OAKLAND, CA—Donna Demello pleaded guilty in federal court in Oakland today to conspiracy to commit wire and mail fraud for her role in a mortgage fraud scheme, United States Attorney Melinda Haag announced. At the time of the offense, Demello worked as an escrow officer at Stewart Title in Milpitas, Calif.

Demello, 44 of San Jose, Calif., was indicted by a federal grand jury on May 13, 2010. She and five others, including James Delbert McConville, were charged with conspiracy to commit mail and wire fraud in violation of Title 18, United States Code, Section 1349. The Indictment alleges that McConville purchased hundreds of condominiums throughout California in the names of straw buyers, individuals who were promised $5,000 to $10,000 for the use of their names and credit. The loan applications are alleged to have contained false information about the employment, income, and assets of the straw buyers. Demello admitted to participating in the fraudulent approval of approximately 80 loans for condominiums in Escondido, Calif., and San Marcos, Calif. The government has alleged in its filings that loans totaling more than $20 million were approved for the purchase of these condominiums in Southern California, and that more than $11 million of that was paid directly out of escrow to individuals and companies controlled by McConville.

In pleading guilty to Count One of the Indictment, Demello admitted that she conspired with McConville and others to conceal from the lending institutions the “marketing fees” paid to McConville for the sale to straw buyers of approximately 80 condominiums in Escondido and San Marcos. Demello acknowledged that marketing fees paid to McConville averaged about $150,000 per loan transaction.

Demello also admitted that in furtherance of the conspiracy, she would create two “final” versions of the settlement statements on a form approved by the United States Department of Housing and Urban Development (called the HUD-1). The correct version of the HUD-1 that was provided to the seller would show a large marketing fee paid to an individual or entity associated with McConville. The fraudulent version of the HUD-1 that was sent to the lending institution would not show the payment of any marketing fee. At McConville’s direction, his “marketing fee” would be paid directly from escrow to individuals associated with him and/or one of many corporate entities he controlled, including but not limited to: Diamond House Development, La Mirage HA, Emerald Park Housing, Hi Investments, Kearny Mesa Townhomes, LLC, Stonemark Asset Portfolio, Sunset Drive Media, 3 Mac Asset Portfolio, 3 Mac Development Corp., and Sapphire Park House.

Araks Davoudi, a former employee of Citibank, previously pled guilty to the same conspiracy on Aug. 2, 2010, for her role in creating false verifications of deposit for straw buyers. Two others who worked for McConville have pled guilty to conspiracy to commit mail and wire fraud in a related case, United States v. Raymond Davoudi and Bahareh Shamlou, CR 10-364 SBA. McConville is currently in custody.

The sentencing of Demello is scheduled for Dec. 8, 2010, before U.S. District Court Judge Phyllis J. Hamilton in Oakland. The maximum statutory penalty for each count of conspiracy in violation of Title 18, United States Code, Section 1349, is 30 years’ imprisonment and a fine of $1,000,000 or twice the gross gain or loss involved in the conspiracy, whichever is greater. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Keslie Stewart is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathleen Turner and Patty Lau. The prosecution is the result of a one year investigation by the Federal Bureau of Investigation, Internal Revenue Service – Criminal Investigation, U.S. Department of Housing and Urban Development – Office of Inspector General, U.S. Postal Inspection Service, and the Alameda County District Attorney’s Office.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that RAVI PERSAUD, a real estate attorney, and GEORGE ESSO, a former loan officer, were found guilty yesterday of participating in a multi-million-dollar mortgage fraud scheme through GuyAmerican Funding Corp., a mortgage brokerage located in Queens, New York. The scheme involved the use of numerous fraudulent loan applications designed to trick banks into lending money to unqualified borrowers for the purchase of residential properties in the New York City area. In total, ESSO and RAVI PERSAUD were charged along with eight other defendants in a scheme that defrauded banks out of more than $23 million in home mortgage loans.

According to the Superseding Indictment and the evidence introduced at trial before U.S. District Judge SHIRA A. SCHEINDLIN:

RAVI PERSAUD and ESSO participated in a massive mortgage fraud scheme operated through a branch office of GuyAmerican Funding located on Liberty Avenue, in Jamaica, New York. ESSO was a loan officer at GuyAmerican and a licensed real estate broker who received thousands of dollars in commissions based on fraudulent loan applications submitted to lenders. In particular, ESSO was personally involved in submitting loan applications on behalf of borrowers that contained numerous false statements relating to the borrowers’ income, employment, and residence. For example, ESSO and another loan officer, PEGGY PERSAUD, agreed to list fake jobs on the borrowers’ loan applications in order to convince banks that the borrowers made more money than they actually did and were therefore a good credit risk. ESSO directly participated in obtaining over $1 million in fraudulent mortgages through false statements.

