Stamford Accountant Admits Involvement in Conspiracy to Defraud Mortgage Lenders

Nora R. Dannehy, United States Attorney for the District of Connecticut, today announced that JOSE I. FLORES, 50, of Fairfield Avenue, Stamford, waived his right to indictment and pleaded guilty yesterday, January 20, before United States District Judge Christopher F. Droney in Hartford to one count of conspiracy to commit wire fraud stemming from his participation in a mortgage fraud scheme.

In pleading guilty, FLORES, an accountant, admitted that from approximately 2004 to 2008, he conspired with others to defraud mortgage lenders by causing so-called “accountant letters,” which contained materially false information about the loan applicant, to be submitted to lending institutions on behalf of applicants for residential real estate mortgages.

According to court documents and statements made in court, FLORES, who did business as a tax preparer and accountant under the name Harvard Financial Services in Stamford, was approached by the owner of a real estate and mortgage broker in Stamford to create fraudulent accountant letters. Under a mortgage program offered at the time by certain mortgage lenders, mortgage applicants could apply for a so-called “stated income loan,” which did not require income verification. Through this program, lenders required a letter from the applicant’s accountant or tax preparer verifying, among other things, the applicant’s employment status, particularly for applicants claiming to be self-employed. FLORES agreed to write accountant letters containing false information for the owner of the mortgage brokerage and its loan officers knowing that the letters would be used in connection with loan applications to mortgage lenders. Over the period of several years, FLORES was paid up to $100 per letter by the mortgage brokerage to provide numerous false accountant letters.

Judge Droney has scheduled sentencing for April 9, 2010, at which time FLORES faces a maximum term of imprisonment of five years and a maximum fine of $250,000, or twice the gross gain or loss from the offense.

This matter is being investigated by the Connecticut Mortgage Fraud Task Force and is being prosecuted by Assistant United States Attorney Eric J. Glover. The Connecticut Attorney General’s Office provided valuable assistance to the investigation.

U.S. Attorney Dannehy stated that the investigation is ongoing.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.

Mortgage Fraud Task Force Mortgage Fraud Task Force

Mortgage Fraud Task Force Mortgage Fraud Task Force

MICHAEL HERSHKOWITZ, Manhattan Real Estate Developer Sentenced to Four Years in Prison for $27 Million Mortgage Fraud and Ponzi Scheme

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that Manhattan real estate developer MICHAEL HERSHKOWITZ was sentenced today to four years in prison for his participation in a $27 million Ponzi scheme involving fraudulent loans secured by nonexistent mortgages.

According to the documents filed in the case in Manhattan federal court:

HERSHKOWITZ, working through a Manhattan real estate development company, The Kingsland Group, Inc., and related entities (collectively, “The Kingsland Group”), fraudulently induced approximately 100 individuals to lend the Kingsland Group over $27 million to fund the renovation of approximately sixteen multi-family apartment buildings located in upper Manhattan. HERSHKOWITZ and a co-conspirator, IVY WOOLF-TURK, falsely represented that the lenders would hold, as collateral for the loans, interests in bona fide first mortgages in the various properties in which they thought they were investing. In truth and in fact, HERSHKOWITZ did not record mortgages on behalf of the lenders. Some interest was paid to some of the defrauded lenders with loans made by other victims, and HERSHKOWITZ or WOOLF TURK made false statements to investors about the status of their loans. Ultimately the principal on the loans was not repaid when due, and the lenders learned that they did not have valid first mortgages on the properties in question, as had been falsely promised to them.

Numerous victims wrote letters to the Court, describing the impact of HERSHKOWITZ and WOOLF-TURK’s Ponzi scheme. One stated that she had “lost my life savings of a little over $200,000 because I trusted MICHAEL HERSHKOWITZ’s integrity,” and that her “life had changed completely, and I fight depression every day.” Another victim stated that because of the fraud, she “can no longer afford health insurance,” and “ha[s] no way to get decent health care despite having spinal cord and health problems.” Another complained that HERSHKOWITZ “preyed upon unsuspecting retirees, such as myself, with promises of safe, secure investments supported by New York City real estate.” Victims also complained that the fraud had decimated their retirement savings and their childrens’ college funds, and made them unable to make mortgage payments.

HERSHKOWITZ, 53, of New York, New York, previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. He was sentenced today by United States District Judge P. KEVIN CASTEL. In addition to the four-year prison term, Judge CASTEL ordered forfeiture of $27,184,750, representing the funds obtained through the fraud.

In sentencing HERSHKOWITZ, Judge CASTEL said, “this was a systematic course of criminal conduct.”

WOOLF TURK, of Port Washington, New York, previously pleaded guilty to a related charge and was sentenced on November 23, 2009, to five years in prison and restitution of $27,184,750.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation.

“Michael Hershkowitz and Ivy Woolf Turk defrauded nearly 100 victims out of more than $27 million dollars. Their victims entrusted sometimes a lifetime’s worth of hard-earned savings, only to lose everything. We will continue to work with our partners at the FBI to combat fraud and to bring those responsible to justice,” said U.S. Attorney PREET BHARARA.

Orlando Man Sentenced to 22 Years for Arranging Fraudulent Mortgages

ORLANDO, FL—United States Attorney A. Brian Albritton announces that U.S. District Judge Anne C. Conway today sentenced Garry S. Martin (age 36, of Orlando) for conspiring to commit money laundering in connection with various mortgage fraud schemes and violating the terms of his supervised release. As part of his sentence, the court also ordered that Martin pay more than $1 million in restitution to his victims. Martin pleaded guilty to the charges on July 16, 2009.

According to the plea agreement, Martin was convicted in the United States District Court for the Eastern District of New York in 2006 for engaging in mortgage fraud. Martin had made several applications to secure mortgages from Citimortgage, Inc., a subsidiary of CitiBank. Those applications contained several false statements, including inflated values for the borrower’s income and assets.

The terms of Martin’s supervised release for his 2006 conviction prohibited him from offering various real estate services. After Martin had been placed on supervised release in the Middle District of Florida, however, he maintained his real estate sales agent license and obtained his real estate brokers license. He also formed various companies, including Antigua Housing and Management, Inc. (“Antigua H&M”), Antigua Real Estate, Antigua Abstract LLC (“Antigua Abstract”), GSM Financial LLC, and Savvy Professional Title Company (“Savvy”), each with its principal office listed as 5449 South Semoran Boulevard, Suite 200, Orlando, Florida. Through those companies, and up until August 2008, Martin conducted various schemes, including foreclosure fraud, reverse mortgage fraud, and completely sham transactions, to defraud financial institutions out of more than $5 million.

Through Antigua H&M, Martin obtained money from people facing foreclosure by promising that Antigua would bring their past due mortgages current through refinancing and forward their payments to their lenders. He then used the foreclosure payments himself and did not pay the banks.

Through Savvy and Antigua Abstract, Martin marketed reverse mortgages to seniors, sent fraudulent financing packages to support the mortgage applications, arranged the mortgage closings himself, and then diverted mortgage proceeds to his personal use.

Martin also created wholly fictitious agreements between fake buyers and fake sellers to receive mortgage proceeds.

This case was investigated by the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and Orange County Sheriff’s Office. It was prosecuted by Assistant United States Attorney Vincent A. Citro.

