David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury sitting in New Haven has returned an 11-count indictment charging STEVEN J. KOTTAGE, 44, and GENARO R. HATHAWAY, 46, both of Weston, and MARY ELLEN DURSO, 53, of Milford, with conspiracy and other offenses stemming from the defendants alleged involvement in mortgage fraud.

The indictment alleges that KOTTAGE and HATHAWAY, who are married, conspired to commit wire fraud relating to a home on Fire Island, New York. HATHAWAY, a former attorney in Connecticut and New York, and KOTTAGE purchased and financed the property in the name of KOTTAGE’s mother by filing false loan applications to Wells Fargo Home Mortgage. In each instance, HATHAWAY served as the closing attorney on behalf of KOTTAGE’s mother and Wells Fargo. The indictment further alleges that HATHAWAY subsequently purchased the property from KOTTAGE’s mother’s estate in his own name and, in so doing, made a materially false loan application to H&R Block Home Mortgage to obtain a separate mortgage. Rather than using the sale proceeds due and owing to KOTTAGE’s mother’s estate to pay off the outstanding loans issued by Wells Fargo, KOTTAGE and HATHAWAY used those proceeds to pay off an obligation arising from a separate real estate transaction in which HATHAWAY served as the closing attorney for the seller. The losses resulting from this alleged conspiracy exceed $500,000.

The indictment further alleges that KOTTAGE, HATHAWAY, and DURSO conspired to commit bank fraud by filing a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. DURSO served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of KOTTAGE and HATHAWAY.

The indictment also charges HATHAWAY with tax evasion in 2005 and DURSO with filing false tax returns from 2004 to 2008.

The indictment charges KOTTAGE and HATHAWAY with two counts and DURSO with one count of conspiracy, a charge that carries a maximum term of imprisonment of 30 years on each count. The indictment further charges KOTTAGE and HATHAWAY with two counts of wire fraud, a charge that carries a maximum term of imprisonment of 30 years on each count. KOTTAGE, HATHAWAY and DURSO are each charged with one count of bank fraud, which carries a maximum term of imprisonment of 30 years. The one count of tax evasion against HATHAWAY carries a maximum term of imprisonment of five years, and the five counts of filing false tax returns against DURSO carry a maximum term of imprisonment of three years, on each count.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This case is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney David T. Huang.

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

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

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

The United States Attorney’s Office for the Middle District of Pennsylvania announced that an Atlanta, Georgia resident was sentenced to 18 months in federal prison by Senior U.S. District Court Judge William J. Nealon for her role in a Luzerne County mortgage fraud scheme in 2005 and 2006.

According to United States Attorney Peter J. Smith, Nancy Barlet, age 52, previously pleaded guilty to a charge of mail fraud as an aider and abettor. Barlet admitted to providing false employment and income information on mortgage applications for numerous properties in the Wilkes-Barre area in 2005 and 2006. The fraud involved mortgages worth more than $400,000.

Barlet was charged in a criminal information filed by the United States Attorney’s Office in October 2008. The charge resulted from an investigation by the Federal Bureau of Investigation and Wilkes-Barre Police.

Judge Nealon also ordered Barlet to serve three years of supervised release following her prison sentence, and pay a special assessment of $100. The amount of restitution will be determined within 90 days.

U.S. Attorney Smith noted that the case was prosecuted by Assistant U.S. Attorney Francis P. Sempa.

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that seven more defendants have been sentenced in federal court for their roles in a $12.6 million mortgage fraud conspiracy that involved 25 upscale residential properties in Lee’s Summit, Mo., and Raymore, Mo.

Stefan M. Guerra, 31, of Lee’s Summit, Mo., Jerome Shade Howard, 41, of Anaheim, Calif., Michael Conrad Smith, 49, of Lancaster, Calif., and Gerald D. Williams, 49, and his wife, Judith E. Williams, 49, both of Bunkie, La., were sentenced in separate hearings today by U.S. Chief District Judge Fernando J. Gaitan. James F. Simpson, 41, of Lee’s Summit, and Cheryl Ann Romero, 52, of Santa Fe Springs, Calif., were sentenced on Thursday, July 22, 2010.

Howard was sentenced to three years in federal prison without parole, and ordered to pay $5,945,996 in restitution and to forfeit $900,731 to the government. Guerra was sentenced to one year and one day in federal prison without parole, and ordered to pay $2,425,787 in restitution. Smith was sentenced to five years of probation, including six months of home detention and 4,000 hours of community service, and ordered to pay $640,289 in restitution. Gerald Williams was sentenced to five years of probation, including six months of home detention and 2,000 hours of community service, and ordered to pay $238,008 in restitution. Judith Williams was sentenced to five years of probation, including four months of home detention and 100 hours of community service, and ordered to pay $238,008 in restitution. Simpson was sentenced to one year and one day in federal prison without parole, and ordered to pay $495,578 in restitution. Romero was sentenced to five years of probation, including six months of home detention and 4,000 hours of community service, and ordered to pay $488,102 in restitution.

They are among 18 defendants who have pleaded guilty in connection with a conspiracy to defraud mortgage lenders from June 2005 to May 2007. Eleven co-defendants have now been sentenced.

Conspirators were involved in buying and selling new homes in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore. Buyers purchased the homes at inflated prices, obtaining mortgage loans by providing false information to mortgage lenders, then keeping the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from the builder, Jerry R. Emerick, 40, of Raymore. Kickbacks ranged from $60,000 to $125,000 on each house.

