Charles E. Walker, 56, owner and president of the Charles E. Walker Realty in Springfield, Missouri was indicted by a federal grand jury December 16, 2009 along with 16 other people on 52 counts related to mortgage fraud conspiracy.

Also indicted with Walker were his wife Lind, his son Lee, five real estate agents at the realty, three mortgage brokers, two real appraisers and four investors.

Federal agents raided the Walker Realty three years ago after their investigation revealed that Walker and co-defendants inflated home values defrauding lenders and submitting false loan applications totaling nearly $11 million dollars.

Don Ledford, spokesman for the U.S. attorney’s office for western Missouri, said he could not provide details of the investigation because of the lengthy process of the paperwork.

“When you have this kind of financial crime, there is quite a bit of paperwork to be investigated and evaluated,” he said. “That takes time.”

A news release from the U.S. attorney outlined alleged fraud that involved 26 residential properties between Nov. 1, 2004, and June 30, 2006. The allegations include the following:

Investors, some of whom were real estate agents at Walker Realty or mortgage brokers, bought and resold homes among themselves to increasingly inflate the property values.

Walker Realty and its agents received commissions for many of those transactions.

Potential home buyers represented by Walker Realty were told they could receive substantial funds at the time of closing under the guise of repair costs or remodeling, which they could use for their personal benefit if they agreed to buy the homes at inflated prices.

Defendants Vincent Cantrell, 40, and Charles V. Pursley, 82, submitted inflated appraisals on the properties to support inflated prices.

Mortgage brokers William Wagoner, 56, Steve Casarez Jr., 32, and Juan A. Johnson, 41 — all named as defendants — reportedly facilitated the scheme by giving lenders false information about borrowers’ actual income, assets and liabilities. They also concealed the fact that portions of the loan proceeds would be remitted to the borrowers after closing.

Knowing the applications contained false information and omitted material facts, the borrowers signed and approved the loan applications. Some of the borrowers were indicted.

In some cases, Charles Walker, his agents and investors provided temporary loans to borrowers for down payments, with the understanding they would be paid back from future loan proceeds. Such information was not disclosed to lenders.

The loan applications also falsely reflected that the properties were purchased as the borrower’s primary residence rather than for investment purposes.

The loan proceeds totaled about $10,944,023, and the defendants pocketed $4.3 million, prosecutors alleged.

More than 20 of the 26 homes have since been foreclosed on, causing financial losses to the lenders, said Ledford.

In addition to the 26 mortgage fraud cases in which Charles and Linda Walker are charged, the federal indictment also alleges that:

- Lee Walker engaged in seven fraudulent real estate transactions totaling about $3,080,229.

- Frankie R. Powell, 67, a Walker Realty agent and an investor, engaged in nine fraudulent transactions totaling about $3,272,771.

- James H. Powell, 71, an investor, engaged in eight fraudulent transactions totaling about $4,197,139.

- Wagoner, a mortgage broker and an investor, prepared and submitted nine loan applications for himself and on behalf of other borrowers totaling about $2,578,531.

- Casarez, a mortgage broker and an investor, prepared and submitted five loan applications for himself and on behalf of other borrowers totaling about $2,345,588.

- Johnson, a mortgage broker, prepared and submitted nine loan applications for himself and on behalf of other borrowers totaling about $3,104,265.

- Eddie Lee Rohrs, 37, an investor, bought and sold four properties through Walker Realty at artificially inflated prices totaling about $2,416,919.

- Christopher Forrester, 29, an investor, bought and sold one property through Walker Realty at an artificially inflated price of about $1,501,595.

- Robert C. Barnica, 35, an investor, bought and sold two properties through Walker Realty at artificially inflated prices totaling about $1,006,015.

Julian M. Hickman, 32, now of East Cleveland, appeared before U.S. District Judge Michael Barrett. Hickman was sentenced Thursday, Dec. 10, to 33 months in federal prison for his role in an extensive mortgage fraud scheme that affected 210 residential properties, including 205 in Montgomery County.

According to Carter M. Stewart, U.S. Attorney for the Southern District of Ohio, the scheme affected 63 investors and led to foreclosure against owners of more than 90 percent of the properties.

He is the second of six co-defendants to be sentenced; the first, Jessica A. Zbacnik, who was sentenced Dec. 3 by Barrett to 30 months in prison.

Hickman pleaded guilty in December 2008 to two counts of conspiracy and three counts of willful failure to file income tax returns.

In a statement of facts filed with his plea, Hickman admitted that, between March 2002 and June 2008, he and others recruited unsuspecting individuals to buy residential properties, many of them dilapidated, at prices artificially inflated above legitimate fair-market values.

Hickman admitted that he participated in 107 separate fraudulent real estate closings between March 2002 and June 2006. He and his co-conspirators netted more than $3.8 million from the deals.

Hickman failed to file federal income tax returns in 2003, 2004 and 2005. In 2003, Hickman received gross income in excess of $680,000. In 2004, Hickman received gross income in excess of $830,000. In 2005, Hickman received gross income in excess of $200,000.

Zbacnik, 42, of Mason, pleaded guilty July 29 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud and money laundering.

According to the statement of facts filed in court, Zbacnik admitted that she had helped arrange, facilitate and manipulate documents associated with real estate sales and closings. The purpose was to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties.

There are four co-conspirators who are still awaiting sentencing:

— Edward McGee, 74, of Dayton, who pleaded guilty on May 12, 2009 to conspiracy to commit money laundering.

— Kenneth O. McGee, 49, of Dayton, son of Edward, who pleaded guilty May 12, 2009 to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering.

— Robert Mitchell, 42, of Vandalia, who pleaded guilty to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering on March 11, 2009.

— Kamal J. Gregory, 34, of Centerville, who pleaded guilty to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering on April 14, 2009.

Patricia Morgen, 62, of Oakland, California pleaded guilty in federal court in San Francisco yesterday to wire fraud, mail fraud and money laundering, United States Attorney Joseph P. Russoniello announced December 17, 2009.

In his announcement, U.S. Attorney Russoniello restated the Department of Justice’s top priority to vigorously prosecute individuals who commit mortgage fraud and other financial crimes.