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

 Garry S. Martin   Garry S. Martin  Garry S. Martin  Garry S. Martin   Garry S. Martin  Garry S. Martin

Fort Lauderdale Attorney Pleads Guilty in Billion-Dollar Ponzi Scheme

MIAMI—Jeffrey H. Sloman, U.S. Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, FBI, Miami Office; and Daniel W. Auer, Special Agent in Charge, Internal Revenue Service (IRS), Criminal Investigation Division, announced today that attorney Scott Rothstein, 47, of Fort Lauderdale, Fla., entered a plea of guilty to a five-count information. Defendant Rothstein is scheduled for sentencing before the Honorable James I. Cohn on May 6, 2010. He faces a total maximum statutory term of 100 years in prison.

Rothstein pleaded guilty to one count of conspiracy to violate the racketeering influenced corrupt organization (RICO) statute (Count 1); one count of conspiracy to commit money laundering (Count 2); one count of conspiracy to commit mail fraud and wire fraud (Count 3); and two counts of wire fraud (Counts 4 and 5). In addition, Rothstein agreed to forfeit $1.2 billion, including 24 pieces of real property, numerous luxury cars, boats, and other vessels, jewelry, sports memorabilia, business interests, bank accounts, and more.

According to court records and statements made in court, Rothstein admitted that from around 2005 through November 2009, he engaged in a pattern of racketeering activity through his law firm, Rothstein, Rosenfeldt, and Adler, P.A. (RRA), located in Ft. Lauderdale. Specifically, Rothstein admitted that RRA was the criminal enterprise through which he and others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes. According to the information, defendant Rothstein and co-conspirators used RRA to fraudulently induce investors to: (1) loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and (2) invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements.

In court, defendant Rothstein admitted that he and other co-conspirators solicited investors to loan money to purported RRA clients through promissory notes and short-term bridge loans. Defendant Rothstein falsely represented to the investors that the purported clients were willing to pay high rates of return on these loans. In the settlement agreement scheme, Rothstein and other co-conspirators solicited clients to invest in purported civil case settlement funds. Rothstein and his co-conspirators falsely told investors that these settlements ranged in amounts from hundreds of thousands to millions of dollars. Rothstein falsely represented to investors that these settlements could be purchased at a discount and would be repaid over time to the investors at full face value. In addition, investors were told that these funds would be held in the trust account of RRA. In both instances, the purported investment vehicles never existed, but were part of an elaborate Ponzi scheme in which new investors’ money was used to repay money owed to earlier investors.

To execute this four-year fraud scheme, Rothstein and his co-conspirators used multiple bank accounts at TD Bank, N.A., Gibraltar Private Bank and Trust and other financial institutions to deposit and launder investors’ money. As well, to perpetuate and conceal the fraud, Rothstein and his co-conspirators created and caused the creation of false bank documents, false online bank account information, and false settlement agreements and promissory notes, which were shown to investors as proof that the settlement and loan monies existed. In fact, however, there were no settlement funds or loan clients and the bank accounts only contained “Ponzi” scheme funds.

To further fund the Ponzi scheme, defendant Rothstein and other co-conspirators defrauded clients of RRA in a civil suit initiated by RRA on their behalf as plaintiffs. Without the clients’ knowledge, RRA settled the lawsuit in favor of the defendant, thereby obligating the clients to pay $500,000 to the defendant in the civil lawsuit. To perpetuate and conceal the fraud, defendant Rothstein and other co-conspirators created a false federal court order, purportedly signed by a U.S. District Judge, stating that the clients had won the lawsuit and were owed a judgment of approximately $23 million. The false court order also stated that the defendant in the civil suit had transferred the funds to the Cayman Islands to avoid paying the judgment. Defendant Rothstein and other co-conspirators falsely advised the clients that to recover those funds, the clients were required to post bonds. In this way, defendant Rothstein caused the clients to wire transfer approximately $57 million to a trust account he controlled, purportedly to satisfy the bonds.

According to the information, defendant Rothstein and other co-conspirators used the funds obtained through the Ponzi scheme for their own benefit. This included, for example, using the money to fund and operate RRA, to make contributions to federal, state, and local political candidates, and generous donations to public and private charitable institutions. The money was also used to pay for lavish gifts, including exotic cars, jewelry, boats, cash and bonuses to individuals and members of RRA, to hire local police officers to provide security, and to provide gratuities to high ranking members of police agencies. In addition, the money was used to purchase controlling interests in restaurants and other businesses, and to socialize with politicians and sports figures. According to the information, these expenditures were calculated to enhance defendant Rothstein’s reputation and ability to solicit potential investors in the Ponzi scheme, provide an air of legitimacy and credibility to RRA, engender loyalty, and deflect law enforcement scrutiny.

U.S. Attorney Jeffrey H. Sloman said, “Today’s guilty plea is an important step in bringing to justice those who perpetrated a $1.2 billion Ponzi scheme under the guise of operating a legitimate law firm. The U.S. Attorney’s office will continue to pursue all leads and evidence as they are uncovered.Rest assured, those who are criminally culpable will be held accountable. Victims can also take comfort in knowing that the United States will do everything it can to identify, seize and equitably refund fraud proceeds.”

“Scott Rothstein used a classic approach to mislead investors—an ostentatious lifestyle, a charismatic personality and guarantees of sky-high returns—all red flags in the world of Ponzi schemes,” said FBI Special Agent in Charge John V. Gillies. “It is a lesson for all investors to learn that they need to look beyond the hype. We will continue to work with our partners to investigate investment fraud schemes. The quick resolution of this case was the direct result of the outstanding teamwork between the U.S. Attorney’s Office, the Internal Revenue Service, and the FBI.”

IRS Special Agent in Charge Daniel W. Auer stated, “This case shows that the appearance of success can be a mask for a tangled financial web of lies. This investigation is not over as we are committed to ‘following the money trail.’ We will continue to pursue the evidence wherever it leads, leaving no financial stone unturned.”

Mr. Sloman commended the investigative efforts of the FBI and the IRS in connection with this investigation. Mr. Sloman also noted the cooperative efforts of the Securities and Exchange Commission, Miami Regional Office. The case is being prosecuted by Assistant U.S. Attorneys Lawrence LaVecchio, Paul F. Schwartz and Jeffrey N. Kaplan. The forfeiture proceedings are being handled by Alison Lehr and Evelyn Baltodano-Sheehan.

Investigation by Federal, State, and Local Task Force Leads to Mortgage Fraud Charges Against Six People Involving Million-Dollar-Plus Houses
Two Home Builders and Former Banker Charged

CINCINNATI—A two-year investigation by the Greater Cincinnati Mortgage Fraud Task Force has resulted in a seven-count indictment charging two Cincinnati area home builders, a former Huntington National Bank vice president, and a self-employed tax preparer and interior designer with participating in a mortgage fraud scheme to sell four high-end luxury properties to “straw buyers.” A straw buyer is someone who is listed as the owner of a house, but is not really the one buying the house.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Ohio Attorney General Richard Cordray, Warren County Prosecuting Attorney Rachel Hutzel, and Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI) and other task force participants announced the indictment today.

The grand jury returned charges against:

Eric D. Duke, 35, Newport, Kentucky. Duke is a self-employed tax preparer and interior designer. He also owned a property management company called Rivendale Property Management Group, L.P., in Maineville, Ohio.

