Greed and financial desperation drove an El Sobrante man to orchestrate the murder of a wealthy San Ramon mortgage lender who had long mentored him in the real estate business, a prosecutor told jurors Thursday during opening statements in Reginald Robinson\’s murder trial.

Robinson, 33, was running a real estate fraud scam involving two North Richmond townhouses financed by Kasmir Billon in 2008 when he either hired someone to kill Billon, or committed the killing himself, deputy district attorney Ken McCormick said.

Robinson, who was deep in personal debt and at risk of losing his home and cars, hoped to reap the profits from the sales of the over-appraised townhouses to straw buyers that he created once Billon was out of the picture, prosecutors say. Robinson has pleaded not guilty to one count of murder, two counts of solicitation of murder, forgery and being a felon in possession of a handgun.

Robinson\’s attorney denied that his client had any part in killing Billon. It was Billon who was the puppet master in all legitimate and fraudulent real estate deals involving Robinson, who had no opportunity to make money if Billon was dead, deputy public defender Jonathan Laba said.

Billon, 42, was found shot dead in his BMW 745 on April 27, 2008, on a frontage road near the San Ramon Marriott. The car was in park, the engine was still running and Billon\’s foot was on the gas pedal. Three .44 Magnum bullets had been fired at the car, one passing through Billon\’s heart, causing him to bleed to death.

Investigators did not find any evidence at the scene pointing to the killer\’s identity.

The attorneys agree that Billon met Robinson at a Walnut Creek gas station about 9 p.m. and gave him a $1,750 check for tree-cutting services at a house they were flipping on Giaramita Street in Richmond. Laba said that Robinson returned home to his wife and children about the same time Billon was shot to death, and he was shocked to learn about the killing the next day.

Two men, strangers to each other, will testify that Robinson had solicited each of them to kill his business associate by April 27, the day before escrow was to close on the first North Richmond townhouse, McCormick said.

The second man called police April 28 to report Robinson\’s proposition after seeing a TV news report about Billon\’s death. Richard Rogers, a felon who met Robinson through the Jevohah\’s Witness community, said Robinson offered him $50,000 to masquerade as a tree-cutter and kill Billon at the Giaramita Street house, according to McCormick. Rogers backed out after Robinson refused to pay him half the money upfront. He told police that Robinson came to him after Derek Wheat, the first person he solicited, bailed on their deal.

Laba said both men have a motive to lie.

The trial will continue for several weeks in the courtroom of Contra Costa Superior Court Judge John Laettner.

By Malaika Fraley<–>

United States Attorney A. Brian Albritton announces that U.S. District Judge Henry Lee Adams, Jr. yesterday sentenced Barry C. Westergom (age 60, of Jacksonville) to four years in federal prison for conspiracy to commit wire and bank fraud. The court also ordered restitution in the amount of $866,141.62 and entered a money judgment for $100,000, the amount that Westergom had obtained from the fraud. Westergom had pleaded guilty on October 8, 2009.

According to court documents, during 2004 and 2005, Westergom’s co-conspirator, Juan Carlos Gonzalez, contracted to purchase about 55 houses. Gonzalez retained Westergom, who was a licensed real estate appraiser, to appraise most of the properties. Westergom then fraudulently inflated the appraisals, valuing each property at a significantly higher price than the negotiated purchase price. Westergom knew that Gonzalez intended to submit the appraisals to lenders in support of mortgage loan applications in which the inflated appraisal value was listed as the purchase price. The lender was not informed that the price listed in the transaction documents was higher than the actual price negotiated with the seller. Gonzalez also submitted fraudulent financial documents and information, including altered bank statements and payroll records, to the lenders in support of the loan applications.

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

Westergom’s plea agreement details one transaction in which Westergom, acting as a buyer’s agent for Gonzalez, negotiated with a seller to purchase a house for $490,000. Westergom then fraudulently appraised the house for $625,000. Gonzalez submitted first and second mortgage loan applications for the house reflecting a sales price of $625,000. Gonzalez also submitted altered bank account statements showing significantly larger cash balances in the account than actually existed. The lender approved the loans and, at the closing, Gonzalez received $134,000, which was listed on closing documents as an “Assignment of Contract Fee.” Westergom received $12,250 as a broker’s fee and $550 as an appraisal fee.

The conspirators’ fraudulent acts resulted in lenders extending more than $29,272,000 in first and second mortgage loans. Westergom received a total of about $100,000 in commissions and fees. Gonzalez received $6,296,303.65 from the scheme.

Gonzalez pleaded guilty to a conspiracy charge and was sentenced to seven years in federal prison on November 5, 2009.

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

A 56-year-old Rainbow City woman pleaded guilty Wednesday in federal court to charges of bank and mortgage fraud that totaled more than $500,000, U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Patrick Maley announced.

ROXANNE SAUNDERS GILLILAND entered guilty pleas before U.S. District Judge C. Lynwood Smith, Jr., to one count of making false statements on a mortgage loan application and three counts of bank fraud. She agreed to forfeit $577,796 to the government as proceeds of illegal activity.