Emerick, who pleaded guilty to conspiracy to commit mortgage fraud and wire fraud and to transfer funds obtained by fraud across state lines, is scheduled to be sentenced on July 30, 2010. Angela R. Clark, 41, of Lee’s Summit, a real estate agent who sold new homes for Emerick, has also pleaded guilty to her role in the conspiracy and awaits sentencing. Co-defendant Cynthia Jordan, 43, of Lee’s Summit, another mortgage broker, has also pleaded guilty and awaits sentencing.

In total during the course of the conspiracy, mortgage lenders approved 25 loans totaling $12,616,990. From that total, buyers received approximately $2,343,337 without the lenders’ knowledge. Lenders sustained actual losses totaling $6,434,043.

Guerra was a mortgage broker who obtained loans for co-defendants to purchase 11 properties in the fraud scheme. The loan applications were fraudulent, and all the loans went into default and were foreclosed. Some of the property buyers in the scheme purchased more than one property. In those instances, Guerra processed the loans quickly so that the loans for the subsequent purchases would be completed before the earlier purchases showed up on the buyers’ credit reports. Guerra also used different lenders for multiple loans to avoid the risk that the lender would notice an individual was buying more than one property.

Howard purchased two properties in the fraud scheme and recruited five other California residents—including Romero and Smith—who completed a total of 10 additional purchases. Howard acted as the middleman or contact person for the California buyers. He also provided false Social Security numbers to co-defendants Ronald E. Brown, Jr., 40, of Gladstone, Mo., and Daryle A. Edwards, 39, of Olathe, Kan. Brown and Edwards were sentenced on June 11, 2010. All the loans for Howard and the buyers he recruited went into default and were foreclosed. The properties were then sold to third parties, with a net loss of $5,945,996.

Romero was vice president and branch manager of Bank of the West in Pico Rivera, Calif., and became acquainted with Howard as a customer of the bank. Romero purchased two properties in Lee’s Summit as part of the mortgage fraud scheme and obtained $180,000 in kickbacks from the loan proceeds.

Smith, Howard’s brother-in-law, purchased two properties in Lee’s Summit as part of the mortgage fraud scheme and obtained $180,000 in kickbacks from the loan proceeds.

Simpson purchased four properties in Lee’s Summit and Raymore as part of the mortgage fraud scheme and obtained $301,500 in kickbacks from the loan proceeds. The loans for all four properties went into default; Simpson arranged a short sale of one of the properties to his parents and the rest of the homes went into foreclosure. The foreclosed properties were sold to third parties, wit! h a loss of $676,413.

Gerald and Judith Williams purchased one property in Lee’s Summit as part of the mortgage fraud scheme and obtained $100,150 in kickbacks from the loan proceeds. They defaulted on the loans and the loans were foreclosed, for a loss of $238,008.

This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Kathleen D. Mahoney. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulations; Amos Rojas, Jr., Special Agent in Charge, Florida Department of Law Enforcement; and Alex Sink, Chief Financial Officer, Florida Department of Financial Services, announce the July 6, 2010 filing of a criminal information against defendant Stanley Gabart, 29, of Miami, FL. The defendant surrendered on Thursday, July 8, 2010, and made his initial appearance in West Palm Beach federal court.

The two-count information charges defendant Gabart with conspiracy to commit bank fraud and making false statements on loan applications to Bank of America and JP Morgan Chase Bank, N.A., in connection with the purchase of various properties. If convicted, the defendant faces a maximum statutory term of imprisonment of 30 years on each count.

Among the properties listed in the information are 3586 Royalle Terrace, Wellington, Florida; 10475 Trianon Place, Lake Worth, Florida, and 540 West Avenue, #1414, Miami Beach, Florida. According to the allegations in the information, Gabart conspired with others to submit loan applications for the properties that contained false information about the applicants’ employment, income, assets and intention to live in the homes. In addition, Gabart allegedly recruited straw purchasers and paid the straw purchasers a fee for participating in the scheme. The fraud scheme resulted in more than $7 million in losses to several banks.

This case is the result of the investigative efforts of the multi-agency Palm Beach Mortgage Fraud Task Force. Mr. Ferrer commended the investigative efforts of the FBI, U.S. Postal Service, State of Florida’s Office of Financial Regulation, FDLE, and State of Florida’s Department of Financial Services. The case is being prosecuted by Assistant U.S. Attorney Ellen Cohen.

An information is merely an accusation and a defendant is presumed innocent unless and until proven guilty.

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

Paid Over 15 Straw Purchasers and Used False Documents to Buy 25 Properties; Received Over $3.8 Million in Fraud Proceeds

BALTIMORE, MD—U.S. District Judge J. Frederick Motz sentenced Timothy Reed, age 45, of Beltsville, Maryland, today to 51 months in prison followed by five years of supervised release for mail fraud arising from the fraudulent purchase of 25 properties in Maryland, the District of Columbia, and Virginia using false mortgage and settlement documents. Judge Motz also ordered that Reed pay $4,196,967 in restitution.

The sentence 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; Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service – Washington Division; Montgomery County State’s Attorney John McCarthy and his Economic Crimes Unit; and Special Agent in Charge Jeffrey Irvine of the United States Secret Service – Washington Field Office.