Terrence J. Monahan Jr., 36, Cincinnati, formerly with Huntington National Bank.

Bernard J. Kurlemann, 56, of Mason, owner of Kurlemann Homes of Long Cove and Long Cove Management, LLC.

Bryan Sanneman, 38, of Mason, owner of Sanneman Homes, Inc.

The charges stem from the sale of four residential properties in 2006 to 2007, three of which were sold for approximately $2 million each. The indictment alleges that Monahan, Sanneman, and Kurlemann, each conspired with Duke to defraud lenders involved with the sales. 

The scheme, as alleged in the indictment, involved Duke locating two people willing to buy the properties in name only and let their names be used on loan applications. The indictment alleges that Duke worked with a mortgage broker who submitted fraudulent loan applications that contained false income and assets. According to the indictment, Monahan gave Duke a customer bank account statement to be used as a “go-by” to create fictitious account statements to support fraudulent assets on the loan applications. 

The indictment also alleges that Sanneman and Kurlemann provided documentation to the lenders falsely stating that they had received down payments from the borrowers when they had not. The indictment alleges that the defendants conspired with Duke to have the fraudulent loans approved in order to sell their properties. 

The indictment alleges that the defendants benefitted from the scheme because they were able to sell their expensive properties, get out from under substantial mortgages, and receive additional loan proceeds. 

The indictment charges all four defendants with conspiracy. Duke and Monahan are charged with conspiracy to commit wire fraud and wire fraud, both crimes punishable by up to 20 years’ imprisonment.

Duke and Kurlemann are charged with conspiracy to commit loan fraud, punishable by up to five years’ imprisonment, and two counts of loan fraud. Each count of loan fraud is punishable by up to 30 years’ imprisonment.

Duke and Sanneman are charged with conspiracy to commit loan fraud and loan fraud.

The indictment also seeks forfeiture of any property or assets derived as a result of the crimes.

Loan proceeds from the alleged fraud totaled approximately $6.7 million.

Charges have been filed separately against the straw buyers. Francisca Webster, 46, of Cincinnati, has been charged in a separate information, with conspiracy to commit wire fraud punishable by up to 30 years’ imprisonment. Christopher Gagnon, 37, of Florence, Kentucky has been charged with loan fraud, punishable by up to 30 years’ imprisonment.

Stewart commended the investigation by the Greater Cincinnati Mortgage Fraud Task Force. The Greater Cincinnati Mortgage Fraud Task Force is a multi-agency, multi-jurisdictional initiative dedicated to combating the mortgage fraud problem in the Southern District of Ohio.

The defendants will be summoned for their initial appearances before a U.S. Magistrate Judge.

The case is being prosecuted by Assistant United States Attorney Jennifer C. Barry, and Special Assistant United States Attorneys Bruce McGary of the Warren County Prosecutor’s Office and Christopher Wagner with Ohio Attorney General Richard Cordray’s Office.

Milton Retana  Con Man Found Guilty of Operating $62 Million Ponzi Scheme That Targeted Spanish-Speaking Investors

LOS ANGELES—A Huntington Park man who preyed on Spanish-speaking investors with promises of hefty returns in the real estate bubble has been found guilty of federal charges for bilking more than 2,000 victims out of more than $62 million. , 46, was convicted yesterday by a federal jury of six counts of mail fraud and one count of making false statements to government agents who were investigating the case.

Following a week-long trial in United States District Court, jurors deliberated for less than an hour on Tuesday before convicting Retana of charges that carry a potential penalty of 125 years in federal prison. Dozens of victims were in court to hear the announcement of the guilty verdicts.

Retana began soliciting investors in 2006 through his company, Best Diamond Funding, by telling them that their money would be used to buy and sell real estate. Best Diamond Funding solicited money through advertisements in Spanish-language magazines, on the Internet, and during weekly investment seminars at locations across Los Angeles. The investment seminars often had as many as 300 potential investors and incorporated religious messages. Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit. However, records obtained by federal investigators showed that Retana used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money.

During the trial, several victims testified that they mortgaged their homes and drained their retirement accounts because they believed Retana’s promises that their investments would be safe. The victims who testified at trial were largely from working-class families in East Los Angeles, and they included a stone mason, a long-haul truck driver, and a roofer who was also a pastor at his local church.

Retana’s scheme was almost uncovered in the summer of 2008, when the California Department of Real Estate audited his company. But Retana stymied that investigation by ordering his employees to hide all of the investor files at the back of his wife’s religious bookstore, La Libreria Del Exito Mundial. His scheme was disrupted in October 2008, when federal agents from the United States Postal Inspection Service and the Federal Bureau of Investigation executed search warrants on the offices of Best Diamond Funding and the bookstore. During those searches, agents found $800,000 in cash stashed in Retana’s desk, as well as another $3.2 million in cash hidden in the back of the bookstore. The FBI also seized another $8 million from Retana’s bank accounts.

Soon after the execution of the federal search warrants, agents interviewed Retana, who lied about how much money he had received from the investors and claimed that he could pay all of them back. Retana was later secretly recorded telling a Best Diamond employee not to tell the government how much money Best Diamond had received from the investors.

Retana is scheduled to be sentenced by United States District Judge R. Gary Klausner on April 26

Milton Retana  Milton Retana

Wheatland Bank in Naperville, IL, which opened less than three years ago, sued its former chief executive, Michael Sykes for allegedly breach of fiduciary duty, fraud, negligence and conspiracy.

The lawsuit was filed in Cook County Circuit Court Dec. 21, 2010.

Sykes, a bank organizer and shareholder resigned as Wheatland CEO last June; Arthur Sundry, a bank shareholder who served on the board until July 1; and Edward Elsbury, a shareholder; allegedly approved commercial real estate loans they knew were shaky and then guiding those customers to another lending group that he owned.

According to a Crain’s Chicago Business report, the documents alleged that the three men co-owned a Naperville business called Mezzanine Finance LLC that made loans to commercial real estate developers at high rates. They then allegedly arranged loans from Wheatland that helped borrowers pay back the money they owned Mezzanine Finance.

The lawsuit said the three defendants “personally profited from these loans as proceeds were used to pay off mezzanine loans placed by them against the properties through their separate finance company, Mezzanine Finance LLC.” Principle officers at Wheatland didn’t know about Mezzanine’s role, the lawsuit said.

Sykes used his Wheatland desktop computer to email Mezzanine clients and others about that company’s business and did so during bank business hours, the lawsuit said.

Wheatland has about $480 million in assets, and about 30 percent of its loans are seriously delinquent. In the lawsuit, the bank is seeking compensatory and punitive damages, among other things.

Mark Strodtman, owner of JS Real Estate, LLC in Greeley, Colorado, was sentenced by a Weld County judge January 4 to 31 years in prison.

A jury on Nov. 18 convicted Strodtman of 23 criminal counts including one count of a pattern of racketeering under the Colorado Organized Crime Control Act; 11 counts of theft of $15,000 or more; and 11 counts of forgery of a check or commercial instrument.

In April 2007, more than 20 homeowners alleged that Strodtman and his associates from JS Real Estate LLC tricked them into buying homes out of their price range by falsifying documentation to approve their loans. The homes bought are located in the Gateway Lakes subdivision in southwest Greeley.

