David B. Fein, United States for the District of Connecticut, announced that JOHN JACKSON, 42, of Hamden, was sentenced today by United States District Judge Christopher F. Droney in Hartford to six months of home confinement and two years of probation for participating in a mortgage fraud scheme. Judge Droney also ordered JACKSON to pay restitution in the amount of $100,000.
According to court documents and statements made in court, in 2006, JACKSON conspired with a New Haven-based real estate attorney and an East Hartford-based mortgage broker to defraud Mortgage Lender Network USA, Inc., a Florida corporation with offices in Middletown, through the purchase of Meriden residential property. Working with the attorney and mortgage broker, JACKSON signed a loan application provided by the mortgage broker for a loan in the amount of $280,000. Both JACKSON and the mortgage broker knew that application contained several material misrepresentations, including JACKSON’s true financial condition. The application also falsely represented the purchase price of the property, which was substantially less than reflected on the loan application; that the property was to be JACKSON’s primary residence, when it was not; JACKSON’s total liabilities, which were much higher than represented on the application, and that JACKSON would provide approximately $60,000 in cash at the loan closing.
On approximately July 21, 2006, as part of the scheduled loan closing, Mortgage Lender wired approximately $283,000 into the attorney’s trust account. At the closing, JACKSON signed a HUD settlement statement, which was prepared by the attorney, that overstated the actual purchase price of the property by more than $150,000, and that stated that JACKSON had made an earnest payment toward the purchase. In fact, JACKSON had not made a payment. Instead, the attorney had made a payout to JACKSON.
On July 29, 2010, JACKSON pleaded guilty to one count of conspiracy to commit wire fraud.
This case is being investigated by Federal Bureau of Investigation and the Connecticut State Police. The case is being prosecuted by Assistant United States Attorney Christopher W. Schmeisser.

Mark Roth, 55, Indianapolis, was sentenced today to 43 months in federal prison by Circuit Judge David F. Hamilton following Roth’s guilty pleas to one count of wire fraud and one count of money laundering. This sentencing concerned Roth’s role in a multi-million dollar mortgage fraud scheme operated by Robert Penn. Roth was found responsible for 25 fraudulent loans, including the first 11 Windsor Village loans, amounting to more than $5 million.
Today’s sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division, with the assistance of the Federal Bureau of Investigation. Eight other individuals have been charged in the scheme. The remaining three cases are currently set for sentencing before Circuit Judge Hamilton on February 2, 2010. The investigation is continuing as to other individuals who were involved in the mortgage fraud schemes. Previously sentenced in this investigation were:
• Robert Penn – 84 months’ imprisonment;
• Timothy Brown – 37 months’ imprisonment;
• Stephen Scott Brown – 37 months’ imprisonment;
• Jerry Jaquess – 30 months’ imprisonment;
• Tamara Scott – 24 months’ imprisonment.
Mark Roth was involved in the mortgage brokerage business and assisted in brokering numerous loans through Argent Mortgage Company and The MoneyStation Inc. Through his years of experience in the business, Roth had developed relationships with Argent Mortgage Company employees. Roth prepared the Argent mortgage broker application packages for Web Mortgage Company LLC and American Funding Solutions Inc., to assist these companies in being able to broker loans through Argent. Roth also opened and ran the Indianapolis branch office of 1st Start Mortgage. Roth, alone and with the assistance of others, prepared and submitted to the lenders false and fraudulent loan applications along with false supporting documentation for the loans, knowing that the documents were false when he submitted them. On some occasions, Roth also requested other individuals to “front” down payment checks for the investors. Roth received money from the fraudulent loan proceeds. He opened an entity and bank account in the name WJP Roth Investments Inc., and used this bank account to deposit the fraudulent loan proceeds which he received. Roth was also partners with Jaquess in Homevestors LLC, a company involved in the purchase of the first 11 Windsor Village properties, located near Arlington Avenue and 21st Street, on the east side of Indianapolis. These properties were purchased for $50,000.00 each, and then “sold” to straw purchasers for $120,000.00 each. All of the loans involved in the schemes went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties. Many of the duplexes in Windsor Village later re-sold in 2007 and 2008, generally for amounts between $3,500.00 and $15,000.00.
According to Assistant United States Attorney Susan Heckard Dowd, who prosecuted the case for the government, Circuit Judge Hamilton ordered Roth to serve three years on supervised release following his 43 months of incarceration and also ordered him to pay a total of $1,459,025.97 in restitution to Argent Mortgage Company and Homecomings Financial.

ATLANTA—Kelsey Torrey Hull, 38, and Jonathan Alfred Kimpson, 27, both of Lithonia, Georgia, pleaded guilty today in federal district court to a conspiracy to defraud reverse mortgage lenders and the Federal Housing Administration (FHA) insurer of the loans. Hull pleaded guilty to an additional bank fraud charge involving mortgage fraud, and Kimpson pleaded to an additional identity theft charge.

U.S. Attorney Sally Quillian Yates said, “These defendants plead to profiting from the corruption of a FHA-insured program designed to assist seniors with either cash for equity in their home or with funds toward the purchase of a home. These defendants changed real estate records and used other fake documents to place seniors in houses worth only a fraction of the amounts represented, and divert loan proceeds to themselves. With these prosecutions, we have taken a significant step to stop this type of crime.”

Inspector General Kenneth Donahue, U.S. Department of Housing and Urban Development (HUD) said, “HUD’s Home Equity Conversion Mortgage Program was created to help senior citizens find greater financial security through FHA-insured reverse mortgage loans. The HUD Office of Inspector General will aggressively investigate those who would prey on America’s senior citizens through reverse mortgage fraud, and encourages anyone having knowledge of such schemes to contact our HUD Hotline at 1-800-347-3735.”

According to U.S. Attorney Yates, the charges and other information presented in court: Reverse mortgages were designed to assist with the financial security of seniors, ages 62 or older. There are two types of reverse mortgages. In a “refi-reverse,” the senior homeowner receives money from the lender for a portion of the equity in the home they own. In a “purchase money reverse,” the senior receives money from the lender toward the purchase of a new home. Under both types of reverse mortgages, the senior does not have to repay the lender for as long as the senior lives in the home. However, refi-reverse mortgages fund only a percentage of the property value, requiring significant equity to remain in the property, and purchase money reverse mortgages require a significant down payment from the senior borrowers to establish equity in the property. The equity must remain in the home to cover loan principal, interest, insurance, and servicing costs upon FHA sale of the property when no longer occupied by the senior.

Hull and Kimpson took advantage of the system by faking the required seniors’ down payments needed to qualify for the FHA-insured purchase money reverses. The defendants did this through bogus “gift” letters from “relatives” in amounts between $50,000 and $105,000. They also used fake “HUD-1” Settlement Statements purporting to document the sale of the senior’s non-existent assets. All down payments were actually supplied by the defendants, not the senior citizens, to be returned to the defendants upon the reverse loan closings, along with profits substantially in excess of the true sales prices of the properties. The return of funds to the defendants were disguised as either seller proceeds or lien payoffs. All such fraudulently obtained reverse mortgages included inflated appraisals.

Kimpson’s plea to aggravated identity theft relates to his use of the stolen identity of realtors and their password to falsify Georgia Multiple Listing Service (MLS) records to create fake property listings and sales at inflated amounts in support many of the fraudulent appraisals.

