CINCINNATI—James D. Powell, 53, of Hamilton, pleaded guilty in United States District Court here today to operating a Ponzi-style fraud scheme which cost 90 victims more than $9 million over six years by promising them high rates of return on a portfolio of real estate investments, and defrauded at least two mortgage companies and a private seller out of nearly $1 million.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Gerald A. O’Farrell, Assistant Inspector in Charge, U.S. Postal Inspection Service, and Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI), announced the pleas entered today before Senior United States District Judge Herman J. Weber.

According to court documents, Powell created several companies in Hamilton under the names of Capital Investments, Great Miami Debentures, or Great Miami Real Estate and served as the president of the companies. Beginning sometime in 2002, Capital Investments held itself out as an investment company offering attractive rates of return to numerous investors in Ohio, Kentucky, and Indiana on their investment, evidenced by promissory notes and purportedly backed by a real estate portfolio of properties owned and managed by Capital Investments and Great Miami Real Estate.

Powell and a co-conspirator, now deceased, sold investments in the portfolio to numerous victims, many of whom were elderly, unsophisticated, or inexperienced investors. In addition, some of the victims attended the Princeton Pike Church of God in Fairfield, Ohio with one of the conspirators, and some of the investors were also insurance clients of the conspirators.

“The conspirators took advantage of the trust developed through this common church affiliation and prior insurance agency relationship, as well as the lack of financial sophistication of many of the investors,” Stewart said.

Powell took money from new investors to pay off old investors, a type of fraud known as a Ponzi scheme. In addition to the individual investors, Powell admitted defrauding a mortgage company out of $944,848 by using false documents to get mortgage loans on the properties.

Powell told investors that the number of properties increased from 13 properties to 40 properties and the value of the properties increased from $4 million to over $14 million with an overall property equity of about $10.5 million when, in fact, such purported property values and equity were falsely inflated, most of the properties listed on the portfolios were not purchased with investor monies but instead were owned by others, and by November 2007 most of such properties were in a state of disrepair, were in default, or were in some stage of foreclosure.

Powell pleaded guilty to one count of conspiracy to commit mail fraud and one count of wire fraud. Each crime is punishable by up to 20 years imprisonment and a fine of up to $250,000 or twice the gain by the defendant or loss to the victims. Judge Weber could also order restitution.

Judge Weber set a sentencing hearing for Powell on September 28, 2010 at 10 a.m.

Stewart commended the cooperative investigation by Postal Inspectors and FBI agents, and Senior Litigation Counsel Anne Porter, who is prosecuting the case. Stewart also commended Butler County Prosecutor Robin Piper’s office and the Ohio Department of Commerce Division of Securities for their role in the investigation.

Suspects may find themselves behind bars living rent free thanks to nationwide mortgage fraud arrests.

Members of the Financial Fraud Enforcement Task Force released the results of a nationwide dragnet, “Operation Stolen Dreams,” which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The White Collar Crime Committee of the National Association of Chiefs of Police obtained relevant documents describing this enormous operation.

The sweep was organized by President Barack Obama’s interagency Financial Fraud Enforcement Task Force, which was established “to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.”

Starting on March 1 through June 17, Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions, which have resulted in the recovery of more than $147 million, according to the Federal Bureau of Investigation.

“From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” said FBI Director Robert S. Mueller, III. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners.

The operation was conducted in conjunction with the Department of Justice — including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program, and other components — as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General, and the National District Attorneys Association.

The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources, according to officials.

MORTGAGE FRAUD REPORT

According to the Federal Bureau of Investigation’s 2009 Mortgage Fraud Report, released today, mortgage fraud suspicious activity reports referred to law enforcement increased 5 percent to 67,190 during fiscal year 2009.

It’s estimated that $14 billion in fraudulent loans originated in 2009. The total dollar loss attributed to mortgage fraud is unknown.

Other key findings presented in the report include:

There are more than 2.8 million properties with foreclosure filings, a 120 percent increase from 2007 to 2009. The Las Vegas area reported the most significant rate of foreclosures, with more than 12 percent of housing units there receiving a foreclosure notice.

The top 10 states ranked by the number of foreclosure filings per housing unit were California, Florida, Arizona, Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey. In April 2010, one in every 386 housing units received a foreclosure filing.

Prevalent mortgage fraud schemes in fiscal year 2009 include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications. Emerging trends include fraud involving economic stimulus plans/programs, property theft/fraudulent leasing of foreclosed properties and tax-related fraud.

A federal grand jury in Connecticut indicted five people this week linked to a $10 million mortgage-fraud scheme led by Syed A. Babar, a 28-year-old Connecticut resident. The defendants previously were arrested on criminal complaints and released on bond, according to the U.S. Attorney’s office.

The scheme involved approximately 35 properties and loans obtained in the amount of an estimated $10 million, according to the government. Current losses from the operation are estimated at $3 million.

New charges were brought against Babar, who has been held without bail since he was indicted in April. He is now accused of conspiring with the others to defraud the Federal Housing Administration, which offers insurance for government loans to borrowers of low and moderate income.

Indicted with Babar were Thomas E. Gallagher, 67; Morris I. Olmer, 82; David Avigdor, 56; Nathan M. Russo, 34; and Rab Nawaz, 47. They are each charged with one count of conspiracy, eight counts of wire fraud and four counts of making false statements.

Nawas is also charged with one count of obstruction of justice, after he was accused of trying to influence a witness to provide false information during the government investigation.

The indictment alleges that between February 2007 and April 2010, Babar, along with Russo, a mortgage broker; Gallagher, a real estate appraiser; Olmer, a former attorney who has not been licensed to practice since February 2007, and Avigdor, an attorney who shared an office with Olmer, obtained millions of dollars in residential real estate loans through the use of sham sales contracts, false loan applications and fraudulent property appraisals.