According to GILLILAND’s plea agreement and other court documents, GILLILAND was an employee of Dawson Construction Company in Gadsden and, between March 2005 and October 2008, fraudulently withdrew the $577,796 from personal and business accounts connected to the company. Also, in April 2007, GILLILAND submitted a personal home mortgage application in which she claimed a business account of Dawson Construction as a personal asset in order to obtain a mortgage loan she would have been otherwise ineligible to receive.

“Any individual who commits both bank and mortgage fraud becomes a serious threat to our community. This defendant’s criminal fraud struck at both our local businesses and financial community. It is our mission to deal with these individuals swiftly and decisively in order to deter others from committing similar crimes,” Vance said.

The maximum sentence for counts one through four is 30 years in prison and a $1 million fine.

Special agents of the FBI investigated the case, which Assistant U.S. Attorney Patrick Carney is prosecuting for the government.

Struggling homeowners on the verge of foreclosure are being warned by the state Attorney General’s Office of the latest mortgage-relief scam known as “forensic loan audits.”

Forensic loan audits are what state Attorney General Jerry Brown calls “phony mortgage relief services” that charge upfront fees for a forensic review of loans but will never lead to lowered monthly payments or loan principle.

California is a minefield for scams, because it accounted for 22 percent of the nation’s 632,573 foreclosures in 2009. The metropolitan Stockton area has ranked at or near the top of the nation in foreclosure filings since the housing bubble burst in 2007.

To get help

• Nonprofit housing counselors certified by the U.S. Department of Housing and Urban Development provide help free. Call (800) 569-4287.

• Attorney General Jerry Brown’s office will take complaints of mortgage relief fraud at (800) 952-5225.

• For complaints against a lawyer, contact the State Bar complaint hot line at (800) 843-9053.

The most recent scam is in a mortgage consultant’s claim that a forensic audit could find whether a homeowner’s lender is violating state and federal laws, and a sales pitch that locating a violation in a mortgage agreement could offer an opportunity for them to void the loan and force a modification.

“Forensic loan audits are yet another phony foreclosure-relief service hawked by loan modification consultants trying to cash in on the desperation of homeowners facing foreclosure,” Brown said this week. “The foreclosure relief industry continues to be long on promises but short on results.”

Evan Westrup, a spokesman for the attorney general, said Brown’s office has received about 3,500 complaints against mortgage modification professionals in the past six months. The Department of Real Estate has investigated more than 2,000 cases in 2009, with more than 350 companies have been delivered desist and refrain order to stop all illegal activity.

“The DRE has aggressively pursued loan modification scammers who prey on vulnerable and financially stressed homeowners and those peddling false hope by promising mortgage relief with a forensic audit will be scrutinized,” Department of Real Estate Commissioner Jeff Davi said in a statement.

Brown offered the following tips to struggling homeowners:

» Don’t pay fees up front. Foreclosure consultants are prohibited by law from collecting money before services are performed.

» Respond to all letters from lenders and loan services. Working with your lender is the best opportunity to modify your loan.

» Don’t transfer title or sell your house to a “foreclosure rescuer.” The attorney general says this is a scam to convince homeowners they can stay in their house as renters and buy it back later, only to be evicted.

» Don’t make a mortgage payment to anybody but your lender or bank. A mortgage consultant will keep the money.

» Don’t sign any documents without reading them thoroughly. Scammers often convince victims to sign their house over to them in a sea of paperwork that has not been properly vetted.

- Keith Reid

A Richmond, VA, real estate promoter who cheated 22 investors out of more than $2 million and three banks out of $252,000 pleaded guilty to mail fraud in federal court yesterday.

Robert S. Capehart, 54, faces up to 20 years in prison and a fine of $250,000 when sentenced May 24 by U.S. District Judge James R. Spencer. The plea agreement calls for him to make full restitution of $2,305,000.

“Robert Capehart stole millions by lying to his lenders and investors,” said U.S. Attorney Neil MacBride. “This deceit is at the heart of our financial crisis and that is why we are dedicating so much of our resources to detecting and prosecuting financial fraud in this district.”

According to a criminal information filed in the case, from 2003 to 2006 Capehart purchased about 40 rental properties. When obtaining loans from banks, he did not disclose all his loan liabilities and other real estate holdings.

Capehart bought property in the rising real estate market with little or nothing down and then refinanced it after it appreciated in value. He used the proceeds from the new mortgage to pay off the old one and kept the excess for business and personal use.

When property values started to fall in 2006, he could no longer make money by refinancing, so he sought and misled private investors into buying promissory notes that would pay interest rates as high as 20 percent over three months.

The program, however, quickly became a Ponzi scheme in which he needed new investors to pay off old ones to keep it going.

The victimized banks were Wachovia, J.P. Morgan Chase and SunTrust.