Hull also committed refi-reverse fraud by transferring properties into seniors’ names to obtain refi-reverse mortgages at fraudulently inflated amounts. He thereby avoided the down payment requirement for purchase money reverses, and was able to divert loan proceeds to his shell companies, disguised as lien payoffs.

Hull was charged by a criminal information on Feb. 25, 2010. Hull could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on each of the conspiracy and bank fraud counts. Kimpson was indicted on Feb. 24, 2010. Kimpson could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on the conspiracy count, as well as a mandatory consecutive sentence of two years in prison and a fine of up to $250,000 on the aggravated identity theft charge. In determining the actual sentence upon any convictions in these cases, the court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Sentencings for both Hull and Kimpson are scheduled for July 16, 2010, beginning at 2 p.m., before U.S. District Judge Julie E. Carnes.

These mortgage fraud cases are prosecuted federally as 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.

These cases are being investigated by Special Agents of the HUD-Office of Inspector General and the Federal Bureau of Investigation (FBI). Assistance in this case is being provided by the U.S. Department of Treasury Financial Crimes Enforcement Network (FINCEN) and the Georgia Multiple Listing Service.

Assistant U.S. Attorney Gale McKenzie is prosecuting the cases.

For further information please contact Sally Q. Yates, U.S. Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the home page for the U.S. Attorney’s Office for the Northern District of Georgia is www.usdoj.gov/usao/gan.

The United States Attorney for the District of Connecticut today announced that a federal grand jury sitting in Bridgeport has returned a nine-count indictment charging WILLIAM A. TRUDEAU, JR., 47, of Westport, with bank fraud, wire fraud, and mail fraud offenses stemming from his alleged participation in a Fairfield County mortgage fraud scheme. The indictment was returned yesterday, November 18.
The indictment alleges that TRUDEAU, a property developer, was an unnamed principal in both Aspetuck Building & Development and Huntington South Associates, LLC, the latter of which was a shell company that TRUDEAU used to pay for personal expenses and to secure loans fraudulently. From approximately February 2004 to April 2010, it is alleged that TRUDEAU conspired with Joseph Kriz, Heather Bliss, Fred Stevens, Thomas Preston, and others to defraud federally insured financial institutions and mortgage lenders. Through this scheme, it is alleged that TRUDEAU and his co-conspirators submitted false mortgage loan applications to financial institutions to obtain mortgages on various properties in Fairfield County in order to develop and sell the properties for profit, and to pay off debts owed to “hard money” lenders from whom they had previously obtained high interest loans. The mortgage applications, which included false income information and omitted the mortgage applicants’ true indebtedness, caused the financial institutions to issue mortgage loans on properties that TRUDEAU and his co-conspirators would not have otherwise been qualified to purchase, allowing the applicants to qualify for mortgages that far exceeded their ability to repay the loans.
The indictment further alleges that TRUDEAU’s name did not appear on any documentation related to the loans or the properties for which the loans were obtained, and that money was hidden in bank accounts that were not in TRUDEAU’s name, in part to prevent the collection of more than $450,000 in restitution that a court ordered TRUDEAU to pay in July 2003.
Through this scheme, it is alleged that TRUDEAU and his co-conspirators fraudulently obtained more than $3.5 million in mortgage loans.
The indictment charges TRUDEAU with one count of conspiracy commit bank fraud, mail fraud, and wire fraud; two counts of bank fraud; three counts of mail fraud; and three counts of wire fraud. If convicted, TRUDEAU faces a maximum term of imprisonment of 240 years.
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.
Kriz, Bliss, Stevens, and Preston have pled guilty to charges related to their involvement in this scheme. Each awaits sentencing.
This matter is being investigated by the Federal Bureau of Investigation. Citizens with information about this case are encouraged to contact FBI Special Agents McNamara or Bowery at 203-333-3512.
The case is being prosecuted by Assistant United States Attorney Rahul Kale.

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 can report mortgage fraud activity by contacting the Connecticut Mortgage Fraud Task Force at 203-333-3512, or by sending an e-mail 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 Division; 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.

The company had all the trappings of success—its top officials lived lavish lifestyles, kept a fleet of chauffeur-driven cars, and donated generously to charities. And it used slick marketing to sell its “Dream Homes Program,” which promised to pay homeowners’ mortgages in return for an up-front fee that would be invested in profitable business ventures.

But the dream turned into a $70 million nightmare for more than a thousand investors—among the latest victims of mortgage fraud.
FBI Executive Assistant Director Thomas J. Harrington of our Criminal, Cyber, Response, and Services Branch (right) and Assistant Attorney General Lanny A. Breuer of the Department of Justice’s Criminal Division.
FBI Executive Assistant Director Thomas J. Harrington of our Criminal, Cyber, Response,
and Services Branch (right) and Assistant Attorney General Lanny A. Breuer
of the Department of Justice’s Criminal Division.

According to federal grand jury indictments unsealed today, the five people behind Metro Dream Homes and the bogus mortgage payment program were actually running an elaborate deception—one eventually unraveled through the cooperative efforts of federal and state law enforcement agencies.

“The effects of this wide-ranging mortgage fraud scheme are particularly disturbing against the backdrop of today’s economic environment,” said Thomas J. Harrington, Executive Assistant Director of our Criminal, Cyber, Response, and Services Branch.

Here’s how the scam worked:

* Between 2005 and 2007, victims were persuaded into investing at least $50,000 with Metro Dream Homes, either by refinancing their existing homes or buying new homes at inflated prices.
* Investors were told not to worry about high mortgages because Metro Dream Homes would pay their future monthly payments and pay off their mortgages within five to seven years using returns on the homeowner’s original investment. Then the homeowner and Metro Dream Homes would own an equal interest in the home.
* Victims were told that their $50,000—not including an administrative fee of up to $5,000—would be used to fund investments in automated teller machines, flat-screen TV displays that carried commercial advertisements, and Touch-N-Buy electronic kiosks that sold telephone calling cards and other items.
* To make the scam seem more legitimate, the company marketed its program through live presentations at posh hotels in Washington, D.C.; Baltimore; and even Beverly Hills, California.

In the end, it was a classic Ponzi scheme: the proceeds from later investors went to pay the mortgages of earlier investors. The ATMs, flat-screen TVs, and electronic kiosks never generated any meaningful revenue, federal prosecutors contend.

And the bulk of the money? It lined the defendants’ pockets—with $200,000-a-year salaries, luxury cars, and travel to major sporting events like the 2007 Super Bowl.

By the time law enforcement shut down the company, homeowners had already invested about $70 million. When Metro Dream Homes stopped making the mortgage payments, the homeowners were left holding the bag. The defendants, meanwhile, are facing long prison terms for multiple counts of fraud, conspiracy to commit money laundering, and other charges.

At a press conference today at the Department of Justice to announce the indictments, Harrington said that to combat the recent “exponential rise in mortgage fraud investigations,” the FBI has increased the number of agents who investigate mortgage fraud from 120 in 2007 to more 250 today. We participate in 18 mortgage fraud task forces and 47 working groups across the country.

“One of the best tools the FBI has in its arsenal for combating mortgage fraud,” he said, “is its long-standing partnerships with other federal, state, and local law enforcement.”

If you have been the victim of a mortgage fraud scheme or have information about one, call your local FBI office or submit a tip electronically.