PHILADELPHIA—Gennaro Rauso, who owned and operated a real estate management company that purported to help financially distressed homeowners with their foreclosure problems, was charged today by information with several mortgage fraud related offenses. The information alleges that as part of his scheme, Rauso took advantage of desperate homeowners with the promise of staying in, or saving, their homes, when in fact, he was using them to defraud the mortgage holders. The charges were announced by United States Attorney Zane David Memeger, Internal Revenue Service Acting Special Agent-in-Charge Troy N. Stemen, with the Criminal Investigation Division, Federal Bureau of Investigation Special Agent-in-Charge Janice K. Fedarcyk, and Inspector General of the Department of Housing and Urban Development Kenneth M. Donohue. Invaluable assistance was also provided by the Office of the United States Trustee.

According to the information, between January 2005 and December 2008, Rauso owned and operated a real estate management company, D&B Property Investors, to carry out a scheme to defraud mortgage companies out of hundreds of thousands of dollars in mortgage payments. Rauso sought out homeowners who were facing immediate foreclosure on their homes and offered to help them avoid foreclosure. In a flyer mailed to these homeowners, Rauso claimed that he could help homeowners fight the mortgage companies on their behalf, while at the same time helping them to rebuild their credit so they could keep their home. Rauso also boasted that even if their home were lost to foreclosure, he could still keep them in their home for an additional 12-18 months after the sheriff’s sale.

Once a homeowner agreed to participate, Rauso had the homeowner transfer the title of the home over to him for a nominal sum. Rauso then had the homeowner sign a lease, making the homeowner a tenant who paid rent to Rauso. He then delayed and obstructed the foreclosure process by, among other things, filing federal bankruptcy petitions. During this time when foreclosure was delayed, Rauso collected monthly rent payments from the homeowners, but made no payments to the mortgage companies. Ultimately, Rauso used more than 200 homeowners and their properties in his scheme to defraud mortgage companies, resulting in Rauso pocketing at least $400,000 in diverted or lost mortgage payments. With respect to at least four of the homes involved, the mortgages were federally insured by the Federal Housing Administration (“FHA”), resulting in substantial claims paid by the FHA once the mortgages defaulted.

“The troubles in our economy and housing market have, unfortunately, created new opportunities for scam artists,” said Memeger. “According to the information, this defendant took advantage of struggling homeowners, and preyed on their desperation to use them in his corrupt scheme to defraud mortgage companies. We urge the public to seek assistance from the U.S. Department of Housing and Urban Development before signing over their lifelong investment to a third party.”

In addition to the mortgage fraud scheme alleged in the information, Rauso is also charged with willfully failing to file a tax return on behalf of D&B Property Investors, defrauding the government of taxes owed on more than $1.6 million in income.

INFORMATION REGARDING THE DEFENDANT

NAME: Gennaro Rauso
ADDRESS: Trenton, New Jersey
AGE OR YEAR OF BIRTH: 46

If convicted, the defendant faces a maximum possible sentence of 247 years in prison, a $6.95 million fine, five years of supervised release and a $2,000 special assessment.

Janice K. Fedarcyk, Special Agent in Charge of the Philadelphia Division of the FBI stated: “The type of criminal activity alleged in this indictment today is particularly despicable in that it targeted those victims who were the most vulnerable financially and the most desperate for some type of assistance to avoid foreclosure on their properties. It also represents an affront to the millions of hard-working Americans who struggle every day to meet their mortgage obligations and keep their families in their homes.”

Kenneth M. Donohue, Inspector General of the Department of Housing and Urban Development stated: “In the past several years, we have seen enormous and damaging developments in the mortgage and housing markets with an urgent reliance on the government to bolster unstable marketplaces and devastated communities. The HUD OIG, in partnership with other federal agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”

Troy N. Stemen, Acting Special Agent-in-Charge of IRS Criminal Investigation, stated: “The charges announced today describe a scheme involving fraud at many levels. According to the charging documents, not only did Rauso earn substantial income by deceiving homeowners, defrauding mortgage companies and manipulating the bankruptcy process, he also failed to pay taxes on this income. The financial expertise of IRS-CID agents allows us to analyze complex financial transactions, such as those employed in this scheme.”

The Office of the United States Trustee also praised the work of investigators working to target abuses of the bankruptcy system: “I am grateful to U.S. Attorney Zane Memeger and our law enforcement partners for their pursuit of those who seek to use the bankruptcy system to prey upon financially distressed consumers,” said Roberta DeAngelis, United States Trustee for Pennsylvania, Delaware, and New Jersey. “As a member of the President’s inter-agency Financial Fraud Enforcement Task Force, the U.S. Trustee Program works to combat fraud and abuse throughout the bankruptcy system, including bankruptcy-related mortgage fraud.”

The case is being prosecuted by Assistant United States Attorney Leo R. Tsao.

Acting United States Attorney Robert S. Cessar announced today, June 22, 2010, that Andrew McCullough, a resident of Allegheny County, Pennsylvania, has been sentenced in federal court in Pittsburgh to 15 months in prison to be followed by three years’ supervised release on his conviction of wire fraud conspiracy in connection with a mortgage fraud scheme.

United States District Judge Joy Flowers Conti imposed the sentence on McCullough, age 37, of Bethel Park, Pennsylvania.

According to information presented to the court by Assistant United States Attorney Bruce J. Teitelbaum, McCullough was employed in various capacities with several mortgage brokerage companies, including New Era Financial, Prestige Mortgage Services, Money Solutions, Mortgage Solutions and Iron Gate Mortgage. While employed at those mortgage broker companies, McCullough participated in a conspiracy in which he and his co‑conspirators submitted false information and documents to lenders.