Several of the co-conspirators charged as part of the scheme worked with GuyAmerican loan officers to recruit homeowners in financial distress who were willing to sell their homes. These co-conspirators used “straw buyers”—persons who posed as home buyers in exchange for a fee, but who had no intention of living in the mortgaged properties—to perpetrate the scheme. The co-conspirators then arranged home sales between the distressed sellers and the straw buyers, frequently using the same straw buyer to obtain multiple mortgage loans, and all using fraudulent representations about the supposed purchasers’ net worth, employment, and income.

RAVI PERSAUD acted as the closing attorney in connection with many of these fraudulent transactions, including on loans in which the same straw buyer was used to purchase multiple properties within a short period of time. As the closing attorney, RAVI PERSAUD was supposed to represent the interests of the bank in connection with the real estate transaction and distribute the loan proceeds according to a schedule that he provided to the bank. Instead, the evidence established that RAVI PERSAUD acted at the behest of his coconspirators in the scheme, receiving the loan proceeds into his attorney account and subsequently making illicit payments from the loan proceeds to his co-conspirators. RAVI PERSAUD also assisted the scheme by writing checks to co-conspirators in order to set aside six months worth of mortgage payments from the closing proceeds, so that the lenders would not discover the scheme. He further concealed these payments by sending false documents to the banks regarding how the loan proceeds were being distributed.

ESSO, 38, of Saint Albans, New York, was convicted of one count of conspiracy to commit bank and wire fraud and one count of bank fraud, and faces a maximum penalty of 60 years in prison.

RAVI PERSAUD, 44, of Glen Head, New York, was convicted of one count of bank and wire fraud and three counts of bank fraud. He faces a maximum sentence of 120 years in prison.

Both defendants will be required to pay restitution to the victims of their offenses, and to forfeit the proceeds of their crimes.

PEGGY PERSAUD, ORETTE KILLIKELLY, and ELTON LORD previously pled guilty.

The case against CHEDDI GOBERDHAN is still pending.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation and the New York State Banking Department and thanked them for their assistance in this case.

Manhattan U.S. Attorney PREET BHARARA stated: “The real estate professionals found guilty yesterday sacrificed their licenses to their greed, and sought to profit at the expense of the banks that relied upon them. This verdict sends the clear message that we will continue to work tirelessly, together with our law enforcement partners, to prosecute mortgage fraud and to hold professionals accountable when they cease to be gatekeepers and decide to join the fraud themselves.”

This case was part of the coordinated takedown of “Operation Bad Deeds,” a joint federal, state, and local law enforcement operation targeting mortgage fraud crimes, announced on October 15, 2009, in which 41 defendants were charged in various mortgage fraud scams in New York, Pennsylvania, Ohio, and North Carolina.

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.

The cases arising from “Operation Bad Deeds” are being overseen by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys ANTONIA M. APPS and REBECCA ROHR are in charge of the prosecution.

CINCINNATI—Kevin Miller, 55, of Fairfield, was sentenced in United States District Court today to 15 months’ imprisonment for his role in a real estate investment fraud scheme between 2005 and 2008 that defrauded more than 90 victims out of more than $9 million.

Carter M. Stewart, United States Attorney for the Southern District of Ohio; Dugan T. Wong, Assistant Inspector in Charge, U.S. Postal Inspection Service; Keith Bennett, Special Agent in Charge, Federal Bureau of Investigation, Cincinnati Field Division (FBI); and Butler County Prosecutor Robin Piper, announced the sentence handed down today by Senior United States District Judge Herman Weber.

In addition to the prison time, Miller’s sentence includes two years of supervised release and an order to pay restitution of $184,354.36 to the three victims directly affected by his actions. Miller is also prohibited from engaging in any further investment solicitation activity.

Miller pled guilty on January 21, 2010 to one count of conspiracy to commit mail fraud and one count of obstruction of an investigation. According to court documents, Miller was a salesperson for Capital Investments. Capital Investments, Greater Miami Debentures and Great Miami Real Estate were three entities that duped victims into investing with them, claiming the investments were secure and backed by equity in real estate properties in Butler County, Ohio and in Florida. Many of the properties were not purchased or developed with investor monies and were owned by one of the conspirators, or the spouse or parent of a conspirator, and by November 2007 many of the properties lacked substantial equity, were in a state of disrepair, were in default, or were in some stage of foreclosure.

Miller or a co-conspirator sent a letter dated January 8, 2008 to one couple he had persuaded to invest with Capital Investments, representing that the investment was a “success” and continuing to be “an active player in the investment industry” providing “yields that are higher than those found elsewhere in the marketplace” when, in fact, by or before November 2007 all investors’ money was gone, with many of the properties which purported to back the victims’ investments in or approaching foreclosure.

In June, 2008, Miller tried to conceal his role in the investment scheme by falsely completing a questionnaire sent to victims by the Ohio Department of Commerce Division of Securities which was investigating the sale of the unregistered securities.