He had been indicted in March 2008 in connection with a mortgage fraud scheme. The indictment asserted he induced, or directed others to induce, buyers by agreeing to pay them a kickback from the proceeds of the sale of the homes, under-representing the amount of the monthly mortgage payments, and encouraging them to occupy the home prior to closing the sale.

It also alleged that Strodtman assisted in securing financing for the purchase of JS Real Estate’s homes by providing lenders with false information, including inflated incomes and assets and falsely verified employment and outstanding loans.

Strodtman failed to turn himself in to the sheriff’s department after the charges were filed. After an extensive search by the Federal Bureau of Investigation and the Weld County Sheriff’s Office that reached south to Mexico. He was arrested as a fugitive in Mexico on September 23, 2008. He was transported back to the Weld County Jail the following month.

Strodtman’s business partner in JS Real Estate, Dean Juhl, pleaded guilty on Feb. 13, 2009, to theft of $15,000 or more and to second-degree forgery. He received a four-year deferred sentence, will serve 30 days in jail, complete 100 hours of community service and pay restitution.

The charges against Strodtman could have carried a maximum sentence of 378 years: 48 years for the COCCA count, 24 years for each theft count and six years for each forgery count. Weld District Court Judge Marcelo Kopcow handed down 24 years for the COCCA count, four years for one of the theft counts and three years for one of the forgery counts. Strodtman’s sentences for the theft and forgery counts will run concurrently.

In a complicated Ponzi scheme investigated by The Columbia Dispatch since July 2009, Somnath Ganguly is alleged to have stolen more than $1.5 million from them in real-estate schemes.

Columbus police have traced at least $500,000 in thefts by Ganguly and have turned the case over to the Franklin County prosecutor’s office. A grand jury has yet to review the case.

On December 29, 2009 Ganguly appeared before a U.S. Bankruptcy Court trustee to begin the process to erase nearly $850,000 owed to mortgage companies for investment properties, credit-card companies and former friends who invested with him.

Some of those investors attended the hearing, too, hoping that what is owed them will stick with Ganguly and not be eliminated by bankruptcy.

Ganguly has denied that he stole anything. He blames his former friends for ruining his plans to strike it rich by turning rental properties into condos.

Those friends and associates Ganguly, 47, of southern Delaware County, has left them penniless and buried in their own mountains of debt.

One woman was there with a copy of a $45,000 judgment against Ganguly. She and her elderly husband gave Ganguly more than $127,000 to invest and lost it all. She now works as a cashier to help make ends meet while her husband battles cancer.

Another was there hoping to recoup about $20,000 he invested.

“It’s amazing what devastation one single person can do,” said Raj Chakrabarti, who drained his savings account, mortgaged his house and borrowed from relatives to keep a 60-unit apartment complex in Worthington from falling into foreclosure. His efforts failed.

All were duped in a complex, Ponzi-like scheme in which Ganguly persuaded them to provide down payments on investment properties that he promised to fix up for resale or to turn into condominiums.

No property was ever renovated. At least five houses and two apartment complexes have faced foreclosure. County records show that the properties were mortgaged at their full value, meaning no down payment was made.

In the meantime, the investors hope to keep Ganguly on the hook. “These creditors represent thefts,” said Thomas Conkle, a Columbus lawyer who represents Chakrabarti and another investor.

Debts accumulated because of fraud cannot be forgiven by bankruptcy.

James Merritt Eaton, 60, his son Brian Chandler Eaton, 28, both of Laguna Beach, and real estate appraisal firm executive Michael John Bell, 32, of Corona del Mar, were charged January 6, 2010 with one felony count of conspiracy to defraud another of property.

As the principles of Landmark Equities Group, the father and son team allegedly conspired to inflate property appraisal values and get more business from lenders.

The Laguna Beach father and son, who operated a realty appraisal service, were arrested on suspicion of conspiring to artificially inflate real estate values in order to secure more business with lending institutions. “A Corona del Mar man has turned himself in on similar charges related to the case,” said Farrah Emami, spokeswoman for the Orange County District Attorney’s office.

All three defendants face 17 felony counts of grand theft by false pretense, two felony counts of identity theft, two felony counts of false personation, and sentencing enhancement allegations for aggravated white collar crime of more than $100,000 and property damage exceeding $50,000.

If convicted, each defendant faces a maximum sentence of 18 years in state prison. The three are scheduled for a continued arraignment on Feb. 22, Emami said

Aristotle R. “Rick” Matsa, of Worthington, OH, was arrested on a 20-count federal indictment of tax fraud, obstruction of justice, and witness tampering on December 21st.

It is not clear whether Matsa will represent himself.  (Matsa is licensed to practice law in the state of Ohio.)  Matsa, in addition to being a lawyer, is a licensed real estate broker, a licensed architect, and a licensed minister.      

The 20-count indictment includes setting up a series of foreign trust entities to disguise his income and earnings, preparing fraudulent tax returns that omitted the income and earnings he hid in those entities, and tampering with a witness and giving a false statement to derail the federal investigation of his activities.

According to a Department of Justice press release, Matsa also claimed fraudulent tax deductions and used funds from the trusts to buy a farm in Hocking County as well as a house in Worthington during the past decade. Matsa also involved his mother, Loula Matsa, and close friend and Urbana lawyer George Z. Pappas in his schemes, using his mother’s bank account to hide income and naming his law practice after Pappas to hide its ownership.

Pappas then lied to a grand jury about this ownership, leading to his arrest on a federal charge of making a false statement. This charge normally carries a maximum sentence of five years in prison, a $250,000 fine, and three years’ supervised release, but Pappas agreed to a plea bargain in exchange for providing the information that led to Matsa’s arrest.  It is likely that Pappas’ sentence will be considerably reduced.

If Matsa is convicted, he could face 90 years in prison, a fine of $5,000,000, and supervised release of 5 years (at which point the 53-year-old will be 143 years old if he serves the maximum). It’s possible Matsa’s arrest will spur federal investigations into Matsa’s other activities, including his real estate companies Spectrum Companies, Landmarks U.S.A., and Protidea Ltd., his architectural-services company Architects Spectrum Ltd., and the several churches he incorporated in Ohio.

Former Attorney Sentenced in Fraud Case

INDIANAPOLIS—Brian L. Nehrig, 43, Fishers, Indiana, was sentenced to three years’ probation today by U.S. District Judge Sarah E. Barker following his guilty plea to mail fraud. This case was the result of a investigation by the Federal Bureau of Investigation.

During 2005 and 2006, Nehrig worked as a foreclosure attorney doing foreclosure work for Citifinancial. Citifinancial required Nehrig to submit a bid at sheriff’s sales for foreclosed houses, sell the houses at arm’s length transactions, and then submit the proceeds if the home sold to a third party. Instead, Nehrig sometimes submitted inflated bids and had arrangements with friends and associates to buy the properties. Nehrig did not tell Citifinancial about the side deals, which were usually for a few thousand dollars more than the minimum bid requested by Citifinancial. Nehrig did not send Citifinancial the profits. The Court determined the loss to Citifinancial to be $66,000. Citifinancial has been paid through an insurance claim.

According to Assistant U.S. Attorney Gayle L. Helart, who prosecuted the case for the government, Judge Barker also imposed six months’ home confinement, and a requirement that Nehrig perform eight hours of community service per month for each of the 36 months that he is on probation. Nehrig was fined in the amount of $2500. Judge Barker noted that Nehrig’s law license was previously revoked and ordered that he not be self-employed and give full disclosure of this felony conviction to any future employer.