After accepting his plea yesterday, U.S. Magistrate Judge M. Hannah Lauck allowed Capehart to remain on bond pending sentencing. The case is being handled by David T. Maguire, an assistant U.S. Attorney.

By Frank Green

Likening the investigation into an alleged Meredith-based Ponzi scheme to Watergate, two Seacoast lawmakers have asked for a separate legislative inquiry into the matter.

In a letter addressed to House Speaker Terie Norelli, state representatives James Splaine and Paul McEachern cited what they believe to be a conflict of interest between the Office of Attorney General’s mandate to protect the interests of the state and its role in reviewing the actions of various state agencies in their dealings with Financial Resources Mortgage Inc. and its president, Scott D. Farah.

“This is not a matter of trusting … any individual or individuals or state agencies or departments — it is a matter of making sure that our state government itself can be trusted to do what it should,” Splaine and McEachern, both Portsmouth Democrats, said in an e-mailed letter entitled, “Tyring to Prevent a NH Watergate.”

Earlier this month, the pair as well as state Senate President Sylvia Larsen, speaking on behalf of the entire Senate, asked Attorney General Michael Delaney to “shine more sunlight” into the investigation.

State Rep. Francine Wendelboe, R-New Hampton, echoed the calls from across the aisle, adding she met with Gov. John Lynch last month to address the concerns of many of her constituents who, because of their proximity to the Center Harbor and Meredith-based company, have contacted her.

“I am not convinced my concerns as well as Paul and Jim’s are being properly investigated,” she said.

The three are reacting to a Feb. 12 news account in the New England Business Review in which Deputy Attorney General Orville “Bud” Fitch said there was not enough conflict of interest to warrant a third-party investigation into the role of the state agencies during the run-up to the mortgage company’s 2009 shut down. They are also concerned that the Office of the Attorney General “did not react positively” to a letter sent by Securities Director Mark Connelly in June 2003 requesting it “secure the assets” or freeze the accounts of Financial Resources and Assistance of the Lakes Region after an investigation into a complaint revealed the company was selling unregistered securities.

“I know it’s an old cliche, but ’sunlight is a wonderful disinfectant’ is true,” said Splaine Tuesday morning regarding the latest letter which he e-mailed late Monday night. “I see the possibility of a cover-up.”

Calling it an “unacceptable delay,” Splaine and McEachern also have questioned the six-week time frame for the Attorney General’s review, saying the results will not come in time for the sitting Legislature to act in this session.

Responding to the criticism, Delaney said, “The timing of the legislative session should not warrant a rush review of this matter.” The attorney general added that Gov. John Lynch and the Executive Council asked him to conduct “a fair, thorough and impartial” review of what various government agencies knew about Financial Resources Mortgage Inc. and when they knew it.

What is known is that Scott Farah was running Financial Resources Mortgage, Inc., then known as Financial Resources Assistance of the Lakes Region, in the year 2000 when a complaint alleging his company was selling unregistered securities was brought to the attention of then-Securities Director and current Banking Commissioner Peter Hildreth.

Hildreth recused himself from the investigation because he said one of his brothers was an investor with the company. In 2002, Hildreth left Securities to become Banking Commissioner.

Hildreth could not be immediately reached for comment.

His successor, Mark Connelly, said the investigation continued until the winter and spring of 2003, but his investigators feared the company did not have enough assets to repay all of its investors should they ask for their money back. Despite the statements of Farah’s attorney that the company had enough cash flow to repay those who wanted out, Connelly said he felt an asset freeze was in order and he sent his request to the AG’s Office on June 17, 2003.

Delaney said part of his review of the oversight into FRM involves what happened after the AG’s office got Connelly’s letter; but he said Tuesday he would address it when the entire review was complete.

Ultimately, Financial Resources paid $1 million to investors who wanted their money and a $20,000 fine. It continued to do business until early November 2009 when Farah abruptly shuttered the doors, leaving hundreds more investors in the dark as to the whereabouts of what is estimated to be between $80 and $100 million.

But to investors like Ken Miller of Amherst and Susan and Al McIlvene of Kittery, Maine, no part of the investigation is satisfactory.

Miller and the McIlvenes have been in nearly continual contact with each other and hundreds of their fellow victims, exchanging information and, in many cases, conducting investigations of their own.

“What I’d like to know is whether or not anyone ever got any of their principal returned,” said Miller who said, while he is reluctant to use the words “cover up,” he thinks many state officials are not as forthcoming as they could be.

“I think my biggest complaint is that we don’t get any information,” Miller said.

Other issues facing investors are the cost of legal representation and the costs being incurred by the bankruptcy trustee, highlighted by an e-mail circulating with the hourly rates being charged by the forensic accounting firm that include a $390 per hour charge for one of the principals and an $80 per hour fee for clerical work.

“Who gets $80 an hour for clerical work?” questioned Susan McIlvene.