According to Reed’s plea agreement, Reed and others paid over 15 straw purchasers $10,000 per property to purchase houses for Reed and others. Reed created false mortgage and settlement documents, many of which misrepresented the straw purchasers’ income and assets. Reed and others also created false invoices to claim that their company, Brotherly Investment Group, performed “renovations” on some of the properties. Using these false invoices, Reed and others were “repaid” at closing for the purported renovations. Reed was an organizer and leader in this scheme.

From 2006 to 2008, Reed and others received approximately $3,830,418 in fraudulent funds as part of this scheme. Many of the purchased properties have been foreclosed upon.

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 the integrity of the credit markets. Information about 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 thanked Assistant United States Attorney Kwame J. Manley, who prosecuted the case.

Yesterday in federal court in St. Paul, the 30-year-old part owner of Legacy Lending pleaded guilty to participating in a mortgage fraud scheme that involved 37 separate real estate transactions and $20 million in loan proceeds. Appearing before United States District Court Judge Richard H. Kyle, Thomas John Hunter, of Maple Grove, pled guilty to one count of wire fraud and one count of money laundering in connection to this crime. He was charged via an information on January 26, 2010.

In his plea agreement, Hunter admitted that from September 2005 through July 2007, he and others carried out a fraud scheme, through which mortgage loans were obtained from unsuspecting lenders by straw purchasers, in amounts far exceeding actual purchase prices, based on inflated property appraisals. Hunter also admitted that during the course of this scheme, he and others failed to inform lenders that funds in excess of the actual property purchase prices were misappropriated by those involved in the fraud scheme, and that concealed payments were made out of loan proceeds to participants in the scheme.

To further the scheme, Hunter and others caused fraudulent loan applications to be provided to potential lenders in which property purchasers were falsely identified and property was falsely described as “owner occupied” when in fact each straw buyer was purchasing multiple properties at the same time. In application materials submitted to lenders, the defendant and others also inflated the income and assets of potential borrowers, and a licensed real estate appraiser involved in the fraud scheme created inflated appraisals of the properties to support the fraudulent loan amounts. The defendant participated in 37 separate fraudulent real estate transactions, worth approximately $20 million in total loan proceeds, from which at least $2.2 million was received by participants in the scheme through illegal, concealed payments.

Specific to the charges filed against him in this case, Hunter admitted that on April 20, 2006, he and others engaged in an illegal wire transaction when they obtained $825,000 in mortgage loan financing for the purchase of a residence in Rogers, Minnesota. Hunter also admitted that from those funds, he and his co-conspirators misappropriated at least $110,000. In addition, Hunter admitted that on April 21, 2006, he engaged in an illegal monetary transaction when a check in the amount of $13,2000, representing proceeds from the fraud, was deposited into a Legacy Lending bank account.

For his crimes, Hunter faces a potential maximum penalty of 20 years in prison on the wire fraud count and 10 years on the money laundering count. Judge Kyle will determine his sentence at a future date. This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorneys Timothy C. Rank and Christian S. Wilton.

One of Hunter’s co-conspirators, Frederick Earle Deen, age 30, of Minneapolis, who also had part ownership interest in Legacy Lending, is scheduled to be sentenced this Friday for his role in the fraud scheme. Another co-defendant, Taylor Trump, was sentenced for his involvement in this crime on August 21, 2008.

Kaiyotta, who doesn’t want her last name published, said two years ago she was an unemployed college student searching for a job.

The 23-year-old said she found an opportunity in the paper that seemed perfect for her career path. It was a chance to be a landlord. The company, Maxwell Holdings, told Kaiyotta earning money was simple.

Kaiyotta said company officials told her she only needed to take out a home mortgage in her name and they would set her up with tenants so she could collect rent.

But, before Kaiyotta could collect any rent, the Michigan State University Student received a surprising call from state officials. Investigators told her Maxwell Holdings was under investigation and she was the victim of a scam.

State officials confirm they are investigating Maxwell Holdings because they take mortgage fraud very seriously.

Anyone who feels like they’ve been a mortgage-scam victim is asked to call the Michigan Department of Energy, Labor and Economic Growth on its toll free line 877-999-6442.

After a three-day trial, a jury in federal district court returned a guilty verdict yesterday against Emanuel County, Georgia attorney John R. Thompson on mortgage fraud charges. The case was tried before District Court Judge B. Avant Edenfield at the U.S. Courthouse in Statesboro, Georgia.

United States Attorney Edward J. Tarver stated, “Mortgage fraud is a cancer in our society which must be cured. In this case, a lender relied upon this defendant as their closing attorney and agent and he was in a position of trust. For his criminal violation of that trust for profit, he will soon face a prison sentence.”

According to the evidence presented at trial, Thompson, along with his coconspirators, Brian and Natasha Steptoe, sold a piece of property located in Swainsboro, Georgia, in August of 2007 to what is known in real estate terms as a “straw purchaser.” Thompson and the Steptoes submitted a falsified loan application and supporting documents Bank of America in order to obtain a loan for the purchaser of the property. Based on the lies contained in the loan application and other documents, Bank of America approved a mortgage loan for over $400,000. Thompson and his coconspirators pocketed large sums of money for themselves as a result of their scheme. Soon after the property was sold, it went into foreclosure and remains on the market to this day.

