Two Defendants Indicted for Price-Flipping 35 Homes in Mortgage Fraud Scheme

A federal indictment was unsealed today against a Minnesota pair for allegedly orchestrating a mortgage fraud scheme in which they stole more than $2.5 million from lenders nationally by obtaining fraudulent loans for the purchase of 35 homes in the Twin Cities. The indictment charges Zack Zafer Dyab, 45, of Golden Valley, and Julia Alexander Rozhansky, 45, of Minnetonka, with one count of conspiracy to commit wire fraud, six counts of mortgage fraud through use of interstate wires, and one count of engaging in a monetary transaction involving criminally derived property.

The indictment alleges the defendants conspired to induce through fraudulent means numerous mortgage lenders throughout the U.S. to loan substantial sums of money to unindicted co-conspirators, who were relatives of Rozhansky. From 2003 through 2006, Dyab and Rozhansky allegedly recruited these co-conspirators to act as straw buyers in the purchase of 35 single-family homes in the Twin Cities.

In some instances, the defendants allegedly arranged for the straw buyers to purchase properties at inflated prices directly from Dyab, a mortgage broker, or his company, American Choice Lending, Inc., where Rozhansky was employed. In other instances, the defendants allegedly arranged for the straw buyers to purchase properties at inflated prices from third-party sellers. After those sales, the defendants purportedly caused the sellers to pay them a portion of the sale proceeds. In addition, the defendants sometimes allegedly had a real estate broker receive purported real estate “commissions” from transactions, which the broker then signed over to Dyab. By taking for their personal use substantial portions of the loan proceeds from all of these transactions, the defendants caused more than $2.5 million in loss to the lenders during the life of the scheme.

To further their scheme, the defendants allegedly submitted false mortgage loan applications that greatly exaggerated the monthly income and bank account balances of the straw buyers.

Moreover, they purportedly deposited funds into the bank accounts of straw buyers in order to trick lenders into believing the buyers had substantial liquidity. They also allegedly provided straw buyers with funds to bring to transaction closings, to be passed off as their own downpayment money. Furthermore, the defendants allegedly led lenders to believe the straw buyers intended to live in the homes they bought, even though they knew the straw buyers intended to own the homes for less than a year before selling them to third-party straw buyers, who would then proceed to default on their mortgage loans.

If convicted, the defendants face a potential maximum penalty of five years in prison on the conspiracy charge, 20 years for each count of mortgage fraud, and 10 years on the monetary transaction charge. All sentences are determined by a federal district court judge. This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney David J. MacLaughlin.

Mortgage Broker Sentenced to 20 Months in Prison for 16-Property, $1.9 Million Mortgage Fraud Scheme

A Dearborn mortgage broker was sentenced to 20 months’ imprisonment in connection with a multi-million dollar mortgage fraud scheme, United States Attorney Terrence Berg announced today. Berg was joined in the announcement by Andrew G. Arena, Special Agent-In-Charge of the Federal Bureau of Investigation in Detroit. Nagi was also ordered to pay restitution in the amount of $1 million dollars.

Hassan Nagi, 31, pled guilty to conspiracy to commit bank fraud on December 15, 2008 before U.S. District Judge George Caram Steeh. Nagi admitted that from April 2005 to April 2008, while working as a loan officer at Superior Mortgage, Premier Mortgage Funding, and First Mortgage, he defrauded a half-dozen financial institutions in a 16-property, $1.9 million fraud scheme carried out in Detroit, Dearborn, and Dearborn Heights. Nagi secured financing from various banks—including Countrywide Financial, Washington Mutual, Fifth Third Bank, and IndyMac—for “straw buyers” using inflated appraisals (prepared by co-defendant Ali Haidous) and falsified income documents. Nagi then split the proceeds of the fraud with his co-defendants when the mortgages were abandoned.

United States Attorney Berg stated, “The current economic environment demands vigorous enforcement and stiff punishment against those who obtain mortgages under false pretenses and thereby increase the cost of home ownership for all Americans. These are not victimless crimes and we will work tirelessly to ensure that those who commit fraud are brought to justice.”

Co-defendant Ali Haidous, 25, of Dearborn, was sentenced to one-year imprisonment on March 17, 2009. Two other defendants, Safi Bzeih, 35, and Maria Linares, 32, both of Dearborn, await sentencing on October 26. Hussein Aoun, 23, of Dearborn Heights, is a fugitive believed to be in Lebanon. No trial date has been set.

The case is being prosecuted by Assistant U.S. Attorney Leonid Feller.

Randolph Woman Pleads Guilty in Mortgage Fraud Scheme

BOSTON, MA—A former Bank of America employee was convicted of wire fraud today in federal court for creating false documents to secure approval of mortgage loan applications.

United States Attorney Carmen M. Ortiz; Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation – Boston Field Division; and Susan Dukes, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation – Boston Field Office, announced today that CLARISTA BRAMBLE, age 59, of Randolph, MA, pled guilty before Senior U.S. District Judge Joseph L. Tauro to an Information charging her with nine counts of wire fraud.

At today’s plea hearing, the prosecutor told the Court that had the case proceeded to trial the Government’s evidence would have proven that during the time BRAMBLE was a bank employee from December 2006 to July 2007, she created false bank documents reporting fictitious balances for accounts in the names of people applying for loans from mortgage lending companies. BRAMBLE received cash payments and other financial benefits from others engaged in the scheme, knowing the false documents would be used to fraudulently secure mortgage loans.

Judge Tauro scheduled sentencing for March 17, 2010. BRAMBLE faces up to 20 years’ imprisonment, to be followed by three years of supervised release and a $ 250,000 fine on each count.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service, with the assistance of Bank of America. It is being prosecuted by Assistant U.S. Attorneys Victor A. Wild and Ryan M. DiSantis of Ortiz’s Economic Crimes Unit.

CEO of Metropolitan Money Store Sentenced to Over 11 Years in Prison and Two Other Conspirators Sentenced in $37 Million Mortgage Fraud Scheme

GREENBELT, MD—U.S. District Judge Roger W. Titus sentenced Jennifer McCall, age 48, the Chief Executive Officer of the Metropolitan Money Store, of Fort Washington, Maryland, to 135 months in prison, followed by five years of supervised release, for 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, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also entered a judgement ordering McCall to pay restitution of $16,880,884.86.

Judge Titus also sentenced co-conspirator Wilbur Ballesteros, age 34, of Lanham, Maryland to 63 months in prison, followed by five years of supervised release and sentenced Ronald Aaron Chapman, Jr., age 35, of Washington, D.C., to seven days in prison, 10 months of home detention with electronic monitoring and five years of supervised release. Both men previously pleaded guilty to conspiracy to commit mail and wire fraud for their roles in the scheme. Judge Titus also entered judgements ordering that Ballesteros and Chapman pay restitution of $16,859,950 and $268,279.66, respectively

“Jennifer McCall and her co-conspirators falsely claimed that they were in business to help financially distressed homeowners, when in fact they operated a ‘money store’ that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $37 million of loans that were never intended to be repaid,” said U.S. Attorney Rod J. Rosenstein.

“IRS-Criminal Investigation is united with the rest of the law enforcement community in our resolve to financially disrupt those that commit crimes against our society and the economy,” stated C. André Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge. “IRS-Criminal Investigation is committed to pursuing individuals who create such havoc.”

According to her plea agreement, McCall was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, McCall and Joy Jackson incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Also at that time, McCall, Jackson, Jackson’s husband, Kurt Forham, and McCall’s husband, Clifford McCall and other coconspirators incorporated Fordham & Fordham Investment Group, Ltd. (F&F) and Burroughs & Smythe Financial Services, Inc. (B&S), based in Lanham and Greenbelt, Maryland, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.

From September 2004 to June 2007, Jackson, McCall, Ballesteros, Chapman and others conspired 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 up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland.

Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders 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.

To carry out the fraud scheme, Jackson, McCall and others obtained large cashier’s checks in the names of straw buyers and Metropolitan Money Store employees to conceal transactions from the lenders. Jackson and McCall misappropriated the license and bond numbers of other brokerage and credit repair companies and used them to broker loans and fraudulently improve homeowners’ credit scores by adding fictitious lines of credit to their credit histories.

During the conspiracy, Jackson and McCall provided Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, with more than $100,000 in kickback payments to process real estate closings quickly. Moreover, whenever Jackson or McCall requested, Ballesteros permitted Metropolitan Money Store employees to close loans without him or any other closing agent being present. Jackson and McCall directed others to prepare fraudulent settlement documents that contained false information. Jackson and Kurt Fordham also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and F&F accounts to facilitate loans in straw buyer’s names.

In September 2005, Chapman was hired to work as a loan officer for MMS, although he did not have any experience in the mortgage or financial services fields. Chapman was paid a commission based upon a percentage of each loan that he closed and received at least $66,870 from Jackson drawn on the fraudulently obtained equity transferred into accounts controlled by other conspirators. Victim homeowners directed title companies to disburse proceeds of sales of their homes to RAC Investment Property LLC, a company Chapman owned and operated. Chapman and others caused at least a total of $268,279 in equity proceeds from mortgage loans to be wire transferred into Chapman’s RAC Investment bank account. Chapman was aware that the commissions received from Jackson and MMS and the funds that were deposited into RAC Investment Property LLC’s bank account, were probably the proceeds of fraud, but he deliberately avoided learning the truth as to the fraudulent nature of the funds.

Finally, Jackson and McCall directed others to transfer the equity proceeds of homeowners into the general checking accounts of Metropolitan Money Store and F&F, as well as Jackson and McCall’s personal accounts. Jackson and McCall withdrew these funds and paid for goods and services for themselves, including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding for Jackson and Kurt Fordham. As a result of this scheme, the total loss attributable to Jennifer McCall, including the estimated losses to the mortgage lenders, is $16,880,884.86; the total loss attributable to Ballesteros’s conduct in the scheme, including the estimated losses to the mortgage lenders, is $16,859,950; and the total loss attributable to Chapman’s conduct in the scheme is between $200,000 and $400,000.