A one-count information was filed against Dr. Robert J. Rosenstein, charging him with conspiracy to commit bank fraud, false statements to influence a bank to make a loan, mail fraud, and wire fraud, Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today.
Rosenstein, age 56, resides in the Cleveland area.
Rosenstein is charged as being a “straw buyer” for a co-conspirator, not charged in the information, referred to as “J.C.” The information defines a straw buyer as an individual who, usually for compensation or other benefit, would sign mortgage loan documents to conceal from the lending institution the fact that someone else, usually a person with poor credit, was going to be the de facto owner of the property and that the straw buyer, although he or she signed the mortgage application and note, had no intention of making mortgage payments or living in the mortgaged property as his or her residence.
The information charges that Rosenstein entered into an agreement with J.C, whereby J.C., through his various companies and entities, would make any and all mortgage payments for Rosenstein if he agreed to act as a straw buyer and sign applications, HUD-1 forms and other documents, used to secure mortgage loans using Rosenstein’s credit to purchase properties located in Florida. J.C. also paid Rosenstein $25,000 as an inducement to fill out the paper work and to provide his credit to secure mortgage loans. Rosenstein, and J.C. agreed that J.C. would manage and/or develop the property to enhance its value, pay all expenses, including monthly mortgage loan payments, and, once the property was sold, they would split all profits equally.
The information further charges as part of the conspiracy, that Rosenstein executed false loan applications, HUD-1 forms and other documents for two mortgage loans totaling approximately $2.9 million to purchase properties located in the Panama City, Florida area. The mortgage loans were determined to be false based upon the following reasons: 1) The HUD-1 form indicated that Rosenstein would be responsible for the repayment of the loans by making scheduled, monthly payments to the banks when, in fact, based upon his agreement with J.C., Rosenstein, had no intention at the time he executed these documents to be personally responsible for these loans or to make monthly loan payments as required by the mortgage notes; 2) Rosenstein and J.C. indicated on HUD-1 forms that Rosenstein made down payments of approximately $181,767.00 to First Horizon Bank and approximately $44,787.00 to National City on the purchase of these properties, when, in fact, these down payments were never made; 3) J.C. and Rosenstein falsely inflated bank account balances, assets and income on mortgage loan applications in order to assure Rosenstein’s approval for the loans; 4) The applications indicated that the properties were to be second residences for Rosenstein when, in fact, he never saw or had any plans to live in these properties. Rather, Rosenstein considered these transactions to be an investment and the properties were to be sold within a short period of time and the profits split with J.C., according to the charge.
According to the information, on or about May 2006, J.C. stopped paying the mortgage payments for his straw buyers, and the mortgage loans went into default and foreclosure, resulting in a loss, or charge off, of $811,087.00 for First Horizon Bank and $1,163,148.69 for National City Bank, for a total loss of $1,974,235.69.
The investigation is ongoing.
An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt. If convicted, the defendant’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.
The case is being prosecuted by Assistant U.S. Attorneys Christian H. Stickan, Mark S. Bennett, and Henry F. DeBaggis, following investigation by agents of the IRS-CI, and FBI, Akron Office.

ALEXANDRIA, VA—A federal grand jury today indicted Linda Sadr, 51, of Manassas, Va., for her alleged involvement in a “mortgage elimination” scheme that caused more than $10 million in losses.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement today.
“In today’s housing market, mortgage elimination schemes become very enticing,” said U.S. Attorney MacBride. “Homeowners must be wary of anyone promising to quickly eliminate a mortgage for a fee or predicting guaranteed, unrealistic returns on investments. The indictment alleges that Linda Sadr defrauded more than 150 homeowners of $10 million. We encourage the public to tell law enforcement of similar allegations of fraud.”
“The FBI investigates fraudulent schemes designed to exploit lenders and swindle hard earned money away from homeowners,” said FBI Assistant Director in Charge McJunkin. “In these tough economic times, homeowners must remember that when something sounds too good to be true, it usually is.”
According to the federal indictment, from 2004 through 2008, Sadr is accused of marketing a scheme known as a “Mortgage Elimination Program.” Sadr allegedly falsely represented to potential homeowner clients that lenders were acting illegally with regard to refinanced mortgages and that she could obtain a discharge of newly refinanced loans because of the lenders’ illegal actions. Sadr allegedly proposed that she, acting through her businesses, would represent homeowner clients and challenge the lenders for their purportedly illegal actions, and any monetary settlements obtained from successful challenges against the lenders would be applied against the balances due on the refinanced mortgages, thereby eliminating the mortgages.
In general, those homeowner clients with sufficient equity in their homes who participated in the Mortgage Elimination Program were allegedly required to refinance their mortgages with maximum cash-out refinance loans. Subsequent to settlement, individual homeowner clients were required to pay 10 to 15 percent of the proceeds of the cash-out refinance loan as a fee to Sadr or to one of the entities she controlled. Clients were also required to give Sadr the equivalent of 12 to 18 months of advance mortgage payments to be held in “escrow,” an amount that Sadr allegedly claimed she would use to pay the refinanced mortgages for the homeowner clients until their mortgages were eliminated.
In addition to participation in the Mortgage Elimination Program, Sadr is accused of offering some clients the option of investing equity from their refinance or other monies in exchange for a guaranteed rate of return of 12 to 18 percent. Sadr allegedly guaranteed that the principal on those investments would be refunded at the end of the investment period.
The indictment alleges that Sadr recruited her mortgage elimination services to new clients via word of mouth through satisfied past homeowner clients, who thought their mortgages had been eliminated through monetary settlements received from Mortgage Elimination Program challenges. In reality, the refinanced mortgages were eliminated because Sadr allegedly repaid the refinance lenders in full. In so doing, Sadr allegedly used the “escrowed” mortgage repayment monies she obtained from other unsuspecting homeowner clients without their knowledge or consent.
According to the indictment, none of the more than 150 participants in the program received reconveyances on their homes and none received refunds from Sadr for the fees that were paid to her or the principal on the investments they made through Sadr and her entities. To date, the known homeowner client victim loss from Sadr’s alleged mortgage elimination ponzi scheme and related high-yield investment scheme exceeds $10 million.
The charges in the indictment include mail fraud and wire fraud, both of which carry a maximum penalty of 20 years in prison, and money laundering, which carries a maximum penalty of 10 years in prison.
This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorney Marla B. Tusk is prosecuting the case on behalf of the United States.
The public is reminded that an indictment only contains charges and is not evidence of guilt. 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 Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

TRENTON, NJ—Barry Kantrowitz, 62, of Wayside, N.J., admitted today that he fraudulently concealed $82,100 in cash from a trustee appointed by the United States Bankruptcy Court, U.S. Attorney Paul J. Fishman announced.
Kantrowitz entered his guilty plea, to an Information charging him with one count of fraudulent concealment of assets from a United States Bankruptcy Trustee, before United States District Judge Joel A. Pisano in Trenton federal court.
According to the documents filed in this case and statements made in court:
Kantrowitz admitted that from February 2007 to March 2008, he held and concealed quantities of cash belonging to Solomon Dwek that were part of Dwek’s bankruptcy estate. Kantrowitz met Dwek on three separate occasions to give him cash, intending to conceal the monies from the trustee appointed to preside over Dwek’s bankruptcy proceeding. On March 13, 2007, Kantrowitz hid a plastic bag containing $75,100 in cash behind air conditioning units of Kantrowitz’s business office in Oakhurst, N.J. During two other meetings— held on September 12, 2007, and March 21, 2008, at prearranged locations in Monmouth County, N.J.—Kantrowitz delivered envelopes containing $5,000 and $2,000 in cash, respectively, to Dwek. Dwek, who was cooperating with the federal government at the time, secretly made consensual recordings of his meetings with Kantrowitz.
The charge to which Kantrowitz pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for February 23, 2011.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, with the investigation leading to today’s guilty plea. He also thanked the Monmouth County Prosecutor’s Office, under the direction of Luis A. Valentin, for its assistance in the investigation.
The government is represented by Assistant U.S. Attorney Christopher J. Gramiccioni of the U.S. Attorney’s Office Special Prosecutions Division in Newark.
Defense counsel: Joseph A. Hayden, Esq., Roseland, N.J.