Evidence presented at trial also established that Thompson and his coconspirators committed additional acts of mortgage fraud from October 2006 through May 2008, which included defrauding people out of their money while conducting real estate closings.

U.S. Attorney Tarver recognized the extensive efforts of the Federal Bureau of Investigation in bringing this criminal activity to light. He praised particularly the efforts of Statesboro F.B.I. Special Agent Cornelius Harris, who investigated this matter.

The case was prosecuted by Assistant United States Attorneys Natalie Lee and Frederick Kramer. For additional information, please contact First Assistant United States Attorney James D. Durham at (912) 201-2547.

LAS VEGAS—A former Las Vegas resident has pleaded guilty to conspiracy for his involvement in a Nevada mortgage fraud scheme involving straw buyers and falsified mortgage loan documents, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Brian K. Jackson, 38, currently of Anaheim, California, pleaded guilty on Friday, July 9, 2010, before U.S. District Judge James C. Mahan to conspiracy to commit mail fraud, wire fraud, and bank fraud and is scheduled for sentencing on October 8, 2010, at 10:00 a.m. Jackson was indicted by the Federal Grand Jury in Las Vegas on October 21, 2009. He faces up to 30 years in prison and a $1,000,000 fine.

From about 2002 to May 14, 2008, Jackson, owner of Unlimited Properties, a now-revoked Nevada limited liability corporation, participated in a conspiracy to submit mortgage loan applications to financial institutions to finance straw buyer real estate purchases in Nevada. Jackson recruited and caused to be recruited straw buyers to purchase properties on behalf of the members of the conspiracy. The loans were processed through Sapphire Mortgage, located in Henderson, Nevada. Jackson caused false and fraudulent information to be placed in the straw buyers’ mortgage loan applications concerning their employment, income, assets, intent to occupy property, etc. Jackson caused the same home to be purchased multiple times by different straw buyers at ever increasing prices, and caused the “equity” to be diverted to himself or his company. Jackson also placed renters in the properties and caused the mortgages to default.

The plea agreement states that Jackson caused fraudulent loan applications to be sent to financial institutions to fund mortgage loans for the purchase of a home at 2061 Scenic Sunrise Drive in Las Vegas. Between March 2002 and late 2004, Jackson twice orchestrated the sale of the property using two straw buyers and the placement of false information in their loan applications. In June 2004, Jackson also orchestrated the sale of the Scenic Sunrise property to himself, and falsely stated in his loan application that he intended to reside in the property when he knew he did not. During this period, Jackson also leased the Scenic Sunrise property to another individual and accepted money from the individual as guarantee that he would purchase it in the future, even though Jackson knew that the property at the time was owned by the first straw buyer and was in the process of being sold to the second straw buyer. As a result of the fraud, the financial institutions suffered a loss of approximately $111,103.

In May 2008, the owner of Sapphire Mortgage, Cindy Birkland, was arrested and charged in state court in Las Vegas with mortgage fraud related offenses.

This investigation is being led by IRS Criminal Investigation and the FBI, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the Las Vegas Metropolitan Police Department, Office of the Inspector General for the Social Security Administration, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Postal Inspection Service, and the U.S. Secret Service. The case is being prosecuted by Assistant United States Attorney Brian Pugh.

Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that an Overland Park, Kansas man has been sentenced in federal court for actions taken as part of a bank fraud scheme that forced several low-income homeowners into bankruptcy by saddling them with more debt than they were able to repay.

Harris Poulikidis, 62, of Overland Park, was sentenced by U.S. District Judge Ortrie D. Smith on Friday, July 9, 2010, to two years and nine months in federal prison without parole. The court also ordered Poulikidis to pay $62,100 in restitution to individual homeowners who were defrauded in the home improvement refinancing scheme, as well as $58,252 in restitution to financial institutions that made loans on behalf of the victims.

On March 16, 2010, Poulikidis pleaded guilty to causing an individual to travel across state lines as part of a fraud scheme. Poulikidis admitted that he caused a homeowner to obtain a $61,500 loan from Fremont Investment and Loan to refinance a mortgage and to provide approximately $19,350 in home improvements by Poulikidis’ company, Roofing & Siding Plus. On the same day, Poulikidis caused the homeowner to obtain a second mortgage, a $9,000 loan from his company. The second mortgage was later sold to another financial company.

Poulikidis assured the homeowner that her new payments under the refinancing would be no more than, or less than, what she was paying previously. In reality, however, the monthly payments increased so much that the homeowner could not afford them and filed for bankruptcy.

This case was prosecuted by Assistant U.S. Attorney J. Daniel Stewart. It was investigated by the Department of Housing and Urban Development, Office of the Inspector General, and the Federal Bureau of Investigation.

A 39-year-old woman from the central Minnesota city of Otsego pleaded guilty earlier today in federal court to participating in a mortgage fraud scheme that resulted in a $400,000 loss to several mortgage loan lenders. Appearing in St. Paul before United States District Court Judge Richard H. Kyle, Sharon Michelle Thomas pleaded guilty to one count of aiding and abetting mail fraud. Thomas was charged on June 7, 2010.

In her plea agreement, Thomas admitted that from 2005 through 2006 she assisted others in obtaining money through fraudulent pretenses by depositing 10 “closing packages” in the U.S. mail or with private commercial carriers. During this time, Thomas was a closing agent for a licensed title company, which was affiliated with a local builder and closed residential real estate transactions for the builder. Thomas provided documents to mortgage loan companies that were funding the mortgage loans for each residential transaction, after which the lenders would approve loans and provide loan proceeds to the title company. Thomas admitted concealing from the lenders payments she made to “investors” associated with Superior Investment Group (“SIG”) on 10 Minnesota properties. Thomas admitted receiving only her customary salary and small bonuses for closing the transactions.