Ten defendants, including a lawyer, mortgage broker, real estate agent, loan processor and company officers have pleaded guilty in this scheme. Joy Jackson, age 41, of Fort Washington, Maryland, and President of the Metropolitan Money Store was sentenced to 151 months in prison Jackson’s husband, Kurt Fordham, age 39, also of Fort Washington was sentenced to 10 years in prison for his participation in the scheme. On September 14, 2009, Judge Titus sentenced Richard Allison, age 38, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau who provided legal services to MMS, F&F and Burroughs & Smythe, to 18 months in prison; and Carlisha Dixon, age 32, of Hyattsville, Maryland to five months in prison and five months home detention. On October 5, 2009, Judge Titus sentenced Jennifer McCall’s husband, Clifford McCall, age 48, of Lanham, Maryland to four years in prison and Jennifer McCall’s daughter, Chandra Jones, age 31, of Lanham, Maryland, to 33 months in prison. Katisha Fordham, Kurt Fordham’s sister, was sentenced to 1 day in prison, followed by five months home detention and five months supervised release.

United States Attorney Rod J. Rosenstein thanked the Federal Bureau of Investigation, U.S. Secret Service, Internal Revenue Service – Criminal Investigation and the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation Investigative Unit for their investigative work. Mr. Rosenstein commended Assistant United States Attorneys James A. Crowell IV and Christen Sproule, who prosecuted the case.

Maryland Mortgage Fraud Task Force Announces Progress and Plans
Local, State, and Federal Agencies Working Jointly to Pursue Criminal, Civil, and Administrative Penalties

BALTIMORE, MD—Maryland Mortgage Fraud Task Force members highlighted their progress and plans in a press conference today, including the filing of criminal, civil, and regulatory actions against more than 250 individuals and companies in 2009.

U.S. Attorney Rod J. Rosenstein said, “The Mortgage Fraud Task Force, established in 2009, aims to punish past offenders and deter future violations. Local, state, and federal regulatory and investigative agencies are working together to identify mortgage fraud schemes and pursue the various enforcement tools available to our partner agencies. More than 50 individuals and businesses have been charged with criminal mortgage fraud offenses in federal and state courts this year, and many of them have been convicted and sent to prison. Partner agencies also have filed civil and administrative actions to shut down unlawful schemes. With the additional resources now devoted to mortgage fraud, we expect even more cases to be prosecuted in 2010. Our priorities include pursuing mortgage brokers, lawyers, accountants, appraisers, and other professionals who generate fraudulent loans as well as con artists who market fraudulent ‘foreclosure rescue’ and ‘loan modification’ services.”

“The FBI is committed to collaboration with our Mortgage Fraud Task Force partners in order to detect, investigate, and prosecute criminals who perpetrate mortgage fraud in Maryland,” said FBI Special Agent in Charge Richard A. McFeely.

“I am pleased that the Federal Deposit Insurance Corporation (FDIC) Office of Inspector General can play a role in helping to ensure the integrity of the financial services and housing industries. To this end, we have joined our law enforcement and Inspector General community colleagues to participate in the Maryland Mortgage Fraud Task Force,” said Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation. “In doing so, we leverage the resources needed to successfully combat mortgage fraud and rid the industry of those seeking to undermine the soundness of financial institutions and stability of our nation’s housing market. I congratulate the task force on today’s announcement, which demonstrates the government’s unflagging efforts to see that justice is served.”

RECENTLY FILED CASES

State of Maryland v. David Young Park

On December 8, 2009, the Maryland Attorney General’s Office charged David Young Park, age 43, the former President of Capital City Financial Group in Ellicott City, with theft in Baltimore County Circuit Court. In June of 2007, Park was allegedly working as a mortgage broker and assisted the victim with the refinance of her home. The victim intended to use the more than $100,000 in equity to purchase a commercial condo for her business. Following settlement, Park allegedly obtained the victim’s proceeds from the title company without the victim’s knowledge, deposited them into his escrow account and spent the money on various personal and business expenses over the course of two weeks.

Felony theft is punishable in Maryland by a maximum sentence of 15 years’ incarceration and a $25,000 fine. Originally referred by the Maryland Department of Labor, Licensing and Regulation – Division of Financial Regulation, the investigation was conducted by the Attorney General’s Criminal Division and the Maryland State Police. A criminal charge is merely an accusation of wrongdoing and the defendant is presumed innocent unless the State proves his guilt beyond a reasonable doubt.

United States v. James Fox II and James Dan

After an investigation conducted by the U.S. Department of Housing and Urban Development – Office of Inspector General, the Federal Bureau of Investigation, and the Maryland Department of Labor, Licensing and Regulation – Division of Financial Regulation, a federal indictment was returned on December 8, 2009 against two loan officers employed at a mortgage brokerage in Annapolis, Maryland. From April 2006 to February 2009, James William Fox II, age 39, of Crofton, Maryland, and James Hooper Dan age 45, of Annapolis, Maryland, are alleged to have identified potential victims who were unable to make the mortgage loan payments on their homes. Instead of “rescuing”the victims from foreclosure as promised, the defendants allegedly obtained new mortgage loans in their own names or in the names of “straw purchasers” at even higher monthly mortgage payments than the victims had originally been paying, stripped the properties of equity, falsified information on loan applications, and failed to make the mortgage payments on behalf of the victim sellers as promised. The properties were located in Waldorf, Capitol Heights, Baltimore, Silver Spring, Pasadena, and Hagerstown, Maryland, as well as Glen Rock, Pennsylvania and Chesterfield, Virginia. As a result of the fraud scheme, Fox and Dan allegedly caused lenders to lose over $1.7 million in fraudulently obtained mortgage loans and caused the individual victims to lose over $650,000 in equity in their homes. The indictment seeks the forfeiture of the total loss of $2,350,000.

Dan and Fox face a maximum sentence of 20 years in prison for conspiracy to commit wire fraud and 20 years in prison for wire fraud.

United States v. Daniel Fink, Jr.

A federal grand jury also indicted Daniel E. Fink Jr., age 43, of Baltimore, for wire fraud and money laundering. Fink owned and operated Homemaxx Title & Escrow LLC (Homemaxx), a title company that conducted residential real estate closings with offices in Middle River and Parkville, Maryland. From February 2003 to July 2004, Fink is alleged to have caused Homemaxx to fail to pay outstanding first mortgages on real estate transactions or to record deeds in the real estate records of local and state governments. Fink allegedly transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with Homemaxx, and used the money intended to be disbursed pursuant to a HUD-1 for personal expenditures unrelated to real estate transactions. In connection with a particular real estate refinancing transaction by one of his customers, Fink diverted funds from the escrow account and then used the proceeds of his fraud scheme to purchase a new 2004 CLK Mercedes. As a result of this scheme, Fink is alleged to have defrauded lenders and homeowners of more than $500,000. The indictment seeks the forfeiture of this amount.

Fink faces a maximum sentence of 20 years in prison and a $250,000 fine for each of the three counts of wire fraud and 10 years in prison and a $1 million fine for money laundering. Fink is a fugitive.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

Commissioner of Financial Regulation Acts Against Loan Originator with Equitable Trust Mortgage Corporation

Pursuant to an investigation by the Maryland Department of Labor, Licensing and Regulation, Division of Financial Regulation, on December 10, 2009, the Commissioner of Financial Regulation issued a summary order to cease and desist and a summary suspension of mortgage loan originator licenses against Nicholas Elko for allegedly engaging in an illegal foreclosure rescue scheme whereby Elko, a licensed loan originator with Baltimore-based Equitable Trust Mortgage Corporation (ETM), obtained the title to a Maryland residential property in foreclosure after promising the homeowner that he would convey title back to her after a period of time. Instead, Elko allegedly refinanced the property multiple times through ETM. Each time that the property was refinanced, Elko allegedly stripped more and more equity out of the home, ultimately conveying the property to his mother.

FHA Action Against Equitable Trust Mortgage Corporation

Following an investigation by the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA) announced on December 7, 2009 that it was immediately suspending Equitable Trust Mortgage Corporation (ETM) of Baltimore, Maryland, thereby preventing ETM from originating and underwriting new FHA-insured mortgages. FHA is imposing this action because ETM improperly overcharged 37 borrowers for broker and loan origination fees in excess of what HUD currently allows. HUD discovered that these unauthorized fees were charged to a substantially greater percentage of minority borrowers, 68 percent, than non-minorities. HUD also found that in 21 cases, ETM failed to properly disclose all loan origination fees, as well as lender fees to mortgage brokers on borrowers’ good faith estimates. In addition, ETM’s loans have a high default rate, well in excess of the national average.

“It is critical that FHA lenders apply our standards and do not overcharge borrowers,” said FHA Commissioner David Stevens. “The fact that a disproportionate number of these borrowers were minority families is also troubling.”

At the outset of the Task Force, the participating agencies agreed the goals of the Task Force would include: (1) streamlining the procedures for criminal mortgage fraud referrals; (2) developing and implementing a training program for state and federal investigators and prosecutors who handle mortgage fraud cases; (3) sharing useful information with and facilitating cooperation among the many agencies that have a stake in these cases; (4) tracking open investigations to ensure that partner agencies do not duplicate their efforts; (5) pursuing asset forfeiture and securing restitution for victims; and (6) communicating information to the public in order to warn people about common schemes and help prevent them from becoming victims of mortgage fraud and related financial crimes.

In addition to these recent cases announced today, the Maryland Mortgage Fraud Task Force has many noteworthy accomplishments over the last year, some of which are highlighted in the following attachment.

BALTIMORE CITY STATE’S ATTORNEY’S OFFICE

STATE v. GREGORY TODD ALTER

The Baltimore City State’s Attorney’s Office indicted Gregory Todd Alter, age 37, of Hagerstown, co-owner of All Star Settlement Company on charges of conspiracy to commit theft and issuing a counterfeit deed. On May 14, 2008, Alter conducted a settlement in which a home on Surrey Drive, Baltimore was sold for $40,000. On June 14, 2008 another settlement took place at All Star where the same property was sold to an innocent third party for $90,000. The true owner of the property was Mildred Sheehan, an 85-year-old woman who lives in Massachusetts and had not been to Maryland in 35 years. She never signed any deed nor was she ever aware her property was being sold. Alter received $7,000 from the first transaction and then forwarded a fraudulent deed to the buyer’s lender for the second transaction. He received an additional $2,000 from the second transaction. The scheme was discovered in September 2008, when Mildred Sheehan decided to sell the property and hired a realtor who placed a for sale sign on the property. The buyers who had purchased the property in June 2008 then realized that they had been defrauded. Alter pled guilty to both charges and was sentenced to five years suspended, three years probation.