BIRMINGHAM—A 32-year-old Birmingham man pleaded guilty today in federal court to mail fraud charges connected to a mortgage fraud scheme that totaled more than $1 million, announced U.S. Attorney Joyce White Vance in conjunction with FBI and Housing and Urban Development officials.
AL CARSON ROCKETT, JR., was charged in a five-count information filed in U.S. District Court in Birmingham and pleaded guilty today before U.S. District Judge R. David Proctor to all charges. He agreed to forfeit $1,090,046 to the government as proceeds of illegal activity.
The four mail fraud counts involve parcels containing mortgage-application documents sent by a private postal carrier from Birmingham to mortgage companies in June, July and August 2005. The mortgage fraud ring operated between 2004 and 2006, according to court documents. Count Five of the information sought the forfeiture from Rockett.
According to Rockett’s plea agreement, he conducted the mortgage fraud as follows:
Rockett convinced people they could buy houses from him without any down payment or closing costs and without the need for documents to support a loan application. Buyers were told the houses were ready to be used as government-subsidized rental properties, that tenants were available to move in immediately and rent payments would exceed the mortgage payments. In many instances, however, there were no tenants, the buyers couldn’t make the mortgage payments, and the properties quickly fell into foreclosure.
On other loans, Rockett stated on loan documents that buyers were making down payments when, in fact, Rockett was making the payment.
Finally, none of the loan documents disclosed Rockett was paying each buyer between $3,000 and $10,000 as an inducement to buy his properties. The mortgage loan documents involved required that all cash payments between a buyer and seller associated with a real estate transaction be disclosed.
“This case is a clear example of the dangerous fraud that has permeated our real estate markets,” Vance said. “This prosecution should send a clear signal to anyone who has, or might consider falsifying any type of loan documents that it is our goal to investigate every case and bring the perpetrators to justice. This is not just a question of addressing losses to our financial community,” she said. “We have seen the value of our homes plummet and our communities put at risk by individuals who steal, lie and abuse the system. When a person lies on loan documents and then goes into foreclosure, we all suffer.”
HUD Inspector General Kenneth Donohue said Rockett’s case is an example of how his office, working with law enforcement agencies and U.S. Attorneys’ Offices across the country, will pursue individuals who are participating in mortgage fraud schemes, which are eating away at the economic heart of this country. “We will use whatever means necessary—both civil and criminal—to isolate and punish mortgage companies’ leadership and personnel who are corroding the soundness of HUD programs,” Donohue said.
“Mortgage fraud tears at our economy and threatens the American dream,” said FBI Special Agent in Charge Patrick Maley. “As the mortgage fraud problem continues to grow, the people of North Alabama can be assured that the FBI, along with our law enforcement partners, will be there to aggressively investigate and bring to justice those who would work to defraud financial institutions through lies and deceit,” he said.
The maximum sentence for each mail fraud count is 20 years in prison and a $1 million fine.
Special agents of the FBI and HUD’s Office of Inspector General investigated the case. Assistant U.S. Attorney Patrick Carney prosecuted it on behalf of the United States.

LOS ANGELES—A federal grand jury has indicted a Sherman Oaks woman for her role in a $2 million mortgage fraud scheme in which she allegedly filed fraudulent loan applications that in some cases falsely claimed she and her husband earned nearly $50,000 per month.
Monica Elizabeth Frommer, 33, was indicted November 9 on charges of bank fraud, loan fraud, wire fraud, and making unlawful monetary transactions. Frommer surrendered to federal authorities last Tuesday, and, at an arraignment Tuesday afternoon, Frommer pleaded not guilty to the 12 counts in the indictment. Frommer is currently scheduled to go on trial on January 11, but at a court hearing yesterday attorneys discussed delaying the trial until March.
According to the indictment, from mid-2004 through mid-2007, Frommer submitted at least six fraudulent mortgage loan applications to National City Bank and Washington Mutual Bank. On these loan applications, which were “stated income” applications, Frommer allegedly falsely inflated her income, claiming that she and her husband earned as much as $47,500 per month. The indictment also alleges that Frommer caused phony bank records to be submitted to a lender to verify assets that she claimed to possess. As a result of the fraudulent loan applications, the two victim banks funded loans totaling approximately $2 million.
The indictment alleges that Frommer used most of the mortgage loan proceeds to finance residential construction and to repay earlier mortgage loans. Frommer also used proceeds of the fraud for her own personal benefit and to finance vacations for her family.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
If convicted of the dozen charges in the indictment, Frommer would face a statutory maximum sentence of 290 years in federal prison.
The investigation of Frommer was conducted by IRS-Criminal Investigation and the Federal Bureau of Investigation.

JACKSONVILLE, FL—United States Attorney Robert E. O’Neill and James Casey, Special Agent in Charge, Federal Bureau of Investigation, announce the unsealing of a 14-count indictment charging Lydia I. Cladek, of St. Augustine, Florida, with wire and mail fraud and conspiracy to commit wire and mail fraud. Cladek faces a maximum penalty of 20 years in federal prison for each count and a $3.5 million fine. The indictment also notifies Cladek that the United States is seeking the forfeiture of specific assets, including oceanfront property, jewelry, and artwork which are alleged to be traceable to proceeds of the offense. The indictment also notifies the defendant that the United States is seeking a money judgment in the amount of $113,235,968.02, which represents the value of the proceeds of the charged criminal conduct.
According to the indictment, Cladek was the president and sole shareholder of Lydia Cladek, Inc. (LCI), an investment company involved in the purchase of high-interest motor vehicle retail installment contracts. It is alleged that Cladek encouraged investors to loan money to LCI to be used to purchase these high-interest notes with Cladek guaranteeing a return rate of 15 percent to 20 percent on the investment. Cladek would then issue a promissory note secured by the vehicles and the car notes. According to the indictment, Cladek used these funds to support her lifestyle, to acquire property, and to repay other investors to conceal her fraudulent use of the funds.
An indictment is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.
This case was investigated by the Federal Bureau of Investigation. It will be prosecuted by Assistant United States Attorney Jay Taylor, Jacksonville Division.