“Arm’s Length Transactions”

Former Irving Police Officer Pleads Guilty in HUD Fraud Case  “Good Neighbor Next Door/Officer Next Door”

DALLAS—Ramon Anthony Reyes, Jr. has pleaded guilty before U.S. District Judge Jane J. Boyle  to one count of making a false statement to the U.S. Department of Housing and Urban Development (HUD) with regard to his participation in HUD’s “Good Neighbor Next Door/Officer Next Door” mortgage program, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Reyes, 45,  faces a maximum statutory sentence of two years in prison and a $250,000 fine. He is scheduled to be sentenced by Judge Boyle on April 29, 2010.

Under the terms of the “Good Neighbor Next Door/Officer Next Door” mortgage program offered through HUD, law enforcement officers receive a 50 percent discount from the list price of a home in return for living in the property as their sole residence, for 36 months. Participating law enforcement officers also may not own any other residential real estate property at the time they submit their purchase offer and for one year previous to that date. The purpose of the program is to strengthen communities by encouraging employed, professional law enforcement officers to live in areas needing revitalization.

According to plea documents filed in the case, Reyes was employed as a police officer for the City of Irving since 1998. In 1998, Reyes purchased a home located on Dorothy Drive in Grand Prairie, Texas, and began living there.

In 2007, Reyes purchased another home, located on Palo Alto Drive in Mesquite, Texas, using the “Good Neighbor Next Door/Officer Next Door” mortgage program. To comply with the program’s requirements, Reyes transferred title of this Grand Prairie home to a relative and continued to live in the Grand Prairie home, maintaining all utilities in his name and paying the property taxes on the residence.

Reyes admitted that he made a false statement on the annual certification form for the program when he signed the form certifying that he had continuously resided at the Mesquite address, when he knew that he had not.

“Good Neighbor Next Door/Officer Next Door”  “Good Neighbor Next Door/Officer Next Door”

Michael Fiorito, 41, was convicted in May, by a federal jury on seven counts of mortgage fraud in connection with an equity-skimming scheme that targeted vulnerable homeowners.

Fiorito had been a mortgage broker at three different Minnesota mortgage companies from 2003 through early 2007. Working with an assistant, he devised a scheme to defraud homeowners who were in foreclosure or behind on their payments.

This sounds all to familiar.  So what’s so different about this episode of mortgage fraud? Homeowners in distress were looking to save money in tough times.  So they refinanced their homes — only to discover they’d been taken in by fraud.

Now they are fighting the government in foreclosure and the loss of their home.

What you probably haven’t heard before is that these victims are being foreclosed on by the Federal Deposit Insurance Corp., a federal agency that generally pushes to keep people in their homes by reworking loans rather than foreclosing them.

So Glenn and Brenda Clark of Golden Valley are taking another unusual step — they are fighting their foreclosure in federal court.

The Clarks have filed suit in U.S. District Court in Minneapolis, saying their foreclosure is improper. They have asked for a temporary restraining order to allow them to come up with a way to stay in the home where they raised two daughters since 1993.

“It’s been a nightmare,” Brenda Clark said of their three-year battle.  Said the Clarks’ attorney, Jacqueline Williams: “We went through the proper channels, and it didn’t work. No one was listening.”

There is no doubt the Clarks are victims. He and the assistant convinced homeowners to refinance their homes — often after inflated appraisals — and then stole some or all of the equity checks the homeowners were to receive.

In all, Fiorito stripped more than $400,000 in equity from at least 17 victims. He is scheduled to be sentenced in federal court on Dec. 30.

In June of 2006, Fiorito called Glenn Clark after the Clarks’ application to refinance their mortgage through another lender was denied. The Clarks were hoping to cash in some of their equity to cover bills. After all, times were — and still are — not easy. In May 2005, Glenn Clark, a drywall installer, fell out of the back of a pickup truck and suffered a brain injury. Work has been sporadic ever since. Brenda Clark cuts and styles hair. Like many families, they needed the money.

“He promised we could get cash out with basically the same payment I had at the time,” Glenn Clark said.

So they went with Fiorito. They owed $201,000 on their home when Fiorito contacted them. But, using an inflated appraisal that Glenn Clark said he never saw, Fiorito promised the Clarks $23,500 in home equity.

Instead, he handed Glenn Clark a check for $16,000, which the Clarks never cashed. Fiorito pocketed the rest. When they saw they had been victimized, the Clarks contacted their banks and moved to cancel the mortgages.

But the clock never stopped ticking.

Now, the Clarks owe $240,000 for a house worth less than $200,000.  When the bank that held the Clarks’ mortgage went under in July 2008, the FDIC took over, Williams said. But, rather than renegotiating the mortgage, the FDIC continued the foreclosure process.

A real estate agent even showed up to change the locks. Others have offered the Clarks cash to leave before the eviction process is complete, Brenda Clark said.

The Clarks say all they want is to work out lower payments so they can keep their home.

FDIC chairwoman Sheila Bair has championed restructuring mortgages rather than foreclosing. She has even suggested providing financial incentives to banks to rework home loans to help people keep their houses.

Andrew Pizor, a staff attorney with the National Consumer Law Center (NCLC), said that has been the FDIC’s track record — restructuring loans rather than foreclosing.

So why not in the Clark’s case?

A recent report by the NCLC says that programs designed to encourage loan modifications have failed to slow the nation’s foreclosure crisis — in part because mortgage servicers find it cheaper to foreclose than to restructure.

A Jan. 7 hearing has been scheduled to consider the Clarks’ request for a temporary restraining order, as well as a motion by the FDIC to dismiss the case.

Williams, the Clarks’ attorney, said the only thing her clients did wrong was to trust a fraud.

“They were victimized by Fiorito,” she said. “They shouldn’t have to lose their home as well.”

Seven Indicted in Mortgage Fraud Scheme  Debbie Sferrazza

CINCINNATI—A federal grand jury here has indicted six members of a family and one of their employees charging them with operating a mortgage fraud conspiracy between 2004 and 2009.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI), Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service Criminal Investigation, and Gerald A. O’Farrell, Assistant Inspector in Charge, announced the indictment returned yesterday against the following individuals:

- Debbie Sferrazza, 45, of West Chester,
- Salvatore Sferrazza, 70, the husband of Debbie Sferrazza,
- Keiron Ashurst, 44, Fairfield, a brother of Debbie Sferrazza,
- Whitney Bonapfel, 21, Cincinnati, a daughter of Debbie Sferrazza,
- James Ashurst, 26, West Chester, a son of Debbie Sferrazza,
- Heather Ashurst, 26, the wife of James Ashurst,
- Tabatha Sturgill, 34, Hamilton, an employee of Debbie Sferrazza.

The indictment alleges that Debbie Sferrazza worked in the mortgage lending and real estate industry through her management of several different companies, including Alpha Mortgage Lending, LLC; Alpha Mortgage Exchange, LLC; S.D.S. Processing LLC (also known as S.D.S. Inc.); and Target Loan Packaging (also known as Target Loan Processing). The indictment accuses the seven of operating a mortgage fraud conspiracy that involved family members and mortgage brokerage businesses from at least 2004 to 2009. The charges center around 14 real estate transactions involving eight residential properties during that time period.