PRINCE GEORGE’S COUNTY STATE’S ATTORNEY’S OFFICE

STATE v. NATHANIEL WRIGHT

STATE v. AARON BOWE

The Prince George’s County State’s Attorney’s Office Mortgage Fraud Unit prosecuted Nathaniel Wright and Aaron Bowe, who promised victims that their company could save the victims’ homes from going into foreclosure by participating in their rent back program. The defendants then used an unsuspecting straw buyer’s credit information to obtain loans. As a result of the defendants’ false promises, the victims transferred title to their homes and lost approximately $80,000 per victim. Wright and Bowe were convicted of felony theft and violating Protection of Homeowner in Foreclosure Act Law and were ordered to pay restitution totaling $220,000.

CONSUMER PROTECTION DIVISION, MD OFFICE OF THE ATTORNEY GENERAL CONSUMER PROTECTION DIVISION v. RODNEY SPELLEN, ET AL.

The Office of the Maryland Attorney General, Consumer Protection Division, filed a complaint in Baltimore City Circuit Court against Rodney Spellen, Mid Atlantic Consulting, Inc., Jemel Lyles, Absoloot Ventures Inc., Brian Boyd, 1st Choice Property Management Firm, Inc., Sahar Ali, Alan Muniu, Phillip George, Certified Title & Escrow, Inc., and Reggie Simmons, alleging that the defendants promised to save consumers’ homes from foreclosure and restore their credit when, instead, they attempted to take title to the homes and strip the home equity. On November 9, 2009, the court entered summary judgment as to liability in favor of the Consumer Protection Division and against each of the defendants except Reggie Simmons. A trial was held on November 23rd and 24th, 2009 to determine Simmons’ liability, and the appropriate measure of damages, restitution, penalties and costs for each of the defendants. A decision has not yet been issued by the court. The case was originally investigated and referred by the Maryland Department of Labor, Licensing and Regulation – Division of Financial Regulation.

MARYLAND DEPARTMENT OF LABOR, LICENSING AND REGULATION – DIVISION OF FINANCIAL REGULATION

The Office of the Commissioner of Financial Regulation issued summary orders to cease and desist, and in some cases, summary suspensions of Maryland mortgage lender licenses and mortgage loan originator licenses against the following individuals and businesses on the following dates:

Commissioner of Financial Regulation v. ATT Mortgage Company, Shawpin Jong, et al.

ATT Mortgage Company, Shawpin Jong a/k/a Steve Chung, and various other companies and individuals on December 10, 2009 for allegedly engaging in, or conspiring to engage in, mortgage fraud. ATT Mortgage Company allegedly obtained at least 11 different mortgage loans for borrowers after submitting fraudulent employment information to a single lender, falsely claiming that the borrowers were all employed by ASI Alpha Scientific. Both ATT Mortgage and ASI Alpha Scientific are allegedly owned and operated by the same individual, Shawpin Jong a/k/a Steve Chung, at the same location: 416 Hungerford Drive, Suite 200, Rockville, Maryland.

Commissioner of Financial Regulation v. The Shmuckler Group, LLC, Nova Key, LLC, Howard R. Shmuckler, Alon Fisch, and Ted Dubin

The Shmuckler Group, LLC, Nova Key, LLC, Howard R. Shmuckler, Alon Fisch, and Ted Dubin on December 10, 2009 for allegedly engaging in illegal loan modification activities by collecting up-front fees from Maryland homeowners in default on their residential mortgage loans prior to completing all promised services, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender. The respondents also allegedly failed to obtain a Maryland credit services business license. These Respondents allegedly collected over $1.2 million in up-front fees while promising to modify 372 different Maryland residential mortgage loans (charging an average of $3,440 in up-front fees to each Maryland resident, with amounts varying between $1,750 and $6,000). However, Respondents allegedly obtained loan modifications or analogous results in only a quarter of those cases, yet refused to provide any refunds to Maryland consumers. These Respondents operated primarily out of Northern Virginia.

Commissioner of Financial Regulation v. U.S. Equity Solutions, et al.

U.S. Equity Solutions, LLC, Mortgage Rehabilitation, LLC., Rodney Scott Getlan, Chad Edwards, Brent MacDonald, Jennifer Streaks, Richman and Associates, Inc., and others on November 24, 2009 for allegedly engaging in illegal loan modification activities by collecting up-front fees from over 160 Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and failing to obtain a Maryland credit services business license. These Respondents operated primarily out of Maryland, with the exception of Richman and Associates, which operated out of California.

Commissioner of Financial Regulation v. Save My HomeUSA, Inc., et al.

Save My Home USA Co., Inc., LM Processing, Jason McCallum, Chad Buchanan, Justin McCallum, and others on November 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. These Respondents operated primarily out of Madison Heights, Michigan.

Commissioner of Financial Regulation v. GIAN, Inc., ASM, Inc., Roberto T. Aiello, and Trevor S. Smith

GIAN, Inc., ASM, Inc., Roberto T. Aiello, and Trevor S. Smith on November 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. These Respondents operated primarily out of Santa Ana, California.

Commissioner of Financial Regulation v. Help Modify Now, Inc., et al.

Help Modify Now, Inc., Help Modify Now Debt Solutions, Inc., Chas Bain, Larry Gunter, and others on November 24, 2009 for allegedly collecting up-from fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender and for failing to obtain a Maryland credit services business license. These Respondents operated primarily out of California and Nevada.

Commissioner of Financial Regulation v. Equity Recovery Services, LLC, The Malone Financial Group, LLC., Richman and Associates, Inc., The Law Offices of Erica T. Itzhak & Grace B. Kilchenstein, et al.

Equity Recovery Services, LLC, The Malone Financial Group, LLC, Richman and Associates, Inc., Steven R. Forrest, Jesse Malone, George Denikos, Jason Denikos, Jim Richman, the Law Offices of Erica T. Itzhak & Grace B. Kilchenstein, and others on November 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. Equity Recovery Services, LLC and the Malone Financial Group, LLC are located in Maryland. Richman and Associates operated primarily out of California, while The Law Offices of Erica T. Itzhak & Grace B. Kilchenstein has offices in New York and Maryland.

Supplemental Note: The Commissioner of Financial Regulation has taken enforcement actions against more than 200 business entities and individuals for mortgage-related misconduct in 2009. For example, the Agency has issued 23 summary orders to cease and desist against loan modification companies during that time, and has brought other regulatory actions for various other violations of the Maryland Mortgage Lender Law and the Mortgage Originators Law. The Agency has also referred multiple cases to federal and local state prosecutors for criminal prosecution; this includes prosecutions not only in Maryland, but also in other jurisdictions such as Orange County, California (which prosecuted three cases based on earlier Summary Orders to Cease and Desist against loan modification companies), as well as actions by the California bar against California attorneys named in our actions.

FEDERAL CRIMINAL CASES

METROPOLITAN MONEY STORE

In the case of the Metropolitan Money Store (MMS), a $37 million mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, 10 defendants, including a lawyer, mortgage broker, real estate agent, loan processor and company officers have pleaded guilty in U.S. District Court to their participation in this scheme. Joy Jackson, age 41, of Fort Washington, Maryland, and President of the Metropolitan Money Store was sentenced to 151 months in prison; Jennifer McCall, age 48, the Chief Executive Officer of the Metropolitan Money Store, of Fort Washington, Maryland, was sentenced on December 7, 2009 to 135 months in prison; and Jackson’s husband, Kurt Fordham, age 39, also of Fort Washington was sentenced to 10 years in prison for his participation in the scheme. In addition, Wilbur Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, age 34, of Lanham, Maryland, was sentenced to 63 months in prison on December 7, 2009; Jennifer McCall’s husband, Clifford McCall, age 48, of Lanham, Maryland was sentenced to four years in prison; Jennifer McCall’s daughter, Chandra Jones, age 31, of Lanham, Maryland, was sentenced to 33 months in prison; Richard Allison, age 38, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau who provided legal services to MMS and companies associated with the conspirators, was sentenced to 18 months in prison; and Carlisha Dixon, age 32, of Hyattsville, Maryland to five months in prison and five months home detention. Ronald Aaron Chapman, Jr., a loan officer for MMS, age 35, of Washington, D.C., was sentenced to seven days in prison and 10 months of home detention with electronic monitoring; and Katisha Fordham, Kurt Fordham’s sister, was sentenced to one day in prison, followed by five months home detention and five months supervised release. The case was investigated by the Federal Bureau of Investigation, U.S. Secret Service, Internal Revenue Service – Criminal Investigation and the Maryland Department of Labor, Licensing and Regulation – Division of Financial Regulation.

U.S. v. MICHAEL K. LEWIS, ET AL.

In September, 2009, Michael K. Lewis, age 57, of Takoma Park, Maryland, was sentenced in U.S. District Court to 78 months in prison for conspiracy and bankruptcy fraud arising from a scheme he orchestrated in which he aired TV ads offering to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders. The goal of Lewis and his co-conspirators was to steal the homeowners’ equity by inducing the homeowners to sell their property to Earnest Lewis and converting sale proceeds to the use of the conspirators. Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their “lease/buy-back program” would help the homeowners to keep their homes. Lewis referred several homeowners to Cheryl Brooke to file bankruptcy-related paperwork as a way to postpone foreclosure proceedings in order to give them time to participate in the lease/buy-back program. Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that the “good credit” of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes only by paying inflated “rent” and fees by having their bank accounts directly debited to an account belonging to co-conspirator Brooke’s company “In the House Technologies.” Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit. U.S. District Judge Deborah K. Chasanow entered an order of forfeiture judgment against Michael of $2,228,878. Earnest Lewis, age 52, of Takoma Park, Maryland, Cheryl Brooke, age 52, of Upper Marlboro, Maryland, and Winston Thomas, age 43, of New Carrollton, Maryland were sentenced to 54 months, 46 months and 37 months in prison, respectively, for their roles in the scheme. The case was investigated by the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigation and the U.S. Trustee’s Office, with assistance from the Maryland Attorney General’s Office Consumer Protection Division.