One of Miller’s co-conspirators, James D. Powell, 53, of Hamilton, pled guilty on June 28, 2010, to conspiracy and wire fraud and is awaiting sentencing.

Stewart commended the cooperative investigation by Postal Inspectors, FBI agents, and investigators with the Ohio Department of Commerce Division of Securities who investigated the case, and Senior Litigation Counsel Anne Porter, who prosecuted the case.

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.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; and J. Thomas Cardwell, Commissioner, State of Florida Office of Financial Regulation, announced that defendant John Fisher, 35, of Jupiter, Florida, pled guilty this morning in federal court to one count of conspiracy to commit mail and wire fraud and to one count of substantive mail fraud.

Also pleading guilty today were defendants Tracey Balli, 35, of Pembroke Pines, Florida, Justina Bryan, 35, of Hollywood, Florida, and Delano McLennon, 33, of North Lauderdale, Florida. These defendants pled guilty to one count of making false statements on a HUD-1 Real Estate Settlement Form in connection with a mortgage fraud scheme. Sentencing has been scheduled for November 19, 2010 before U.S. District Judge Ursula Ungaro.

According to records filed with the court and statements made during the plea hearing, the defendants and other conspirators engaged in a scheme to enrich themselves by fraudulently causing real property in Fort Lauderdale, Jupiter, Cape Coral, and Royal Palm Beach, Florida, to be bought and sold through straw buyers who obtained high value mortgages based upon fraudulent mortgage loan applications.

A co-conspirator orchestrated the scheme, in which defendant John Fisher, a licensed mortgage broker, Tracey Balli and Justina Bryan, both loan processors, joined. Balli and Bryan, along with other conspirators, recruited straw buyers, including Delano McLennon, to join the scheme.

In order to obtain mortgages on these properties, the defendants and other co-conspirators submitted and caused to be submitted fraudulent documents to various mortgage lenders across the United States. Based on these false documents, the mortgage lenders issued approximately $2,500,000 in loans to the defendants and their co-conspirators.

“South Florida continues to be a hot spot for mortgage fraud,” said Special Agent in Charge John V. Gillies of the FBI Miami Division. “It affects all of us, making homes artificially overpriced and then eventually losing value through neglect. The housing industry is a key component of our economy and combating mortgage fraud will remain a top priority for the FBI.”

Mr. Ferrer commended the investigative efforts of the U.S. Postal Inspection Service, the FBI, and the State of Florida Office of Financial Regulation. This case is being prosecuted by Assistant U.S. Attorneys Randy D. Katz and Jeffrey H. Kay.

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.

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner, FBI Special Agent in Charge Drew S. Parenti, and IRS Special Agent in Charge Scott O’Briant announced that a federal grand jury in Sacramento returned an indictment on Thursday, charging eight persons in a real estate investment fraud scheme operated under the name of Heaven Investments. The following individuals are charged in the indictment:

* Akbar Bhamani, 56, of Carmichael, CEO, Heaven Investments
* Aly Khan Bhamani, 28, of Carmichael, Vice President, Heaven Investments
* Zainulabidin Akbar Bhamani, 30, of Sherman Oaks, Vice President, Heaven Investments
* Laila Bhamani, 57, of Tracy, Finance Department, Heaven Investments
* Feroza Bhamani, 55, of Carmichael, Finance Department, Heaven Investments
* Ken Sarna, 46, of Vallejo, Director of Operations, Heaven Investments
* John Pierre Quintana, 30, of Dixon, Director of Marketing, Heaven Investments
* Shaun Bhamani, 26, of Valencia, Loan Officer, Global Financial & Assets Inc.

The first seven defendants are charged with 15 counts of mail fraud and wire fraud in connection with the scheme to defraud investors of over $11.4 million through a company called Heaven Investments Holding Co. (HIHC). HIHC was a family-run real estate development company in Sacramento that offered investors two principal types of investments. The first was called the Planned Income Program that promised to use investor money to acquire residential single-family dwellings that would be renovated and resold for a profit. The second was the Tenants in Common program that promised to use investor money to develop four pieces of property known as Mission Manor, Alder Heights, Walnut Acres, and the Hegenberger Hotel. Investors were promised a 12 – 15 percent annual return.

According to the indictment, the defendants claimed that the investment was safe because it would be secured by a deed of trust on the property in which the investor would be in no worse than second or third position and that the indebtedness on the property would never exceed 70 percent of the value of the property. In fact, the indictment alleges, HIHC had acquired the properties through 100 percent financing from private lenders. Further, the defendants’ promise was illusory because either HIHC failed to actually place the investor on the deed as promised or on those occasions when HIHC did put an investor’s name on the deed, the property frequently had multiple investor names and was leveraged by as much 300 to 400 percent.