SIG was owned and operated by Troy David Chaika, age 43, of Burnsville, and Dustin Lee LaFavre, age 27, of Webster, Minnesota. The two men conspired to obtain money fraudulently through approximately 183 residential property transactions that defrauded real estate mortgage lenders out of more than $7 million. LaFavre pleaded guilty to one count of conspiracy to commit mail and wire fraud and awaits sentencing. Chaika has been indicted on seven counts of wire fraud, three counts of mail fraud, and one count of conspiracy to commit wire fraud and mail fraud.

For her crime, Thomas faces a potential maximum penalty of 20 years in prison. Judge Kyle will determine her sentence at a future date, yet to be scheduled. This case is the result of an investigation by the Federal Bureau of Investigation and the U.S. Postal Inspection Service. It is being prosecuted by Assistant U.S. Attorney Tracy L. Perzel.

DENVER—Shawn R. Tieskotter, age 37, of Greenwood Village, Colorado, and Craig D. Patterson, age 30, of Littleton, Colorado, each pled guilty before U.S. District Court Judge Robert E. Blackburn Wednesday to one count of mail fraud related to a mortgage fraud scheme. Tieskotter and Patterson were indicted by a federal grand jury in Denver on March 10, 2010. On May 20, 2010, a superseding indictment was filed. Both defendants pled guilty on July 7, 2010, and are scheduled to be sentenced by Judge Blackburn on November 12, 2010.

According to the stipulated facts contained in the plea agreements and indictments, between March 26, 2005, and continuing through June 30, 2005, in Colorado and elsewhere, Shawn Tieskotter and Craig Patterson knowingly executed and attempted to execute a scheme to defraud various financial institutions as well as commercial mortgage lenders. The scheme was executed in connection with residential mortgage loan applications relating to 13 properties in the Denver, Colorado metropolitan area. The neighborhoods included Aurora, Centennial, Littleton, Parker, and Castle Rock.

As part of the scheme, Tieskotter and Patterson prepared and submitted applications for two loans, a first mortgage and a second mortgage. Each of these applications contained materially false and fraudulent representations that Tieskotter intended to use the property as his primary residence. Most of the applications also contained materially false and fraudulent representations about the extent of Tieskotter’s liabilities related to other residential mortgage loans, in that they failed to include a complete list of the properties Tieskotter owned or was in the process of purchasing and falsely indicated that one of Tieskotter’s other properties was leased. All of the false information was material to the lenders because it affected their ability to assess Tieskotter’s ability to re-pay the loans for which he was applying and it affected his eligibility for various loan products.

Tieskotter and Patterson also hid from lenders the extent of Tieskotter’s liabilities for other mortgages by preparing, submitting, and causing to be prepared and submitted applications for multiple loans, secured by multiple properties, before such liabilities would appear on Tieskotter’s credit reports. This practice further affected the lenders’ ability to assess Tieskotter’s ability to re-pay the loans for which he was applying.

Tieskotter and Patterson also pulled money from the transactions at the time of closing by causing the disbursement at closing of additional monies to PK Design Group, LLC, an entity controlled by Patterson, or Dream Design, a trade name for an entity controlled by Tieskotter. Tieskotter and Patterson concealed from the lenders and other parties associated with the transactions their control of these entities. Tieskotter and Patterson also misrepresented that these monies would be used entirely for repairs or improvements to the properties, which led the lenders to falsely believe that the value of their collateral would increase as a result of these payments.

“Mortgage fraud remains a top priority of the Department of Justice. Those who perpetrate this fraud face prosecution and incarceration,” said U.S. Attorney David Gaouette.

“Mortgage fraud remains a significant crime problem for the Denver Metropolitan Area,” said FBI Special Agent in Charge James Davis. “Combating mortgage fraud will continue to be a priority for the FBI for the foreseeable future.”

United States Postal Inspector in Charge Antonio Gomez stated, “In an ongoing effort to combat mortgage fraud, federal agents from multiple agencies have joined together to assure offenders are caught and prosecuted. United States Postal Inspectors in the Denver office will continue to work aggressively in this effort to pursue anyone who uses the mail in a fraudulent manner for criminal gain. We appreciate the United States Attorney’s efforts in prosecuting these offenders and are pleased with the outcome in this investigation.”

“IRS Criminal Investigation stands ready to partner with law enforcement agencies to pursue individuals who commit Mortgage Fraud,” said Christopher M. Sigerson, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

Mail fraud carries a penalty of not more than 20 years’ imprisonment, and up to a $250,000 fine, per count.

This case was investigated by the Internal Revenue Service Criminal Investigation (IRS CI), the Federal Bureau of Investigation (FBI), and the United States Postal Inspection Service (USPIS).

The case is being prosecuted by Assistant U.S. Attorney Matthew Kirsch.

Mortgage fraud is a major part of President Barack Obama’s Financial Fraud Enforcement Task Force, which was established 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.