The information typically overstated the income and assets of the borrowers and overstated the value of the properties that were to serve as collateral for the loans. Some of the false documents included the following: false and altered documents verifying assets, such as bank statements; false and altered documents verifying income, such as pay stubs and W‑2s; back‑dated land contracts; false and altered Verification of Employment documents; false and altered Verification of Rent documents; false and altered account documents verifying self‑employment; false and altered loan payoff and debt satisfaction documents; appraisals that inflated the true market value of the properties; appraisals that represented that they were prepared by licensed appraisers when they were really prepared by unlicensed appraisers; and false and altered checks representing purchaser down payments.

Mr. Cessar commended the Mortgage Fraud Task Force for the investigation leading to the successful prosecution of McCullough. 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 Federal Bureau of Investigation; the Internal Revenue Service—Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; the United States Postal Inspection Service; and the United States Secret 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.

Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894‑7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General’s Consumer Protection Hotline at (800) 441‑2555.

GREENBELT, MD—Rolando Alonzo Cousins, a/k/a “Junior,” age 32, of Bowie, Maryland, pleaded guilty today to conspiracy to commit mail fraud and wire fraud in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. With Cousins’ plea all 11 defendants in the Metropolitan Money Store case have now been convicted.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Special Agent in Charge Jeffrey Irvine of the U.S. Secret Service – Washington Field Office; Special Agent in Charge Barbara Golden of the U.S. Secret Service – Baltimore Field Office; Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation; and Sarah Bloom Raskin, Commissioner of the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation.

According to Cousins’ plea agreement, he was the senior loan officer with the Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Cousins also owned and operated Prosper Investments LLC. In 2005, Joy Jackson and Jennifer McCall incorporated Metropolitan Money Store. Also at that time, Jackson, Jennifer McCall, Jackson’s husband, Kurt Forham, and McCall’s husband, Clifford McCall and others incorporated Fordham & Fordham Investment Group, Ltd. (F&F) and Burroughs & Smythe Financial Services, Inc. (B&S), based in Lanham and Greenbelt, Maryland, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.

From September 2004 through June 2007, Cousins, Jackson, McCall and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit, by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit.

Cousins and other Metropolitan Money Store employees personally served as a straw buyer on several properties in Maryland, because they had good credit history. Cousins and other straw buyers were paid approximately $10,000 to participate in the scheme; fraudulently bolstered the credit of the straw buyers so they could qualify for more favorable mortgages; obtained fraudulently inflated loans on the properties in the straw buyers names; served as straw buyers themselves; stripped away the bulk of the homeowners equity proceeds and converted that money to their own personal use; and stopped making the mortgage payments on the homes, resulting in the homes being foreclosed upon.

The total loss attributable to Cousins from the scheme, including the estimated losses to the mortgage lenders, is $471,702.

U.S. Attorney Rod Rosenstein expressed special appreciation to the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation Investigative Unit for its assistance in the investigation.

Cousins faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. U.S. District Judge Roger W. Titus scheduled sentencing for September 13, 2010 at 3:00 p.m.

Joy Jackson and Jennifer McCall pleaded guilty to their role in the scheme and were sentenced to 151 months in prison and 135 months in prison, respectively. Nine other coconspirators also have pleaded guilty and been sentenced.

United States Attorney Rod J. Rosenstein thanked Assistant United States Attorneys James A. Crowell IV and Christen Sproule, who are prosecuting the case.

A federal indictment was unsealed today, charging three Minnesotans in connection with an alleged mortgage fraud scheme that resulted in a $16 million loss for lenders. The indictment, filed with the U.S. District Court in Minneapolis on June 15, 2010, was unsealed following the initial appearances of the three defendants, which occurred earlier today. The indictment charges Ericvan Anthony McDavid, age 35, of Brooklyn Center; Larry Africanus Hutchinson, age 39, of St. Paul; and Jerone Ian Mitchell, age 34, of Minneapolis, with one count of conspiracy to commit wire fraud and eight counts of mortgage fraud through use of interstate wire.

The indictment alleges that from April of 2005 through February of 2009, the defendants conspired to obtain loan proceeds fraudulently by making materially false representations and promises as well as by withholding material information about the residential property purchases they orchestrated. During that time period, McDavid was either an owner or co-owner of several businesses, including EVM Properties, Skyy Realty, and Universal, Inc., through which he bought and sold properties and managed properties. Hutchinson also owned several real estate companies, including LAH Properties and L&D Mortgage, and was an agent for Unity Realty. Mitchell was the owner of Infinite Developers, a construction business.

Beginning in 2005, McDavid and Hutchinson allegedly recruited straw buyers to purchase selected properties by promising them payments of $15,000 to $52,000 per transaction. Once a straw buyer agreed to purchase a particular property, McDavid and Hutchinson provided the buyer with funds to put toward the purchase, thereby misleading the lender into believing that the buyer actually had incentive to repay the loan. McDavid and Hutchinson also produced false loan applications on behalf of the buyers, which then were provided to various lenders. The fraudulent documents overstated the assets and employment status of the straw buyers. Based on those documents, loans were approved in no fewer than 25 instances, totaling more than $16 million. Homes subject to the scheme were located in Prior Lake, Savage, and Minnetonka, among other Minnesota communities.

The indictment alleges that prior to the real estate closings, the defendants also provided lenders with fraudulent bills for management fees, construction invoices, and non-existent second mortgages, causing cash disbursements to be made from the proceeds of the mortgage loans to the companies controlled by the defendants. Without the lenders’ knowledge, those disbursements were then routed, in part, back to the straw buyers. These types of actions occurred in at least 45 transactions, through which the defendants secured a total of approximately $4.7 million in fraudulent payments from loan proceeds. The eight mortgage fraud counts set forth in the indictment are in relation to eight wire transfers of loan proceeds in 2006 and 2007.

If convicted, the defendants face a potential maximum penalty of 20 years on each mortgage fraud count and five years on the conspiracy count. All sentences will be determined by a federal district court judge.