The indictment also charges that the defendants led investors to believe that HIHC was more efficient than other development companies of its kind because it had its own in-house architectural staff and construction company. As a consequence, the defendants would routinely make promises that a particular property such as Mission Manor or Alder Heights would be completed within a few months. In fact, HIHC did not have a team of architects or a construction company and, after nearly three years of soliciting investors’ money, HIHC had not moved beyond the permit stage on any of the TIC properties.

The indictment also alleges that HIHC operated like a Ponzi scheme in that the source of the funds used to make interest payments to investors was not from profits but rather from money obtained from new investors. Because of this, a recurring problem at HIHC was a scramble for money with which to pay investors. The defendants would use various devices to stall investors including intentionally failing to sign the check and telling the investor that the check had been lost in the mail.

The indictment charges that in an attempt to raise money for HIHC, three of the defendants—Zain Bhamani, Aly Bhamani and Shaun Bhamani—engaged in a separate mortgage fraud scheme. They are charged with eight counts of mail fraud in connection with that scheme. Zain Bhamani is alleged to have recruited two straw buyers to purchase eight properties owned by HIHC. Shaun Bhamani, who is a mortgage broker in Los Angeles and a cousin of Zain and Aly Bhamani, handled all the transactions. Seven of the eight properties involved in the scheme went into foreclosure resulting in losses to the lenders of approximately $775,000. The remaining property is currently in foreclosure. Zain Bhamani and Aly Bhamani are also charged with seven counts of money laundering.

The maximum statutory penalty for the indicted charges are as follows: 20 years for each count of wire fraud, 20 years for each count of mail fraud, and 20 years for each count of money laundering. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges are only allegations and each defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

This case is the product of an investigation by the FBI and the IRS, Criminal Investigation. Assistant United States Attorney R. Steven Lapham is prosecuting the case.

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 Securities Fraud Working Group, which is tasked with combating investment fraud schemes. For more information on the task force, visit StopFraud.gov.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, and J. Thomas Cardwell, Commissioner, State of Florida Office of Financial Regulation announced that on Friday, August 6, 2010, a federal jury in Miami convicted Mayelin Salas, 36, of Miami Springs, and Lucy Segurola, 51, of Miami, for their participation in a mortgage fraud scheme that resulted in approximately $21 million in fraudulent loans. Salas and Segurola were found guilty of conspiracy to commit mail and wire fraud. Salas was also found guilty of mail fraud.

According to the evidence presented at trial, Salas was an employee of State Mortgage Lending, a mortgage lending company in Doral, which was owned and operated by Magile Cruz. Cruz previously pled guilty and was sentenced in January 2009 to 120 months’ imprisonment for her participation in this scheme. Cruz’s other companies included Star Lending Mortgage, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County.

According to the trial evidence, in 2005, Salas participated in a double HUD scheme through which the defendants created and submitted to Fremont Investment and Loan, a lending institution, false duplicate HUD-Settlement Statement Forms, which grossly inflated the true *purchase price of a property that Salas was purchasing. Salas received a $5,000 payment from Cruz for her participation in the scheme.

The evidence at trial established that Lucy Segurola acted as a straw borrower on at least three loans totaling more than one million dollars. Segurola allowed her credit information to be used to apply for these loans knowing that she was not the true borrower and that Cruz would be making the monthly mortgage payments. The loan applications also included false employment verifications, pay stubs, income and funds on deposit, and IRS Forms W-2. Segurola was paid a total of $15,000 for her participation in the scheme.

The defendants face a maximum term of imprisonment of twenty years as well as fines and mandatory restitution. Sentencing has been scheduled for October 22, 2010.

Mr. Ferrer commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Postal Inspection Service, U.S. Secret Service, and the State of Florida Office of Financial Regulation.

HONOLULU, HI—Two indictments of 13 Oahu residents and one from the state of Washington on mortgage fraud related charges were unsealed today with the arrests of 10 of the 14 defendants. A federal grand jury had returned the indictments on August 11, 2010, but they had remained sealed until today. One indictment charged 10 defendants in 56 counts of conspiracy, wire fraud, and false statements on loan applications, while the other named four defendants in 33 counts of the same nature. The 14 named defendants are:

* ESTRELITA “ESTHER” GARO MIGUEL (58)
* JENNIFER GARIN MIGUEL (29)
* YOLIE CASTILLO TIBURCIO (36)
* VINAH CERIALES MORALES (45)
* GERALDINE GARIN MIGUEL LUKELA (33)
* TERESITA “TESSIE” FAELDONEA SORINO (33)
* MARY ANN LAPENIA (57)
* STEPHEN ELMER CALLO (59)
* FELICIDAD “FELICIA” TABALBAG CORPUZ (60) (Washington)
* ALBERT LONOIKAUAKINI JOY (45)
* ATLANTICA KAHAUNANI “NANI” TANUVASA (37)
* LENE TANUVASA, JR. (40)
* SAMANTHA MICHEL (37)
* MICHELLE LEE MALULANI KAMA (39)