“The 33-count indictment charges the defendants with conspiracy, wire fraud, mail fraud, money laundering, and the filing of false tax returns,” Stewart said.

Each count is punishable by a maximum sentence of 20 years’ imprisonment, except for filing false income tax returns, which is punishable by up to three years’ imprisonment.

According to the indictment, Debbie Sferrazza, Tabatha Sturgill, and the others used their mortgage lending companies to submit fraudulent loan applications for herself, her family, and her customers. The loan applications showed a pattern of inflating the borrower’s income by, among other methods, creating false Verifications of Employment, fake paystubs, fake Social Security benefit letters, and fake W-2 forms. The loan applications sometimes misrepresented the borrower’s assets, supported by fake bank statements or Verifications of Deposit. The loan applications allegedly misrepresented the identity of the mortgage broker or contained forged signatures for the borrower or other names involved in the loan application process. The loan applications sometimes misrepresented whether the property would be used as a primary residence or whether another property had been sold by the borrower.

In one allegation, a false and forged rental agreement was submitted to the lender relating to the property to be purchased. In another instance, property was transferred to an unemployed mother-in-law who had no intention of paying for or ever living in the property. At the closings, the defendants would often misrepresent the source of the borrower’s funds at closing and divert the sale proceeds back through Debbie Sferrazza’s family. The scheme also included the sale of properties at inflated values in order to obtain additional funds from the mortgage lenders.

The gross funds that were allegedly fraudulently obtained in these 14 transactions is in excess of $3 million, and the net amount of funds laundered through the Sferrazza family is allegedly in excess of $900,000.

Stewart commended the investigation which was by the Greater Cincinnati Mortgage Fraud Task Force, primarily through the Federal Bureau of Investigation, the Internal Revenue Service, and the United States Postal Inspection Service.

In addition to the FBI, IRS, and Postal Inspection Service, agencies participating in the Task Force include Ohio Attorney General Rich Cordray’s Office, U.S. Housing and Urban Development Office of Inspector General, the Cincinnati Police Department, the U.S. Secret Service,Debbie Sferrazza the Springdale Police Department, Warren County Prosecutor Rachel Hutzel, Hamilton County Prosecutor Joe Deters, the U.S. Attorney’s Office in the Eastern District of Kentucky, the West Chester Police Department, the Middletown Police Department, Hamilton County Sheriff Simon Leis, the FDIC, and the Ohio Department of Commerce Division of Financial Institutions.

Debbie Sferrazza  Debbie Sferrazza

Four Sentenced in Mortgage Fraud Scheme  Mortgage Fraud Scheme

DAYTON—Four participants in an extensive mortgage fraud scheme that affected 210 residential properties, including 205 in Montgomery County, were sentenced today in federal court by U.S. District Judge Michael R. Barrett.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation; Jose Gonzalez, Special Agent in Charge, Internal Revenue Service Criminal Investigation, and other members of the Dayton Mortgage Fraud Task Force announced the sentences handed down today by U.S. District Judge Michael A. Barrett.

Edward McGee, 76, was sentenced to three years’ probation and fined $140,000. Edward McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit money laundering.

His son, Kenneth O. McGee, 50, was sentenced to 32 months in prison and fined $12,500. Kenneth McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud, and money laundering, and one count of conspiracy to commit money laundering.

Robert Mitchell, 43, Vandalia, was sentenced to 32 months in prison and fined $12,500. Mitchell pleaded guilty on March 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.

Kamal J. Gregory, 36, Centerville, was sentenced to 10 months in prison and fined $12,500. Gregory pleaded guilty April 14, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.

These cases stem from a 13-count indictment involving six defendants which was originally handed down on June 25, 2008. The four sentenced today were part of a conspiracy that operated and controlled various Dayton-based real estate mortgage and title insurance related businesses and corporations that schemed to defraud 33 mortgage lending institutions out of over $7 million in loan proceeds and other things of value. This scheme involved arranging, facilitating, and manipulating documents associated with real estate sales and closings in order to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties for the personal benefit of the co-conspirators.

Two others involved in the scheme were previously sentenced. Julian M. Hickman, 32, formerly of Centerville and now living in East Cleveland, pleaded guilty on December 15, 2008 to conspiracy and tax crimes. Hickman was sentenced on December 10, 2009 to 33 months’ imprisonment. Jessica A. Zbacnik, 42, of Monroe, pleaded guilty on July 29, 2009 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud, and money laundering. She was sentenced on December 3, 2009 to 30 months’ imprisonment.

Agencies participating in the Greater Dayton Mortgage Fraud Task Force in addition to the FBI and IRS include the Ohio Department of Commerce Division of Financial Institutions, the Ohio Attorney General’s Office, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, and the Perry Township Police Department.

Mortgage Fraud Scheme Mortgage Fraud Scheme  Mortgage Fraud Scheme

Federal Authorities Announce Significant Regional Federal Mortgage Fraud Investigations and Prosecutions Coinciding with Nationwide “Operation Malicious Mortgage” Takedown

SACRAMENTO, Calif.—United States Attorney McGregor W. Scott, FBI Special Agent-in-Charge Drew Parenti; and Internal Revenue Service–Criminal Investigation Special Agent-in-Charge Scott O’Briant announced today a number of significant events that have occurred here in the Eastern District of California as part of the United States Department of Justice’s nationwide takedown, “Operation Malicious Mortgage.”

These cases have arisen out of the efforts of the Eastern District of California Mortgage Fraud Task Force, which was created as a result of a significant increase in reported mortgage fraud. Members of the task force include representatives from the United States Attorney’s Office, the Federal Bureau of Investigation, the Internal Revenue Service- Criminal Investigations, the Department of Housing and Urban Development, the United States Bankruptcy Trustee’s Office, and the California Department of Real Estate. The task force allows for a more targeted, coordinated approach in prioritizing the massive volume of referrals being made to federal and state agencies.

Mortgage fraud cases in the Eastern District of California include:

United States v. Joy Johnson et al.

Nine defendants were charged by complaint Tuesday with mail fraud, money laundering, and related offenses in connection with a “cash back to buyer” mortgage fraud scheme that occurred between May 2006 and September 2006. The defendants charged are JOY JOHNSON, 33; ELIZABETH CARRION, 38; husband and wife LENIN and CARMEN GALEANO, 32 and 30; ANGELITO EVANGELISTA, 40; husband and wife CLARISA and CRIS ANG, 43 and 46; CRIS’ mother LYDIA ANG, 71; and CORY WHALEN, 31. All defendants are from Solano County. The defendants purchased 12 houses in Solano County. In all but one of the transactions, the real estate agent was JOHNSON. The real estate transactions were designed to allow the sellers to credit defendants “money for repairs” at the close of escrow. The purchase prices were substantially inflated from the list prices, and the increases were then credited at the close of escrow to fictitious businesses controlled by the defendants. The defendants by and large did not use the funds they received for repairs on the properties. Instead, the funds were used to pay the mortgage payments on the properties and for living expenses. In addition, the loan applications contained false information about employment, income, assets, real estate owned, and/or occupancy status. Eleven of the homes have either been foreclosed upon or have had notice of defaults recorded against them. The
amount of loss attributed to these defaults has not been determined, but it is anticipated the
lenders will sustain losses in excess of one million dollars. This case was investigated by the FBI
and IRS-Criminal Investigation. The case is being prosecuted by Assistant United States
Attorney Courtney Linn.