In regard to this same fraud scheme, the Office of the Maryland Attorney General, Consumer Protection Division, won a judgment against Michael K. Lewis, Earnest Lewis, Cheryl Brooke, In the House Technology, Inc. and Winston Thomas, in the Circuit Court for Baltimore, barring the individual defendants from selling services of any kind to a homeowner who is in default on a mortgage or is in foreclosure, and requires them to pay over a million dollars in restitution and penalties. In the same case, the Consumer Protection Division entered into a consent order with Cornerstone Title & Escrow, Inc., a real estate settlement company that was also named in the action, requiring Cornerstone to pay $100,100, and bars Cornerstone from performing settlement services for the individual defendants and In the House Technology, Inc.

METRO DREAM HOMES

A federal indictment was returned on April 22, 2009, charging four individuals with wire fraud, bank fraud and conspiracy to commit money laundering, in connection with a scheme that targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” According to the indictment, in exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes allegedly spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C., the Marriott Marquis Hotel in New York, New York, and the Regent Beverly Wilshire Hotel in Beverly Hills, California.

In February 2006, the Dream Homes Program added a second program called “POS Dream Homes” that offered similar promises of paying off investor mortgages in five to seven years in exchange for an upfront investment of $50,000 or more. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia, and California. The Dream Homes Program successfully recruited over 1,000 investors who invested over $70 million. Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland, pleaded guilty to conspiracy to commit wire fraud and Carole Nelson, age 50, of Washington, D.C., pleaded guilty to money laundering, in connection with their participation in the scheme. The four defendants charged in the indictment are scheduled to go to trial on June 1, 2010. This prosecution was brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces and is being investigated by the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the Maryland Attorney General’s Office – Securities Division and the Federal Deposit Insurance Corporation – Office of Inspector General.

U.S. v. DEBORAH WILLIAMS

In U.S. District Court, Deborah Williams, age 57, of Pasadena, Maryland, owner of a Severna Park title company, was sentenced to seven years in prison for mail fraud related to a scheme in which she defrauded lenders of over $3.4 million by diverting settlement funds to her own benefit. The case was investigated by the Federal Bureau of Investigation, with assistance provided by the Maryland Insurance Administration.

BROTHERLY INVESTMENT GROUP

In a multi-million dollar mail fraud scheme to purchase numerous properties in Maryland, Virginia and Washington, DC, using fraudulent mortgage and loan applications, Terrence White, Timothy Reed, Osman Al-Bari, his sister Jamilah Al-Bari, Kara McIntosh, and others, paid straw purchasers, including Sabrina Weinberg, $10,000 per property to purchase houses for them. Weinberg was also told that she would receive an additional $10,000 per property once the property was sold. From February 2006 to October 2006, Weinberg purchased seven properties with mortgages totaling $4,692,836. Kara McIntosh acted as the mortgage broker and created loan applications for those purchases which misrepresented Weinberg’s income and assets. For example, on several mortgage documents, Weinberg’s income was stated to be over $15,500 per month when Weinberg, McIntosh, Reed, and others knew that she did not have such income. Al-Bari and others had the straw buyers claim large account balances at banks and had Jamilah Al-Bari, who worked at one of the banks, send “verification letters” falsely confirming that the straw buyers had such assets.

Al-Bari, White, and Reed also created false invoices to claim that their company, Brotherly Investment Group, performed “renovations” on some of the properties, including the Weinberg properties. Using these false invoices, the co-conspirators were “repaid” at closing for the purported renovations, even though all participants in this scheme knew that no such renovations were done.

The conspirators repeated this fraud scheme with over 15 straw buyers and approximately 25 properties in Maryland, the District of Columbia, and Virginia. From 2006 to 2008, Al-Bari, White, Reed, and others received approximately $3,830,418 in fraudulent funds. This scheme involved fraudulent loans worth over $19,021,366. Over 10 individuals and banks were harmed. Many of the purchased properties have been foreclosed upon.

Osman Sharrieff Al-Bari, age 35, of Washington, D.C., was sentenced to 78 months in prison and Terrence White, age 35, of Oxon Hill, Maryland, was sentenced to 42 months in prison. Kara McIntosh, age 47, and Sabrina Weinberg, age 44, both of Bethesda, Maryland, were sentenced to three years and two years in prison, respectively for mail fraud. Jamilah Al-Bari, age 37, of District Heights, Maryland, and Timothy Reed, age 44, of Beltsville, have pleaded guilty to mail fraud in connection with their participation in this scheme and are scheduled to be sentenced in the next two months. The case was investigated by the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Montgomery County State’s Attorney’s Office – Economic Crimes Unit and the U.S. Secret Service.

The following agencies participate in the Mortgage Fraud Task Force:

Maryland Department of Labor, Licensing & Regulation, Division of Financial Regulation
Maryland Office of the Attorney General (Criminal Division, Securities Division, and Consumer Protection Division)
Maryland Insurance Administration
Maryland Department of Human Resources
Maryland State Police
Howard County Police Department
State’s Attorney’s Office for Baltimore City
State’s Attorney’s Office for Baltimore County
State’s Attorney’s Office for Howard County
State’s Attorney’s Office for Montgomery County
State’s Attorney’s Office for Prince George’s County
United States Attorney’s Office for the District of Maryland
Federal Bureau of Investigation
Federal Reserve Bank of Richmond
Inspector General, Federal Reserve Board
Inspector General, Federal Deposit Insurance Corporation
Inspector General, Social Security Administration
Inspector General, U.S. Department of Housing & Urban Development
Inspector General, U.S. Department of Veterans Affairs
Internal Revenue Service, Criminal Investigation Division
U.S. Postal Inspection Service
U.S. Secret Service

President of First Fidelity Mortgage, Inc. Pleads Guilty to Bank Fraud
Nichols Prepared Fraudulent Notes by Forging Signatures of Borrowers

SHREVEPORT, LA—William Everett Nichols, 56, of Alexandria, La., President and sole shareholder of First Fidelity Mortgage, Inc., pleaded guilty to defrauding Sabine State Bank in Many, La. out of $2.9 million, United States Attorney Donald W. Washington announced today.

According to court testimony, Sabine State Bank provided a line of credit to First Fidelity Mortgage, monies that were in turn used by First Fidelity to fund mortgages for its customers. This line of credit at Sabine State Bank was secured by the customer notes pledged by First Fidelity.

Nichols devised a scheme by which he prepared fraudulent notes by forging signatures of borrowers and notaries public, and would then deliver them to Sabine State Bank as collateral in order to cause the bank to deposit more money into First Fidelity Mortgage’s account. When the bank would deposit funds into the account to fund these loans, Nichols just kept the money for himself. In total, Nichols defrauded the bank out of $2.9 million.

“Nichols helped himself to millions of dollars of other people’s money through his deceit and deception. Individuals who lie and steal money from banks insured by the American taxpayer should expect to be swiftly prosecuted and punished.” United States Attorney Washington said.

Nichols faces a maximum penalty of 30 years in prison, a $1,000,000 fine, or both. Sentencing is scheduled for February 4, 2010 at 10:00 a.m. Nichols has been detained without bond since his arrest on this indictment in July 2009.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Alexander C. Van Hook.

Four Suburban Men Charged in Mortgage Fraud Scheme

Robert D. Grant, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation (FBI) and Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, announced today the filing of criminal charges against four west suburban men in connection with a mortgage fraud scheme.

The charges were contained in an indictment returned last week by a Federal Grand Jury in Chicago and were unsealed late Tuesday afternoon. The indictment charges three brothers, AHSAN M. MOINUDDIN, age 39; MOSHIN M. MOINUDDIN, age 36; and MUBEEN M. MOINUDDIN, age 33, all of 115 Hesterman Drive in Glendale Heights, Illinois; along with a fourth man, identified as MOISES AGUILERA, age 40, of 3517 South 56th Street in Cicero, Illinois, with multiple counts of Wire Fraud and Identity Theft, both of which are felony offenses.

According to the indictment, the three MOINUDDIN brothers, who were employed as loan officers with First Choice Mortgage, a licensed mortgage broker located in Bloomingdale, Illinois, and AGUILERA devised and participated in a scheme to defraud Argent Mortgage Company, a Rolling Meadows, Illinois based mortgage lender, out of nearly $1 million between 2004 and 2006. The indictment alleges that this fraud was accomplished by submitting loan applications containing materially false statements, which included false and stolen identities and the use of “straw buyers”.

The indictment also identifies three specific properties, all located in DuPage County, which were purchased by the MOINUDDIN’s under false pretenses and which subsequently went into default. The properties were listed as 2210 Concord Lane and 1132 North Anvil Court, both located in Addison, Illinois and 1174 Brighton Place in Glen Ellyn, Illinois.

The three MOINUDDIN brothers were all arrested Tuesday morning, without incident, by FBI Special Agents and Investigators from the Inspector General’s Office at the Department of Housing and Urban Development (DHUD). AGUILERA surrendered to FBI Agents, late Tuesday.

All four defendants appeared in U.S. District Court in Chicago, late Tuesday afternoon, before Magistrate Judge Michael Mason. All four defendants were released on bond, pending their next scheduled court appearance. If convicted of the charges filed against them, all four defendants face a possible sentence in excess of 100 years incarceration.

This case was investigated jointly by the Chicago FBI and Investigators from the DHUD. The charges announced today were the result of “Operation Mad House,” which is a long-term undercover investigation targeting mortgage fraud in the Chicago area.

Mortgage Fraud Surge Investigation Nets More Than 100 Individuals Throughout Middle District of Florida
Part of the Justice Department’s Ongoing Initiative

TAMPA—United States Attorney A. Brian Albritton today announced the results of a nine-month-long Mortgage Fraud Surge investigation that has resulted in charges against more than 100 defendants and involves allegations concerning more than $400 million in loans procured by fraud and more than 700 properties. U.S. Attorney Albritton is holding events throughout the district this week to highlight the announcement.

