 75, his wife Constance Roeder, 65, and David Finnman, 61, have all been sentenced for their roles in a real estate scam involving real property tax appraisal and assessment schemes. Last May, after a 10-week trial, a jury convicted Nicolo and Finnman with defrauding Eastman Kodak Company, IBM, Global Crossing, ITT Industries, Inc., and the taxpayers of Greece, New York, in connection with several real property tax appraisal and assessment schemes. Nicolo and Roeder were also convicted of numerous tax fraud counts. Nicolo was sentenced to 12 years in prison. Roeder received probation. David Finnman got a 21-month in sentence.

John Nicolo was convicted of three conspiracy charges, nine mail fraud counts, eight wire fraud counts, and twenty-one money laundering counts, while David Finnman was convicted of one conspiracy count, two mail fraud counts and two money laundering counts.

The charges stem from various schemes in which David Finnman, and later Mark Camarata, while working at Kodak, would hire John Nicolo, a real property appraiser, to perform real property appraisal services for Kodak in connection with many of Kodaks’s properties during the years 1997 through 2005. In return for hiring John Nicolo, David Finnman would receive money representing kickbacks from Nicolo. In addition to the kickbacks received by Finnman, the trial established that the Greece, NY, Town Assessor also received payments from Nicolo in connection with various property tax assessment matters involving property located in Greece.

While there were several schemes proven at trial, the largest scheme involved the Town Assessor accepting bribes in return for reducing the real property tax assessment for Kodak property located in Greece, NY. Kodak had property located in Greece known as Kodak Park. Based on the reductions the Town Assessor made to Kodak Park’s real property tax assessment, John Nicolo calculated the tax savings to Kodak over a 15-year period to be $31,527,168. They also calculated Nicolo’s fee from Kodak to be $7,881,798.00, which was 25 percent of Kodak’s projected tax savings.

Additionally, John Nicolo and Constance Roeder were convicted of conspiracy to defraud the Internal Revenue Service. Nicolo was convicted of nine counts of filing or aiding and abetting the filing of false income tax returns. Roeder was convicted of five counts of filing false income tax returns.

The indictment also contained forfeiture allegations against John Nicolo and David Finnman. The government seized over $12,000,000 dollars in assets during the investigation. The Honorable David G. Larimer has issued a preliminary order of forfeiture regarding the seized assets, and additionally imposed a forfeiture money judgment against Nicolo in the amount of $9.7 Million and against Finnman in the amount of $140,000.

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Posted By: Ralph Roberts @ 11:31 pm | | Comments Off on John Nicolo, Constance Roeder, and David Finnman Setenced for Real Estate Fraud | Trackback |
Filed under: New York,Real Estate Fraud

February 19, 2009

Is Obama’s Foreclosure Plan Ripe for Mortgage Fraud?

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If you believe some lawmakers, President Obama’s $75 billion foreclosure rescue plan is an open invitation for people to commit real estate and mortgage fraud. From CBS News:

House Republican leadership and Senator Charles Grassley (R-IA), ranking member of the Senate Finance Committee sent letters to administration officials asking for assurances that anti-fraud measures will be put in place to guarantee that taxpayer dollars are not used to re-do mortgages that were originally based on fraudulent documentation. Grassley notes that experts in mortgage lending say that anywhere from 30-70% of all mortgages inked in the last few years were based on fraudulent claims of assets or income.

The Treasury Department is considering a new computer program developed by Smithfield and Wainwright, a real estate business out of Florida known as “Mo-Mod.” A company spokesperson says the product can modify up to a million loans per month.

Some in the mortgage industry doubt that an automated program could catch fake documentation.

“You’ve got to get a human into there and look at it to underwrite it so that you can properly assess the risk,” Jon Daurio of Kondaur Capital Corporation in Southern California told CBS News. “I do a full documentation. I am verifying that income, getting tax forms, bank statements, etc. and I want to verify that that gross income is accurate,” he said.

But the “Mo-Mod” automated system under consideration by the Treasury Department will not re-examine the original W-2s or paystubs.

Hogan Copeland who goes by the name “Big Hogan” developed “Mo-mod” through his company Smithfield and Wainwright. Copeland told CBS News if his company is involved they will only be conducting appraisals not determining the homeowner’s true income or credit history. “We are not forensic accountants, that’s the bank’s determination, that’s not Big Hogan’s determination,” he said. “We will be evaluating the house, that’s the piece in question, that’s the hottest button right now.”