“I can’t afford any kind of lawyer,” said one Tilton woman who declined to be identified but who said that, since FRM’s shutdown, her husband has been laid off. Together she said they lost nearly $120,000 — almost of all of the money they had saved for retirement.

Still others are frustrated by a lack of any criminal charges against Farah and his partner, Donald Dodge.

In an e-mail sent to U.S. Attorney Mark Zuckerman, one Meredith investor said he had documented the way Scott Farah tricked him into investing $32,000 into a home improvement loan for a woman in Florida in September when he knew the woman who had requested the loan had withdrawn her application in July.

“For instance, my dealings with him were a pretty cut and dry case of theft by deception and fraud. I have certainly given you enough about that one case to justify an immediate arrest on this specific event,” he wrote in his e-mail to Zuckerman earlier this week.

Zuckerman confirmed last week the Office of the U.S. Attorney, assisted by the FBI and investigators from the Securities Exchange Commission, are conducting a criminal investigation but he declined to comment on the specifics.

By GAIL OBER

A 41-year-old Quincy man was sentenced to 42 months in federal prison on a mortgage-fraud conviction.

In U.S. District Court on Tuesday, Judge Douglas P. Woodlock also gave Michael Hicks three years of supervised release following his imprisonment. An order of restitution was deferred for up to 90 days because one unit of the foreclosed properties is scheduled to be sold at auction.

Hicks pleaded guilty in November to one count of wire fraud and one count of money laundering.

The office of U.S. Attorney Carmen Ortiz said Hicks recruited straw buyers and provided false financial information to secure mortgages for five dwellings on Quincy Street and Sexton Court in Dorchester.

Hicks was paid a total of $180,500 by Michael Lee, who converted the Quincy Street dwelling into three condominiums. The Sexton Court dwelling is owned by Lee’s in-laws.

The payment to Hicks was turned over to the government and the court ordered its forfeiture.

Lee has also been indicted on five charges of wire fraud in connection with the scheme. His case is pending.

The case was investigated by the Secret Service and the criminal investigations branch of the Internal Revenue Service. It was prosecuted by Assistant U.S. Attorney Sandra Bower of Ortiz’s economic crimes unit.

The state Department of Public Health found last year that Hicks was the victim of botched liposuction surgery in 2008. The report placed the blame on both the doctor and Beth Israel Deaconess Medical Center, where it was performed. Hicks sued the hospital, six doctors and two nurses and reached a confidential settlement.

Wayne Marlon Benedic Lezama, 44, of Virginia Beach, Va., was sentenced today in Norfolk federal court to five years in prison and ordered to pay $1.1 million in restitution for wire fraud in connection with a scheme to obtain over $4 million with 14 mortgage loans in the Tidewater area. Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after Lezama was sentenced by Senior United States District Judge Henry Coke Morgan, Jr. Lezama previously pled guilty on November 23, 2009.

According to court documents, Lezama participated in a scheme from August 2005 until January 2007 to obtain mortgage financing to purchase homes throughout southeastern Virginia, including real estate in the cities of Norfolk, Hampton, Virginia Beach, Chesapeake, and Suffolk. The property would be purchased in the name of Lezama or a nominee buyer. During the course of the scheme over $4 million in financing was obtained through fraudulent means, including submitting false financial information regarding down payments, monthly income and liquid assets.

The Federal Bureau of Investigation investigated the case. Assistant United States Attorney Robert J. Seidel, Jr. prosecuted the case on behalf of the United States.

PREET BHARARA, the United States Attorney for the Southern District of New York, JOSEPH M. DEMAREST JR., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (”FBI”), and BRIAN G. PARR, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service (”USSS”), announced today the arrests of three defendants—SHAHEID BILAL, RHONDA PAYNE, and RICHARD BRITT—on charges stemming from a subprime mortgage fraud scheme involving $3 million worth of mortgages on residential properties in and around Orange and East Orange, New Jersey.

According to the five-count Indictment filed in Manhattan federal court:

From 2005 through 2007, the defendants targeted residential properties in Orange and East Orange, New Jersey. To purchase the properties, the defendants submitted mortgage loan applications, in the name of straw purchasers, that contained false information regarding, for example, the applicant’s creditworthiness and intention to live in the residence. The defendants recruited such straw purchasers by, among other things, paying them thousands of dollars in fees. The defendants told several of these straw purchasers that they would not have to pay the mortgages because the defendants would make payments for several months, and/or that the defendants would make money to pay the mortgages by renting out the properties. The defendants involved in each transaction distributed the proceeds from the fraudulently obtained home mortgage loans among themselves and their co-conspirators for their personal gain.

The defendants involved in each transaction further profited by renting out the fraudulently mortgaged properties to tenants while failing to make mortgage payments on behalf of the straw purchasers. Certain affected straw purchasers have gone into default on their mortgages, and mortgage lenders have foreclosed on certain properties.

BILAL, 33, of Lawrenceville, Georgia, supervised and coordinated the recruitment of straw purchasers and the preparation of fraudulent loan applications and other documents for submission to the lenders, among other things.