In pleading guilty, Morgen admitted that the company she founded and controlled, Chicago Development and Planning (CDP) 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 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 CDP 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’Brian, Special Agent in Charge, IRS-Criminal Investigation, and 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 was indicted by a federal Grand Jury on Nov. 20, 2008. She was charged with 11 counts of mail and wire fraud, as well as a single count of money laundering. 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.

Lucette Montane, 26, was arrested December 15, 2009 and arraigned in federal court 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 before Magistrate Judge Jan Adler.

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, Montane 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.

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.

If convicted on the charges of conspiracy to commit wire fraud and conspiracy to launder monetary instruments Montane could face a maximum penalty of 20 years behind bars and a fine up to $250,000 for each charge.

As reported by Chad Halcom in Crain’s Detroit Business yesterday, four Oakland County business owners are appearing in court to answer charges of foreclosure rescue fraud, though just one so far faces possible jail time in the case, the Michigan Attorney General’s office announced today.

The AG’s office brought a total of 18 charges against Madison Heights-based Save My Home USA Co. Inc., Birmingham-based Help4homeowners, Livonia-based Michigan Economic Reinstatement Program L.L.C. and Payment Doctors of Livonia. Also charged personally was MERP’s owner, Mark Aloe.

Matt Frendewey, communications advisor for the AG’s office, said owners or principals of the four companies will appear in court today to answer the criminal charges — but only Aloe faced charges personally because he is the only company owner the state could tie directly to criminal acts.

Jason McCallum is owner of Save My Home in Madison Heights and Payment Doctor is owned by Katherine Small.

The charges stem from an undercover operation by the Attorney General’s office, and include 17 counts of violating Michigan’s Credit Services Act. An additional count of unauthorized use of the Great Seal of the State of Michigan was lodged against MERP and Aloe only.

“Preying on residents in the process of losing their homes is not only shameful, it’s illegal,” Attorney General Mike Cox said in a statement. “Today we are sending a message that mortgage rescue fraud will not be tolerated.”

Charges included:

• Four MCSA violations against Save My Home. State officials allege the company took $595 to $2,000 from customers and advised some not to communicate with their primary mortgage lender.

• Three MCSA violations against Help4homeowners. State officials claim the company charged before services, falsely claimed a 97 percent success rate and one employee admitted having no loan training.

• Two MCSA violations against Payment Doctors, for false claims and payment before services.

• Four MCSA violations against Michigan Economic Reinstatement Program L.L.C. and Aloe, for charging $360 to $3,000 before completion of services, false claims and business cards with the state seal even though MERP was not an agency of the State of Michigan.

Cox also sent out inquiry letters to 17 other out-of-state businesses, including five in California and four in Florida, warning that their practices may violate state law and seeking more information.

Three former New Century Financial executives were charged with fraud by the Securities and Exchange Commission on Monday, December 7, 2009: former New Century CEO Brad Morrice; former CFO Patti Dodge and ex-controller David Kenneally.

The charges against the New Century trio were filed in U.S. district court in Los Angeles, which like the thousands of foreclosures that have roiled Southern California, has become the epicenter of litigation against former executives from mortgage originators.

An investigative report by bankruptcy examiner Michael Missal of K&L Gates criticized New Century’s auditors and outside counsel at KPMG and O’Melveny & Myers for certain accounting practices and discovery delays. But Missal came down even harder on New Century executives, whom he claimed were responsible for improper loan evaluations and inflated profits by the real estate investment trust.

New Century was once the nation’s second-largest subprime mortgage loans provider and was valued at more than $1 billion before the company filed for bankruptcy in April 2007 after the mortgage market collapsed.  A trial date has not yet been set.

The trendy Hard Rock Hotel of San Diego, the first ever condo for that city, was sued for fraud last month by a group of investors who claim that they were lured with a “bait and switch” scheme.

Investors bought suites and had the right to occupy them for a maximum of 28 days a year. For the rest of the year, they would be occupied by their clients, time-share owners.

Plaintiffs, Tamer Salameh and Real Estate 4 Hospitality LLC claim they have lost a bundle of money on their investments. The suit will attempt to become a class action. Defendants include Irvine’s Tarsadia Hotel, officials Tushar and B.U. Patel, and 5th Rock LLC.

The suit charges that the investments were not registered with either the Securities and Exchange Commission or the California Department of Corporations.

The promoters allegedly used bait and switch techniques in selling the investments. Plaintiff’s attorney Mia Severson says that investors were told the rental program was not mandatory, but it was. It was not feasible for investors to operate their own rental management system, as they were promised, the suit says.

Mortgage Attorney Pleads Guilty in Fraud Scheme After Four Days of Trial

Acting United States Attorney Robert S. Cessar announced today, January 8, 2010, that Robert Danenberg, a resident of Pittsburgh, Pennsylvania, pleaded guilty in federal court to a charge of Wire Fraud Conspiracy in connection with a mortgage fraud scheme.

Danenberg, age 45, pleaded guilty to one count before United States District Judge Donetta Ambrose.

In connection with the guilty plea, Assistant United States Attorney Brendan T. Conway advised the court that Danenberg is an attorney who specialized in closing real estate transactions. He participated in a mortgage fraud conspiracy in which a co-conspirator recruited buyers to purchase properties at fraudulently elevated prices and financed through fraudulently obtained loans. Danenberg’s role in the conspiracy was to close the fraudulent loans, and the closings themselves were fraudulent in two primary respects. First, the closings required the borrowers to bring their own certified funds to the closings to make the down payments associated with the purchase. The borrowers, however, did not have sufficient funds to make the down payments and were often getting cash back at the closings. The down payments were paid by the sellers, the mortgage broker, and on several occasions, by Danenberg himself. The closings were also fraudulent in that the settlement statements reflected payments to contractors for work purportedly already done on the properties serving as collateral for the loans. In fact, however, as Danenberg well knew, those payments were kickbacks to participants in the conspiracy.

In total, Danenberg closed approximately 70 fraudulent loans totaling in excess of $5,000,000 of loan proceeds. Danenberg pleaded guilty after four days of trial.

Judge Ambrose scheduled sentencing for May 7, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both. As part of his plea agreement, Danenberg agreed to forfeit another $250,000. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the criminal history, if any, of the defendant.

The Mortgage Fraud Task Force conducted the investigation that led to the prosecution of Danenberg. The Mortgage Fraud Task Force is comprised of investigators from federal, state, and local law enforcement agencies and others involved in the mortgage industry. Federal law enforcement agencies participating in the Mortgage Task Force include the United States Secret Service; Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; and the United States Postal Inspection Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff’s Office; the Pennsylvania Attorney General’s Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee’s Office.