Former Park Bank Employee Sentenced for Conspiracy to Obstruct Mortgage Fraud Investigation
MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Amy B. Strait was sentenced today by U.S. District Judge William M. Conley to three months in federal prison in a prosecution stemming from a federal investigation of bank fraud and tax fraud. The prison sentence will be followed by a two-year term of supervised release.
Strait, 43, McFarland, Wis., pleaded guilty on September 9, 2010, to conspiracy to obstruct the bank fraud investigation.
Three other individuals have been convicted and sentenced on related charges:
Carlos R. Solis, 33, Morrisonville, Wis., a former real estate agent, was sentenced on October 26, 2010, to a year and a half in federal prison. He pleaded guilty on May 25, 2010, to bank fraud.
Marty G. Mendez, 27, Sun Prairie, Wis., a former tax preparer at Mendez Connection, a Madison area tax preparation business, was sentenced on October 26, 2010, to a year and a day in federal prison. He pleaded guilty on May 17, 2010, to assisting in the filing of a false income tax return.
David Knickmeier, 45, Madison, Wis., a former tax preparer at Mendez Connection, pleaded guilty to assisting in the filing of a false income tax return and was sentenced on September 28, 2010, to one year and a day in federal prison.
A fourth individual has been convicted and is awaiting sentencing: Gail L. Mendez, 45, Sun Prairie, the former owner of Mendez Connection,, pleaded guilty to bank fraud and assisting in the filing of a false tax return. She is scheduled to be sentenced on January 6, 2011, at 1:00 p.m.
The Mortgage Fraud Scheme
The prosecution established the following facts at the guilty pleas of Carlos Solis and Gail Mendez:
During 2006 and 2007 Gail Mendez worked as a tax preparer in the Madison area, doing business as Mendez Connection. Amy Strait was employed as a mortgage loan officer at Park Bank, a federally-insured financial institution. Carlos Solis did business as a real estate agent.
Park Bank had a mortgage loan program that allowed borrowers to apply for a loan using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number. An ITIN is a nine-digit tax processing number issued by the IRS to aliens who are required to have a U. S. taxpayer identification number but are not eligible to obtain a Social Security number. Under Park Bank’s ITIN mortgage program, a borrower applying for an ITIN loan was required to submit to the bank copies of the borrower’s income tax returns for the prior two tax years. Under the program, the bank did not check with the IRS to verify the income stated on a borrower’s submitted federal tax returns.
From February 2006 to October 2007, Gail Mendez, Strait, and Solis engaged in a scheme to defraud Park Bank and to obtain money owned by the bank and under its custody and control. In connection with approximately 50 ITIN loans totaling more than $8 million, Gail Mendez, Strait and Solis caused false tax returns to be fabricated and presented to Park Bank. The returns falsely inflated borrowers’ income and had not been filed with the IRS. The scheme resulted in losses to Park Bank exceeding $400,000.
The Conspiracy to Obstruct the Bank Fraud Investigation
At Amy Strait’s plea hearing, the prosecution established the following facts:
When Park Bank told Amy Strait its discovery of the fraud scheme, the bank directed her not to talk with anyone about the investigation, noting that federal investigators could be involved. Immediately after Strait learned of the investigation, however, she called Solis and told him about it. She told him the bank was looking at tax documents that had been submitted for ITIN loans, and they were not matching what had been reported to the IRS. Strait purchased a prepaid cell phone for the purpose of communicating with Solis about the investigation.
Solis relayed to Mendez what Strait had told him. Mendez later asked for a list from Solis for all the loans that Park Bank might be investigating. Mendez told Solis she needed this list so she could be sure all her files matched the bank’s loan files. Solis, with Strait’s assistance, generated a list of the loans under investigation and faxed it to Gail Mendez on October 24, 2007. Mendez then used the list of names to direct her employees to destroy evidence of the scheme contained in her tax files
The Tax Fraud Scheme
The prosecution established the following facts at the guilty pleas of Gail Mendez, Marty Mendez, and David Knickmeier:
Gail Mendez and her employees, including Marty Mendez and David Knickmeier, willfully aided and assisted taxpayers in filing U.S. Individual Income Tax Returns that falsely and fraudulently claimed dependents and child tax credits to which they were not entitled. The court has found that the tax loss was in excess of $900,000.
In December 2007, Gail Mendez learned that the IRS was investigating the claiming of child tax credits on returns prepared at Mendez Connection. At her direction, employees of Mendez Connection removed from the Mendez Connection files and destroyed any notes referring to the fraudulent child tax credits.
These charges are the result of an investigation conducted by the Federal Bureau of Investigation and Internal Revenue Service Criminal Investigation. The prosecution of these individuals has been handled by First Assistant U.S. Attorney Stephen P. Sinnott.
These prosecutions 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.

BOSTON, MA—An Acushnet man was convicted today in federal court of participating in an elaborate scheme to defraud the lenders of the former Gitto/Global Corporation.
WILLIAM F. DEAKIN, 62, pleaded guilty before U.S. District Judge F. Dennis Saylor to conspiracy and wire fraud. At today’s plea hearing, the prosecutor told the court that had the case proceeded to trial, the evidence would have proven that from1998 through September 2004 the principals of Gitto/Global Corporation, a plastics manufacturer in Lunenburg, were engaged in a complex scheme to defraud the company’s secured lenders by systematically overstating the company’s sales and inventory, thereby inducing the lenders to advance millions of dollars that would not have been advanced had the company accurately reported its assets. In order to support the false claims, numerous Gitto/Global employees spent hours of every business day generating supporting false documentation including invoices, bills of lading, and packing slips.
Judge Saylor scheduled sentencing for February 15, 2011. DEAKIN faces up to 20 years’ imprisonment, to be followed by five years of supervised release and a $250,000 fine. Co-conspirators FRANK MILLER, GARY GITTO and LOUIS PELLEGRINE previously pleaded guilty and will be sentenced in January and February, 2011.
United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation – Boston Field Division; and William Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. It is being prosecuted by Assistant U.S. Attorney Lori J. Holik and Auditor Thomas J. Zappala of Ortiz’s Economic Crimes Unit

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.