This case is the result of an investigation by the Federal Bureau of Investigation and the Minnetonka Police Department. It is being prosecuted by Assistant United States Attorney Christian S. Wilton.

An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by a defendant. A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.

GREENBELT, MD—A federal jury today convicted Robert Dewain Venson, age 38, of Fort Washington, Maryland, for mail and wire fraud, money laundering and failing to file tax returns in connection with a three-year mortgage fraud scheme involving 13 residential properties.

The conviction was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Assistant Director in Charge Shawn Henry of the Federal Bureau of Investigation-Washington Field Office; Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service-Criminal Investigation, Washington D.C. Field Office; and Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service-Washington Division.

According to evidence presented at the two week trial, from 2004 to 2007 Venson negotiated the purchase of 13 residential properties in Maryland and the District of Columbia, including houses in Hyattsville, Ocean City, Fort Washington, and Salisbury, Maryland. Rather than purchase the properties in his own name, the evidence proved that Venson paid straw buyers to appear at the settlement posing as the buyer. Witnesses testified that Venson typically would represent to the straw buyer that he would pay the loan obligation. Venson inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price. Venson misrepresented and concealed the true purchase price, his arrangement with the straw buyer and other material information from the mortgage lender. Under this scheme, the trial evidence showed that Venson reaped hundreds of thousands of dollars.

Evidence showed that Venson failed to file individual federal income tax returns for 2004, 2005, and 2006, during the period of the scheme. Based on the mortgage fraud scheme, the indictment seeks forfeiture of property, including a money judgment of $892,371.

“The IRS-Criminal Investigation, in partnership with other law enforcement agencies, vigorously pursues individuals who commit crimes against our community and economy,” stated Rebecca Sparkman, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington D.C. Field Office. “Convictions, like the one just returned against Robert Venson, send a loud and clear message that people who willfully defy the laws, including tax laws, will be fully investigated and prosecuted for their actions.”

Venson faces a maximum sentence of 20 years in prison for each of the eight counts of mail fraud, each of the eight counts of wire fraud, and each of the seven counts of money laundering; and one year in prison for each of the three counts of failure to file tax returns. Judge Alexander Williams, Jr. ordered Venson detained pending his sentencing, scheduled for October 7, 2010 at 9:30 a.m.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention, and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

United States Attorney Rod J. Rosenstein commended Assistant United States Attorneys Michael R. Pauze and Robert Hur, who are prosecuting the case.

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced that last Thursday a federal grand jury returned a 48-count indictment charging 10 defendants with conspiracy to commit mortgage fraud, mail fraud, and making false statements in mortgage applications to federally insured banks. The indictment was unsealed yesterday.

The defendants are as follows:

* Hoda Samuel, 58, of Elk Grove,
* Connie Devers, 40, of Elk Grove,
* Dana Faulkner, 43, of Oakland,
* Charles Robert Maness, 32, of Elk Grove,
* Tracy Painter, 50, of Lodi,
* Sean Patrick Gjerde, 34, of Elk Grove,
* Ronald Burris, 36, of Elk Grove,
* Ygnacia Bradford, 34, of Oakland,
* Nicole Dawson, 40, of Oakland, and
* Daniel Harrison, 40, of San Diego.

This case is the product of an extensive investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney Philip Ferrari is prosecuting the case.

According to the indictment, Hoda Samuel, a licensed real estate broker, was the head of two Elk Grove companies engaged in residential real estate transactions: Liberty Real Estate and Investment Company and Liberty Mortgage Company. From April 2006 through February 2007, Liberty was involved in approximately 30 residential real estate transactions in which the mortgage lenders were given false information as to the income of the purchasers and/or the value of the homes being purchased. At least 28 of the properties have since gone into foreclosure, resulting in a loss to lenders of over 5.5 million dollars.

As part of the scheme, conspirators at Liberty Mortgage Company prepared loan applications for borrowers that contained false employment information and inflated income. Connie Devers and Dana Faulkner, both of whom were unlicensed by the Department of Real Estate, would help prepare such loan applications. When a mortgage lender would attempt to verify this information by calling the purported employer, the lender often spoke to a Liberty employee or associate who falsely verified the information. Ygnacia Bradford, Tracy Painter and Nicole Dawson are all alleged to have provided false verifications of information in loan applications to lenders. On more than one occasion, such false verifications were provided by Sean Gjerde, an Elk Grove attorney, who wrote letters to lenders falsely claiming to have prepared tax returns for individual purchasers and falsely verifying the employment information in their applications.

The indictment alleges that Liberty typically offered sellers $15,000 to 40,000 more than the asking prices for properties. At times the purchase agreements would come with addendums that called for the difference between the two prices to be diverted at closing to contracting companies so that the homes could be remodeled and rendered compliant with the Americans with Disabilities Act. Charles Robert Maness, a licensed real estate broker with Liberty, is charged with falsely assuring a seller’s agent that a particular transaction was financed by a special program for persons with disabilities to make changes to their homes. In fact, such remodeling was seldom if ever done, and the payments were funneled indirectly back to Liberty clients. Because the addendums calling for these payments were usually withheld both from appraisers and mortgage lenders, the lenders were typically unaware that the true purchase price for each property was below the total amount funded by the lender.

Of the 30 properties that are the subject of the indictment, 20 of them were purchased by buyers who bought more than one residence, representing that they intended to live in each. Ronald Burris Jr. bought three properties over the 11-month period. When a single purchaser bought more than one residence, Liberty would typically arrange for the transactions to be handled by separate title companies, and submit the loan applications to separate mortgage lenders. In addition, the purchases would be scheduled to occur close in time to each other so that one purchase would not appear in a credit report run in connection with a subsequent purchase.