PAYNE, 36, of Queens, New York, recruited straw purchasers to participate in the fraudulent scheme and assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

BRITT, 48, of McDonough, Georgia, assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

A chart setting forth the charges contained in the Indictment and the maximum potential penalties for each offense is below.

All three defendants were arrested yesterday. This case has been assigned to United States District Judge DENNY CHIN. PAYNE was presented yesterday before United States Magistrate Judge THEODORE H. KATZ in Manhattan federal court;

BILAL and BRITT were presented yesterday before United States Magistrate E. CLAYTON SCOFIELD III in the Northern District of Georgia.

Mr. BHARARA praised the work of the FBI, USSS, FDICOIG, and USPIS. He also thanked the New York State Banking Department for their outstanding work in the investigation.

U.S. Attorney PREET BHARARA stated: “In a time when real families are having difficulties obtaining mortgages honestly, it is all the more important to stop schemes to obtain mortgages fraudulently. The money stolen from banks in mortgage fraud schemes is money that could be going to enable working families to buy homes. We will continue to work with our partners at the FBI, the USSS, and the FDIC-OIG, as well as the New York State Banking Department, to bring mortgage fraudsters to justice.”

FBI Assistant Director JOSEPH M. DEMAREST, JR., stated: “Vigorous enforcement to thwart mortgage fraud is an FBI priority. The health of the economy is affected by the vitality of the housing market, and steps to ensure integrity in mortgage financing reduce the risks of failed banks and foreclosed properties.”

USSS Special Agent-in-Charge BRIAN G. PARR stated: “Mortgage Fraud continues to be a priority investigative area for the United States Secret Service. Our partnership with the other agencies allows us to maximize our resources to combat this type of fraud.”

A Placer County man who hosted hotel seminars promising his audience certain wealth has been charged with fraud by the Securities and Exchange Commission.

The civil complaint, filed Tuesday in Sacramento federal court, charges Lawrence “Lee” Loomis and his father-in-law, John Hagener, with taking at least $10 million from more than 100 investors by promising them a 12 percent return with no risk.  SEC investigators said the money was instead used to prop up Loomis’ failing businesses.

News10 obtained videotape of one of the “Loomis Wealth Solutions” seminars hosted at a Sacramento hotel in December 2007.  On the tape, Loomis promised investors they would become rich.  “At a minimum, this is my vision for you. To have a net worth of at least ten million dollars. At least ten million. And many of you will have more, but at a minimum have a net worth of ten million,” Loomis told his audience.

In addition to the civil complaint, sources told News10 Loomis still faces a criminal probe in a $100 million multi-state real estate Ponzi scheme.  Three former associates have already been charged and two are in custody.

In 2008, FBI agents raided Loomis’ Roseville offices and his Granite Bay home, and later seized his bank accounts.  Placer County tax records show that Loomis’ home, valued at $1.6 million, was taken by the bank last summer.

by George Warren,

Two men, accused of selling the same property twice, were convicted on several counts, including grand larceny.

Mavis Samuel, 41, and Carlyle Ebanks, 55, were charged with selling the same Crown Heights building twice, to two different straw buyers.  They were convicted of Grand Larceny in the Second Degree and multiple counts of Falsifying Business Records in the First Degree. When they are sentenced April 13, they will face up to 15 years in prison.

The defendants first sold 1162 Pacific Street in September 2004. In that transaction, they paid a straw buyer $4,000 to buy the building. Though the straw buyer held the deed, Ebanks and Samuel maintained control of the building. While the straw buyer was recovering from a traumatic brain injury in spring 2005, Samuel convinced him to deed the property back to her.

Then, in November 2006, Ebanks approached a friend and told him that if he bought the building, Samuel and Ebanks would make him a partner in their real estate investment company. The defendants illegally inflated the “partner’s” income and savings account balance on a $1 million mortgage application, to buy 1162 Pacific Street for that price. With that “sale”, they paid off the mortgage on the original straw purchase, pocketed between $300,000 and $400,000, and maintained ownership.

In the time between the two sales, the building burned down. The case originated with the investigation into a string of suspected arsons in Crown Heights in early 2006.

In the fourth quarter of 2009, California had the highest mortgage fraud risk, according the quarterly Mortgage Fraud Risk Report released Friday by Agoura Hills, California-based Interthinx, a provider of risk mitigation and regulatory compliance tools for the financial services industry.With an index value of 222, California took the No.1 spot from Nevada, which had topped the rankings over the last five consecutive quarters.

Nevada dropped to second place with an index of 220 and was closely followed by Arizona with an index of 211. Florida remained in fourth place with an index of 179, and Colorado was ranked fifth with an index of 153. With indices between 55 and 71, West Virginia, Maine, Kansas, South Dakota, and Montana were named as the five states with the lowest mortgage fraud risk.