Indianapolis Man Sentenced to 43 Months in Prison for Mortgage Fraud Scheme

Mark Roth, 55, Indianapolis, was sentenced today to 43 months in federal prison by Circuit Judge David F. Hamilton following Roth’s guilty pleas to one count of wire fraud and one count of money laundering. This sentencing concerned Roth’s role in a multi-million dollar mortgage fraud scheme operated by Robert Penn. Roth was found responsible for 25 fraudulent loans, including the first 11 Windsor Village loans, amounting to more than $5 million.

Today’s sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division, with the assistance of the Federal Bureau of Investigation. Eight other individuals have been charged in the scheme. The remaining three cases are currently set for sentencing before Circuit Judge Hamilton on February 2, 2010. The investigation is continuing as to other individuals who were involved in the mortgage fraud schemes. Previously sentenced in this investigation were:

• Robert Penn – 84 months’ imprisonment;
• Timothy Brown – 37 months’ imprisonment;
• Stephen Scott Brown – 37 months’ imprisonment;
• Jerry Jaquess – 30 months’ imprisonment;
• Tamara Scott – 24 months’ imprisonment.

Mark Roth was involved in the mortgage brokerage business and assisted in brokering numerous loans through Argent Mortgage Company and The MoneyStation Inc. Through his years of experience in the business, Roth had developed relationships with Argent Mortgage Company employees. Roth prepared the Argent mortgage broker application packages for Web Mortgage Company LLC and American Funding Solutions Inc., to assist these companies in being able to broker loans through Argent. Roth also opened and ran the Indianapolis branch office of 1st Start Mortgage. Roth, alone and with the assistance of others, prepared and submitted to the lenders false and fraudulent loan applications along with false supporting documentation for the loans, knowing that the documents were false when he submitted them. On some occasions, Roth also requested other individuals to “front” down payment checks for the investors. Roth received money from the fraudulent loan proceeds. He opened an entity and bank account in the name WJP Roth Investments Inc., and used this bank account to deposit the fraudulent loan proceeds which he received. Roth was also partners with Jaquess in Homevestors LLC, a company involved in the purchase of the first 11 Windsor Village properties, located near Arlington Avenue and 21st Street, on the east side of Indianapolis. These properties were purchased for $50,000.00 each, and then “sold” to straw purchasers for $120,000.00 each. All of the loans involved in the schemes went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties. Many of the duplexes in Windsor Village later re-sold in 2007 and 2008, generally for amounts between $3,500.00 and $15,000.00.

According to Assistant United States Attorney Susan Heckard Dowd, who prosecuted the case for the government, Circuit Judge Hamilton ordered Roth to serve three years on supervised release following his 43 months of incarceration and also ordered him to pay a total of $1,459,025.97 in restitution to Argent Mortgage Company and Homecomings Financial.

Mark Roth Sentenced

Robert Penn Sentenced to Seven Years in Prison for Mortgage Fraud Crimes
Two Co-Defendants, Stephen Scott Brown and Tamara E. Scott, Sentenced to 37 Months and 24 Months

INDIANAPOLIS—Robert Andrew Penn, 44, formerly of Indianapolis, was sentenced to seven years in prison late yesterday by Circuit Judge David F. Hamilton for Penn’s part in a multi-million dollar mortgage fraud scheme in the Indianapolis area. Penn had entered guilty pleas to charges of wire fraud, conspiracy to commit wire fraud, and money laundering. Co-defendant Tamara E. Scott, age 50, Indianapolis, was sentenced to 24 months in prison for conspiracy to commit wire fraud and money laundering, and co-defendant Stephen Scott Brown, age 37, Indianapolis, was sentenced to 37 months in prison for conspiracy to commit wire fraud and money laundering.

These sentencings follow a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division with assistance from the Federal Bureau of Investigation. A total of nine individuals have been charged in these schemes. Jerry Jaquess and Timothy Brown were previously sentenced to 30 months and 37 months in prison, respectively, and the remaining cases are currently pending before Circuit Judge Hamilton. The investigation is continuing as to other individuals who were involved in the mortgage fraud schemes.

Between November 2003 and August 2005, at least 136 fraudulent loans, totaling $16,613,850.00, were obtained by Penn and his numerous business entities, assisted by Scott Brown, and others. The loans were obtained from Argent Mortgage Company, The MoneyStation, and People’s Choice Mortgage / Countrywide Home Loans. Penn accepted responsibility for all 136 of these loans.

Penn and his associates owned and operated numerous business entities which were created and used to illegally obtain loans on residential real estate properties in the Indianapolis area. Penn controlled and directed the activities of the other people involved in the illegal activities. Scott was married to Penn during the commission of all of the mortgage fraud crimes, and was involved in the business activities of most of the entities used to purchase, sell and manage properties in the fraudulent transactions. Brown was involved in the mortgage brokerage business and assisted in brokering many of the loans with Argent Mortgage Company and The MoneyStation.

Of the 136 fraudulent loans charged, 39 loans related to the purchase of properties from individual sellers, generally individuals who either did not have their homes listed to sell, or had them listed as “for sale by owner.” These loans totaled over $7,000,000.00 and were all issued by Argent Mortgage Company.

The remaining 97 fraudulent loan transactions charged all relate to the sale of duplexes in the Windsor Village neighborhood, located near Arlington Avenue and 21st Street, on the east side of Indianapolis. These loans totaled over $9,312,000.00 and were funded by Argent Mortgage Company, The MoneyStation and by People’s Choice Mortgage, a warehouse lender in Kentucky who had a correspondent lending agreement with Countrywide Home Loans in California. Countrywide Home Loans purchased all of these loans shortly after they were funded. All of the loans involved in the schemes went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties.

Scott’s involvement in the business included attending closings and signing fraudulent documents, receiving checks for fraudulent loan proceeds, depositing those checks to corporate bank accounts, obtaining cashiers’ checks to pay co-conspirators, and directing others in the disbursements to be made from the corporations. As part of the Windsor Village transactions, Scott, at Penn’s direction, added the names of investors to bank accounts of numerous entities and forged their signatures on bank account signature cards, to make it appear that the investors had assets which they did not have. Scott’s sentence reflected her involvement in approximately 130 fraudulent loans (including all 97 Windsor Village loans). The total amount of those loans was $14,931,300.00. Her total fraud loss was calculated at $6,149,300.00.