The maximum statutory penalty for mortgage fraud committed through use of the mails is a sentence of 20 years in prison. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

In a separate mortgage fraud case, the U.S. Attorney’s Office arrested two defendants in Kern County. The defendants, Eric Ray Hernandez, 34, Monica Marie Hernandez, 29, and Evelyn Brigget Sanchez, 27, all of Bakersfield, were charged in an indictment returned last Thursday by a federal grand jury in Fresno. The defendants made their initial appearances before a U.S. Magistrate Judge in Fresno yesterday. That case was investigated by the FBI and the IRS, Criminal Investigation, and is being prosecuted by Assistant US Attorney Kirk Sherriff.

This law enforcement action is part of the work being done by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. One component of the FFETF is the national Mortgage Fraud Working Group, cochaired by U.S. Attorney Wagner. For more information on the task force, visit StopFraud.gov.

PREET BHARARA, the United States Attorney for the Southern District of New York, and GEORGE VENIZELOS, the Acting Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest this morning of ANTOINETTE HODGSON on charges that she orchestrated a $45 million real estate Ponzi scheme that fraudulently solicited investments from over 20 New York and New Jersey investors. HODGSON is charged in a Complaint with one count of wire fraud conspiracy and one count of wire fraud, and surrendered to the FBI this morning. She is expected to appear in Manhattan federal court later today.

According to the Complaint unsealed today in Manhattan federal court:

HODGSON solicited tens of millions of dollars from investors in New York and New Jersey on the false pretense that she would use the investors’ money to purchase and/or renovate residential real estate properties, and then re-sell the properties to third party buyers or rent them for a period of time before re-selling them. HODGSON promised investors high rates of return on their investments, which she represented was based on the profits generated by her successful real estate business.

In truth and in fact, however, HODGSON, misappropriated tens of millions of dollars of investors’ funds, and used those funds to repay other investors or for her own purposes. Between 2006 and 2009, HODGSON solicited approximately $45 million from investors who understood, based on HODGSON’s representations, that they were investing in her real estate business. During the same period, HODGSON only spent approximately $6 million on residential real estate. Most of the $45 million she received from investors was immediately used to repay other investors, in the pattern of a classic Ponzi scheme.

Some of the investor money was used to enrich HODGSON and her family members. HODGSON spent hundreds of thousands of dollars at casinos in Atlantic City and Las Vegas, invested over $700,000 in a Dunkin Donuts franchise in Arizona, and gave tens of thousands of dollars to friends and family members.

HODGSON is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. If convicted on the conspiracy count, HODGSON faces a maximum sentence of 20 years in a prison and a fine of $250,000, or twice the gross gain or loss derived from the offense, and a maximum sentence of 20 years in prison and a fine of $250,000, or twice the gross gain or loss derived from the offense, for the wire fraud count.

HODGSON, 58, of Montclair, New Jersey, surrendered this morning and will be presented before a United States Magistrate Judge in Manhattan federal court later today.

U.S. Attorney PREET BHARARA said: “What Antoinette Hodgson allegedly promised to investors seemed too good to be true and that’s because it was. This case is a further reminder that whether the real estate market is up or down, innocent investors can be and will be targeted by unscrupulous fraudsters. This Office will continue to work with our partners at the FBI to pursue and prosecute fraud in every sector of our nation’s economy.”

FBI Acting Assistant Director-in-Charge GEORGE VENIZELOS said: “What we have here is a classic example of someone engaging in a get rich quick and get rich easy scheme, but the outcome is far from simple. Antoinette Hodgson allegedly has already proved she’s a lousy gambler by losing the investor’s money in the casinos. She has now gambled with her future and faces serious charges for a plot of her own making. The FBI will continue to seek out those who engage in all types of fraudulent real estate deals, bringing about certain justice for them and clearing a path for those who work hard to uphold the standards of our justice system.”

Mr. BHARARA praised the investigative work of the FBI and added that the investigation is very much ongoing.

If you believe you were a victim of these crimes, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900, ornWendy.Olsen@usdoj.gov. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html

This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant United States Attorneys ANTONIA M. APPS and AMANDA KRAMER are in charge of the prosecution.

The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Seven individuals were charged today in a federal criminal complaint in connection with an extensive multi-million-dollar mortgage fraud scheme, United States Attorney Barbara L. McQuade announced. Joining her in the announcement was Special Agent in Charge Andrew G. Arena, head of the Detroit Division of the FBI.

Named in the complaint were Ronnie Edward Duke, 43, of Fenton; William Camsell Wells, III, 39, of Howell; Wilinevah Richardson, 32, of Rochester Hills; Ryan Andrew Zundel, 36, of Belleville; Robert Charles Brierley, 43, of New Boston; Nicole Lynn Turcheck, 31, of Gibraltar, and Anthony Edward Peters, 72, of Belleville. The complaint charges the defendants with one count of conspiring to commit wire fraud. A conviction for this offense carries a maximum penalty of 20 years in prison, a $1 million fine, and an order of restitution.

According to the complaint, the defendants conspired among themselves and with others to engage and participate in a scheme to defraud mortgage lenders and obtain money and property by means of materially false and fraudulent pretenses and representations. The scheme lasted for close to four years, ending in July 2007 when the FBI executed seven search warrants in metropolitan Detroit and Cape Coral, Florida. The complaint affidavit alleges that the scheme involved over 500 fraudulent mortgage loans, over 100 straw buyers, and approximately 180 different residential properties in metropolitan Detroit that were used as—or falsely represented to mortgage lenders to be—the collateral for the loans, most of which went into default and were foreclosed on. The loans ranged in size from roughly $350,000 to $600,000. Losses to the lenders resulting from the scheme are expected to exceed $100 million.