Kelsey Torrey Hull, 38, and Jonathan Alfred Kimpson, 27, both of Lithonia, Georgia, pleaded guilty today in federal district court to a conspiracy to defraud reverse mortgage lenders and the Federal Housing Administration (FHA) insurer of the loans. Hull pleaded guilty to an additional bank fraud charge involving mortgage fraud, and Kimpson pleaded to an additional identity theft charge.
U.S. Attorney Sally Quillian Yates said, “These defendants plead to profiting from the corruption of a FHA-insured program designed to assist seniors with either cash for equity in their home or with funds toward the purchase of a home. These defendants changed real estate records and used other fake documents to place seniors in houses worth only a fraction of the amounts represented, and divert loan proceeds to themselves. With these prosecutions, we have taken a significant step to stop this type of crime.”
Inspector General Kenneth Donahue, U.S. Department of Housing and Urban Development (HUD) said, “HUD’s Home Equity Conversion Mortgage Program was created to help senior citizens find greater financial security through FHA-insured reverse mortgage loans. The HUD Office of Inspector General will aggressively investigate those who would prey on America’s senior citizens through reverse mortgage fraud, and encourages anyone having knowledge of such schemes to contact our HUD Hotline at 1-800-347-3735.”
According to U.S. Attorney Yates, the charges and other information presented in court: Reverse mortgages were designed to assist with the financial security of seniors, ages 62 or older. There are two types of reverse mortgages. In a “refi-reverse,” the senior homeowner receives money from the lender for a portion of the equity in the home they own. In a “purchase money reverse,” the senior receives money from the lender toward the purchase of a new home. Under both types of reverse mortgages, the senior does not have to repay the lender for as long as the senior lives in the home. However, refi-reverse mortgages fund only a percentage of the property value, requiring significant equity to remain in the property, and purchase money reverse mortgages require a significant down payment from the senior borrowers to establish equity in the property. The equity must remain in the home to cover loan principal, interest, insurance, and servicing costs upon FHA sale of the property when no longer occupied by the senior.
Hull and Kimpson took advantage of the system by faking the required seniors’ down payments needed to qualify for the FHA-insured purchase money reverses. The defendants did this through bogus “gift” letters from “relatives” in amounts between $50,000 and $105,000. They also used fake “HUD-1” Settlement Statements purporting to document the sale of the senior’s non-existent assets. All down payments were actually supplied by the defendants, not the senior citizens, to be returned to the defendants upon the reverse loan closings, along with profits substantially in excess of the true sales prices of the properties. The return of funds to the defendants were disguised as either seller proceeds or lien payoffs. All such fraudulently obtained reverse mortgages included inflated appraisals.
Kimpson’s plea to aggravated identity theft relates to his use of the stolen identity of realtors and their password to falsify Georgia Multiple Listing Service (MLS) records to create fake property listings and sales at inflated amounts in support many of the fraudulent appraisals.
Hull also committed refi-reverse fraud by transferring properties into seniors’ names to obtain refi-reverse mortgages at fraudulently inflated amounts. He thereby avoided the down payment requirement for purchase money reverses, and was able to divert loan proceeds to his shell companies, disguised as lien payoffs.
Hull was charged by a criminal information on Feb. 25, 2010. Hull could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on each of the conspiracy and bank fraud counts. Kimpson was indicted on Feb. 24, 2010. Kimpson could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on the conspiracy count, as well as a mandatory consecutive sentence of two years in prison and a fine of up to $250,000 on the aggravated identity theft charge. In determining the actual sentence upon any convictions in these cases, the court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
Sentencings for both Hull and Kimpson are scheduled for July 16, 2010, beginning at 2 p.m., before U.S. District Judge Julie E. Carnes.
These mortgage fraud cases are prosecuted federally as 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.
These cases are being investigated by Special Agents of the HUD-Office of Inspector General and the Federal Bureau of Investigation (FBI). Assistance in this case is being provided by the U.S. Department of Treasury Financial Crimes Enforcement Network (FINCEN) and the Georgia Multiple Listing Service.
Assistant U.S. Attorney Gale McKenzie is prosecuting the cases.
For further information please contact Sally Q. Yates, U.S. Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the home page for the U.S. Attorney’s Office for the Northern District of Georgia is www.usdoj.gov/usao/gan.

Thomas Kontogiannis, a New York real estate developer who led a mortgage fraud conspiracy resulting in more than $90 million losses, pleaded guilty to conspiracy to commit bank and wire fraud in federal court in Brooklyn today. Kontogiannis admitted defrauding Washington Mutual Bank (“WAMU”) and DLJ Mortgage Capital, Inc. (“DLJ”), a subsidiary of Credit Suisse, in connection with his development of two tracts of land in Brooklyn and Queens. The proceedings were held before United States District Judge Kiyo A. Matsumoto.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Janice K. Fedarcyk, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, Richard H. Neiman, New York Superintendent of Banks, and Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation.
The indictment alleges that from 2001 to 2003, Kontogiannis purchased and subdivided Loring Estates, located in East New York, Brooklyn, and Edgewater Development, located in College Point, Queens. After the conspirators obtained permits to construct multi-unit housing, Kontogiannis staged sales of the properties financed by mortgage loans. He then directed others to prepare false loan files to create the appearance that the properties were being purchased by creditworthy homeowners, when, in fact, Kontogiannis sold the properties to family members and employees who acted as straw buyers. The mortgages were supported by fraudulent appraisals depicting finished homes when the buildings had yet to be built or had fictional addresses, and the mortgage files contained fraudulent title abstract reports and other documentation designed to indicate that the seller, a Kontogiannis-controlled entity, had clear title to convey and that the lender’s interest was protected by title insurance. The loans were financed by lenders controlled by Kontogiannis, including Interamerican Mortgage Corp., later known as CIP Mortgage Corp. and Coastal Capital Corp. After the loans were closed, Kontogiannis ensured that the mortgages and deeds were not recorded, thereby permitting him to “sell” the same property repeatedly. Kontogiannis eventually sold the loans to WAMU or DLJ.
In an effort to conceal the multiple sales of the same properties, Kontogiannis changed the addresses of properties located in East New York, Brooklyn, to addresses in neighboring Howard Beach, Queens. In addition, he directed others to make monthly payments on the mortgages, ensuring that none of the mortgages became delinquent. The payments ceased in 2007, with approximately $92 million in principal outstanding on the fraudulent mortgages.
Kontogiannis, along with eight other defendants, were indicted on conspiracy and bank and wire fraud charges in June 2009. Four other defendants have pleaded guilty to date.
“The scope of this fraud is staggering,” stated United States Attorney Lynch. “The defendant controlled every aspect of the mortgage lending process, right up to the sale of fraudulent loans into the secondary market.” Ms. Lynch expressed her grateful appreciation to the New York State Banking Department for its assistance.
FBI Assistant Director-in-Charge Fedarcyk stated, “Kontogiannis has added another conviction to his rap sheet by defrauding banks and others in his $92 million mortgage fraud scheme. He thought he had the system figured out and now faces adding even more time to his sentence. This guilty plea is a step towards cleaning up the housing market, and the FBI will continue to vigorously investigate those that perpetrate this type of crime which affects all Americans.”
New York Superintendent of Banks Neiman stated, “This plea of guilty to one of the largest mortgage frauds directed by a single individual was made possible by seamless coordination between federal agencies and the state banking department. This degree of cooperative federalism, with each agency contributing specialized expertise, will restore confidence in the mortgage sector and the greater financial system.”
FDIC Inspector General Rymer stated, “The Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) is pleased to join the United States Attorney’s Office for the Eastern District of New York and our law enforcement colleagues in announcing this guilty plea. The American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that individuals and entities involved in mortgage fraud criminal misconduct will be prosecuted. Bringing these individuals to justice helps maintain the safety and soundness of the nation’s financial institutions.”
Kontogiannis faces up to 30 years’ imprisonment on the conspiracy count to which he pleaded guilty. Kontogiannis also consented to forfeiture of the proceeds of his fraudulent activity, including a criminal forfeiture money judgment and money traceable to four commercial properties he controlled worth at least $50 million.
The government’s case is being prosecuted by Assistant United States Attorneys Jonathan E. Green and Duncan Levin.
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. More information about the Financial Fraud Enforcement Task Force can be found at www.stopfraud.gov.

NEWARK, NJ—Nine criminal complaints unsealed today charged 28 individuals with participating in various mortgage fraud scams that collectively sought to defraud lenders out of more than $5.5 million and involved more than 17 New Jersey properties, U.S. Attorney for the District of New Jersey Paul J. Fishman and FBI Special Agent in Charge Michael B. Ward announced.

The charged defendants include 12 real estate agents, four investors, four mortgage consultants, three fraudulent document makers, two accountants, an appraiser, a bank employee, and a mortgage broker. Twenty-three of the defendants were arrested this morning as a result of a coordinated law enforcement investigation into mortgage fraud in northern New Jersey. Of the remaining defendants, one is in state custody on related charges, one is scheduled to self-surrender, and three remain at large.

The defendants, arrested this morning, appeared before U.S. Magistrate Judge Patty Shwartz at 2:00 p.m. in Newark federal court.

A 29th defendant, a fraudulent document maker involved in several of the charged scams, was previously charged by complaint with conspiracy to commit wire fraud and arrested on March 9, 2010. He has been in federal custody since his arrest.