Stephen Scott Brown’s participation included filling out false loan applications, obtaining false documents, obtaining inflated appraisals, and submitting the fraudulent loan packages to the lenders, knowing the documents to be false. Brown received $1,500-2,000 for each fraudulent loan which he brokered. He also assisted in funding some of the fraudulent down payments. Stephen Scott Brown’s sentence reflected his involvement in 43 fraudulent loans, including the first 11 Windsor Village loans. The total amount of those loans was $6,575,300.00. The actual loss was calculated at $2,793,412.64.

According to Assistant United States Attorney Susan Heckard Dowd, who prosecuted these cases for the government, Circuit Judge Hamilton also ordered Penn, Scott and Brown to serve three years on supervised release following their incarceration and make restitution as follows:

• Penn: $11,411,722.32
• Scott: $2,793,412.64
• Brown: $11,122,891.82

The remaining defendants charged in these schemes are set for sentencing hearings before Circuit Judge Hamilton as follows:

• Mark Roth: January 11, 2010 – 2:00 p.m.
• Aaron Warren: February 2, 2010 – 9:30 a.m.
• Donald Brown: February 2, 2010 – 10:30 a.m.
• Keven LaFavers: February 2, 2010 – 2:30 p.m.

Leader of $47 Million Mortgage Fraud Scheme Sentenced to Prison
Mortgage Fraud Scheme Used Web of Companies and False Loan Documents

VIKTOR KOBZAR, 32, of Federal Way, a mortgage broker, was sentenced today in U.S. District Court in Seattle to five years in prison and three years of supervised release for conspiring to commit bank fraud, mail fraud, wire fraud and filing a false personal income tax return. KOBZAR was a mortgage broker who, with co-defendant Vladislav A. Baydovskiy, operated two brokerage companies, Nationwide Home Lending LLC and Kobay Financial Corporation; and established a third company, Emerald City Escrow, to close transactions involving the fraudulently obtained loans. KOBZAR was one of six people arrested March 26, 2009, on a grand jury indictment for a mortgage fraud scheme that defrauded more than a dozen banks and mortgage lenders of more than $47 million. At sentencing U.S. District Judge Marsha Pechman said, “This is a very serious crime and many, many people were harmed… People who take advantage of lax review by financial regulators bear a huge responsibility for the financial meltdown that harmed many people.”

According to records filed in the case the defendants secured through “straw buyers” and otherwise unqualified purchasers at least 68 loans, representing at least $46 million in loan proceeds, based on false and fraudulent representations. All of the fraudulently obtained loans were closed at Emerald City Escrow. Employees and principals at Kobay and Nationwide prepared and submitted falsified loan applications and related verification documents to lenders in a scheme to conceal the fact that buyers were otherwise unqualified to obtain purchase money loans. Relying on the fraudulent information, lenders extended loans that exceeded the value of the property and the borrower’s ability to re-pay the loan. Employees and principals of Emerald City diverted some of the fraudulently obtained loan proceeds to themselves and others associated with the scheme. False settlement documents were prepared to conceal the diversion from lenders.

For sentencing purposes, prosecutors estimated that the amount of loss suffered by banks and lenders was between $2.5 million and $7 million. However, they noted in their sentencing memo that the damage from these mortgage fraud schemes goes far beyond the lenders. “Fraud perpetrated by those involved in the mortgage lending industry has caused massive losses to lenders and is responsible for the failure of banks and private lending institutions. Investors in mortgage backed securities have lost funds needed for income and retirement. Home values have been distorted by inflated appraisals leading to a shortage of affordable housing. Foreclosures caused by mortgage fraud have riddled neighborhoods with abandoned houses and properties in disrepair,” Assistant United States Attorney James Oesterle wrote in his sentencing memo.

Defendants in the case are forfeiting to the government a 2004 Lamborghini Gallardo, a 2006 BMW 750, a 2007 BMW X5, a 31 foot Bayliner yacht, and several bank and investment accounts totaling approximately $2.4 million. A hearing will be held later this month to determine the amount of restitution owed by the defendants.

Last month co-defendant Vladislav A. Baydovskiy was sentenced to five years in prison. Four other defendants in the case were sentenced in December 2009. Camie Byron, 28, of Renton, a loan officer, was sentenced to two years in prison. Alla Sobol, 28, of Renton, a mortgage broker, was sentenced to two years in prison, and her husband, David Sobol, 40, of Issaquah, a real estate agent, was also sentenced to two years in prison. Sandra Thorpe, 55, of Shoreline, an accountant who falsified income statements and employment verification letters, was sentenced to probation and 200 hours of community service.

The case was investigated by the FBI, U.S. Postal Inspection Service, and the Internal Revenue Service Criminal Investigation (IRS-CI).

The case was prosecuted by Assistant United States Attorneys Jim Oesterle and Carl Blackstone

According to a January 4, 2010 Bloomberg Report, Bradley Birkenfeld, was a key informant in a U.S. investigation of offshore tax evasion aided by US Bancorp (UBS). On Jan. 8, Birkenfeld reported to prison for a 40-month prison term as ordered by U.S. District Judge William Zloch in federal court in Fort Lauderdale, Florida.

“I gave them the biggest tax fraud case in the world,” said the 44-year old Birkenfeld. “I exposed 19,000 international criminals. And I’m going to jail for that?”

Birkenfeld, a former banker with USB AG, pleaded guilty in 2008 to helping California billionaire Igor Olenicoff and hundreds of others evade taxes. Before his sentencing, Birkenfeld cooperated with the Justice Department, a U.S. Senate investigation and the Internal Revenue Service probe of the Zurich-based financial giant, detailing how UBS helped Olenicoff and other rich Americans evade taxes.

Birkenfeld, a former UBS banker, sought a postponement of the term imposed Aug. 21 by, and a new hearing to seek a shorter sentence. He promised to continue cooperating with prosecutors. Zloch denied the request in a one-page order.

“It’s a setback for whistleblowers everywhere,” said Birkenfeld attorney Stephen Kohn, executive director of the National Whistleblowers Center in Washington. “It just undermines the public interest that thousands of major tax cheats all escape any prosecution, and the one person who turned it in gets the longest sentence.”