LITTLE ROCK—Jane W. Duke, United States Attorney for the Eastern District of Arkansas, announced that a real estate developer, Roger Stephen Clary of Little Rock, was charged by the Grand Jury for the Eastern District of Arkansas with four counts of wire fraud and one count of mail fraud. Each count carries a statutory penalty of no more than 30 years’ incarceration and/or a fine of $1,000,000.

According to the indictment, Clary created a company called Destination Ventures which was to purchase, custom outfit and lease buses. Clary obtained a loan from Banc of America Leasing Corporation (BALC) to fund the purchase and outfitting of the buses. The loan was approved and entered into on May 8, 2008. On the following day, Clary requested that BALC distribute a portion of the loan proceeds to purchase and outfit the buses. However, on the same day, Clary directed the vendor who was to outfit the buses to redistribute the funds once the vendor received them. The vendor complied with the directives from Clary. Consequently, $1,595,000 of the loan proceeds were paid to companies in which Clary had a financial interest but which had no involvement in the purchase, custom outfitting, or leasing of the buses as intended by the loan agreement. The mail fraud count charges Clary with later falsely certifying to BALC that the buses had been custom outfitted.

The investigation was conducted by the Little Rock Field Office of the Federal Bureau of Investigation.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that IRVING STITSKY, the former managing partner of Cobalt Capital Funding, LLC, and executive vice president of Cobalt Real Estate Services, LLC, was sentenced today to 85 years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. STITSKY was sentenced in Manhattan federal court by United States District Judge KIMBA M. WOOD, who presided over the three-week jury trial at which STITSKY, along with co-defendants MARK ALAN SHAPIRO and WILLIAM B. FOSTER, were found guilty.

According to the Superseding Indictment, the evidence at trial, and statements made at the sentencing proceeding:

Beginning in late 2003, STITSKY, SHAPIRO, and FOSTER founded a group of companies that operated under the name “Cobalt,” which purportedly engaged in the acquisition and development of multi-family real estate properties throughout the United States. Through the Cobalt entities, STITSKY, SHAPIRO, and FOSTER fraudulently induced victims to invest by, among other things: (a) misrepresenting Cobalt’s operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by STITSKY and SHAPIRO, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt’s purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by STITSKY and SHAPIRO, and did not own several of the properties that it claimed to own.

In order to carry out their scheme, STITSKY, SHAPIRO, and FOSTER established a telemarketing center in Great Neck, New York. STITSKY was in charge of the Great Neck telemarketing center, where he trained dozens of callers to pitch prospective Cobalt investors about the Cobalt private offering. The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about the investment for which the investors’ funds were solicited, including false representations about: (i) the
identities and relevant background information about the individuals controlling the Cobalt entities; (ii) the identities of Cobalt’s business partners; (iii) the properties that Cobalt owned; (iv) the properties in which investor funds were to be invested; (v) the history of the Cobalt entities; (vi) the amount of management fees to be taken by Cobalt entities from the investor funds; (vii) the uses of the management fees taken by Cobalt entities from the investor funds; and (viii) SHAPIRO’s educational background.

For example, in the summer of 2004, STITSKY solicited a Cobalt investor by misrepresenting that Cobalt owned the Hotel Simone in Miami, Florida, whereas, as STITSKY well knew, Cobalt did not own that property. STITSKY, SHAPIRO, and FOSTER then caused millions of dollars of investors’ funds to be transferred to accounts for the defendants’ personal benefit.

In addition to his prison term, Judge WOOD sentenced STITSKY, 55, of Milan, New York, to three years of supervised release and ordered him to pay $22,075,631 in restitution and to forfeit $23,152,235 in proceeds from his offenses.

STITSKY’s co-defendants, WILLIAM B. FOSTER, 70, of East Hampton, Massachusetts, and MARK ALAN SHAPIRO, 50, of Avon, Connecticut, are scheduled to be sentenced on July 26 and July 29, 2010, respectively.

In sentencing STITSKY, Judge WOOD stated that “this was a vast securities fraud preying on individuals who were, for the most part, not particularly sophisticated in investing” and that “it warrants very severe punishment.” Judge WOOD also described STITSKY to be “just as the government describes, an inveterate con-man.”

U.S. Attorney PREET BHARARA said: “Irving Stitsky is a recidivist fraudster who stole millions of dollars from hundreds of investors through trickery and deceit. He preyed on vulnerable victims, including widows and retirees, by falsely promising guaranteed returns on their investments in Cobalt’s South Beach, Florida-based real estate scam. This office remains committed to working with our partners at the Federal Bureau of Investigation to weed con-men like Stitsky out of the marketplace.”

Mr. BHAHARA praised the work of the Federal Bureau of Investigation in this case.

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.

Assistant United States Attorney MARC P. BERGER is in charge of the prosecution.

The California Attorney General has just joined the Department of Real Estate and the State Bar to issue a warning to homeowners about what they termed an ‘alarming rise’ in short sale fraud in California in a field “rife with scam artists.” Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees.

As banks are taking back fewer homes and new federal programs (HAFA) are put in place to encourage homeowners to consider a short sale as an alternative to foreclosure, all the mortgage fraud, loan mod fraud and other real estate fraud scam artists are coming out of the woodwork to exploit yet another niche as desperate homeowners struggle with their options.