Florence T. Nakakuni, United States Attorney for the District of Hawaii, said that according to the indictments, the purposes of the conspiracies and fraud schemes were to defraud lending institutions and others by submitting loan documents containing false information. The two indictments allege that certain defendants recruited individuals to apply for mortgage loans and to sign loan documents containing false representations, and that some defendants were loan officers who submitted fraudulent loan applications. In reliance on the false statements, the lending institutions funded the loans, and some of the defendants then distributed the loan proceeds, as well as collected their standard fees and commissions.

For the conspiracy count, the defendants face a maximum period of imprisonment of five years and a maximum fine of $250,000. For the wire fraud counts, the defendants face a maximum period of imprisonment of 20 years and a maximum fine of $250,000. For the false statement on loan application charges, the defendants face a maximum period of imprisonment of 30 years and a maximum fine of $1,000,000. Charges in an indictment are merely accusations, and each defendant is presumed innocent unless and until proven guilty.

At arraignments today, trial dates were set for October 13, 2010, for the 10 and four defendant cases before Chief United States District Judge Susan Oki Mollway and United States District Judge J. Michael Seabright, respectively.

The case resulted from an investigation by the Federal Bureau of Investigation and Internal Revenue Service – Criminal Investigation Division. The prosecution is being handled by Assistant United States Attorney Clare Connors.

MADISON, WI— John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Brian K. Bowling, 44, of Sun Prairie, Wisconsin, was sentenced today by U.S. District Judge Barbara B. Crabb to 51 months in prison, with a five-year term of supervised release. Judge Crabb also ordered Bowling to pay $377,271 in restitution. Bowling was convicted of two counts of wire fraud on May 28, 2010.

Bowling pled guilty to engaging in a mortgage fraud scheme using his mortgage brokerage company called Platinum Concepts. Bowling defrauded banks and other mortgage lenders by submitting false loan applications to obtain home loans. The loan applications included inflated income amounts, exaggerated assets, falsified employment information, bogus down payments, and silent second mortgages. To date, five individuals have pleaded guilty to participating in this scheme.

At today’s sentencing, Judge Crabb told Bowling he engaged in very serious criminal conduct that affected a lot of people and involved over $1.7 million in intended losses. Judge Crabb expressed concern that despite Bowling having a good upbringing and all the advantages to succeed, he still engaged in criminal conduct to make more money and to build up his business and standing in the community.

These cases are 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.

The charges are the result of an investigation conducted by the Madison office of the Federal Bureau of Investigation. The prosecution of this case has been assigned to Assistant United States Attorney Dan Graber.

Two Prior Lake men have pleaded guilty in federal court in Minneapolis for their roles in a scheme that defrauded mortgage lenders out of more than $2.5 million by causing them to make loans based on false information. Appearing before United States District Court Judge David S. Doty earlier today, Beau Wesley Gensmer, age 28, pleaded guilty to one count of wire fraud and one count of money laundering in connection to that crime. Christopher Glenn Kennedy, age 31, pleaded guilty to the same charges on August 6, 2010. Gensmer and Kennedy were indicted on April 21, 2010. A third co-defendant pleaded guilty earlier in the case.

In their respective plea agreements, Gensmer and Kennedy admitted that from July of 2007 to September of 2008, they executed the mortgage-fraud scheme. They admitted that in April of 2007, a multi-unit condominium building was built in Prior Lake by a development company owned by one of Gensmer’s relatives. The units were listed for sale but were removed from the market after only a couple of units were successfully sold. Later during the summer of 2007, Gensmer and Kennedy admittedly solicited three individuals to purchase multiple condominium units as “investments.” Gensmer and Kennedy assured the “investors” that they would pay nothing to buy the properties because the down payments and monthly mortgage payments would be provided to them by Gensmer and Kennedy. Moreover, Gensmer and Kennedy admitted they recruited the investors by telling them that the condos would be rented for a time but ultimately sold at a profit, and that the investors would share in that profit.

In order for the investors to qualify for their mortgage loans, Gensmer and Kennedy caused accountants to prepare tax returns that reflected inflated income figures. Those returns and other fraudulent documents were then knowingly submitted to potential mortgage lenders by the defendants. Gensmer and Kennedy also temporarily deposited money into the bank accounts of some of the investors to make it appear to potential lenders that the investors had more cash on hand than they actually did. As a result of those actions, ten mortgage lenders funded the purchase of 18 condominium units by the three investors. Eventually, Gensmer and Kennedy stopped supplying the property purchasers with monthly mortgage payments, causing the loans to go into default and then into foreclosure.