According to the complaints filed in these cases, the defendants sought to obtain fraudulent mortgages for real estate transactions involving prospective purchasers who were not qualified to obtain the loans they were seeking To do so, the defendants made, obtained and presented to mortgage lenders documents that falsified the purported borrowers’ employment, inflated their income and assets, and provided other fraudulent information. In some cases, those documents included fraudulent W-2 forms; pay stubs; employment verification letters; bank account statements; tax returns; addresses and telephone numbers for borrowers and purported employers; and identification documents such as driver’s licenses and social security cards.

“These cases demonstrate just how pervasive the mortgage fraud problem is in New Jersey,” said U.S. Attorney Fishman. “Mortgage fraud is not limited to people who steal millions at a time. It is more insidious. It is more pernicious. And it is more prevalent. Mortgage fraud is often done at a retail level, and involves many different people playing many different roles. No matter what your role, if you participate in this kind of scheme, you will be held accountable.”

“For decades, home ownership has been the American Dream, a way to establish roots in a community, build personal wealth, and secure a peaceful retirement,” said Special Agent in Charge Ward of the FBI’s Newark field office. “Mortgage fraud places this dream at risk. Today’s arrests do not signify the culmination of a single investigation, but rather serve as notice that law enforcement is aggressively pursuing mortgage fraud schemes in New Jersey. If you have information concerning mortgage fraud in our state, please do not hesitate to contact the FBI at 973-792-3000.”

The 29 defendants, listed on the attached chart by complaint, range in age from 27 to 77 and live in eight of New Jersey’s 21 counties—Essex, Bergen, Union, Hudson, Burlington, Monmouth, Morris and Passaic. Some of the fraudulent schemes alleged in the complaints involve loans issued in connection with the Federal Housing Administration (FHA), which is a division of the U.S. Department of Housing and Urban Development (HUD). The FHA encourages designated lenders to make mortgage loans to qualified borrowers by protecting against loan defaults through a government-backed payment guarantee. Other loans involved in the scheme are what is known as “conventional” mortgage loans, which lenders underwrite and fund using their own funds and credit lines. After funding the conventional mortgage loans, the lenders can either service the loans themselves during the mortgage loan period or sell the loans to institutional investors in the secondary market.

Each of the 28 defendants is charged with one count of conspiring to commit wire fraud affecting a financial institution and one count of conspiring to commit bank fraud. Each count carries a maximum sentence of 30 years in prison and a maximum fine of $1 million. One defendant, Roberta Ferreira is charged in two complaints and faces an additional count each of wire fraud and bank fraud conspiracy.

United States v. Rodrigo Molina, et al., Mag. No. 10-3127 (PS)

This complaint charges four individuals: Rodrigo Molina, a licensed real estate agent; Domingo Fuentes, an investor who owned multiple companies he used to purchase real estate properties; Manuel Salgado, an accountant with a purported tax-filing service; and Vilma Dacruz, a bank employee. The defendants provided a loan officer with false W-2 Forms, tax returns, utilities statements, and bank statements, as well as a fraudulent driver’s license and social security card. Among other things, Molina and Fuentes provided fraudulent employment and wage documents, Salgado provided false tax returns, and Dacruz provided a false letter purportedly issued by her employer, a major bank, with false balance information on an account that did not exist.

United States v. Eugenio Mendes, Mag. No. 10-3128 (PS)

Eugenio Mendes, a licensed real estate agent, obtained fraudulent documents, including W-2s, pay stubs, bank statements, and copies of a driver’s license and social security card, all of which he used in an effort to obtain mortgages to which he was not entitled. Mendes procured these documents from co-conspirator Jairo Nunes, a document maker previously charged in a separate complaint (Mag. No. 10-8033), from whom Mendes had obtained fraudulent documents for approximately five years. One of the purported borrowers whose identity Mendes used to obtain a mortgage loan was an illegal alien. A search of Nunes’ home on March 9, 2010, revealed a thumb drive that contained a folder labeled “DOCUMENTOS EUGENIO,” which contained some of the fraudulent documents that Mendes had provided to obtain mortgage loans.

United States v. Lucilene Guido, Mag. No. 10-3124 (PS)

This complaint charges three individuals: Lucilene Guido, a real estate agent and former loan officer at a northern New Jersey mortgage company; Roberta Ferreira, a licensed real estate agent registered with a Riverside, N.J., realty company; and Genilza Nunes, a licensed real estate agent registered with the same realty company, but working out of a Newark, N.J. office. The defendants obtained false bank statements and identification documents from Jairo Nunes, who produced the documents at their request. Genilza Nunes produced additional fraudulent documents, including W-2s, tax returns, and false pay stubs purportedly from a New Jersey trucking company, and verified a prospective borrower’s employment via telephone. Defendants sent Jairo Nunes detailed instructions regarding changes to the fraudulent bank statements he had created so they could ensure the loan would proceed without a snag. During a search of Genilza Nunes’ office, law enforcement officers found a telephone labeled with the name of the fictitious trucking company, as well as other telephones labeled with the names of other non-existent companies.

United States v. Rogerio Silva, et al., Mag. No. 10-3130 (PS)

Rogerio Silva and Rui Talaia were licensed real estate agents and brokers of record at separate realty companies located in Riverside and Kearny, New Jersey, respectively. These individuals worked with Jairo Nunes to obtain documents that he created at their request, including false employment and income verification and bank account documents. The fraudulent documents, in the name of a purported buyer of real estate, included W-2s, pay stubs, a fraudulent bank verification letter, and bank statements. Relying on these documents, the victim bank transferred approximately $455,534 to New Jersey for the defendants’ benefit. Only one mortgage payment was made on a mortgage now in default. The defendants used additional false documents in an effort to obtain more loans. The search of Jairo Nunes’ home revealed a thumb drive that contained a folder labeled “ROGERIO” and included some of the fraudulent documents that Silva and Talaia had provided in an attempt to get the fraudulent loans.

United States v. Joelma Graca, Mag. No. 10-3129 (PS)

Joelma Graca, a real estate agent in Newark, and John Malheiro, a mortgage loan officer for two different New Jersey mortgage companies, sought mortgage loans via fraudulent bank statements, pay stubs, W-2s, and a loan application. For example, one buyer worked at a paint company, but was not earning enough to qualify for a mortgage loan so they instead claimed he worked at a consulting firm. Per their respective roles in the scheme, Graca identified the prospective borrowers and Malheiro located the properties to be purchased.

United States v. Viviane Bernardim, Mag. No. 10-3126 (PS)

This complaint charges eight individuals: Viviane Bernardim, a mortgage consultant; Theresa Dattalo, a mortgage loan officer, real estate agent and owner of a title company; Matthew DiBenedetto, a licensed appraiser and broker of record for a Newark real estate agency; Genady Macedo, a real estate agent; Sarah Santos, a mortgage consultant; Ioneides Sousa, a real estate investor; Iodete Pereira, who assisted in transactions; and Jorge Toledo, a real estate agent. The defendants obtained false documents from Jairo Nunes and used false W-2s, pay stubs and bank statements, as well as tax returns, to fraudulently obtain mortgage loans. A co-conspirator described one document maker involved in the scheme as a “broker of identities” for more than 30 years, who bought identities from people who were leaving the U.S. and sold them to others. The complaint also alleges that another co-conspirator described some of their current loan transactions as having been “put together with spit.”