In February 2009 the court ordered USB to pay $780 million in fines and to hand over data on 250 accounts to avoid prosecution. It agreed in August to turn over data on another 4,450 clients sought by the IRS.

At Birkenfeld’s sentencing on Aug. 21, 2009 the DOJ prosecutor, Kevin Downing stated that the U.S. couldn’t have unraveled the bank’s “massive tax fraud scheme” without his help. Prosecutor Downing recommended a minimum sentence of 30-months for Birkenfeld, since he wasn’t initially truthful about his dealings with Olenicoff.

In an interview on CBS’s “60 Minutes,” Birkenfeld said he didn’t deserve to go to jail when other bankers and clients haven’t. Birkenfeld also seeks a reward from the IRS of up to 30 percent of the taxes collected based on his information.

Olenicoff, who pleaded guilty in 2007 to filing a false tax return, got two years probation and paid $52 million in back taxes, fines and penalties. Last year, six former UBS clients pleaded guilty. While one got 12 months house arrest, none was sentenced to more than three months in prison.

Birkenfeld, who is under house arrest with electronic monitoring in Massachusetts, filed a motion Dec. 26 seeking a delay in his prison term and a hearing on a reduced sentence.

In that motion, Birkenfeld’s lawyers said he has been “ready, willing and able” to provide continued assistance to the government, and prosecutors had not taken him up on the offer.

In the four months after his sentencing, “the government has neither met with Mr. Birkenfeld nor asked him a single question about UBS, Swiss private banking, or any of Mr. Birkenfeld’s former U.S. clients.” His lawyer also spoke once to U.S. authorities on Dec. 14 about Birkenfeld’s former UBS clients, according to the filing.

In a Dec. 7 letter to U.S. Attorney General Eric Holder, Kohn also said that his client told the Senate, the IRS and the Securities and Exchange Commission in 2007 about Olenicoff. “There clearly was a breakdown in communication between DOJ and Mr. Birkenfeld,” Kohn wrote. “There also appears to have been a breakdown in the cooperation and information sharing between various government entities.”

Birkenfeld was indicted with a Liechtenstein investment adviser, Mario Staggl, who was declared a fugitive. Two former UBS bankers, Raoul Weil and Hansreudi Schumacher, and a Swiss lawyer, Matthias Rickenbach, also were indicted in the U.S. and declared fugitives.

Man Sentenced to More than Three Years in Federal Prison in Mortgage Fraud Scheme
Defendant Apprehended on a Shrimp Boat in Caribbean Sea

DALLAS—James Ragnauth, a defendant charged in a mortgage fraud case, who was on the lam for about six weeks and apprehended on a shrimp boat in the Caribbean Sea by the U.S. Coast Guard in March 2009, was sentenced today by U.S. District Judge Sidney Fitzwater to 37 months in federal prison, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Judge Fitzwater also ordered Ragnauth to pay approximately $205,000 in restitution.

Ragnauth pleaded guilty in September 2009 to one count of causing false entries to deceive the U.S. Department of Housing and Urban Development (HUD). According to the indictment, Ragnauth incorporated J.R. Mortgage, located in Dallas, and was in charge of the company’s day-to-day loan operations and supervised several loan officers, including co-defendant Rosa Irene Galvan and Ignacio Juan Jasso, charged in a related case.

Ragnauth admitted in documents filed in court that in 1997 and 1998, he and loan officer Jasso knowingly and willfully made false entries in HUD statements in connection with several residential loans. As part of their scheme to defraud HUD, Ragnauth and Jasso created, and caused others to create and later submit to HUD, several false and fraudulent documents, such as a Uniform Residential Loan Application which contained false information, a fraudulent W-2 form and a fraudulent credit report. At the sentencing hearing today, Ragnauth was found to be the organizer leader of a mortgage fraud scheme that caused the fraudulent funding of 30 residential loans, totaling more than $1.8 million.

Both Galvan and Jasso have pleaded guilty to their roles and are scheduled to be sentenced on February 26, 2010.

While Ragnauth was a fugitive in the Beaumont, Texas area, the U.S. Marshals Service in Beaumont featured Ragnauth’s photo on local newscasts along with information that he might be leaving the U.S. on a boat from Port Arthur, Texas. Ragnauth, a naturalized citizen, was captured by the U.S. Coast Guard when he was attempting to flee to his native Guyana. Guyana is located just east of Venezuela on the northern coast of South America. Ragnauth made it about half way to Guyana, being arrested in international waters between Cuba and Haiti.

The case was investigated by the FBI and HUD-Office of Inspector General. Assistant U.S. Attorney David Jarvis was in charge of the prosecution.

Former CPA for Crisp & Cole Real Estate, Wife Plead Guilty in Mortgage Fraud Schemes

FRESNO, CA—United States Benjamin B. Wagner announced today that KEVIN PATRICK SLUGA, 60, and his wife, LESLIE SLUGA, 57, of Bakersfield, pleaded guilty today before U.S. District Judge Oliver W. Wanger, in Fresno, to four counts of wire fraud and two counts of wire fraud, respectively. As part of their respective plea agreements, KEVIN SLUGA and LESLIE SLUGA have agreed to cooperate in the government’s ongoing investigation.

This case is the product of an extensive investigation by the Federal Bureau of Investigation.

According to Assistant United States Attorneys Sheila K. Oberto, Kirk E. Sherriff, and Stanley A. Boone, who are prosecuting the case, KEVIN SLUGA is a Certified Public Accountant (CPA) who provided corporate tax and accounting services to Crisp & Cole Real Estate and Tower Lending, a mortgage company affiliated with Crisp & Cole and owned by Crisp & Cole’s owners. KEVIN SLUGA prepared tax returns for a Crisp & Cole owner as well as for various Crisp & Cole employees. KEVIN SLUGA and LESLIE SLUGA admitted in their plea agreements, that they, along with certain individuals at Crisp & Cole and Tower Lending, and other individuals, executed schemes to defraud mortgage lending institutions by causing materially false and fraudulent statements to be submitted in mortgage loan applications and related documents to obtain loans from lenders for property purchases.