The defendants admitted that due to their actions, mortgage loan lenders wire transferred funds on 15 different occasions. The men also admitted that on two occasions, they used some of those fraudulently obtained funds as down payments to a title company for additional condo purchases, and that the title company was owned in part by individuals with an ownership interest in the entity that originally constructed the condo building.

For their crimes, the defendants face a potential maximum penalty of 20 years in federal prison on the wire fraud charge and 10 years on the money laundering charge. Judge Doty will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation, the Internal Revenue Service–Criminal Investigation Division, and the Prior Lake Police Department. It is being prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and William J. Otteson.

Note, this law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The Task Force was established to wage an aggressive, coordinated, and proactive war on financial crimes. It 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 along with state and local partners, its members will 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 Miami federal jury has found Mayelin Salas, 36, Miami Springs, and Lucy Segurola, 51, Miami, guilty in a $21 million mortgage fraud scheme.
The women were among 41 people charged in six separate mortgage fraud cases in July 2009.
According to the evidence presented at trial, Salas was an employee of State Mortgage Lending in Doral, which was owned and operated by Magile Cruz.
Cruz pleaded guilty and was sentenced in January 2009 to more than 10 years in prison.
Cruz’s other companies included Star Lending Mortgage, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County.
According to evidence presented at trial, Salas participated in a fraud scheme in which they provided false duplicate HUD-Settlement Statement Forms, which inflated the real purchase price of a property that Salas was buying. Salas received $5,000 from Cruz for her participation.
Segurola acted as a straw borrower on at least three loans totaling more than one million dollars and allowed her credit information to be used to apply for the loans, according to evidence presented at trial. Segurola was paid $15,000 for her participation.
The women face up to 20 years in prison along with fines and mandatory restitution. Sentencing has been scheduled for Oct. 22.

California Woman, Florida Man Indicted

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a California woman and a Florida man were indicted by a federal grand jury today for their roles in a credit history fraud that allegedly contributed to a nearly $3 million mortgage fraud scheme in Lee’s Summit, Missouri.

“Credit history fraud is a new and troubling criminal scheme,” Phillips said. “By supplying false credit information, they artificially boost credit scores and create a fraudulent credit history that enables their customers to commit financial fraud. Today’s indictment marks the first time this district has charged a credit history fraud case, and signals our determination to prevent such schemes from proliferating.”

Karen Washam-Hawkins, 48, of Carson, California, and Gerald William Bartlett, 38, of Tampa, Florida, were charged in a six-count indictment returned by a federal grand jury in Kansas City, Missouri.

Washam-Hawkins, a real estate agent, allegedly obtained and sold false Social Security numbers to enable individuals to create false credit histories in order to deceive lenders and obtain loans. Bartlett, through his Tampa businesses, provided fraudulent account and payment information to a credit bureau to falsely enhance the creditworthiness of individuals in order for those individuals to deceive lenders and obtain loans.

According to today’s indictment, beginning in late 2004 to early 2005 and continuing through Aug. 15, 2006, several customers of Washam-Hawkins and Bartlett benefitted from the credit history fraud scheme in order to fraudulently purchase six properties in Lee’s Summit in a mortgage fraud scheme totaling $2,959,200.

Washam-Hawkins allegedly supplied Shade Jerome Howard of Anaheim,Calif., with false Social Security numbers. Howard then gave Bartlett those false Social Security numbers, along with other identity information, and requested positive credit information for those individuals in order to enhance their creditworthiness. Bartlett, using the names South Florida Management Group and Consumer Financial Group, allegedly reported false account and payment information to a credit bureau.

According to today’s indictment, this scheme allowed Howard, along with Ronald E. Brown, Jr., of Gladstone, Missouri, and Daryle A. Edwards of Overland Park, Kansas, to enhance their creditworthiness in order to deceive lenders and obtain mortgage loans for residential properties in Lee’s Summit. Brown purchased three residential properties totaling $1,339,700. Howard purchased two residential properties totaling $1,201,000. Edwards purchased a residential property for $418,500.

In addition to the conspiracy, today’s indictment charges Washam-Hawkins and Bartlett with three counts of transferring funds obtained by fraud across state lines. Washam-Hawkins is also charged with two counts of wire fraud.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Linda Parker Marshall. It was investigated by the Federal Bureau of Investigation.

Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans

ATLANTA, GA—BRENT MERRIELL, 38, of Atlanta, Georgia, was sentenced today by United States District Judge Jack T. Camp to federal prison on charges of making false statements to the Federal Deposit Insurance Corporation (FDIC) and aggravated identity theft.

“The FDIC serves a critical role by insuring the assets of hard-working Americans. Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said United States Attorney Sally Quillian Yates. “This double fraud has landed him in federal prison.”

MERRIELL was sentenced to three years and three months in prison to be followed by five years of supervised release. MERRIELL was convicted of these charges on March 23, 2010, upon his plea of guilty.