Copeland says if the government uses “Mo-Mod”, his team of 23,000 “independent and unbiased” appraisers nationwide would immediately begin to appraise foreclosed homes or those on the edge of foreclosure. Copeland notes that his network of appraisers would use a nationwide set of standards based on at least 20 data points to get at the new value of each home, “It’s just coming back to reality,” he said.

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Posted By: Ralph Roberts @ 12:21 am | | Comments (11) | Trackback |
Filed under: Legislation,Mortgage Fraud,Mortgage Meltdown

February 17, 2009

Joseph Baumeister Pleads Guilty in St. Louis Mortgage Fraud

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Joseph Baumeister has pled guilty to bank fraud charges in a mortgage fraud scheme involving 16 area properties, United States Attorney Catherine Hanaway announced last week.

According to court documents, between January 2007 and October 2008, Joseph A. Baumeister operated a scheme to defraud several mortgage lenders through his St. Louis, MO-based company, Prophet Development. Baumeister used straw purchasers to buy 16 residential properties based on misrepresentations to lenders. He then took money from the closings of the properties by artificially inflating the sales price or by falsely claiming that various home improvements had been made.

After the closings on the properties, Baumeister found tenants for the properties, collected rent, and made mortgage payments on occasion. Eventually, mortgage payments fell behind or were not made, and the majority of these properties went into foreclosure. All told, Baumeister stole $364,523.00, which was used in large part to pay for a wide range of personal expenses.

Baumeister, 56, St. Louis, 63126, pled guilty to one felony count of bank fraud. He now faces a maximum penalty of 30 years in prison and/or fines up to $1,000,000, when he is sentenced on May 1, 2009.

As an aside, last November, U.S. Attorney Hanaway convened the first meeting of the U.S. Attorney’s Mortgage Fraud Task Force. The task force consists of over 70 residents of the Eastern District of Missouri involved in banking, mortgage brokerage, real estate sales, title insurance, real estate appraising as well as federal, state, and local law enforcement, regulatory officials and non-government organizations. Anyone wishing to report suspected mortgage fraud or participate in the work of the task force is encouraged to call the Mortgage Fraud hotline at 1-866-587-9571.

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Posted By: Ralph Roberts @ 11:10 pm | | Comments Off on Joseph Baumeister Pleads Guilty in St. Louis Mortgage Fraud | Trackback |
Filed under: Guilty Plea,Missouri,Mortgage Fraud

February 11, 2009

Freddie Mac Chooses Troubled Ocwen Financial Corporation To Streamline Loan Modifications

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Freddie Mac’s recent choice of Ocwen Financial Corporation to participate in a pilot program aimed at streamlining high risk loan modifications is an interesting one, to say the least.


  • In 2004, Ocwen Financial Corporation sought voluntary dissolution of Ocwen Federal Bank. According to Ocwen’s FORM 10-K filings for the fiscal year ended December 31, 2004, the bank filed for voluntary dissolution of OFB with the The Office of Thrift Supervision (OTS) on November 24, 2004. (The OTS acts as the primary regulator of all federal and many state-chartered thrift institutions, including savings banks and savings and loan associations.)
  • A jury in Galveston, Texas, in November 2005, awarded $11.5 million to a customer of Ocwen Financial Corp and its former Ocwen Federal Bank subsidiary, after determining the two companies committed fraud in servicing the customer’s home equity loan.
  • The verdict against Ocwen Federal was issued in Texas’s 212th District Court. The jury ordered the Ocwen companies to pay Sealy Davis $10 million in actual damages and about $1.5 million for mental anguish and economic damages, reported the South Florida Business Journal.
  • This came after Ocwen Federal Bank signed a written agreement in April 2004 with OTS agreeing to improve its compliance with the Real Estate Settlement Procedures Act (RESPA), the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act.
  • Again, according to Ocwen’s FORM 10-K filings for the fiscal year ended December 31, 2004, the company reported that “if this process, which we refer to as “debanking,” is completed, we would dissolve the Bank and continue its non-depository businesses, including its mortgage servicing business, under another subsidiary of our Company, which would be licensed where necessary at the state or territory level.”

Fast forward to February 2009 and Ocwen is once again making headlines in the loan servicing industry. Freddie Mac must be satisfied that Ocwen has changed its ways because it just selected Ocwen to test a new pilot program to streamline loan modifications for distressed homeowners.

Under the new pilot, a selected portfolio of higher risk mortgages that are at least 60 days delinquent will be given to a specialty servicer–Ocwen Financial Corporation–for intensive attention using the full range of Freddie Mac workout opportunities, including the Streamlined Modification Program developed with the Federal Housing Finance Agency, Fannie Mae and the HOPE Now Alliance.