United States v. Villegas

MELISSA VILLEGAS, 29, of Natomas, was arrested Monday in Sacramento, charged with lying to federal agents. According to the complaint, she had been involved in transactions that were the subject of a mortgage fraud investigation, including paying money to a suspected straw buyer. During the course of the investigation, VILLEGAS falsely stated that she had not paid any money to this other person whom investigators believed to be a straw buyer in a mortgage fraud scheme. This case is being investigated by the FBI and IRS-Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Russell Carlberg.

United States v. Ahmad et al.; United States v. Bridge; United States v. Blanford;
and United States v. Ngo

Seven defendants are facing charges or have been sentenced arising out of a “straw buyer” mortgage fraud scheme. IFTIKHAR AHMAD, 36; MANPREET SINGH, 24; and JOSE SERRANO, 44, each from Stockton, California, were indicted on October 25, 2007, for mail fraud. AHMAD and SERRANO were also charged with money laundering. Between 2003 and 2005, the defendants engaged in a scheme to defraud in connection with residential real property purchases primarily in the Stockton area. AHMAD, through I & R Investment Properties, fraudulently sold 10 houses to straw buyers, obtaining in excess of $1.5 million. AHMAD pleaded guilty on April 28, 2008 to mail fraud and money laundering. SERRANO pleaded guilty on April 17, 2008, to mail fraud. SINGH pleaded guilty on March 31, 2008, to mail fraud. All three are scheduled to be sentenced on August 25, 2008. Also arising out of the AHMAD investigation, four other defendants have been charged in separate cases, discussed below.

WILLIAM T. BRIDGE, 41, of San Francisco, California entered a guilty plea Monday to one count of filing a false tax return and three counts of paying illegal kickbacks to a loan coordinator at Long Beach Mortgage between 2003 and 2006. BRIDGE, a loan broker, admitted that in each of those tax years, he derived more than $10,000 from criminal activity involving fraudulent loans funded by Long Beach Mortgage on houses purchased in Sacramento and Stockton. The total tax loss to the United States for those tax years exceeded $1,000,000. BRIDGE also pleaded guilty to paying illegal kickbacks to a loan coordinator at Long Beach Mortgage in violation of the Real Estate Settlement Procedures Act of 1974 (RESPA). BRIDGE paid a loan coordinator working for Long Beach Mortgage more than $120,000 between July 2003 and March 2007, in exchange for the loan coordinator using his position at Long Beach Mortgage to process fraudulent loan applications submitted by BRIDGE. He is scheduled to be sentenced on September 2, 2008.

PAUL BRIDGE, William’s brother, who is also a loan broker, was charged Tuesday with paying kickbacks in violation of RESPA.

JOEL BLANFORD, 40, of San Ramon, Calif., was indicted on June 12, 2008, on six counts of mail fraud and one count of conspiring to engage in money laundering. From April 2003 through October 2005, BLANFORD, while working as a sales representative for Long Beach Mortgage, participated in a scheme to defraud that company. BLANFORD allegedly paid a Long Beach Mortgage loan coordinator in cash and checks to falsify documents, provide false verification of borrowers’ employment or professional licensing status, and to turn a blind eye to fraudulent representations contained in loan applications and other documents submitted to Long Beach Mortgage. In each of the years 2003, 2004, and 2005, the indictment alleges that BLANFORD received, before taxes and payroll deductions, more than $1,000,000 in commissions and other compensation from Long Beach Mortgage. The indictment further charges that between April 2003 and October 2005, he conspired with others to engage in money laundering in order to conduct financial transactions to promote the carrying on of the fraud scheme and to conceal and disguise the nature and source of the payments to the loan coordinator.

JOHN NGO, 27, of Dublin, California, was charged with lying under oath before a federal grand jury. He pleaded guilty on December 17, 2007, and is scheduled to be sentenced on July 14, 2008. NGO admitted that between September 2001 and May 2006, he worked as a Senior Loan Coordinator at Long Beach Mortgage, a subprime lender of residential real property that is now a subsidiary of Washington Mutual. NGO was responsible for validating and verifying loan application information, including employment information, submitted by loan applicants. In September 2007, NGO testified under oath before a federal grand jury investigating a mortgage fraud scheme in the San Joaquin County area. He was asked whether a mortgage broker had given NGO any money. NGO falsely testified that the broker had not given him any money. In fact, records later obtained from Bank of America showed that between July 2003 and March 2007, NGO received in excess of $100,000 in checks and bank transfers from the mortgage broker. NGO admitted in his plea agreement that most of the payments were to ensure that fraudulent loan applications were processed and funded. NGO also admitted he received payments from Long Beach Mortgage sales representatives to push applications through the funding process. He knew many of these applications were fraudulent, and he and others took steps to “fix” applications by creating false documents or adding false information to the applications or the loan file.

These cases were investigated by the FBI and IRS-Criminal Investigation, and are being prosecuted by Assistant United States Attorneys Benjamin Wagner and Courtney Linn.

United States v. Charles Head

CHARLES HEAD, 33, of Los Angeles, California, was the leader of a nationwide “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all of whom were located in California. On February 28, 2008, a federal grand jury indicted Head and 15 other defendants with violations of mail fraud, conspiracy to commit money laundering and related offenses. The defendants are alleged to have used straw buyers to replace victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants then shared the proceeds of the ill-gotten equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left without their home, equity, and with damaged credit ratings.

On March 13, 2008, the grand jury returned a second indictment in the HEAD case against seven defendants, including four not charged in the first indictment. “Head Two” involved an “equity stripping” scheme, netting approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. This time CHARLES HEAD allegedly altered the scheme by recruiting strangers via the Internet to act as straw buyers. Under this new scheme, he would receive approximately 97% of the stolen equity. His “sales agents” and employees, and the other defendants, would receive the remaining 3% of equity.

The following defendants were charged in the “Head One” indictment: CHARLES HEAD; JEREMY MICHAEL HEAD, 30, of Huntington Beach, California; ELHAM ASSADI, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California; LEONARD BERNOT, 51, of Laguna Hills, California; AKEMI BOTTARI, 28, of Los Angeles; JOSHUA COFFMAN, 29, of North Hollywood; JOHN CORCORAN, aka Jack Corcoran, 52, of Anaheim; SARAH MATTSON, 27, of Phoenix, Arizona; DOMONIC McCARNS, 33, of Brea, California; ANH NGUYEN, 36, of Los Angeles; OMAR SANDOVAL, 32, of Rancho Cucamonga, California; XOCHITL SANDOVAL, 29, of Rancho Cucamonga; EDUARDO VANEGAS, 28, of Phoenix; ANDREW VU, 39, of Santa Ana; JUSTIN WILEY, 28, of Irvine; and KOU YANG, 32, of Corona, California. The following defendants were charged in the “Head Two” indictment: CHARLES HEAD, JOHN CORCORAN, KOU YANG, each also charged in “Head One,” as well as KEITH BROTEMARKLE, 42, of Johnstown, Pennsylvania; BENJAMIN BUDOFF, 41,
of Colorado Springs, Colorado; DOMONIC McCARNS, 33, of Brea; and LISA VANG, 24, of
Westminster.