In pleading guilty, KEVIN SLUGA admitted that during the period from January 2005 to January 2007, he prepared verification of employment letters (CPA letters) that contained false information to assist the owners of Crisp & Cole, and others, in a scheme to obtain mortgage loans from lenders to purchase property, using straw buyers and other illegal means. The false CPA letters were submitted to lenders in support of applications for mortgage loans to be used to finance purchases of properties. The CPA letters included material misstatements regarding the borrowers’ employment status, occupation, and experience as a landlord, among other material misstatements or omissions. For example, KEVIN SLUGA would at times state that the borrower was employed at California Business Solutions, also known as Comprehensive Business Solutions (CBS), in a specific capacity for a certain period of time, when in truth and in fact, the borrower had either never worked at CBS or had not been employed in such a capacity at CBS. Based on his experience as a CPA, KEVIN SLUGA knew and expected that the false and fraudulent CPA letters would be submitted to the lenders in response to the lenders’ request for such verification, and that the lenders would reasonably rely on such misstatements and omissions in approving the loans. The lenders then distributed the mortgage loan funds to escrow companies or other companies, often across state lines.

LESLIE SLUGA admitted that from April 2005 through May 2006, at the direction of one of the owners of Crisp & Cole, she purchased three properties with a total purchase value at the time of approximately $2.5 million, and obtained loans to finance such purchases. In almost all of the loan applications, she knowingly made material misstatements and omitted relevant and material information. LESLIE SLUGA admitted that she knew and expected that the lenders would reasonably rely on such misstatements and omissions in approving the loans. LESLIE SLUGA’s misstatements and omissions included misstatements concerning her employer, the number of years employed, and her position and title with the employer; misstatements regarding her income and her outstanding liabilities (including her liabilities with respect to other properties), and misstatements that she would use certain properties as owner-occupied residences when in fact she had no intent to reside in the properties.

KEVIN SLUGA, LESLIE SLUGA, and others involved in these schemes committed these acts to deceive lending institutions into funding mortgage loans on the basis of the false information. A number of the properties purchased with the loan proceeds were subsequently foreclosed upon after loan payments were not made when due.

U.S. Attorney Wagner stated, “The United States Attorney’s Office will vigorously pursue those responsible for mortgage fraud schemes in this district. Schemes such as the ones committed in this case have contributed to the devastation in real estate and financial markets.”

To further the prosecution of mortgage fraud cases arising out of the southern half of the Central Valley, in 2009 the U.S. Attorney’s Office and the FBI created a Mortgage Fraud Task Force based in Fresno, comprising both federal and local law enforcement agents and prosecutors.

KEVIN SLUGA and LESLIE SLUGA are scheduled to be sentenced by Judge Wanger on July 12, 2010, at 1:30 p.m. The maximum statutory penalty on the wire fraud charge is 20 years in prison, and a criminal fine of $250,000. 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.

Dustin LaFavre plead guilty to one count of conspiracy to commit mail and wire fraud in connection with this crime. LaFavre was charged on November 5, 2009.

Appearing before United States District Court Judge Richard Kyle in St. Paul, the 27-year-old Webster man pleaded guilty today in federal court to bilking more than $7 million from at least 15 real estate mortgage lending companies between 2005 and 2008.

LaFavre and another individual, a licensed real estate broker, solicited real estate buyers by telling them they would receive significant cash from the proceeds of the mortgage loans. With the assistance of his accomplice, LaFavre then negotiated the value of single pieces of property as well as property groupings, known as bulk purchases, in an effort to inflate the sale prices of that real estate. Those inflated prices were reported to and ultimately approved by lenders. Then, after transaction closings, LaFavre and accomplice divided among themselves and the buyers the difference between the inflated sale prices and the true sales prices.

In addition, LaFavre helped buyers qualify for their mortgage loans by creating false verifications of employment, depositing money into their bank accounts to make their balances appear higher, providing them with down payments, and working with mortgage brokers and loan officers who were willing to prepare false documentation for submission to lenders.

LaFavre sold at least 172 properties during the course of this three-year scheme. In furtherance of the scheme, LaFavre sent false documents via the U.S. Mail as well as commercial carriers. He also caused wire transfers of mortgage loan proceeds from which he and others obtained cash kickbacks.

LaFavre faces a potential maximum penalty of 20 years in prison for his crime. Judge Kyle will determine his sentence in January 2010.

In US law, Money Laundering is the practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money. It is the process of creating the appearance that large amounts of money obtained from serious crimes, such as real estate fraud, originated from a legitimate source. Today its definition is often expanded by government and international regulators to mean any financial transaction which generates an asset or a value as the result of an illegal act.

Jeffrey Bennett and Stephen Doherty of Doylestown-based Bennett & Doherty are charged with conspiracy to commit mail and wire fraud and conspiracy to commit money laundering and Doherty is also charged with bankruptcy fraud.

Two partners in a Pennsylvania law firm have been federally indicted along with three other defendants including two mortgage company owners in a wide-ranging alleged real estate fraud scheme.

Federal prosecutors in Philadelphia say the $14.6 million scheme involved 35 fraudulent loans, real estate deals in which purchases were made by straw buyers and false promises of help to homeowners trying to stave off foreclosure.

If convicted, Doherty could get a maximum of 385 years in prison and $4 million in fines and Bennett faces as much as 240 years and $3.2 million in fines.

“These are allegations. And now you have others wanting to join in hoping they hit a lucky number too,” says Bennett’s lawyer, George Bochetto of Bochetto & Lentz in Philadelphia. “Jeff Bennett is a fine, fine attorney who’s always worked hard on behalf of homeowners in tough situations.”

I wrote about Lend America earlier last month here on my Flipping Frenzy blog. The article concerned Lend America’s negative esteem among the halls of the Housing and Urban Development (HUD) for having, “…a default rate that is eight times the industry’s average.”

Within 48 hours, first the Federal Housing Administration (FHA), then the Government National Mortgage Association (Ginnie Mae) the next day withdrew their approval for Lend America to participate in the FHA single family insurance program.

A national mortgage lender, Lend America is known for its aggressive media marketing campaigns: full-page newspaper ads and television infomercials to solicit business from homeowners facing foreclosure, can no longer originate or underwrite FHA loans or issue Ginnie Mae securities.

The FHA also imposed civil money penalties against the Melville, N.Y. lender for $512,500 based upon two notices of violation issued to the Company last month. Lend America has 30 days to challenge the withdrawal action and the imposition of civil money penalties before an Administrative Law Judge. The action taken today follows a Quality Assurance review that found Lend America, also doing business as Ideal Mortgage and Lending Key violated a number of HUD/FHA requirements.