Posted on Freddie Macs site was this statement by Ocwen Chairman and CEO, William Erbey:

“We applaud Freddie Mac’s leadership in foreclosure prevention and are delighted to support this innovative initiative. We bring the technology and processes that now achieve successful workouts in the overwhelming majority of delinquent loans in our servicing portfolio. Our goal is and will continue to be to engineer workouts that keep homeowners in their homes and return greater cash flow to the loan owner than the proceeds from a foreclosure – a win/win situation for American homeowners and taxpayers alike.”

Understanding that there are only a limited number of companies large enough to handle the volume of loan modification business Freddie Mac has, it still leaves you wondering whether Freddie Mac made the best choice by picking Ocwen.

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Posted By: Ralph Roberts @ 11:26 pm | | Comments (3) | Trackback |
Filed under: Freddie Mac,Ocwen Financial Corporation

February 9, 2009

Metropolitan Money Store’s Chandra Jones Pleads Guilty in Mortgage Fraud Case

To follow up on a case I first reported about last July (see “Maryland Metropolitan Money Store Employee Charged with Mortgage Fraud“), 31-year-old Chandra Jones, of Lanham, Maryland, is the latest person to plead guilty to conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit.

Before reading about Chandra Jones, here’s a related story from MSNBC:

Back to Chandra Jones, according to her plea agreement, in July 2005, Jones was hired to work as a loan processor at the Metropolitan Money Store (MMS), located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Shortly after she began working at MMS, Jones conspired with others in a scheme to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit.

The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid to participate in the scheme.

Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes and prepared and submitted to mortgage lenders fraudulent loan applications to obtain inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.

In November 2005, Chandra Jones was hired to work at Fordham & Fordham Investment Group, Ltd., a Maryland corporation based in Lanham and Greenbelt, that assisted Metropolitan Money Store in its foreclosure consulting and credit servicing business. Jones was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of Fordham & Fordham Investment Group and was also made a director of Burroughs & Smythe Financial Services, Inc., another Maryland corporation that assisted MMS in its foreclosure consulting and credit servicing business. Jones was not licensed to provide credit repair services and had not received any training related to the mortgage industry, credit repair, or financial services.

During the course of the conspiracy, Chandra Jones placed $788,978.30 from Fordham & Fordham Investment Group’s bank accounts into her personal bank accounts. For example, on October 25, 2006, Jones wire transferred $20,000 drawn on one of Fordham & Fordham Investment Group’s accounts and deposited the funds into her personal bank account. At the direction of co-conspirators, Jones transferred funds from the Fordham & Fordham Investment Group accounts to pay the personal expenses of co-conspirators and observed co-conspirators using funds from the Fordham & Fordham Investment Group accounts for their personal benefit.

Chandra Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. Jones was paid $3,600 for serving as a straw buyer for a property in Accokeek, Maryland, and $5,000 for serving as a straw buyer for a property in Bladensburg, Maryland. In purchasing the properties, Chandra Jones made false statements as to personal and financial information on settlement documents.

As a result of this scheme, the total loss attributable just to Chandra Jones, including the estimated losses to the mortgage lenders, is $4,189,283.86.

Chandra Jones now faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. U.S. District Judge Roger W. Titus scheduled Jones’ sentencing for October 5, 2009 at 9:30 a.m.

Chandra Jones, the daughter of co-defendants Jennifer and Clifford McCall, is the sixth defendant to plead guilty in the Metropolitan Money Store mortgage fraud scheme. The others include:

  • Jennifer McCall, age 47, of Ft. Washington, Maryland, a chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC
  • Katisha Fordham, age 35, of Washington, D.C., a loan processor at the Metropolitan Money Store
  • Richard Allison, age 37, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau
  • Clifford McCall, age 47, of Lanham, Maryland, president of Burroughs & Smythe Financial Services, Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland
  • Carlisha Dixon, age 31, of Hyattsville, Maryland, vice president and a director of Burroughs & Smythe Financial Services, Inc.
Posted By: Ralph Roberts @ 4:25 pm | | Comments (4) | Trackback |
Filed under: Maryland,Mortgage Fraud

February 5, 2009

Mortgage Fraudster Christopher Warren Flees on Private Jet

Move over Matthew Cox, there’s a new poster child for mortgage Fraud in America. From in Sacramento, California:

The mortgage broker who admitted on his company Web site that he had been involved in massive mortgage fraud was charged Thursday in connection with what was described as a $100 million scam.