There are currently mortgage fraud-related charges pending against approximately 500 defendants in federal mortgage fraud cases around the nation. The cases concern both mortgage schemes designed to defraud mortgage lenders and “foreclosure rescue schemes” which prey on distressed homeowners.

“This initiative sends a clear message that mortgage fraud will not be tolerated. We must protect the integrity of the real estate market in our communities, which is a major contributor to the health of our economy, here and throughout the country,” said U.S. Attorney Albritton.

Florida’s Mortgage Fraud Surge was launched in late January 2009 in response to the epidemic of mortgage fraud throughout the state, which began during Florida’s real estate boom earlier this decade. To address this wide scale problem, the U.S. Attorney’s Office for the Middle District of Florida, along with the Federal Bureau of Investigation (FBI) in both its Tampa and Jacksonville Divisions, began a nine-month intensive effort to identify, investigate, and prosecute mortgage fraud in all of its forms.

To accomplish the Surge, the FBI and the U.S. Attorney’s Office for the Middle District of Florida devoted significant additional personnel and resources to investigating and prosecuting mortgage fraud cases. All of the Assistant U.S. Attorneys in the Ft. Myers, Orlando, and Jacksonville offices responsible for criminal matters handled mortgage fraud investigations, and in the District’s largest office, Tampa, over half of the Criminal Division Assistant U.S. Attorneys were assigned mortgage fraud matters. In addition, FBI Special Agent in Charge Steven E. Ibison of the Tampa Division and FBI Special Agent in Charge Jim Casey of the Jacksonville Division established mortgage fraud task forces in their respective jurisdictions. A number of state and federal law enforcement agencies joined these mortgage fraud task forces, and the agents, investigators, and other law enforcement personnel from these participating agencies conducted an intensive and wide-ranging investigation into hundreds of mortgage fraud leads during this Surge phase. Along with the FBI, the agencies that joined in the Surge and who participated in the mortgage fraud task forces are: the Internal Revenue Service-Criminal Investigation, U.S. Secret Service, U.S. Housing and Urban Development Office of Inspector General, U.S. Postal Inspection Service, Florida Department of Law Enforcement, Florida Department of Financial Services/Division of Insurance Fraud, Florida Office of Financial Regulation, Florida Department of Business and Professional Regulation, Lee County Sheriff’s Office (Ft. Myers Division only), Collier County Sheriff’s Office (Ft. Myers Division only) and Brevard County Sheriff’s Office (Orlando Division only).

The U.S. Attorney’s Office charged mortgage fraud defendants throughout the Middle District of Florida. The number of defendants charged by office breaks down as follows: Ft. Myers-32; Tampa-30; Orlando-19; and Jacksonville-24. Of these defendants, 7 are related to cases under seal and not in the public record at this juncture.

An indictment or complaint is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.

The surge investigation completed on October 31, 2009, and announced today is the first phase of a continuing effort to investigate and prosecute not only mortgage fraud professionals and other individuals who have engaged in multiple fraudulent mortgage transactions, but also larger organizations and even financial institutions.

Palm Beach County Mortgage Fraud Task Force Brings Charges Against 15 Defendants for Lying to Banks to Get Money

Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulations, announce fraud charges against fifteen defendants as a result of four separate investigations led by the Palm Beach County Mortgage Fraud Task Force In total, the fraudulent loans resulted in more than $20 million in losses to banks and title insurance companies. These charges are the result of the investigative efforts carried out by a multi-agency task force conducted during the past year.

(1) Eight Defendants Charged in $8.5 Million Dollar Mortgage Fraud Ring

According to a fifteen count indictment returned by a federal grand jury sitting in West Palm Beach, eight individuals were involved in making false statements to banks to obtain mortgage money to purchase five pieces of property in the Versailles subdivision of Wellington, Florida, between January 2007 and October 2007. The defendants include licensed mortgage brokers, title agents, and straw buyers.

Charged by either indictment or information are the following people: Rony Alberto Aguilar-Hecker, 33, of Miami,; Reinaldo Perez-Sanchez, 44, of Miami and Colombia; Pablo Atouro Aponte-Torres, 44, of San Juan, Puerto Rico; Fabio Salazar, 54, of Miami and Colombia; Roger Omar Nunez-Murillo, 60, of Miami Beach; Idalmis C. Arias, 27, of Miami Beach; Ericson Perez, 42, of Cumming, Georgia; and Juan Carlos Lopez, 42, of Miami.

The indictment and informations allege that the defendants and straw buyers engaged in a scheme which resulted in property being sold twice in one day and nearly doubling the value of that property during that one day. The defendants found property which was ostensibly sold to a straw buyer at the price listed to the public for sale through the Multiple Listing Service (MLS). These straw buyers brought no money to the closings, became the owners of the properties for less than 24 hours after which they transferred the titles to second purchasers. For these efforts the straw buyers were paid approximately $10,000.

A second closing occurred in each instance and the properties were “sold” by the straw buyers to the second purchaser for values which increase the properties prices by as much as 60%. The second purchasers obtained mortgages by making false claims as to their income, assets and liabilities on applications to obtain mortgage money from Washington Mutual Bank and that money was used, in part, to pay off the original sellers of the properties. At the conclusion of these second sales, the second purchasers were paid as much as $437,000 from the mortgage money for their efforts and some of the defendants received as much as $155,000 for each property involved.

Mortgage payments on the properties in this scheme were made for less than a year to Washington Mutual Bank and in some instances were abandoned, which caused the bank to move to foreclose on the property and take ownership of the homes. The result was that the bank lost much of the mortgage money by the actions of these defendants. A total of more than $8.5 million in mortgage money was obtained from Washington Mutual Bank through this conspiracy and scheme to defraud.

(2) Four Charged with Recruiting College Students and Military Personnel to Apply for False Loans

According to an indictment returned by a federal grand jury sitting in West Palm Beach, between April 2006 and April 2007, four individuals were involved in recruiting college students and military personnel to make false statements on mortgage loan applications and creating false documents supporting those applications to obtain more than $1.7 million in mortgages for five real estate transactions.

Charged by the indictment are the following people: Allen J. Gingrich, 29, of Atlanta, Georgia; Stephen Mark Lecorgne, 29, of Palm Beach Gardens; Brian Ernest Oelbermann, 28, of West Palm Beach; and Donte Deshaun White a/k/a Donte Cox, 30, of Atlanta, Georgia.
According to the indictment, Gingrich and Cox were the principals of Focus International Equity Partners, LLC, which they touted as a real estate investment and management company. The company was run out of a townhouse in Atlanta, Georgia. Gingrich and Cox solicited college students and young soldiers through Focus International, in the Atlanta area, to obtain mortgage loans on various properties, many of which were in South Florida. The information submitted on the loan applications was false. Gingrich and Cox used Warshaw Capital, LLC, a mortgage brokerage firm in Palm Beach County, to facilitate obtaining all of the fraudulent loans because Brian Olberman and Steven Marks LeCorgne, two of the loan originators at Warshaw Capital, agreed to participate in the scheme.

(3) West Palm Beach Residents Charged with Looting Title Company’s Escrow Account

According to an indictment returned by a federal grand jury sitting in West Palm Beach, between July 2005 and May 2008, Roger C. Gamblin, 61, and Peggy L. Gamblin, 53, both of Royal Palm Beach, Florida, defrauded companies and individuals out of approximately $10 million.

According to the indictment, the husband and wife owners and operators of Flagler Title Company teamed up to steal money from the escrow account for Flagler Title Company to cover company operating expenses and personal expenses. The fraud was committed by promising the Title Insurance Companies they represented and various companies and individuals with outstanding real estate transactions that money in the Flagler Title Company escrow accounts would be used solely in connection with real estate transactions and their fees would not be disbursed until the transactions occurred and Flagler had earned their fee. Instead, the Gamblins caused money to be transferred without completing the transactions or obtaining permission from the Title Insurers, buyers, sellers and mortgagees involved in the property transactions.

(4) Coral Springs Resident Charged with Obtaining False Business Loans
According to an information filed by the United States Attorney, Michelle Fletcher, 33, of Coral Springs, Florida, obtained business loans from four banks based upon loan applications which contained false statements. Ms. Fletcher is charged with three counts of committing fraud on a financial institution. The information alleges that Ms. Fletcher obtained loans from National City Bank, Regions Bank and Peninsula Bank for a business which she falsely claimed to own for two or more years, to be engaged in consulting, and to have gross receipts of more than $1.3 million during the year prior to the applications for the loans. The information goes on to allege that loans totaling $400,000 were sought and based on the false information provided to the banks, loans in the amount of $200,000 were approved.

Defendants charged with conspiracy to commit wire fraud and substantive wire fraud can face up to 30 years incarceration and a $1 million fine for each count along with restitution.
“Through hard work and coordination with our law enforcement partners, the United States Attorney’s Office will continue to prosecute those who commit bank and mortgage fraud,” said Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida.

Mr. Sloman commended the investigative efforts of the FBI, Secret Service and the State of Florida’s Office of Financial Regulation. The cases are being prosecuted by Assistant United States Attorneys Ellen Cohen and Carolyn Bell.

Jacksonville Man Sentenced to Seven Years in Mortgage Fraud Scheme

JACKSONVILLE, FL—United States Attorney A. Brian Albritton announces that U.S. District Judge Henry Lee Adams, Jr., today sentenced Juan Carlos Gonzalez (age 51, of Jacksonville) to seven years in federal prison for conspiring to commit wire and bank fraud. The court also entered a money judgment against Gonzalez for $6,296,303.65, the amount that Gonzalez obtained from the fraud. Gonzalez had pleaded guilty on November 25, 2008.

According to court documents, during 2004 and 2005, Gonzalez contracted to purchase 55 properties. For each property, Gonzalez directed an appraiser to significantly inflate the property’s value and submitted the inflated price to a lender to support a mortgage loan based on that price.

Gonzalez also submitted fraudulent financial documents and information, including altered bank statements and payroll records, to cause the lender to approve a loan for a higher amount.

At each closing, Gonzalez received the difference between the loan amount, which was based on the inflated appraisal, and the actual purchase price.