The defendants are alleged to have participated in obtaining both “real” loans and “ghost” loans. The “real” loans were used to purchase and then control residential properties. The related warranty deeds and mortgages were properly recorded at county registers of deeds. The “ghost” loans were used to obtain additional funds from mortgage lenders. The home sales that the “ghost” loans were supposed to finance were nothing but sham transactions, purporting to be secured by the residential properties purchased with the “real” loans, according to the complaint. The warranty deeds and mortgages associated with the “ghost” loans were not recorded, and the lenders were completely unsecured.

The complaint also alleges that the proceeds of the scheme were used to make monthly payments on the “real” and “ghost” loans (to keep the scheme afloat), to pay the straw buyers and other participants in the scheme, to finance unrelated businesses, to purchase a helicopter, expensive car, boats, and expensive residential properties, and to travel extensively overseas.

Defendants Ronnie Duke, Wilinevah Richardson, and Ryan Zundel are expected to appear before a federal magistrate judge this afternoon. The other defendants are expected to appear in court later this week.

A complaint is only a charge and is not evidence of guilt. Trial cannot be held on felony charges in a complaint. When the investigation is completed a determination will be made whether to seek a felony indictment.

This case has been investigated by the Federal Bureau of Investigation, with the assistance of the U.S. Secret Service. It is being prosecuted by Assistant United States Attorneys Stephen Hiyama and Erin Shaw.

According to the Federal Bureau of Investigation’s 2009 Mortgage Fraud Report, released today, mortgage fraud suspicious activity reports referred to law enforcement increased 5 percent to 67,190 during fiscal year (FY) 2009. The total dollar loss attributed to mortgage fraud is unknown. It’s estimated that $14 billion in fraudulent loans originated in 2009.

“Mortgage fraud is an insidious crime that has devastating economic effects on families, communities and the nation,” said FBI Director Robert S. Mueller, III. “The FBI remains committed to working with our law enforcement, regulatory, and industry partners to unravel these complicated fraud schemes driven by greed and bring their perpetrators to justice.”

Other key findings presented in the report include:

* There are more than 2.8 million properties with foreclosure filings, a 120 percent increase from 2007 to 2009. The Las Vegas area reported the most significant rate of foreclosures, with more than 12 percent of housing units there receiving a foreclosure notice.
* The top 10 states ranked by the number of foreclosure filings per housing unit were California, Florida, Arizona, Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey. In April 2010, one in every 386 housing units received a foreclosure filing.
* Prevalent mortgage fraud schemes in fiscal year 2009 include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications. Emerging trends include fraud involving economic stimulus plans/programs, property theft/fraudulent leasing of foreclosed properties and tax-related fraud.

The entire report is available on the FBI’s website. While there, sign up for e-mail alerts to ensure you receive the latest information about the FBI.

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FRESNO—United States Attorney Benjamin B. Wagner announced today that a federal grand jury returned a 30-count indictment charging Tony Huy Havens, 36, of Modesto, California, with wire fraud and criminal forfeiture.

According to the indictment, Havens targeted victims in at least eight states who were seeking multi-million-dollar loans for large construction projects that were in danger of foreclosure. Havens provided the victims with fraudulent documents that showed a third-party lender was prepared to make a loan to the victim. On Havens’ instructions, the victims wire transferred money into a bank account controlled by Havens to pay in advance certain costs associated with the loans. No loans were ever made. In total, Havens represented that he could arrange at least $1.1 billion in financing for at least 15 victim borrowers, and collected at least $248,750 by wire transfers from these victim borrowers.

The maximum statutory penalty for a violation of wire fraud is 20 years in prison and a $250,000 fine on each count. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an extensive/joint investigation by the Federal Bureau of Investigations and the Stanislaus County District Attorney’s Office. Assistant United States Attorney Mark J. McKeon is prosecuting the case.

The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

Frank S. Guzik Jr., 41, of Derry owned and operated investment and housing companies in Monroeville. He received more than $14 million from 105 investors before disappearing, federal court filings say. He promised annual returns of 8 percent to 14 percent from the practice of “flipping” properties — buying distressed houses cheaply, fixing them up and quickly selling for a profit.

Prosecutors say that in reality, Guzik provided multiple investors with mortgages on the same properties and assigned them higher values than they were worth. For one property on McNeilly Avenue in Dormont, he took money from different investors and provided them with mortgages ranging from $25,000 to $100,000, the federal indictment states.

One of Guzik’s last acts before vanishing was to purchase $200,000 worth of untraceable gold coins, according to information unsealed recently. He hasn’t been seen here since about March 2008. He is charged with mail and wire fraud and faces up to 20 years in prison if convicted.

Bernardo Katz, 50, of Mt. Lebanon was charged with two co-defendants a year ago for trying to sell properties for more than they were worth from 2005 to 2007, and for lying about their values and the amount of rent they generated. Federal prosecutors linked Katz and the others to wire transfers from two banks totaling $1.7 million.

Katz, a cellist-turned-investor, developed commercial properties in Mt. Lebanon and bought several Beechview buildings. He fled to Brazil in 2007 with three of his four children, authorities say.

Charged with wire and bank fraud, Katz faces up to 30 years in prison if convicted.

ALEXANDRIA, VA—Lloyd Mallory, 48, of Silver Spring, Maryland was sentenced today to 60 months in prison, followed by three years of supervised release, for his role in helping to carry out a multi-million-dollar mortgage fraud scheme. He was also ordered to pay $2,797,855 in restitution.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Shawn Henry, Assistant Director in Charge of the FBI Washington Field Office, made the announcement after sentencing by United States District Judge T.S. Ellis, III.

Mallory was convicted of conspiracy and mail fraud on March 25, 2010. According to court records and evidence at trial, Mallory was a self-employed Certified Public Accountant who conspired with Michael Milan, 49, of Bethesda, Maryland and others to defraud mortgage lenders into lending funds for the purchase and refinance of residential properties. Mallory created false tax returns in the names of Milan’s clients which listed inflated income amounts. These false documents were submitted to banks to back up false claims made in the mortgage applications prepared by Milan and his associates. Milan’s conspiracy defrauded lenders through at least a dozen real estate transactions and caused losses of more than $2.7 million.