These scams generally take one of three tracks:

The homeowner is approached by a so-called “short-sale negotiator, expeditor, consultant” etc. With limited exceptions, short sale negotiations can only be conducted by a licensed real estate agent or an attorney. Even a real estate agent who subsequently hires one of these short sale negotiators is putting their license at risk. As a seller, you should never be charged an up-front fee for your short-sale transaction. Buyers should also be wary if the seller’s agent or negotiator demands a surcharge or hidden fee before your offer is even submitted or prior to close of the transaction. These fees are typically demanded outside of escrow so no paper trail is generated. Unlicensed “experts” and unusual fee demands should be reported immediately to 1-800-952-5225 or www.ag.ca.gov/consumers/general.php.

While there is nothing inherently wrong with property flipping, many scam artists employ “straw buyers” to complete a fraudulent transaction. They will “game” the lender holding the mortgage by submitting only low-ball offers; then, when that lender agrees to the lower price, will immediately sell the house to a higher bidder. Many times they will attempt to use a “concurrent close” so they have no money out of pocket – the lender funding the mortgage pays off the lender selling the property and the middle-man just scrapes off the excess. Not only is this a form of fraud but may result in the holder of a first or second mortgage to pursue recourse action against the original homeowners for the difference.

Fraudulent rental scams. Imagine you are one of the thousands of local homeowners who got caught in the pinch and lost your home. You scrape together your last few dollars to come up with first and last month’s deposit on a rental house and the cost of a moving truck. You sign a year lease but four months down the road you find a notice tacked to your door informing you the property is going back to the bank because the owner is delinquent. That’s right – you’ve been making your payments to the owners and they’ve just been pocketing the cash and you’re the one who’s out of luck.

Good luck finding somebody to help you with that one. In fact, if you quit making payments to the landlord they can come after you because you signed a lease agreement with them – never mind that they lied and are scamming their lender. Best bet – do your homework up front. Demand a current property profile from your rental agent showing that there is no notice of delinquency or foreclosure filed on the property. Remember, if the deal sounds too good to be true there’s a better than average chance it is. There’s no shortage of unscrupulous scam artists out there who will tell you what you want to hear instead of what you need to hear. For any real estate transaction, purchase or rent, always deal with a professional.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulations; Amos Rojas, Jr., Special Agent in charge, Florida Department of Law Enforcement; and Alex Sink, Chief Financial Officer, State of Florida’s Office of Financial Services, announce fraud charges against a defendant Marie Decosta Quintana, 40, of North Miami, Florida, as a result of an investigation led by the Palm Beach County Mortgage Fraud Task Force. The defendant was arrested Tuesday, June 29, 2010, and made her initial appearance in West Palm Beach this morning.

The two-count indictment charges defendant Quintana with making false statements on loan applications to Bank of America and National City Bank, to purchase property in the Versailles Development at 10475 Trianon Place, Lake Worth, Florida, in 2007. According to the indictment, Quintana lied about her employment, income, assets and intention to live in the house to persuade the banks to provide money through two separate mortgages to buy the home. Quintana was recruited to be the straw purchaser of the home and received payment for allowing the use of her name, credit score and for signing documents containing false information. The fraud scheme resulted in more than $1.1 million in losses to two banks.

The charges announced today are the result of the investigative efforts of the multi-agency Palm Beach Mortgage Fraud Strike Force. Mr. Ferrer commended the investigative efforts of the FBI, the State of Florida’s Office of Financial Regulation, the U.S. Postal Inspection Service, FDLE and Florida’s Office of Financial Services. The case is being prosecuted by Assistant U.S. Attorney Ellen Cohen.

An indictment is merely an accusation and a defendant is presumed innocent unless and until proven guilty.

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

HOUSTON—Albert Terrance Watkins has pleaded guilty to committing wire fraud arising from a $10 million mortgage fraud scheme, United States Attorney José Angel Moreno announced today.

Watkins, 46, a Missouri City area resident, was indicted in June 2009 along with others of perpetrating a scheme to defraud lenders of mortgage loans by making false/fraudulent claims on mortgage loan applications and having some borrowers make false representation of a Social Security number on those same applications. Today, he pleaded guilty and admitted his role in the multi-million dollar fraud scheme before U.S. District Judge David Hittner who has set sentencing for Sept. 27, 2010.

Watkins’ role was two-fold—that of a recruiter of borrowers with good credit on behalf of Phantom Marketing and as a loan processor at Capri Mortgage and United National Mortgage. Watkins and Adrian Levale Cole, who pleaded guilty to these same charges on June 29, 2010, devised a scheme to purchase multiple residential properties in the greater Houston area through fraudulent mortgage loans. Through their association with several companies—including Capri Mortgage Services, United National Mortgage and Phantom Marketing—Watkins and Cole were able to obtain more than $10 million in fraudulent loans as part of this mortgage fraud scheme between June 2003 and July 2006. On the sales agreement for a newly constructed residential property located in Friendswood, Texas, Albert T. Watkins was listed as the broker and buyer’s agent. Previously, Watkins communicated with the seller’s real estate agents and explained that the offer on the house was more than the asking price, because the house was to be modified to be A.D.A. (American Disabilities Act) approved. This was one of many examples of how Watkins was able to inflate the selling price of the homes in the Friendswood development. After the closing on the property, Watkins received two cashier’s checks—one for $11,500 and one for $9,750—and distributed five other cashier’s checks to other individuals. No construction work of any kind was ever done by any construction company to make any improvements on that property located in Friendswood, Texas.