Gonzalez’s plea agreement details one transaction in which Gonzalez contracted to purchase a house for $490,000, obtained an inflated appraisal for $625,000, and submitted first and second mortgage loan applications reflecting a sales price of $625,000. Gonzalez also submitted altered bank account statements showing significantly larger cash balances than actually existed. The lender approved the loans, and, at the closing Gonzalez received $134,000, listed on closing documents as an “Assignment of Contract Fee.”

Gonzalez’s fraudulent acts resulted in lenders extending more than $29,272,000 in first and second mortgage loans. Gonzalez, who had no other source of significant income, received $6,296,303.65 from his scheme.

The case was investigated by the Federal Bureau of Investigation (FBI). It was prosecuted by Assistant United States Attorney Arnold B. Corsmeier.

This case was brought as part of the Middle District of Florida’s Mortgage Fraud Surge, a joint effort by the U.S. Attorney’s Office for the Middle District of Florida, the Federal Bureau of Investigation, Tampa and Jacksonville Divisions, and numerous other federal, state, and local law enforcement agencies. The Surge, which ended October 31, focused intensive investigative and prosecutorial resources on the mortgage fraud crisis that plagues middle Florida and has contributed to the current economic situation nationwide. The Surge accelerated mortgage fraud cases to bring perpetrators to justice quickly and provide maximum deterrence, and it was the first step in an ongoing effort to prosecute mortgage fraud of all types throughout the Middle District. For more information on the Middle District of Florida’s Mortgage Fraud Surge, please contact Steve Cole, Public Affairs Officer for the United States Attorney’s Office.

Annandale Loan Broker Sentenced 48 Months for Two Fraud Schemes

ALEXANDRIA, VA—Hayung Peter Jin, 46, of Centreville, Va., was sentenced today to 48 months in prison, followed by three years of supervised release, on fraud charges involving his loan brokerage business, known as Business Capital and Investments, Inc., located in Annandale, Va. Jin was also ordered to pay restitution in the amount of $665,000.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Joseph Persichini Jr., Assistant Director in Charge of the FBI Washington Field Office, made the announcement after sentencing by United States District Judge James C. Cacheris.

Jin pled guilty to multiple fraud charges and aggravated identity theft on Aug. 17, 2009. According to court documents, Jin admitted his involvement in two separate schemes involving his loan brokerage business, which served primarily Korean Americans in the Washington metropolitan area.

The first scheme occurred in October 2005, when Jin convinced a former client to sell his Loudoun County home to another person, a South Carolina businessman named Han; however, Han had never agreed to purchase the home. Jin used Han’s name and Social Security number to obtain financing for the apparent purchase of the home, plus additional home equity loans in Han’s name. Jin, who was a licensed notary public, fraudulently notarized Han’s signatures on loan documents. The total amount of fraudulently obtained financing was $620,000.

In connection with the second scheme, in January 2007 Jin convinced a local business woman that he had obtained four borrowers who wanted to borrow funds from her in the total amount of $360,000, when in fact the alleged borrowers had never agreed to such an arrangement. Jin forged four promissory notes and gave them to the businesswoman in order to induce her to transfer the $360,000 to him, with the understanding that Jin would transfer the funds to the four “borrowers.” In reality Jin kept the funds for himself.

This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorney Stephen P. Learned prosecuted the case on behalf of the United States.

CFO of Real Estate Development Firm Admits Role in Fraud Scheme

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that PAUL MAYOTTE, 69, of Brookfield, the CFO of Girouard Associates, Inc. and RRG Investments, LLC, both of which are owned by Connecticut real estate developer Richard Girouard, pleaded guilty today before Senior United States District Judge Alfred V. Covello in Hartford to one count of an indictment charging MAYOTTE with conspiring with Girouard to commit wire fraud related to a scheme to defraud an investor out of money.

According to court documents and statements made in court, in November 2002, RRG Investments purchased Fleet Bank’s share of an entity known as “LINC Receivables.” LINC Receivables was the owner of certain leases and installment sales contracts that produced a stream of revenue. That same month, MAYOTTE, on behalf of RRG Investments, negotiated an agreement on lending terms with the victim investor. Under a subsequent written agreement, the investor agreed to loan RRG Investments $2.5 million in return for a 32 percent share of the net cash flows received pursuant to the purchase of LINC Receivables after RRG Investments and the investor had recouped their initial investment of $4.15 million and $2.5 million, respectively.

In October 2005, MAYOTTE informed the victim investor that RRG Investments would be withholding all further distributions to the investor due to legal and tax issues that had arisen concerning LINC Receivables. MAYOTTE told the investor that he would keep him advised and let him know as soon as the issues were resolved.

In pleading guilty, MAYOTTE admitted that he and Richard Girouard agreed to conceal from the investor the fact that the legal and tax issues cited as cause for temporarily withholding distributions did not result in the need to withhold distributions indefinitely, and that he and Girouard agreed not to resume making payments to the investor as they knew they were required to do. Instead, MAYOTTE admitted that he and Girouard kept the money to which the victim investor was entitled.

Judge Covello has scheduled sentencing for February 25, 2009, at which time MAYOTTE faces a maximum term of imprisonment of five years. MAYOTTE also must make full restitution to the victim.

On November 24, 2009, Girouard pleaded guilty to one count of conspiracy to commit financial institution bribery stemming from his involvement in LINC Receivables transactions. Girouard has agreed separately to make restitution of more than $427,000 to the victim investor arising out of the same allegations to which MAYOTTE pleaded guilty today. He awaits sentencing.

This matter has been investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorneys Eric J. Glover and David Novick.

Valley Investments Owners Philip Lochmiller, His Son, as Well as Another Employee Indicted for Conspiracy and Fraud

DENVER—Owners and operators of Valley Investments, Philip R. Lochmiller, age 61, of Mack, Colorado, and Philip R. Lochmiller, II, age 38, presently of Olathe, Kansas, as well as a Valley Investments employee, Shawnee N. Carver, age 33, of Grand Junction, Colorado, were indicted by a federal grand jury in Denver yesterday on conspiracy and fraud charges, U.S. Attorney David Gaouette and Federal Bureau of Investigation (FBI) Special Agent in Charge James Davis announced. The indictment was sealed pending the defendants’ arrest. Lochmiller was arrested without incident this afternoon.

Philip R. Lochmiller and Shawnee Carver will both make their initial appearances on Thursday, December 17, 2009, at 1:00 p.m. at the Federal Courthouse in Grand Junction, Colorado, before U.S. Magistrate Judge Gudrin Rice.

According to the indictment, Valley Investments (which was first called Valley Mortgage) was incorporated in Colorado in 1994, and was originally engaged in the business of originating or brokering home mortgages. The business was located in Grand Junction, Colorado. From its inception until it closed in May 2009, Lochmiller and Lochmiller, II operated and controlled Valley Investments. Beginning in approximately 1999, the Lochmillers and others entered into the affordable housing real estate development and housing sale business. The business primarily involved the acquisition, using investor funds, of vacant land or existing mobile home parks, converting them to mobile or manufactured home subdivisions.

Between November of 1999 through April 2008, Valley Investments acquired five properties purportedly to develop affordable housing subdivisions. To finance the properties, Lochmiller and Lochmiller, II, advertised and solicited investments from individuals by promising a short duration high percent interest rate to be paid monthly. The advertisements characterized the investment as a “solid security” secured and recorded by a Deed of Trust in the investor’s name. The Lochmillers also represented to investors that Valley Investments used investor funds exclusively to acquire the properties and finance the development of the subdivisions they owned. Further, they represented that the company generated large profits by selling manufactured homes together with lots within their subdivisions. They later promised investors a return as high as 18 percent on their investments. In exchange, investors were to receive a promissory note and a recorded first Deed of Trust on individual lots, worth a minimum of $20,000 at a 50 percent loan-to-value ratio.

From 2005 through May 2009, defendant Shawnee Carver was a full-time employee of Valley Investments, and a personal assistant to Lochmiller, II. She had full and exclusive access to data and interacted with investors.

The indictment alleges that Lochmiller failed to disclose a prior conviction for securities fraud in California. It also states that they failed to disclose that the Colorado Division of Securities issued a letter in June of 2001 insisting Valley Investments to cease the offering and advertising of unregistered securities. Both Lochmiller and Lochmiller, II failed to disclose prior Bankruptcy filings.

All three defendants were salaried employees. The indictment alleges that Lochmiller and Lochmiller, II directed and caused Valley Investments to pay numerous personal expenses on their behalf. Lochmiller, II also received bonuses of 1 percent of the amount invested through him. Between 2000 and 2009, Lochmiller and Lochmiller, II caused Valley Investments to receive approximately $31,000,000.00 from approximately 400 investors.

The indictment alleges that from 1999 through May of 2009, the three defendants did knowingly and willfully conspire to devise a scheme to defraud, and obtain money or property by means of false and fraudulent pretenses, representations and promises. It also alleges that the defendants engaged in a scheme to commit securities fraud.

As part of that scheme, Valley Investments did not own sufficient property or assets to secure the investments as represented. Despite this fact, the defendants continued to solicit investor funds for several years despite knowing that the business was not generating sufficient profit. Because the business operation was not sustainable, the three defendants allegedly used new investor funds to make interest payments to existing investors, operate the daily activities of the business, and fund the Lochmillers’ personal expenditures. The Lochmillers and Carver continued to misrepresent to investors that the business was thriving, and did not disclose to new investors how their money was being used. Also, because there were not sufficient funds, the defendants did not file all of the Trust Deeds on behalf of investors, and most of the filed Trust Deeds were not the first encumbrance of the properties named and were thus worthless. The indictment further alleges that Carver notarized forged signatures of investors for fraudulent releases of Deeds of Trust.

In May 2009 the State of Colorado Division of Securities issued a Cease and Desist order to Valley Investments. Less than two weeks later Valley Investments closed its doors. Further, a Denver District Court Judge appointed a Receiver over Valley Investments and all related entities.