According to Interthinx, its fraud risk indices have proven to be a leading indicator of foreclosure activity. As a result, the company said regions that currently have high fraud risk indices are likely to have high foreclosure rates going forward, particularly if housing prices continue on their downward trajectory and if there is no significant improvement in general economic conditions.

The Mortgage Fraud Risk Report also included an analysis of national mortgage fraud and indices for the four most common types of mortgage fraud, including property valuation fraud, occupancy fraud, employment/income fraud, and identify fraud. The findings showed that most fraud types are on the rise.

Despite a 4 percent quarter-to-quarter decrease, the property valuation fraud risk index was up 40 percent over the fourth quarter in 2008 and jumped more than

100 percent from the same period in 2007. Interthinx said this index will continue to be driven by schemes involving short sales, REO inventories, wholesale flipping, and refinancing by borrowers whose equity has been impaired by falling real estate values.

The occupancy fraud risk in the fourth quarter of 2009 rose 16 percent from the third quarter, marking the first significant increase in the index since the fourth quarter of 2006. The magnitude of the quarter-to-quarter increase suggests that occupancy fraud risk will be a serious issue going forward, Interthinx said. The company explained that this will be especially true as continuing price declines and “get-rich-quick” schemes lure investors back into the market and as builders face continuing difficulty in moving unsold inventory.

While employment/income fraud was down 29 percent over the previous year, it increased 3.4 percent from the third quarter — the first increase since the index peaked in the third quarter of 2007. Interthinx said it is too soon to tell whether this uptick signifies a rebound in employment/income fraud risk or whether it reflects a temporary “blip” associated with schemes involving the federal homebuyer tax credit.

Identity fraud, which is frequently used in mortgage fraud schemes in order to hide the identity of the perpetrators and/or to obtain a credit profile that will meet lender guidelines, was the only type of mortgage fraud that showed no increase in the quarterly report. According to Interthinx, the identity fraud risk index has remained relatively constant over the last two years, declining 2 percent from the previous quarter and 4 percent from a year ago.

Going Forward, Interthinx projects that if interest rates remain low, the predominant fraud type will continue to be related to property valuation, as speculative investors and “flipping” return to the market and as consumers attempt to refinance their mortgages despite reduced equity in their properties. Interthinx also expects a rebound in occupancy fraud, particularly in light of investor demand, fueled by ample inventories and the expected release of shadow inventory. In addition, the company said it is likely that the fraud risk index will continue to rise through 2011, as a wave of adjustable-rate mortgages recast for the first time.

Two Sacramento-area men were charged today by securities regulators with running a massive Ponzi scheme that might be the largest mortgage fraud case in the history of the region.

The Securities and Exchange Commission said it charged Lawrence Leland “Lee” Loomis and his father-in-law, John Hagener, in a civil complaint, “with misappropriating approximately $10 million from more than 100 investors who were falsely promised that their money would be loaned to homebuyers and secured by real estate deeds of trust.”

Investors were promised 12 percent rates of return, the SEC said, but federal officials say Loomis actually used the money to prop up other failing businesses.

The SEC says Loomis paid himself hundreds of thousands of dollars with investor funds and that Hagener received more than $190,000 for managing the funds.

The SEC complaint charges Loomis and Hagener with violating antifraud provisions of federal securities laws and seeks “injunctive relief, disgorgement of ill-gotten gains, and monetary penalties.”

Loomis’ attorney has said he is not guilty.

The probe began in 2009 after officials received tips from investors and former Loomis workers, and in August FBI agents raided Loomis Wealth Solutions offices in Roseville.

Three men charged in the case earlier fled the country. One was captured in Barcelona, Spain. Another was arrested as he entered the United States from Canada with $70,000 stuffed in his shoe. A third remains at large.

Sam Stanton

So-called “forensic audits” are often nothing more than con games bilking distressed homeowners out of money they certainly can’t afford to just toss away. One high-ranking California law enforcement official is trying to steer people away from them.

Former California governor, turned current California attorney general, and soon expected to announce he wants again to be California governor, Jerry Brown, is pointing out to all who will listen that some of the home modification firms that charge upfront fees to, among other things, verify that lenders are in compliance with all sorts of regulations, actually never end up giving you any information that could be used by you as leverage to get a mortgage modification.

Brown’s warning comes despite the fact that this past October, the practice of prepaying for mortgage loan modification was banned in California. But that doesn’t seem to have stopped the practice in that state and certainly has no impact on other states.

According to EIN News,quoting a consulting group called Mortgage Fraud Examiners, mortgage loan audits are nothing more than ” snake oil to peddle,” and refers dismissively to those who sell the product as “hucksters.”

The CEO of Mortgage Fraud Examiners, Storm Bradford, is quoted as saying, ” Although ‘loan audits’ can be of substantial value to a homeowner, regrettably, most companies providing “audits” are not qualified to do so.”

Of course, MFE does have a vested interest: it does its own forensic analysis of mortgage transactions. On its Web site, it describes such an analysis as reviewing mortgage documents, looking for fraud, other tortuous conduct and common violations of federal and state statutes. The idea is to then march into your lender’s office, “armed with this information” and then be better able to negotiate.