Lend America has originated some 11,300 FHA-backed loans over the last two years, ranking them No. 22 out of 13,419 (as of today, make that 13,418) among FHA lenders by volume.

In a terse statement today, a Lend America spokesperson offered this response: “The company is surprised and disappointed by today’s action by the U.S. Department of Housing and Urban Development’s Mortgagee Review Board. The Company is currently reviewing all possible options and remedies in response to this action, and will respond shortly once a decision has been reached.”

“The FHA’s action triggers an immediate default in the Ginnie Mae program,” said Ginnie Mae Executive Vice President Mary Kinney. “We have taken these steps to protect the integrity of our MBS program and the American taxpayer.”

“We have no tolerance for lenders who abuse their FHA-approval,” said FHA Commissioner David Stevens. “The evidence in this case points to a disturbing pattern of senior officials and underwriters, either not knowing what they were doing, or not caring. Therefore, Ideal (Lend America) has been immediately withdrawn from participating in the FHA-insured mortgage program.”

In October, the Justice Department filed suit at HUD’s request to bar Lend America from making government-backed loans, accusing the company of falsely certifying borrowers who received $14 million in FHA-backed loans. However, U.S. District Judge Joseph F. Bianco denied the government’s request for a temporary restraining order that would prevent Lend America from making such loans while a civil fraud injunction against the company and one of its senior managers is being decided.

Lend America was the first lender in the country to receive approval from HUD to underwrite, close and insure Hope for Homeowners loan transactions without prior HUD review. In May, it launched a $500,000 a month advertising campaign with the tagline “Relief Comes In The Form Of Hope” featuring full page ads in The New York Times, The Washington Post, USA Today, The Wall Street Journal, and Newsday. In addition, it launched a series of 60 second format TV commercials and cable TV infomercials featuring phony anchors for the “Mortgage Loan Network.”

Matthew B. Pizzolato, 26, of Tickfaw, Louisiana, was charged December 2, 2009 by a federal grand jury sitting in New Orleans in a 64-count indictment for operating an investment “Ponzi” Scheme, announced U.S. Attorney Jim Letten.

Specifically, Pizzolato was charged with 52 counts of mail fraud ( counts 1-52 ), two counts of wire fraud ( counts 53, 54 ), seven counts of money laundering ( counts 55-61 ), one count of securities fraud ( count 62 ), one count of witness tampering ( count 63 ), and one count of obstruction of justice ( count 64 ) in violation of federal law.

According to today’s indictment, since 2005, MATTHEW B. PIZZOLATO, was affiliated with and/or operated and/or owned Gulf Region Guaranty, Inc. ( Gulf Region Guaranty ) and its affiliated companies Acadian Guaranty Group, LLC; Allegiance Financial, LLC; Annuity Presets, LLC; Annuity Recovery Services, LLC; Anova Marketing Systems, LLC; Anova Marketing Systems, LLC; Anytime Fitness of Sulphur, LLC; Cornerstone Wealth Management, LLC; Global Assured Financial, Inc.; Green Pelican Group, Inc.; Gulf South Guaranty, Inc.; Gulf States Guaranty, LLC; GRG Holdings, LLC; GRG I, LLC; GRG II, LLC; Matt P, LLC; National Insurance Advisors, LLC; Pelican Guaranty Group, Inc. ( Pelican Guaranty ); and Spectrum Lending Group, LLC. PIZZOLATO maintained offices in Hammond, Covington, Lake Charles, Baton Rouge, and also conducted business in the New Orleans metropolitan area.

Pizzolato is charged with having purchased hundreds of thousands of dollars worth of luxury cars using investor money including a BMW 750LI, a Mercedes Benz S430V, a Range Rover Sport, and a Chevrolet Corvette. Additionally, the indictment charges that Pizzolato used investor money to build a new half-million dollar home in Ponchatoula, Louisiana and to purchase a $35,000.00 engagement ring.

According to the indictment, during the time period of 2005 through the date of the indictment, Pizzolato, obtained approximately $19.5 Million from approximately 160 investors and spent nearly all of the money.

Seniors and Retirees were prime targets

According to the allegations, during this time period, Pizzolato operated an investment “Ponzi” scheme targeting older investors, specifically retirees. Pizzolato lured his potential victims through advertisements in the local daily newspapers in New Orleans, Baton Rouge and Hammond by promising rates of returns that were higher than market rates for CDs or U.S. Treasury Bills.

FBI Special Agent in Charge David Welker stated: “It is unconscionable that in this stressful economy senior citizens would be targeted and defrauded of their life savings. We have an obligation to aggressively investigate crimes against those citizens who are most vulnerable. The FBI and our law enforcement partners will continue to aggressively pursue those who target our most vulnerable citizens.”

If convicted, Pizzolato faces up to twenty ( 20 ) years imprisonment for each count of mail fraud, wire fraud, securities fraud, and witness tampering; and up to ten ( 10 ) years imprisonment for each of the money laundering and obstruction of justice charges. He also faces fines of up to $16 million and five (5) years of supervised release after he is released from prison.

Colorado Springs, CO

Prosecutors in Colorado Springs announced November 25, 2009 that a grand jury indicted James Brady and Ray Marshall of LandCo Equity Partners on 33 counts each of securities fraud. As chairman, Ray Marshall and president, James Brodie of LandCo Equity are accused of misleading 15 real estate investors in phony deals, stealing “tens of thousands of dollars from them.”

Brodie and Marshall’s company LandCo, was hired by the U.S. Olympic Committee to renovate its headquarters in Colorado Springs, Colorado. None of the current charges involve the new USOC building. Both men posted bond and were scheduled to appear in court December 2.

Source: The Gazette, http://www.gazette.com

Sacramento, CA

The California Department of Real Estate announced Monday that it has banned David Crisp, a former real estate agent from Bakersfield. The ban against Crisp comes after the department revoked his license 2008.

Department officials claimed that Crisp induced lenders to provide millions of dollars worth of loans based on false information. Crisp netted over $11,000,000 worth of mortgage loans on those false representations that officials claim had caused 23 properties to enter default status.

Source: The Associated Press

Cleveland, OH

Here’s a case of being in the Wong place at the wrong time.