“Investors should always remember the old saying that if it looks too good to be true, it probably is,” said U.S. Attorney David Gaouette. “Unfortunately, there are many people out there who are unscrupulous and tempting potential investors with false claims. Law enforcement will investigate these criminals and our office will prosecute them, but the public needs to be wary and only invest after thoroughly checking out these claims of large profits.”

“These arrests demonstrate the FBI’s continuing commitment to aggressively investigate complex financial crimes, especially when the targeted victims are vulnerable and elderly,” said FBI Special Agent in Charge James Davis. “We are especially appreciative of the tremendous cooperation from the victims in this case. The success of this investigation to date is tribute to the combined efforts of our federal law enforcement partners, including the IRS-CID, U.S. Postal Inspection Service, and the U.S. Attorney’s Office in Grand Junction.”

“Money laundering creates an untaxed economy that uses legitimate businesses to conceal criminal activity,” said Christopher M. Sigerson, Special Agent in Charge of IRS Criminal Investigation, Denver Field Office. “IRS-CI has the financial investigators and expertise to follow the money and deprive criminals of their gains.”

“Postal Inspectors partnered with fellow law enforcement agencies in this investigation to assure the arrest of individuals utilizing the U.S. Mail for fraudulent means,” said U.S. Postal Inspector In Charge Shawn Tiller. “This is an offense the Postal Inspection Service takes very seriously.”

Philip Lochmiller faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, 20 counts of money laundering, and 10 counts of mail fraud.

Philip Lochmiller, II, faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, eight counts of money laundering, and 10 counts of mail fraud.

Shawnee Carver faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, and 10 counts of mail fraud.

Conspiracy carries a penalty of not more than five years’ incarceration, and up to a $250,000 fine. Conspiracy to money laundering carries a penalty of not more than 20 years in federal prison, and a fine of up to $500,000. Money laundering carries a penalty of not more than 10 years’ incarceration and a fine of up to $250,000. The penalty for mail fraud is up to 20 years incarceration and not more than a $250,000 fine.

This case was investigated by the Federal Bureau of Investigation (FBI), the Internal Revenue Service – Criminal Investigations (IRS CI), and the U.S. Postal Inspection Service, with substantial assistance from the State of Colorado Division of Securities and the Mesa County Sheriff’s Office.

The case is being prosecuted by Assistant U.S. Attorney Michelle M. Heldmyer.

Architect of Mortgage Fraud and Real Estate Investment Fraud Schemes Pleads Guilty in Federal Court

SAN FRANCISCO—Patricia Morgen pleaded guilty in federal court in San Francisco yesterday to wire fraud, mail fraud and money laundering, United States Attorney Joseph P. Russoniello announced.

In pleading guilty, Morgen admitted that the company she founded and controlled, Chicago Development and Planning, engaged in two fraudulent schemes: (1) a Ponzi scheme that defrauded more than 400 individual investors by falsely promising that their investment funds would be used to acquire, renovate, and re-sell real estate; and (2) a mortgage fraud scheme that defrauded a mortgage broker and various mortgage lenders by use of loan applications with fraudulent income and asset statements. Morgen admitted that the loss for the two schemes exceeded $8 million. In the plea agreement, Morgen agreed to make restitution in the amount of no less than $8,439,086.

“The Department of Justice has made mortgage fraud a top priority,” U.S. Attorney Russoniello said. “We will continue to vigorously prosecute individuals who commit mortgage fraud and other financial crimes.”

The Securities and Exchange Commission (SEC) began investigating Chicago Development and Planning in 2004, and ultimately obtained a default judgment against Morgen when she failed to appear in any of the civil proceedings. In pleading guilty, Morgen admitted that when she learned of the SEC’s investigation, she instructed employees to destroy documents and then fled to Mexico to avoid federal authorities. Morgen also admitted that she instructed an employee to contact a mortgage broker who had worked on Chicago Development and Planning real estate acquisitions in an attempt to convince the mortgage broker not to provide documents to the SEC.

On Sept. 2, 2009, Morgen’s co-defendant, Michael Ware, pled guilty to similar charges involving Chicago Development and Planning’s mortgage fraud scheme.

“This case shows that the appearance of success can be a mask for a tangled financial web of lies,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation, Oakland Field office. “Ponzi schemes can thrive for a time on false claims about how the money is being invested and where the returns are coming from. But that time is gone, and as this case shows, it’s time for those responsible to face judgment.”

Morgen, 62, was indicted by a federal Grand Jury on Nov. 20, 2008. She was charged with 11 counts of mail and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343, as well as a single count of money laundering, in violation of 18 U.S.C. § 1957. Under the plea agreement, Morgen pled guilty to two counts of mail fraud, two counts of wire fraud, and one count of money laundering.

Morgen is currently in the custody of the Bureau of Prisons. Her sentencing is scheduled for April 7, 2010, before Judge Charles R. Breyer in San Francisco. The maximum statutory penalty for mail and wire fraud is 30 years. The maximum statutory penalty for money laundering is 10 years. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Tracie L. Brown and Jeffrey R. Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of a lengthy investigation by the IRS-Criminal Investigation Division and the Federal Bureau of Investigation.

Former Fugitive Arraigned on Mortgage Fraud Charges

United States Attorney Karen P. Hewitt announced that Lucette Montane, a fugitive since June 2008, was arraigned on a 2008 indictment in federal court today before Magistrate Judge Jan Adler. Montane surrendered to Customs and Border Protection officials yesterday at the San Ysidro Port of Entry. Agents from the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation Division, arrested Montane based on a pending arrest warrant.

On July 18, 2008, a federal grand jury returned an indictment charging Montane and five others with devising a plan to defraud and to obtain money and property by false and fraudulent means, related to mortgage fraud. According to court documents, in 2005, Abner Betech, Said Betech and others started Creative Financial Solutions, Inc. (“CFS”), a mortgage brokering company located at 707 Broadway Avenue, Suite 1720, San Diego. CFS was in the business of sending loan application packages and other documents to lenders for review and funding. The court documents further allege that CFS did not fund loans, but instead received commissions from the lenders when the loans closed. The defendants were loan officers at CFS and in addition to the commissions, they received payments from lenders, sellers, and buyers when loans closed.

The documents also allege that CFS obtained mortgage loans for unqualified borrowers by, among other things, concealing the true purchase price of the homes by submitting false purchase contracts; submitting false loan applications; intentionally concealing the fair market value of the home; using misleading appraisals; and submitting false bank statements and income documentation. In total, the victim lenders funded more than $16 million in loans on properties that have been foreclosed or are in the foreclosure process. The lenders have lost over $3.9 million, with potential losses in excess of $5.1 million, due to the fraudulent loans.

This case is the product of an investigation by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation Division.

DEFENDANT
Lucette Montane Age: 26
Criminal Case No. 08 CR 2387-W

SUMMARY OF CHARGES
Title 18, United States Code, Section 1349 (Conspiracy to Commit Wire Fraud)
Maximum Penalties: 20 years’ incarceration, a fine of $250,000, three years of supervised release
Title 18, United States Code, Section 1956(h) (Conspiracy to Launder Monetary Instruments)
Maximum Penalties: 20 years’ incarceration, a fine of $250,000, three years of supervised release

AGENCIES
Federal Bureau of Investigation
Internal Revenue Service – Criminal Investigation

Former Executive at Colorado Home Building Company Admits Role in $16 Million ‘Builder Bailout’ Scheme
Southern California Loan Officer, Real Estate Agent Linked to Scheme in Which Unqualified Buyers Obtained Mortgages for Luxury Homes

LOS ANGELES—The former director of sales for a Colorado real estate company that built luxury homes throughout the state agreed in court papers filed today to plead guilty to a federal conspiracy charge, admitting that he and other company officials participated in a $16 million “builder bailout” scheme in which buyers of $1 million-plus homes were paid kickbacks if they purchased homes from the company.

Benjamin Serrano, 47, who until recently lived in Parker, Colorado, was charged in a criminal information filed this morning. In a related plea agreement also filed this morning in United States District Court, Serrano agreed to plead guilty to one count of conspiracy.

In the court documents, Serrano admits his role in a scheme to bring needed revenue to his company and admits working with Kristin A. Clark, a licensed real estate agent in Los Angeles, and Bradley Bishop, a former loan officer at Washington Mutual Bank and, later, Bank of America. Both Clarke and Bishop previously pleaded guilty to bank fraud charges.

In his plea agreement, Serrano admits to participating in a conspiracy with Clark and Bishop, as well as others at the company, to defraud Bank of America, Wells Fargo Bank, Washington Mutual Bank and other federally insured financial institutions. In the scheme, people associated with the company agreed to pay illegal kickbacks to individuals who agreed to buy homes in one of the company’s five developments.

To conceal the illegal kickbacks from the banks, Serrano and others would record bogus second deeds of trust on the company’s properties, according to papers filed in court. The second deeds of trust were recorded in favor of shell corporations controlled by the company for an amount equal to the kickback. Once someone agreed to buy a home, Bishop would tell Clark what information needed to be listed on the buyer’s loan application in order for him or her to qualify for a home loan at Bank of America, and Clark would use that information to obtain the bogus documentation required by the bank. When the properties were sold and loans funded, the banks would use part of the loan proceeds to pay off the bogus second deeds of trust recorded against the property. That money, which was paid to the company’s shell corporations, was then used to pay the kickbacks to the buyers. The kickbacks typically ranged between 20 percent and 23 percent of the homes’ sales price, which all sold for more than $1 million.

In one instance discussed in Serrano’s plea agreement, a buyer agreed to purchase a home in Parker, Colorado for $1,277,500. In exchange, the company agreed to pay the buyer a kickback of approximately $269,000 out of the loan proceeds. Serrano and others at the company agreed to this sale knowing that the buyer had used a false identity to obtain a home loan from Wells Fargo. In fact, Serrano admitted in the plea agreement, he paid for the buyer to fly to Los Angeles to obtain a better fake identification. FBI agents in Colorado followed up on this sale and discovered that the buyer later defaulted on the loan and the property was sold for $533,000, resulting in a loss of $694,500 to the bank.