As with other loans obtained as part of this scheme, only the first few monthly mortgage payments were made and the mortgage loans went into default for non-payment.

Watkins, who has been permitted to remain on bond with electronic monitoring until sentencing, faces a maximum punishment of up to 20 years in prison and a fine not to exceed $250,000 along with a three-year term of supervise release.

A third defendant charged in this case is pending trial in mid-July 2010.

The investigation leading to the charges in this case was conducted by the FBI, Internal Revenue Service-Criminal Investigations, Social Security Administration-Office of Inspector General, and the Friendswood Police Department. Assistant United States Attorney Melissa J. Annis and Assistant United States Attorney Carolyn Ferko prosecuted the case.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Amos Rojas, Special Agent in Charge, Florida Department of Law Enforcement; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announced today that an Indictment was unsealed at the Fort Lauderdale Federal Courthouse against:

* Joseph Guaracino, 32, Plantation, Florida
* Steven Stoll, 43, Fort Lauderdale, Florida
* Stephen Orchard, 34, Boca Raton, Florida
* Matthew Gulla, 35, Davie, Florida
* Rene Rodriguez, Jr., 37, Plantation, Florida
* Dennis Guaracino, Jr., 34, Plantation, Florida
* Jacqueline Trumbore, 39, Margate, Florida
* John Velez, 37, Plantation, Florida
* Daryl Radziwon, 39, Plantation, Florida
* Casey Mittauer, 37, Cooper City, Florida
* Joseph DeRosa, 35, Coral Springs, Florida
* Robert DePriest, 41, Plantation, Florida
* Joseph LaGrasta, 31, Tamarac, Florida

The Indictment charges the defendants with one count of conspiracy, in violation of Title 18, United States Code, Section 1349; 11 counts of mail fraud, in violation of Title 18, United States Code, Section 1341; 13 counts of wire fraud, in violation of Title 18, United States Code, Section 1343; and eight counts of making a false statement to a government agency, in violation of Title 18, United States Code, Section 1001. Two defendants are charged with obstructing justice, in violation of Title 18, United States Code, Section 1512. Not all defendants are charged in all counts. The conspiracy, mail fraud, wire fraud, and obstruction of justice counts each carry a maximum penalty of up to 20 years’ imprisonment. The false statement counts each carry a maximum penalty of five years’ imprisonment.

According to the Indictment, the defendants engaged in a scheme to enrich themselves by fraudulently causing real property in Broward and Palm Beach Counties to be bought and sold by submitting, and causing to be submitted, false and fraudulent documents to mortgage lenders in order to obtain the loans. The title attorneys falsely represented to the mortgage lenders the source of the deposits/down payments and/or the cash from borrowers needed to close the transactions. The total dollar amount of the loans secured under the scheme was in excess of $16,000,000 dollars.

More specifically, at times relevant to the Indictment, Joseph Guaracino would locate properties to be purchased and negotiated sale contracts along with co-defendants. In order to qualify for mortgage loans, Guaracino and others caused false information to be submitted to lenders, including forged lease agreements, false bank account balances, and inflated income or salary levels. Dennis Guaracino, Jr., Jacqueline Trumbore, John Velez, Daryl Radziwon, Casey Mittauer, Joseph DeRosa, Robert DePriest, and Joseph Lagrasta were investors in the fraudulent real estate investment scheme, who along with others, purchased the properties that Guaracino controlled.

Steven Stoll, a licensed mortgage broker and a licensed attorney, and Stephen Orchard, also a licensed attorney, participated in the scheme by handling the closings of the fraudulently procured loans, along with licensed mortgage brokers Matthew Gulla and Rene Rodriguez, Jr.

U.S. Attorney Wifredo Ferrer stated, “This indictment charges a group of individuals who conspired to enrich themselves by committing mortgage fraud. It includes a number of professionals who betrayed their profession for greed, and in the process, undermined the integrity of the mortgage marketplace on which we all rely. Our office is determined to continue to bring to justice those who engage in such pervasive criminal schemes.”

Special Agent in Charge John V. Gillies of the FBI Miami Division stated, “The FBI will continue to work with our law enforcement partners to investigate allegations of fraud.”

“Once again, a complex mortgage fraud scheme in South Florida has resulted in additional arrests on serious charges,” said Amos Rojas, Jr., Special Agent in Charge of the Florida Department of Law Enforcement’s Miami Regional Operations Center. “Those accused of mortgage fraud—no matter what their role—have left a path of destruction with far too many victims in South Florida, and we will continue to aggressively target, arrest and prosecute those involved in this crime. Justice will be served.”

Commissioner Tom Cardwell of the Florida Office of Financial Regulation stated, “This is an example of how unlawful practices have blemished the mortgage industry and caused damage to Florida’s economy. The Office of Financial Regulation is implementing new rules and regulations regarding qualifications and enforcement that we believe will help protect consumers and create a more sound and stable industry for the benefit of our citizens and economy.”

Mr. Ferrer commended the investigators for their hard work and dedication in this long term investigation by the Florida Department of Law Enforcement, Federal Bureau of Investigation, U.S. Postal Inspection Service, and State of Florida’s Office of Financial Regulation. This case is being prosecuted by Assistant U.S. Attorneys Laurie E. Rucoba, Jeffrey Kay and Michael Patrick Sullivan.

An Indictment is merely an accusation and a defendant is presumed innocent unless and until proven guilty.

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