This case was investigated by the FBI and IRS-Criminal Investigation, and is being prosecuted by Assistant United States Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi.

United States v. Santa et al.

MARIA SANTA, 33; VIRGIL SANTA, 35; and CANDIT SAVA, JR., 26, all of Sacramento, were charged by complaint on March 17, 2008. The complaint alleged that beginning in November 2006, MARIA SANTA and SAVA prepared and submitted loan applications containing false statements as to employment and monthly income, and other false information, of a straw purchaser in order to purchase houses in the name of the straw purchaser. The complaint further alleged that MARIA SANTA and SAVA committed identity theft by using a victim’s identity to purchase property. The case was investigated by the Internal Revenue Service-Criminal Investigation and the California Department of Real Estate, and is being prosecuted by Assistant United States Attorney Matthew Stegman.

SENNETT H. SWIFT, 25, of Sacramento, was sentenced on April 29, 2008, to 15 months in prison on charges of bank fraud and money laundering. He pleaded guilty on January 15, 2008. SWIFT, who was not a licensed loan broker, defrauded two homeowners and the corresponding lenders by fraudulently refinancing two homes, the goal of which was to receive substantial loan broker commissions. To accomplish this fraud, the defendant solicited the two homeowners and falsely told them that they would receive loans with favorable terms, such as a low adjustable rate that would not increase above a certain rate cap. He also falsely led homeowners to believe that their prepayment penalties on their existing mortgages would be rebated by the defendant. Actually, SWIFT knew that the rate caps were much higher than promised, and never intended to rebate the prepayment penalties. Additionally, in one of the cases, SWIFT submitted a forged loan application and forged documents to the lender. Further, the loan application contained false information such as inflated wages. The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service–Criminal Investigation and was prosecuted by Assistant United States Attorney Matthew Stegman.

The above charges, except those to which defendants have already pleaded guilty, are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt. The maximum statutory penalties for mail fraud is 20 years in prison and a fine. The maximum statutory penalty for money laundering is 10 or 20 years in prison and a fine. The maximum statutory penalty for bank fraud is 30 years in prison and a fine. The maximum statutory penalty for identity theft is 15 years in prison and a fine. The maximum statutory penalty for lying to a federal agent is five years in prison and a fine. The maximum statutory penalty for perjury before a grand jury is five years in prison and a fine. The maximum statutory penalty for filing a false tax return is three years in prison and a fine. The maximum statutory penalty for a RESPA violation is one year in prison and a fine. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors.

Over one hundred California Lawyers were charged with loan modification fraud in 2009.

“More than 1,200 complaints against California lawyers were filed by the beginning of November regarding loan modification activity,” said Suzan Anderson, supervising trial counsel for the California State Bar loan modification task force. That is up from four filed in December 2008.

In April, California became the first state to form a “Bar Task Force” to investigate attorneys who deceive homeowners, collect advance fees, and even forge a judge’s signature while delivering little to distressed mortgage holders.

Officials announced Nov. 10, that five more California attorneys have disciplinary charges pending against them alleging that they engaged in loan modification scams.  This brings to 14 the number of lawyers the state bar’s loan modification task force has charged, forced to resign, or put on inactive status.

“That’s all we do. I have four other attorneys and eight investigators,” said Anderson. The task force is currently looking at 250 attorneys. (More than 220,000 attorneys are licensed by the California Bar Association.)  Each loan task force investigator oversees about 135 cases. 

In 2009, almost 20,000 client files have been removed from the offices of lawyers whose loan modification practices have been shut down or abandoned, the bar said. Investigations are up 69 percent over 2008.

Leon Gelfgatt, an attorney from Marblehead, Massachusetts entered an innocent plea Friday, December 18, 2009 to larceny charges. Gelfgatt is alleged to have masterminded an elaborate mortgage fraud scheme.

According to a statement from the Massachusetts’ State Attorney General, Martha Coakley, Leon Gelfgatt used false documents to give the appearance that mortgages on several properties scheduled for impending sale had been transferred to a fake company created by Gelfgatt.

Gelfgatt, according to the Attorney General’s office, recorded false documents at different registry of deeds offices indicating his fake company was the new holder of the mortgages for the properties slated for sale.

“His goal,” Coakley said, “was to divert mortgage payoff money to be sent to the fake company rather than the rightful mortgage holders by obtaining the money from real estate closing attorneys when the properties were sold.”

State Police arrested Gelfgatt Thursday in Boston as he attempted to retrieve more than $1.3 million in funds connected with his scheme. He was arraigned Friday in Cambridge District Court in Medford for attempted larceny.

State troopers assigned to Coakley’s office and AG’s Financial Investigation Unit member James McFadden investigated Gelfgatt.

“This arrest is the result of an intensive and ongoing investigation utilizing state-of-the-art tools and techniques into fraudulent assignments recorded at several Registries of Deeds within Massachusetts,” the AG’s statement said.

Jamal Eljwaidi, also known as Jean Marc Eljwaidi, was arrested July 29, 2009 on six counts of Financial Elder Exploitation, a felony. Eljwaidi allegedly perpetrated a ponzi scheme scamming millions of dollars from dozens of victims worldwide by taking investors’ money for a real estate development and then spent the investments on himself.

He was booked into the Clark County Detention Center in Las Vegas, NV and posted bail at $2,030,000 million. A Justice Court felony arraignment has been scheduled for 8 a.m. on Jan. 8, 2010.

The recent victims say they invested with the real estate developer from 2005 through 2008. As more victims continue to come forward in the investigation real estate scam, Eljwaidi could face new charges including securities fraud, sale of unregistered securities, obtaining money under false pretenses and racketeering.

According to a criminal complaint, Eljwaidi scammed a male senior citizen who suffers from mental incapacitation out of $400,000 by promising to make the man an equal business partner.

Instead, Eljwaidi used up to $600,000, including the man’s money, to live a lavish lifestyle while leaving the elderly man destitute.

Investigators from the Nevada Secretary of State Ross Miller’s office said Eljwaidi and his employees called potential investors between March 2005 and March 2007 and persuaded them to invest in short-term loans for a shopping center project in the Las Vegas Valley in exchange for high interest payments.

The shopping center, hotel, theater and restaurant complex was supposed to be completed in October 2009, but, to date, “It is an empty desert lot,” Miller said.

Eljwaidi initially was sought for elder exploitation in December 2004. However, since his arrest in July, 2009 five more possible victims have come forward.

Records indicate Eljwaidi filed for Chapter 11 bankruptcy shortly before his arrest. The bankruptcy filing listed $10 million to $50 million in both estimated assets and estimated liabilities.

Anyone who invested with Eljwaidi or his companies, Babuski LLC and JKG Development, or anyone who believes they may have been a victim, is asked to call the Secretary of State’s Office in Las Vegas at (702) 486-2440, or (775) 688-1855 in Carson City.

Financial Exploitation of the Elderly is a felony.

It occurs when a relative or caregiver of an elderly person steals, withholds, or otherwise misuses that elderly person’s money, property, or valuables for personal advantage or profit.

There are many methods that relatives and caregivers may use to exploit the elderly. These may include:

• Taking the victim’s money, property, or valuables

• Borrowing money and not paying it back

• Giving away the victim’s possessions without permission

• Misusing ATM or credit cards

• Forcing the victim to part with resources or property