The complaint was sworn by an IRS agent who said Christopher Warren, 27, fled the country on a private jet on Monday, the same day he replaced the home page of the Triduanum Financial Web site with a seven-page essay outlining his crimes and asking for forgiveness.

The complaint, filed in Sacramento federal court, is based in part on the confession that appears on Warren’s Web site and was first reported Monday by News10.

“The complete operation was highly illegal and a Ponzi scheme,” Warren wrote. “Still, I had no problems getting close to $50 million in mortgages purchased and closed.”

Warren is charged with bank fraud, mail fraud, and conducting a financial crimes enterprise. The charges stem from Warren’s earlier association with Roseville-based Loomis Wealth Solutions and related enterprises described by the IRS as a Ponzi scheme involving 500 properties in five states with losses estimated at $100 million.

The complaint alleges Warren committed his crimes at Loomis Wealth Solutions between September 2007 and July 2008, sometimes using the name Mark A. Seagrave.

Authorities raided the offices and home of the founder of Loomis Wealth Solutions, Lee Loomis, last summer. Warren is so far the only person to be charged in the investigation.

Warren incorporated Triduanum Financial after leaving Loomis Wealth Solutions. Triduanum, a mortgage banking operation based on Tech Center Drive in Sacramento, folded last month after apparently overextending its credit line.

In an email to News10 Sunday, Warren offered a “tell all” interview. “If you want to do any kind of coverage it would need to be tomorrow or Monday before 10 am PST,” he wrote.

The IRS did not say what time Warren’s plane left the country Monday.

Warren’s attorney, Donald Heller, told News10 he didn’t know where Warren is. Heller offered an apology to federal authorities who were derided in Warren’s online essay.

Posted By: Ralph Roberts @ 11:05 pm | | Comments Off on Mortgage Fraudster Christopher Warren Flees on Private Jet | Trackback |
Filed under: Christopher Warren

February 3, 2009

Triduanum Financial’s Christopher Warren Tells All!

Charles Ponzi (March 3, 1882–January 18, 1949)...Image via Wikipedia

Noticed this earlier today on Sacramento, California’s…

The managing broker behind a failed mortgage operation posted a rambling essay on the company’s Web site describing his years of fraudulent activity and asking for forgiveness.

The seven-page essay by Christopher Warren, 27, replaced the home page of Triduanum Financial which abruptly closed its doors last month.

Warren said his career in the mortgage industry began when he was still a teenager and took a job with the now-defunct Ameriquest in 2001. Warren claimed he manipulated loan applications to secure financing and eventually hacked into the Ameriquest computer system to approve loans himself with no oversight.

Warren said he left Ameriquest three years later with the personal information of 680,000 Ameriquest customers to start his own mortgage banking operation in Sacramento called WTL Financial.

At the ripe old age of 22, a fraudster trained by the best corporate environment for fraud, I built a company modeled after the movie Boiler Room,” Warren wrote.

Warren said WTL Financial faked credit scores and W-2s to peddle loans to investors who failed to scrutinize the files.

I made over $2.25 million, all of which was spent on 24 cars, five houses and drugs,” he wrote.

Warren said WTL Financial originated $810 million in questionable mortgages before it collapsed in 2007.

Warren then moved on to work as a vice president for Roseville-based Loomis Wealth Solutions, which he described as a real estate Ponzi scheme.

Federal authorities raided the offices of Loomis Wealth Solutions last August and searched the Granite Bay home of founder Lawrence Leland Loomis. Among items they were looking for were “any documents pertaining to Christopher Warren.”

In his essay, Warren said he had been interviewed by the FBI and expected to be indicted for his role in operations at Loomis Wealth Solutions.

Public records show Warren struggled with other personal problems in 2008. In May he lost a $729,000 Folsom home to foreclosure and in November he finished three years of probation for narcotics possession.

State records show Triduanum Financial was incorporated last July. Warren’s essay did not address Triduanum Financial’s business practices, but an earlier Web posting said the company had exceeded its line of credit by $20 million and suggested homebuyers find another lender.

Warren did not immediately return phone calls or email from News10 seeking comment.

In his essay, Warren said he helped ruin the nation’s economy and hopes his experiences can help reform the mortgage and banking systems.

Almost a billion dollars of toxic assets came from me,” he wrote. “Looking back at the life I have led, I beg a higher power for forgiveness.”

Read Christopher Jared Warren‘s entire confessional essay here.

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Posted By: Ralph Roberts @ 11:56 pm | | Comments (5) | Trackback |
Filed under: California,Christopher Warren,Mortgage Fraud,Ponzi Scheme