Special Agents with the FBI in Los Angeles first began investigating Clark, Bishop, Serrano and others involved in the scheme in April 2008 after a woman contacted Bank of America to report that her identity had been stolen and used to apply for a $1 million home loan for property in Colorado. Bishop and Clark later pleaded guilty to their involvement in the conspiracy and agreed to cooperate with the government in its on-going investigation into Serrano and others at the company. Bishop and Clarke each pleaded guilty earlier this year pursuant to plea agreements that have been partially unsealed. According to Bishop’s plea agreement, between January 2008 and April 2008—a time when the real estate market was in sharp decline—he processed 11 fraudulent loans worth $12,571,366 that were used to buy properties built by Serrano’s former company. According to Clark’s plea agreement, she prepared the fraudulent loan applications and submitted fictitious tax returns, W-2s and payroll stubs in support of the fraudulent loans. Clark further admitted that she used her two real estate companies, K&K Investments and Cardinal and Gold Investments, to secretly funnel kickbacks to the buyers.

Serrano agreed to plead guilty to one count of conspiracy, which carries a statutory maximum penalty of five years in federal prison. Serrano is scheduled to make his initial court appearance in United States District Court on December 14.

Clark pleaded guilty in January to 13 counts of bank fraud, which each carry a statutory maximum penalty of 30 years in federal prison. Bishop pleaded guilty in September to 11 counts of bank fraud. Clark and Bishop pleaded guilty before United States District Judge Christina A. Snyder.

The cases against Serrano, Clark and Bishop are part of an ongoing investigation being conducted by the Federal Bureau of Investigation’s Los Angeles and Colorado Field Offices.

Investor Sentenced to 18 Months in Prison for Role in Mortgage Fraud Scheme

PHOENIX—Brandon Azadegan, 29, of Phoenix, was sentenced yesterday to 18 months in prison for an April 2009 conviction for his role as an investor selling four homes to a straw buyer. Azadegan pleaded guilty to one count of Conspiracy to Commit Wire Fraud and one count of Transactional Money Laundering. Six other co-conspirators have pleaded guilty for their involvement in the conspiracy. Gheorge Babeti was sentenced to 14 months in federal prison in August 2009. The remaining defendants will be sentenced in the next few months.

Dennis K. Burke, U.S. Attorney for the District of Arizona, highlighted the significance of this sentence, stating that, “Mortgage fraud has had a devastating impact on property values, lending institutions, and entire neighborhoods in our community. It has resulted in the loss of tax revenues and jobs. To those who engage in mortgage fraud—particularly real estate industry professionals in which the public places trust—you can expect that we are taking these cases very seriously and we will strongly urge prison sentences where appropriate.”

The case against Azadegan was based on an investigation by the Internal Revenue Service, Criminal Investigation Division and the Federal Bureau of Investigation. Azadegan sold his four homes to Babeti, a straw buyer who submitted loan applications to lenders containing false information. Other co-conspirators received cash back at closing. In addition to purchasing Azadegan’s four homes, Babeti purchased six others. All went into foreclosure.

The investigation in this case was conducted by the Internal Revenue Service, Criminal Investigations Division and the Federal Bureau of Investigation. The prosecution is being handled by Kevin M. Rapp and James R. Knapp Assistant U.S. Attorneys, District of Arizona, Phoenix.

CASE NUMBER: CR-08-00612-PHX-NVW

Nine Sentenced in Alaska’s Largest Mortgage Fraud Investigation

ANCHORAGE, AK—United States Attorney Karen L. Loeffler announced that in 2009, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name. Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2,360,185. Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.60. Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.24. Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.77. Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day. Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066.390. Gary Paterna. Mr. Lockard’s father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.86. Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.53. The defendants pled to a total of 64 counts charging conspiracy, wire fraud, bank fraud, and false statements to a financial institution.

The pleas and sentencing bring to a close the largest mortgage fraud scheme ever prosecuted in the District of Alaska. The fraud was perpetrated by professionals in all areas of the real estate industry. Between on or about December 23, 2003, and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudlent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified down payments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved. The effect and result of this conduct was to transfer the investment risk from Lockard and the other co-conspirators to the mortgage lenders and to provide inflated profit and fraudulently obtained loan funds to Lockard and the other co-conspirators. The charges in the indictment to which the defendants pled guilty outlined a total of five separate schemes, involving properties in numerous Anchorage subdivisions, and two large undeveloped properties in the Talkeetna area.

According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no down payments had been made.

The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Company as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.

The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA. Finally, the indictment alleges that Lockard engaged in a “bust out” scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.

At Friday’s sentencing hearing, Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudeulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million dollars. Judge Beistline commented that Mr. Lockard’s crimes were motivated by greed and had an impact on our community. In addition to the financial institutions that were defrauded, one of the individual victims testified at setencing about his personal financial losses, and his struggles to pay the mortgages on three duplexes he had unwittingly purchased for grossly inflated prices. Judge Besitline admonished that there was “no excuse for lying and deception, and no excuse for breaking the law,” and that Mr. Lockard was going to have to “face the consequences of the very poor choices he made.”

United States Attorney Karen L. Loeffler noted that these convictions and sentences point out the vast harm that can be done to an industry and the public when a handful of dishonest individuals are willing to falsify the documents and information on which the mortgage market relies.

Ms. Loeffler also commended the diligent and extensive investigation by special agents of the Federal Bureau of Investigation for their investigation that lead to this result.

Florida Man Sentenced to 50 Months in Federal Prison in Montgomery Mortgage Fraud Scheme
Real Estate Developer Sold Properties in Alabama, Florida, and Tennessee Using Sham Down Payments

MONTGOMERY, AL—Robert B. Guest, Jr., age 46 (a resident of St. Augustine, Florida, who resided in Orlando at the time of the events in the case), was sentenced by U.S. District Judge Myron H. Thompson to 50 months in federal prison for his role in a mortgage fraud scheme, U.S. Attorney Leura G. Canary announced today.

On June 18, 2008, Guest pleaded guilty to a one-count felony information charging him with conspiracy to make false statements to financial institutions, in violation of Title 18, United States Code, Section 371. According to the plea agreement and information, beginning in the Fall of 2002, Guest began engaging in the business of buying and selling houses. Guest would purchase a house in an area of low property values, at first in Birmingham, Alabama, and, beginning in 2005, in Montgomery, Alabama. Guest also bought and sold houses in Orange and Seminole Counties, Florida, and Nashville, Tennessee.

Prior to buying a house, Guest arranged to resell the house to another individual (the “Investor”). Guest’s written contract with the Investor would provide that Guest would sell the property to the Investor for a price substantially in excess of the price Guest had paid for it. The properties were to be rented to “Section 8” tenants, and the rent payments were supposed to provide the Investor with enough funds to cover the amount of the mortgage, plus a profit.

The Investors financed the purchase through a mortgage loan from either a bank or a nonbank mortgage lender. The Investor would apply for an “80/20” mortgage loan, which meant that the Investor was supposed to be paying 20 percent of the purchase price, with the lender financing 80 percent. The Investor and Guest had an unwritten side deal whereby Guest would immediately refund the amount of the down payment to the Investor, typically within 24 hours. Therefore, the economic reality of the transactions was that the Investor was buying the house for the amount of the loan, and the lender was providing 100% financing instead of 80 percent. Both the loan application submitted by the Investor and the closing statement signed by Guest and the Investor represented that the Investor was putting 20 percent down without disclosing the side deal.

Guest sold more than 200 houses pursuant to this scheme, approximately 100 of which were in Montgomery. The lenders for most of the Montgomery houses were Countrywide Bank, FSB and its affiliate, Countrywide Home Loans, Inc. Countrywide is expected to suffer a loss of more than $5 million as a result of these loans.

The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorneys Andrew O. Schiff and Monica A. Stump.

Appraisal Business Owner Indicted in Mortgage Fraud Scheme

ALBANY, NY—Andrew T. Baxter, United States Attorney, Rene Febles, Special Agent in Charge, United States Department of Housing and Urban Development, Office of Inspector General, John F. Pikus, Special Agent in Charge, Albany Division of the Federal Bureau of Investigation, Patricia J. Haynes, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (New York Field Office), and Robert Bethel, Inspector in Charge, United States Postal Inspection Service, announce that MICHAEL CASSADEI, age 53, of Schenectady and Galway, New York, was arrested today following the unsealing of a five-count indictment by a federal grand jury in Albany.

The indictment alleges that defendant MICHAEL CASSADEI, D/B/A/ AAA ALLSTATE APPRAISAL SERVICES, violated Title 18, United States Code, Sections 1344(1), (2) and 2 by participating with others in a complex mortgage fraud property-flipping scheme by making and causing to be made materially false and fraudulent misrepresentations to a federally-insured financial institution with regard to, among others, certain loan applications, down payments, seller-held second mortgages, and HUD-1 forms, and by using his own appraisal business to generate misleading appraisals in support of the residential properties he sold through nominees, and through whom he obtained the bulk of the proceeds of the resulting mortgage loans. All of the properties, which were located in Albany and Schenectady, went into foreclosure and caused significant losses to the financial institutions which held the mortgages.

The indictment further charges that defendant MICHAEL CASSADEI, D/B/A/ AAA ALLSTATE APPRAISAL SERVICES, tampered with a witness by instructing the witness to lie to a federal agent who participated in the investigation. An indictment is merely an accusation and the defendant is presumed innocent unless and until proven guilty.

If convicted, MICHAEL CASSADEI, D/B/A/ AAA ALLSTATE APPRAISAL SERVICES faces a maximum sentence of up to thirty years of imprisonment, a period of up to five years of supervised release, and fines of up to one million dollars on each of the four counts of bank fraud in the indictment, and up to twenty years of imprisonment, a period of up to five years of supervised release, and a fine of up to $250,000 on the witness tampering charge.

MICHAEL CASSADEI, D/B/A/ AAA ALLSTATE APPRAISAL SERVICES was arraigned today on the charges before United States Magistrate Judge David R. Homer in Albany, and was released with conditions.

The case is being investigated by the Office of the Inspector General of the United States Department of Housing and Urban Development, the Albany Division of the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation Division, the United States Postal Inspection Service, the New York State Police Special Investigations Unit, and the New York State Banking Commission. It is being prosecuted by Assistant United States Attorney Joshua S. Vinciguerra