Cuyahoga County Common Pleas Court listened to four real estate buyers plead guilty to multiple counts of corruption related charges. Pak Hor Lui, 55, Pak Chang Lui, 53, and Pak Yan Lui, 48 and Keng Ming Wong, 46, all pleaded guilty to multiple counts each of tampering with records, theft by deception and receiving stolen property.

Pak Yan Lui also pleaded guilty to establishing a pattern of corrupt activity and to three counts of theft by deception and four counts of tampering with records.

All of the defendants are from Independence, and all but Wong are brothers. Their mortgage fraud scheme prosecutors say contributed significantly to foreclosure and blight in Cleveland’s Slavic Village neighborhood.

A fifth defendant, Mark Kellogg, 39, of Fairview Park, awaits trial on charges of engaging in a pattern of corrupt activity, better known as RICO, along with dozens of other counts that include forgery, falsification, fraud and money laundering.

Through a system of kickbacks, shell companies and false down payments Kellogg earned about $250,000, prosecutors said.

Prosecutors say the defendants, who bought, rehabbed and flipped foreclosed homes, eventually teamed up with. Together they launched an operation to deceive lenders with false loan applications that inflated both the value of the houses and the finances of interested buyers, prosecutors said. Seventy-eight Slavic Village homes fell prey to the scam.

Prosecutors said the Lui brothers and Wong will be sentenced after they fulfill their obligation to testify against Kellogg, who is expected to go to trial in early February.

Source: Leila Atassi, The Plain Dealer

Broward County, FL

Following indictments in May 2009, a Davie couple on Monday was found guilty of charges relating to a multimillion-dollar money-laundering scheme involving mortgage fraud.

Garry and Yvonne Souffrant, both 33, were alleged to have used their family business, Progressive Real Estate of Broward, to launder millions of dollars in drug proceeds, according to evidence presented at trial.

Sentencing is set for February 2, 2010.

A third defendant, Garry’s brother, Gamaliel Souffrant, 44, of Pembroke Pines, was found not guilty.

According to the indictment, the couple helped drug traffickers to buy homes and luxury automobiles, including a 2004 Rolls-Royce Phantom. To do this, they either arranged for or acted as straw buyers on behalf of the drug traffickers, allowing the traffickers to use drug proceeds to purchase homes and lease automobiles, while concealing the source of the income, according to a U.S. Department of Justice news release. The defendants also diverted several million dollars of mortgage loan proceeds to continue to fund the scheme and for their personal use.

Source: South Florida Business Journal

Milwaukee, WI

Jeffrey D. Stradelmann, 47, was indicted November 12, 2009 for wire fraud in connection with an investment scheme he is alleged to have conducted between March 2002 and March 2008.

The indictment alleges that Stradelmann obtained more than $2.4 million fraudulently from 50 investors and private-party lenders using false pretenses. The indictment further alleges that Stradelmann converted his victims’ money to his own use while paying some of the investor/victims their interest payments.

If convicted of this charge, Stadelmann would face a maximum term of imprisonment of 20 years and a fine not to exceed $250,000.

Source: US Attorney’s office, Eastern District of Wisconsin

Phoenix, AZ

Jeffrey Todd Crandell, 33, of Mesa, Ariz., pleaded guilty on November 9, 2009, to six counts of Bank Fraud for his role in a mortgage fraud scheme.

Crandell was the leader of a sophisticated cash-back mortgage fraud scheme. In 2005, he obtained the rights to various parcels of real estate located in Queen Creek, Ariz., obscured his interest in those properties by placing them in the name of his brother-in-law, and then recruited friends and acquaintances to buy the properties for inflated prices—often hundreds of thousands of dollars more than the cost of the land.

Among other things, he inflated the buyers´ incomes and assets and stated—falsely—that the buyers would be making the down payment. In fact, at closing, Crandell supplied the down payment on behalf of the buyers and also provided a cash kickback to them. The properties eventually went into foreclosure.

Crandell also acted as the mortgage broker for each transaction. In that capacity, he was responsible for preparing the buyers´ loan applications. Crandell included multiple lies in the applications in order to persuade the lender to approve the loans.

Sentencing will take place on February 22, 2010, before U.S. District Judge G. Murray Snow.

Source: The Crime Blotter

NORFOLK, VA

Wayne M.B. Lezama, 44, a former real estate agent has pleaded guilty to a federal wire fraud charge in a $3 million mortgage fraud scheme.

Lezama faces up to 30 years in prison and $1 million in fines. He will be sentenced in February, 2010. At his guilty-plea hearing Monday in U.S. District Court, Lezama agreed to cooperate with authorities in an ongoing investigation and pay back at least $1 million in losses sustained by financial institutions.

Lezama, originally from Buford, Ga., used an unidentified straw buyer and phony “gift letters” to secure mortgages for 11 houses, including one for a $790,000 home in Virginia Beach’s Lago Mar neighborhood, where he lived.

Lezama used those mortgage proceeds for his own purposes, according to the court filings. Financial institutions that were never paid back were forced to foreclose on most of the houses. The mortgages were obtained between 2005 and 2006, during the real estate boom.

Source: US District Court, Virginia records

The top prosecutors from every state, the Attorneys General, held their winter conference last month in Phoenix, Arizona. On top of their agenda was the nation’s biggest law-enforcement issues: cracking down on mortgage fraud and pushing more lenders to work with homeowners facing foreclosure is on their agenda.

Hosting the conference in his home state of Arizona, Attorney General, Terry Goddard addressed the legal bodies at the welcoming portion of his duties with the daunting task of dealing with the “…incredible avalanche of foreclosures.” Goddard put out the challenge to his colleagues ending his remarks with this statement: “”We have dealt with sub-prime mortgages. Going forward we have to be very concerned with what comes next from the mortgage meltdown and to look at payment-option ARM loans.”

Last fall, Goddard and several other attorneys general reached a settlement with Countrywide Financial over the lender’s alleged use of deceptive loan practices. Bank of America, which acquired Countywide, settled by agreeing to develop an $8 billion loan-modification program and pay states involved in the settlement $150 million to help struggling homeowners.

“Suing lenders is back on the table since the Supreme Court decision,” Goddard said about the recent high-court decision to allow states to exercise their own supervision over national banks. “We are looking for legal remedies to help homeowners in trouble. We are very frustrated with banks’ slow actions to help.”