On his own Web site, California Attorney General Brown just posted Monday his warning to avoid forensic loan audits saying, “Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure. The foreclosure-relief industry continues to be long on promises, but short on results.”

In fact, says Brown in his statement, “there is no evidence or statistical data to support claims that forensic loan-audits — even if performed by a licensed, legitimate and trained auditor, mortgage professional or lawyer — will help homeowners obtain loan modifications or provide any other foreclosure relief.”

Charles Feldman

The Federal Financial Institutions Examination Council (FFIEC) released an updated edition of its white paper on mortgage fraud detection and deterrence.

The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: 2009 Mortgage Fraud White Paper is meant to help examiners understand, identify, and detect mortgage fraud schemes and elements.

New to the white paper is the addition of reverse mortgage fraud, which due to the rapid growth and changes to the market has created a lucrative environment for fraudulent activities says the FFIEC.

According to the FFIEC, the lump-sum cash-out option will yield the greatest amount of loan proceeds and is where most fraud occurs.

In addition, the FFIEC writes that due to the structure of the HECMs, there are no warnings, such as past-due status or default, to raise suspicions, and possibly limit losses, as repayment is only required upon the borrower moving out of the property; upon death; default of property taxes or hazard insurance; or the property is in unreasonable disrepair.

A title company owner, who operated Homemaxx Title & Escrow, was arrested in Palm Beach, Florida. He had been a fugitive since March 26, 2009, when a federal grand jury in Maryland, returned an indictment charging him with wire fraud and money laundering in connection with a scheme to defraud lenders and homeowners.

The indictment states that from February 2003 to July 2004, the fugitive owner had caused Homemaxx to divert funds meant to pay outstanding first mortgages on real estate transactions or to officially record deeds. He had transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with any transactions.

He then used the money intended to be disbursed per the HUD-1 settlement for personal use that had nothing to do with the real estate transaction. With one particular real estate refinancing by one of his customers, he diverted funds from the escrow account and then used the proceeds to purchase a new 2004 CLK Mercedes.

The indictment seeks the forfeiture of $593,228, and is alleged to have defrauded lenders and homeowners and to have used $93,228 of the criminal proceeds for money laundering. Although, an indictment is not a finding of guilt, an individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

One of the most difficult aspects of dealing with real estate fraud is that it is hard to know the scope of the problem. The human element that is involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify.

Because these people are white-collar criminals, they look, dress, act, and talk just like the rest of us. They won’t look like criminals; they’ll look like loan officers, title closing agents, real estate agents, members of management and loan processors or closers and, of course, the people next door.
Once a white-collar criminal gets away with it, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage transactions clearly begin feeling that not only are they above the law but in fact, they are not doing anything wrong in the first place.

We should all congratulate the United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.
It starts with me.
It starts with you.
It starts with us…

Michael S. Richardson
Author of “An American Epidemic, Mortgage Fraud a Serious Business”
www.mortgagefraudsolutions.com

In the earlier days, it was easy to buy, refinance or sell properties. The buying and selling process are straightforward and people were more trustworthy than today. Communities were small and people know about properties that are for sale by word of mouth. Responses are immediate and deals are closed without too much hassle of evaluation, paper work and the like. But the reality is that these days are gone. The process has become complex and the people who make things happen have increased. If before, you can sell or buy a property by yourself and be confident to handle things, these days, it is best to get the right people to represent you and protect you from possible unusual circumstances. Now, you will have to deal with Real Estate brokers, appraisers, mortgage lenders, real estate agents, lawyers and other personalities that will be needed in the process.

Availing of the services of professionals is the first step in protecting yourself from Fraud. These professionals know indicators of bad deals and they can easily advise you on your possible next moves to avoid negative experience. With real estate as a critical and a major area of interest, the government has adopted laws to require professionals to secure their licenses in the practice of their profession. Knowing this, the risk becomes low as you have somebody who would not want to jeopardize his license just to enter into a false deal.

The best person to protect you from frauds is a Real Estate lawyer. You have to find one who will only be loyal to you and nobody else. He is the person to trust and he is responsible for protecting your interest. You have to make sure that you will be hiring somebody who is trustworthy, experienced and credible. Sometimes there is a higher price tag for this type of lawyer but it is surely worth the difference in price when you get somebody you really do not know.

In your hiring process, never trust recommendations without doing your background check. There are established Network of professionals that may look credible but sometimes these organizations can pose some problems because of their expertise. This expertise can be used to impose some Fees and other costs and instead of helping you, they can make you feel robbed at the end of the process.

When you already have a trusted real estate lawyer, you can avoid fraud by not signing any document that your lawyer did not approve. There are many cases when people sign documents just to satisfy notary requirements and end up discovering that there are stipulations in the document that were not agreed on.

Always use the services of your lawyer whatever is your concern. You have to be honest and tell him about your observations and listen to him as he will always have recommendations that can make you benefit even more.