According to United States Attorney Yates, the charges and other information presented in court: MERRIELL obtained millions of dollars in loans from Omni National Bank as mortgages on numerous properties. Omni later failed and was taken over by the FDIC. Beginning in October 2009, MERRIELL faced foreclosure on 14 different properties subject to Omni mortgages. In response, MERRIELL asked the FDIC to forgive $2.2 million in loan payments and instead allow him to “short sell” the properties to seven new purchasers at significantly reduced amounts. The seven new purchasers, however, were phony: the seven names MERRIEL presented to the FDIC were, in fact, stolen identities whose names were forged on sales contracts and counterfeit loan commitment letters. Under this scheme, if law enforcement had not intervened, Merriell would have retained control of the properties, and could then rent them for amounts in excess of the substantially reduced mortgage payment, or resell them at a profit.

A “short sale” occurs when a lender such as Omni Bank agrees to the sale of property—on which the current owner has defaulted—to a third party for less than the full amount due on the loan. Lenders are willing to accept “short sales” as a means of mitigating their losses on troubled loans. The MERRIELL “short sale” fraud was discovered through a sting operation conducted by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) with the assistance of the FDIC.

Other Omni-related prosecutions to date include:

JEFFREY L. LEVINE, 68, of Atlanta, Georgia, who pleaded guilty on January 14, 2010, to causing materially false entries that overvalued bank assets to be made in the books, reports, and statements of Omni, is scheduled to be sentenced on September 14, 2010, at 2:00 p.m., before United States District Judge Jack T. Camp.

DELROY OLIVER DAVY, 37, of Lithonia, Georgia, who pleaded guilty on May 11, 2010, to bank fraud and conspiracy to commit bank fraud, mail and wire fraud in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders, is scheduled to be sentenced on September 14, 2010, before United States District Judge Jack T. Camp.

CHRISTOPHER BERNARD LOVING, 32, of McDonough, Georgia, who pleaded guilty on June 24, 2010, to making false statements to agents of the Office of the Special Inspector General for the Troubled Asset Relief Program and the FDIC in connection with an investigation regarding Omni construction contracts, is scheduled to be sentenced on August 24, 2010, before United States District Judge Jack T. Camp.

MARK ANTHONY MCBRIDE, 44, of East Point Georgia, was sentenced on April 1, 2010, to over 16 years in prison for obtaining fraudulent loans from many lenders, including Omni.

This investigation 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.

This case was investigated by special agents of a mortgage fraud task force formed for Omni-related cases, made up of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Housing and Urban Development Office of Inspector General (HUD-OIG), the United States Postal Inspection Service, the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), and the Federal Bureau of Investigation. The task force is continuing to investigate a number of Omni-related matters.

Assistant United States Attorneys Gale McKenzie and Christopher Bly prosecuted the case.

For further information please contact Sally Q. Yates, United States Attorney, or John Horn, First Assistant United States Attorney, through Linda Isaac, U.S. Attorney’s Office, at (404) 581-6056. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

BALTIMORE—A federal grand jury has indicted Winnie Joanne Barefoot, a/k/a Winnie Jo Budzina, a/k/a Winnie JoAnne Conn, a/k/a Joanne Knopsnyder, a/k/a Olivia JoAnne Morgan, a/k/a Olivia JoAnne Barefoot Morgan, age 55, of Annapolis, Maryland, for bank, wire and mail fraud; Social Security fraud; and making false statements to the Social Security Administration. The indictment was returned on July 30, 2010 and unsealed the next day upon Barefoot’s arrest. Barefoot has a detention hearing tomorrow, August 3, 2010 at 10:30 a.m.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to the seven-count indictment, from December 2005 to August 2009, Barefoot used the identity of Olivia JoAnne Morgan and her daughter to engage in fraudulent real estate and loan transactions, including transactions involving three properties in Annapolis and a business entity she operated.

Specifically, the indictment alleges that Barefoot used a forged power of attorney from her daughter to purchase property at 3528 Narragansett Avenue, Annapolis. Her daughter had not provided any such power of attorney nor had any intention of acquiring the property. Barefoot is alleged to have falsely increased the amount of the deposit to the sellers by $100,000, thus changing the loan-to-value ratio of the transaction; and falsely stated the amount of her daughter’s income and assets. As a result, a mortgage company lent $616,250 for the purchase of the property.

The indictment further alleges that Barefoot used the identity of Olivia JoAnne Morgan and other false information to apply for a mortgage loan to purchase property at 896 Coachway, Annapolis.

In February 2007, Barefoot is alleged to have submitted a fraudulent loan application to a bank to increase an existing home equity credit line from $1.3 million to $2.1 million, secured by property at 1588 Eaton Way in Annapolis where she resided with CWH from 2002 to 2009. Barefoot is alleged to have falsely represented in the loan application that she and her “husband” CWH each had monthly income of $25,000; that her net worth was over $10 million; and used a false social security number.