At sentencing, the court found that Mallory committed perjury when he testified at trial.

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

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

SACRAMENTO – United States Attorney Benjamin B. Wagner announced today that Ralondria Stafford, 36, and Necole Ward, 31, both formerly of Vallejo, pleaded guilty today before United States District Judge Morrison C. England, Jr., to Bank Fraud.

According to court documents, from 2004 through 2006, Stafford and Ward, who are sisters, operated RN Realty, a real estate office located in Vallejo, California, from which they carried out a scheme to commit mortgage fraud by using straw buyers to purchase properties at inflated prices. The straw buyers were approached and offered $5,000 for the use of their names, credit histories, and financial information. The defendants represented to the straw buyers that the purchases would be in name only and that the properties would be repurchased by Stafford and Ward from the straw buyers in 6 to 12 months. With one of the straw buyers, the defendants signed a document called the “The $5,000 Deal,” with the terms of the straw buyer agreement.

In August 2005, Stafford and Ward sold a property in Vallejo, owned by Stafford’s husband to straw buyer “J.G.” “J.G.” received a loan based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Attached to the application were falsified Internal Revenue Service W-2 forms and a lease agreement.

As a result of these false statements, a mortgage company funded a $475,000 loan to the straw buyer for the purchase of the property. Neither Stafford or Ward ever repurchased the property from the straw buyer. Public records indicate that one year after the sale, in August 2006, the property was foreclosed upon and resold for approximately $400,000.

In April 2006, Stafford and Ward sold Ward’s house in Vallejo to straw buyer “C.S.” A mortgage company funded a $1,000,000 loan to the straw buyer for the purchase of the property based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Among the false representations on the application were the fact that the straw buyer had a monthly salary of $6,000 and earned $13,000 in rental income; neither of these statements were true.

On April 17, 2006, a title company wired $97,279.00 to Ward. This money represented Ward’s equity in the property and her profit from the sale. Ward directed that this money be deposited into accounts controlled by Stafford and Ward and that it be disbursed to pay Ward’s creditors.

Neither Stafford or Ward repurchased the property from the straw buyer. Public records indicate that eight months after the sale to the straw buyer, the property was sold in a foreclosure sale for approximately $800,000.

The defendants are scheduled to be sentenced by Judge England on August 26, 2010, at 9:00 a.m. The maximum statutory penalty for Bank Fraud is 30 years’ imprisonment, a $1,000,000, a term of supervised release of five years, and a special assessment of $100. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney Kyle Reardon is prosecuting the case.

DENVER—Gary A. Noble, age 31, of Denver, Colorado, was indicted by a federal grand jury in Denver, which on May 20, 2010, returned a 63-count wire fraud indictment related to a mortgage fraud scheme, United States Attorney David Gaouette and Federal Bureau of Investigation (FBI) Special Agent in Charge James Davis announced. Noble was arrested by FBI special agents without incident on June 3, 2010 in California. He will make his initial appearance in U.S. District Court in Denver on June 18, 2010, where he will be advised of the charges pending against him. He was released yesterday on bond.

According to the indictment, beginning on May 1, 2005 and continuing until March 3, 2006, Noble knowingly devised and intended to devise a scheme to defraud lending companies that funded residential mortgage loans and for obtaining money from them and from buyers who paid cash for a residence by means of materially false and fraudulent representations.

Specifically, it was part of the scheme that Noble allegedly orchestrated the purchase of numerous residential properties by his family members, and in most cases, the resale of those properties shortly thereafter to his and his family’s associates. The defendant used companies he controlled to facilitate and conceal his scheme. Through Noble Mortgage Company, he acted as mortgage broker and arranged to have false and fraudulent documents presented to the lenders to enable the buyers to qualify for loans for the properties. Through Noble Title Agency, he acted as a title insurance agent, and caused commitments for title insurance to be issued which made it appear that the buyers would be purchasing the properties free of prior encumbrances and that the lenders would be guaranteed priority leans, when they would not be. Through Noble Title Agency, the defendant acted as settlement agent for the lenders and received all of the loan proceeds and monies associated with the loans, but failed to use them to pay off the prior loans as directed by the lenders. He also misappropriated a portion of the proceeds for his own use and benefit. Through Equity Builders, Noble diverted proceeds of the fraud and concealed payments he made to facilitate the fraud.

“It is important to prosecute mortgage fraud cases to protect the integrity of the financial markets,” said U.S. Attorney David Gaouette.

“Investigating and prosecuting mortgage fraud cases remains a priority for the Denver Division of the FBI,” said FBI Special Agent in Charge James Davis.

If convicted, the defendant faces not more than 20 years’ imprisonment and/or a fine of not more than $250,000 per count for each of the 63 counts. Noble could also be ordered to pay restitution.

This case was investigated by the FBI.

Noble is being prosecuted by Assistant U.S. Attorney Linda Kaufman.

The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

This case is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

A mortgage broker and real estate closing agent in the Twin Cities have been indicted in federal court for allegedly orchestrating a mortgage fraud scheme that resulted in a $2.5 million loss for financial lenders. The indictment, which was filed earlier today in U.S. District Court in St. Paul, charged Fawaz Mahmoud Wazwaz, age 33, address unknown, and Genevieve Marie McCullough, age 32, of Inver Grove Heights, with one count of conspiracy to commit mortgage fraud by commercial carrier and interstate wire, six counts of mortgage fraud through interstate wire, and one count of mortgage fraud through use of commercial interstate carrier.