The most important way to avoid fraud is to know what the law says. You also have to do due diligence in updating yourself about the state of the real estate industry and improve on your level of understanding in the field. The knowledge that you gain can make you do away with suspicious and fake dealings.

By John Carlstrom

Real Estate Articles

One of two men indicted for defrauding investors who believed their money was being used to finance home construction in Colorado Springs and a high-tech business campus near Larkspur has been sentenced to five years in prison.

Derek Roy Kent, 64, has also been ordered to pay restitution of $765,477 to his victims.

Indicted in September along with Kent was 36-year-old Adam Kelepolo, who will go on trial May 4.

According to the indictment, Kent and Kelepolo raised more than $458,000 from 32 investors for a variety of projects, including a purported effort to develop homes in the Broadmoor Bluffs area of Colorado Springs.

Kelepolo, described as president and chief executive of Lion Gate Homes, was also allegedly involved in a project known as Larkspur Railyard Land, a proposed high-tech business campus near Larkspur.

Kelepolo is alleged to have used the money for personal expenses, including restaurant bills and gambling at Cripple Creek casinos.

According to the indictment, Kent found several of the investors via SunAmerican Securities and AIG Financial Advisors Inc., where he worked as a licensed stockbroker and financial adviser.

By Howard Pankratz
The Denver Post

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Donald C. Lacey, who ran a real estate firm involving investors from the Richmond area and millions of dollars, has been accused in federal court of making false promises and rarely using the money for real estate projects.

The U.S. attorney’s office charged Lacey, a former Henrico County police officer, with one felony count each of mail fraud and engaging in unlawful monetary transactions. The charges were filed late Wednesday.

The charge of mail fraud carries a maximum penalty of 30 years in prison. The maximum penalty for the second charge is 10 years. The maximum fine for each charge is $250,000.

“I think they ought to throw the book at him,” said Allan Mullian, a Richmond investor who, along with his family, had $2 million invested in as many as 100 properties in the Richmond area through companies Lacey was involved in.

Mullian received interest payments for 10 years from his investments, but the money stopped coming in late 2008. He’s not sure if he will recover his money.

Jeffrey Everhart, Lacey’s court-appointed attorney, said yesterday that more will be known in the next two or three weeks about how the case will evolve.

The U.S. attorney’s office declined to comment about the case.

Bond and plea hearings are set for March 15.

Lacey was the managing member of Capital Funding & Consulting, which was marketed as a private real estate investing firm that pooled investor funds to make short-term loans on investment properties, according to the filing in the U.S. District Court for the Eastern District of Virginia.

Lacey also ran several other businesses, including Clayton Investment Group, Premier Investment Properties and Tower Building Properties. He funneled money from Capital Funding through the entities under his control.

In effect, the money was supposed to be used to buy and fix up houses in the Richmond area and flip them at a profit.

“The loans exceeded the loan-to-value ratios promised to investors and the money. . . was rarely used for the designated real estate projects,” according to the court filing.

Lacey promised investors that the loans never would exceed 80 percent of value and that Capital Funding would ensure that the projects were viable, secure investments, according to the charges.

Instead, most of the money was used to pay pre-existing debt service on loans from Old Dominion Financial Services Inc., another company in which Lacey was involved, according to the filing.

Old Dominion, like Capital Funding, also solicited funds from investors and used the money to make loans to borrowers engaged in real estate activities.

Investors were promised high returns of 10 percent to 12 percent a year on promissory notes secured by deeds of trust.

Henrico-based Old Dominion was run by David A. Silver.

Old Dominion is listed as a creditor in a bankruptcy filing of Tamara B. Lacey, Lacey’s wife. Her bankruptcy petition claimed assets of $4.3 million and liabilities of $47.2 million. About $25.8 million of the debt is in promissory notes and guarantees of business obligations.

Mullian and at least a dozen investors sued, claiming they were duped in what some called an elaborate Ponzi scheme involving Richmond-area properties leveraged to the hilt.

According to the Tamara Lacey bankruptcy petition, the couple owned five houses - two in Mechanicsville, two near the Rappahannock River in Middlesex County and one near Wintergreen in Nelson County, ranging in value from $430,000 to $1.5 million.

They also owned a boat valued at $37,000, court records show.

The mail fraud charge says that Lacey sent a letter to an investor in Williamsburg in September 2008, saying that the money was “safe and secure,” the federal court filing said. The intent was to obtain money and property on false and fraudulent pretenses, it said.

The charge of engaging in unlawful monetary transactions involves a check written in May 2008 for $55,000 from one of Lacey’s companies that was used as a payment on his American Express account, according to authorities.

Lacey, if convicted, would forfeit any property traceable to the violations.

The forfeited property would include but not be limited to a value of not less than $7 million and no more than $20 million related to the mail fraud charge, the filing said. It also would include a sum of $55,000 for the unlawful monetary transaction charge.