Barefoot is alleged to have submitted fraudulent applications for a $250,000 line of credit loan and a $120,000 commercial loan to operate Maryland Hyperbarics, LLC, a hyperbaric clinic. On one application in February 2007, she is alleged to have falsely represented that her income and the combined assets for herself and CWH was over $12 million; that the value of the Eaton Way property was $4 million and that it was unencumbered; and used a false Social Security number. In the other application she falsely represented that her monthly income was $30,861, her personal net worth was approximately $1.2 million and that she had not filed bankruptcy in the past 10 years, although in fact she filed bankruptcy in 1999. Barefoot secured the $250,000 line of credit using a forged indemnity deed of trust on the Eaton Way property that was purportedly signed by CWH.

Finally, the indictment alleges that on June 3, 2003 Barefoot applied to the Social Security Administration (SSA) for SSI benefits, claiming that she was disabled beginning in 1997 due to back problems. The indictment alleges that she falsely: denied ever having been accused or convicted of a felony, when in fact she was arrested in 1980 and convicted of federal and state felony offenses; and represented that she had no resources nor received any type of income. Barefoot was ultimately approved for SSI disability benefits in April 2007, and received more than $26,000 in benefits to which she was not entitled. In December 2008, Barefoot falsely represented to SSA representatives investigating her eligibility for benefit payments that she lived alone and that “Olivia Joanne Morgan” was her sister, who was married to CWH, and that they were getting a divorce so CWH spent a lot of time at her house on 896 Coachway, Annapolis.

As a result of the fraud schemes, the indictment seeks forfeiture of $4,061,000.

Barefoot faces a maximum sentence of 30 years in prison and a $1 million fine on each of three counts of bank fraud; 20 years in prison and a $250,000 fine on each of two counts of wire fraud; and five years in prison and a $250,000 fine for Social Security fraud and making false statements.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein thanked Assistant United States Attorney P. Michael Cunningham, who is prosecuting the case.

MANHATTAN SUPREME COURT — Four individuals who were part of “one of the largest and most complex” mortgage fraud cases in the country were convicted on various charges related to a massive real estate scheme, the Manhattan DA said Friday.

The four guilty defendants used a Long Island-based mortgage company to convince banks to front them massive loans so they could purchase distressed properties, but instead they pocketed most of the money, according to prosecutors.

Aaron Hand, 38, Eric Shields, 45, Kenneth Law, 54 and Jerry Strklja, 35, were convicted on Friday after a month-long trial.

They were charged with stealing $100 million from banks and for defrauding home sellers, including some in Manhattan, prosecutors said.

“These defendants built a corrupt enterprise — complete with corrupt lawyers, bankers, appraisers, straw buyers and others — to control every aspect of the residential lending process,” District Attorney Cy Vance Jr. said in a statement.

They all face up to 50 years in prison when they’re sentenced in September.

Ten others who were indicted as part of the fraud pleaded guilty earlier this month.

By Shayna Jacobs

A Livingston County businesswoman and her employee are two of the 10 people charged Thursday for defrauding Michigan families out of thousands of dollars in a foreclosure-rescue scam.

Michelle Rene Garbuschewski, who also uses the name Michelle Justice and owns Howell’s Elite Mortgage Relief, is facing two counts of obtaining at least $1,000 but less than $20,000 under false pretenses while employee Lisa Marie Joboulian of Northville is charged with one count of the same offense, according to Livingston County District Court records.

In all, Attorney General Mike Cox’s office authorized 19 criminal complaints — a total of 69 charges — against 10 people and nine Michigan mortgage companies for allegedly illegally charging homeowners facing foreclosure upfront fees for mortgage-modification assistance, or “foreclosure-rescue” promises, which is a violation of the Credit Services Protection Act.

Joy Yearout, a spokeswoman with the attorney general’s office, said none of the companies were coordinated, but were each separately operating similar scams.

The investigation against Elite Mortgage Relief began in May 2009, when the attorney general’s office received two complaints against the company and the women.

Yearout said the defendants claimed they would help two homeowners by working with their lenders in an attempt to modify the borrower’s mortgage. However, Garbuschewski and Joboulian are accused of pocketing the $8,000 fee they charged but not following through on their promises, Yearout said.

While many of the victims lost their homes to foreclosure, the two victims in the Livingston County cases did not, Yearout noted.

“These companies took advantage of struggling Michigan families trying to hold onto the American dream,” Cox said.

Cox urged any consumers who paid fees to the companies and individuals charged by his office, or any other mortgage-modification company, for services that were not provided to file a consumer complaint online with the attorney general’s Consumer Protection Division at www.michigan.gov/ag or call (877) 765-8388.