The indictment alleges that from 2004 through 2006, the defendants conspired to defraud mortgage-lending institutions out of money. During that time, Wazwaz was employed as a loan officer, primarily at Commonsense Mortgage, Inc., a mortgage brokerage business in Shoreview. In his professional capacity, he originated mortgage loans by finding borrowers, preparing loan applications for those borrowers, and submitting those applications to lenders. McCullough, on the other hand, was employed as a real estate closer with two different title companies during this time period. At both companies, she prepared and oversaw the closing of real estate transactions.

The object of the defendants’ alleged conspiracy was to recruit straw buyers to purchase homes in the Twin Cities at inflated prices. The money to pay for those homes was acquired from area lenders, purportedly based on fraudulent loan applications. When loan proceeds were made available at transaction closings, portions of those funds were reportedly distributed to Wazwaz and others involved in the conspiracy. The indictment states that between January 24 and September 15, 2005, the defendants participated in the fraudulent purchase of 14 residences in Minneapolis, four in St. Paul, and one in Fridley, totaling approximately $2.5 million in losses to financial lenders.

To accomplish this fraud, Wazwaz allegedly arranged for an unindicted appraiser to prepare appraisals supporting the inflated home prices. He also purportedly caused lenders to receive false loan applications. Moreover, he reportedly provided down payments to straw buyers without disclosing that assistance to the lenders. Finally, according to the indictment, he arranged for McCullough to close the real estate transactions.

For her part, McCullough allegedly provided false documents, including false HUD-1 settlement statements, to the lenders and routinely violated the settlement instructions in those documents. She also purportedly closed the fraudulent real estate transactions for above-average fees, which she retained. Furthermore, the indictment states she disbursed some of the mortgage loan proceeds, usually the amounts over and above the true sale prices, to Wazwaz, the straw buyers, and others. In addition, she allegedly disbursed to her co-conspirators portions of the loan proceeds actually meant to go to the property sellers.

If convicted, the defendants face a potential maximum penalty of five years in prison on the conspiracy charge and 20 years on each mortgage fraud count. All sentences will be determined by a federal district court judge.

On May 4, 2010, Taleb Wazwaz pleaded guilty for his role as a straw buyer in this fraud scheme. Specifically, he pled to one count of conspiracy to commit mortgage fraud by interstate wire.

This case is the result of an investigation by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney David J. MacLaughlin.

ALEXANDRIA, VA – Ahmad Z. Abbasi, 36, of Woodbridge, Va., was sentenced today to 46 months in prison, followed by three years of supervised release, and ordered to pay $1,637,412 in restitution. Abbasi pled guilty on March 3, 2010, to conspiracy to commit mail fraud for recruiting unqualified buyers who provided false information to obtain multiple mortgage loans, which were ultimately foreclosed.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Daniel S. Cortez, Postal Inspector in Charge, U.S. Postal Inspection Service; and Shawn Henry, Assistant Director in Charge of the FBI Washington Field Office, made the announcement after sentencing by United States District Judge James C. Cacheris.

According to court documents, from April 2006 to February 2008, Abbasi recruited relatives or associates to fraudulently obtain over $4.5 million in refinanced or new home loans for the purchase of six properties. In furtherance of the scheme, Abbasi and his coconspirators submitted fraudulent loan applications through the U.S. Mail and other means that contained false information regarding the purchasers’ income, employment, and intent to occupy the homes as primary residences. The purchasers fraudulently represented that they worked at the defendant’s auto dealership, submitting false paystubs and W-2s in order to obtain the loans. After these initial purchases were completed, the co-conspirators typically would flip the properties to unqualified buyers at inflated prices, again submitting false information as to the purchasers’ income, employment, and occupancy status.

The real estate agent and mortgage broker involved in the transactions received commission payments from the initial sales, and the participants likewise received undisclosed kickback payments from the sales proceeds generated by the fraudulently inflated secondary sales. After the purchasers subsequently defaulted on the mortgage loans, the lenders initiated foreclosure proceedings, selling the properties for substantial losses.

As a result of these fraudulent loans, Abbasi received kickbacks and proceeds from the loans, refinances, or inflated flips totaling approximately $746,324. The borrowers for each of the properties subsequently defaulted on their loans, resulting in approximately $1,637,412 in losses to the lenders.

This case was investigated by the U.S. Postal Inspection Service and the FBI Washington Field Office. Assistant United States Attorney Inayat Delawala prosecuted the case on behalf of the United States.

-By Virginia Real

Federal authorities have charged Rab Nawaz of Waterford in connection with a real estate fraud scheme that involved purchasing homes in New London and selling them to straw buyers at artificially inflated prices.

Nawaz, 47, of Harbor View Avenue, was arrested Wednesday morning at his home. He appeared before U.S. District Judge Ellen Bree Burns on charges of conspiracy to commit wire fraud and obstruction of justice and was released on a $100,000 bond secured by property.

Nawaz allegedly conspired with Syed A. Babar and others in a scheme involving real estate throughout Connecticut, costing lenders an estimated $2.5 million. The scheme involved more than 25 properties in New London, New Haven and other locations.

According to the U.S. Attorney’s office, Nawaz purchased homes in New London and sold them to straw buyers at artificially inflated prices that, typically, were supported by fraudulent appraisals. Although the straw buyers would represent that they intended to occupy the homes as their primary residence, they had no intention of doing so. They defaulted on the loans and allowed the homes to go into foreclosure.

Following Babar’s arrest on May 14, Nawaz allegedly met with a co-conspirator in the case, advised him of evidence that the government had presented against Babar and instructed him as to “what he should and should not admit knowing to government investigators,” according to the U.S. Attorney’s office.

The charge of conspiracy to commit wire fraud carries a maximum term of imprisonment of 20 years and the charge of obstruction of justice carries a maximum term of imprisonment of 10 years.

U.S. Attorney David Fein said the investigation is ongoing. The case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.

-Karen Florin