United States v. Simone Fernandes, Mag. No. 10-3131 (PS)

Simone Fernandes obtained fraudulent documents created by Jairo Nunes—including pay stubs, W-2s, bank statements, tax returns, and copies of a driver’s license and social security card—and submitted these documents in support of a fraudulent loan application. When the loan officer expressed amazement at the quality and thoroughness of the documents Fernandes and Jairo Nunes had provided, they both told the loan officer that they once had spent an entire day at the computer thinking of all aspects of a real estate transaction for which they could create false documents. The search of Jairo Nunes’ home revealed a thumb drive that contained a folder labeled “SIMONE,” which contained numerous false documents that Jairo Nunes had created for Fernandes. Fraudulent documents were found in the “SIMONE” folder pertaining to at least 14 additional individuals.

United States v. Edivaldo dos Santos, Mag. No. 10-3125 (PS)

This complaint charges six defendants: Edivaldo Dos Santos, a former loan officer holding himself out as a mortgage consultant; Roberta Ferreira (also charged in the U.S. v. Lucilene Guido et al. complaint); Ricardo Muniz, employed in the construction industry; Faye Cargill-Flores, a certified public accountant in Morristown, N.J.; Maria Lourdes Sousa, who worked in the healthcare industry and lived in Paterson, N.J.; and Rosa Damasceno, the owner of a Newark company that provided tax services and driver education in Belleville. Muniz sought to obtain property and cash back at closing, and the co-conspirators provided falsely inflated income information regarding Muniz to help him get the loan. Sousa made false pay stubs and her sister, Damasceno, made falseW-2s and tax returns. The defendants provided the false documents to a loan officer in an effort to obtain a mortgage to which they were not entitled.

United States v. Raquel Berger, Mag. No. 10-3132 (PS)

Raquel Berger, a real estate agent and the broker of record and franchise owner of a realty company in Hillside, N.J., and Cesar DeSouza, who operated an accounting and tax preparation business in Newark, obtained fraudulent documents made by Damasceno (DeSouza’s wife) in support of unqualified borrowers in order to obtain mortgage loans to which they were not entitled. To increase their chance of getting a loan approved, they prepared amended, false tax returns that fraudulently inflated the borrower’s stated earnings.

This case was prosecuted as part of the District of New Jersey’s Mortgage Fraud Task Force (MFTF), which was formally started in 2008, and was among the first such FBI-funded task forces in the country. This case was also brought in coordination with 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.

U.S. Attorney Fishman praised agents of the FBI, under the direction of Special Agent in Charge Ward in Newark, and the Hudson County Prosecutors Office, under the direction of Prosecutor Edward J. De Fazio, for their work leading the investigation of this case. He also credited the other members of the MFTF, including the U.S. Department of Housing and Urban Development Office of Inspector General, the Internal Revenue Service, the U.S. Secret Service, and U.S. Postal Inspection Service for their important contributions to the investigation. Fishman also thanked the Department of Homeland Security’s Customs and Border Protection and U.S. Citizenship and Immigration Services; the U.S. Social Security Administration; and the New Jersey Attorney General’s Office for their assistance.

The cases are being prosecuted by Assistant U.S. Attorneys Mark Coyne, Christine Magdo and Robert Marasco of the U.S. Attorney’s Office Economic Crimes Unit.

The charges and allegations contained in the complaints are merely accusations, and the defendants are considered innocent unless and until proven guilty.

DALLAS—Three Dallas businessmen, Mark Manners, Robert L. Loeb, and Andrew Siebert, who were involved in a massive mortgage fraud scheme that they ran in the area, were sentenced this afternoon by U.S. District Judge Barbara M.G. Lynn, announced James T. Jacks, acting U.S. Attorney for the Northern District of Texas.

Mark Manners was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $1,762,362.71 in restitution.

Robert L. Loeb was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $2,027,841,34 restitution.

Andrew Siebert was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $2,027,841.34 restitution.

Their co-defendant in the scheme, Charles Cooper Burgess, 53, was sentenced in March 2008 to nearly 22 years in prison and ordered to pay more than $3 million in restitution for his role in this mortgage fraud scheme and another scheme involving golf course property in Arkansas. Burgess pled guilty in January 2006 to his involvement in two fraudulent schemes, one involving mortgage fraud and one involving defrauding individuals who invested in golf course property in Arkansas. In November and December 2006, Burgess testified about Manners and Siebert’s extensive role in the mortgage fraud scheme. At the conclusion of that trial, both Manners and Siebert were convicted.

Regarding the mortgage fraud scheme, Burgess admitted that he recruited 20 straw buyers with good credit but limited funds to sign loan and closing documents to purchase homes. As part of a signed “investor management agreement,” Burgess promised to provide the down payment at closing as well as make all mortgage payments. When Burgess’s company needed additional funds for borrower down payments, Siebert agreed to steal bank escrow funds for the borrowers’ down payment. As part of the scheme, Siebert also falsified settlement document on at least 20 loan closings. Siebert only agreed to steal these escrow funds if Burgess agreed to pay Siebert $5000 from each closing as a “kickback payment.” Evidence at trial showed that Siebert stole escrow funds on 20 separate loans and then concealed the theft of these lender funds by falsifying loan closing documents.

Siebert stole lender funds held in escrow and then provided these funds to Manners prior to closing so that Manners could purchase a cashier’s check in the name of the straw buyer. When Siebert received the cashier’s check back from Manners, Siebert falsely certified to the lender on the settlement statement that the down payment came from the borrower. On the settlement statement, Siebert also fraudulently accounted for disbursements to Burgess’ company by falsely listing the expense as a phony lien pay off, or as a “marketing and relocation fee” due to Burgess’ company. Eleven different lenders testified at trial that Siebert falsified the settlement statements to conceal his wrongful and fraudulent release of lender escrow funds. Each lender testified that the loan would never have been funded if the lender had known about the fraudulent use of lender escrow funds.

From December 2002 through March 2004, Siebert stole escrow funds which resulted in the loss of $2,027,841 to 16 different lenders. As a result of Siebert submitting false certifications on settlement statements for each of these 20 loans, Siebert and Manners fraudulently induced the disbursement of loans totaling more than $7 million.

Acting U.S. Attorney Jacks praised the investigative efforts of the Federal Bureau of Investigation and the Federal Deposit Insurance Corporation, Office of Inspector General. The case was prosecuted by Special Assistant U.S. Attorney William M. Martin of the U.S. Department of Justice Anti-Trust Division and Assistant U.S. Attorney David Jarvis.

From industry insiders to straw buyers, nearly 500 people have been arrested in a nationwide mortgage fraud takedown that reflects the coordinated efforts of law enforcement to address the growing problem of crime in the housing industry.

“Mortgage fraud ruins lives, destroys families, and devastates whole communities,” Attorney General Eric Holder said this morning at a press conference to announce the results of “Operation Stolen Dreams.” Launched on March 1, 2010, the multi-agency initiative has led to a total of 485 arrests. More than 330 convictions have been obtained, and nearly $11 million has been recovered. Losses from a variety of fraud schemes are estimated to exceed $2 billion.
The subject identifies a house close to foreclosure. The straw buyer “purchases” the home, but immediately defaults on the mortgage by never making a payment. The subject goes to the lender and arranges a short sale — meaning the lender takes much less than is owed on the house. The lender never knew the short-sale (and resulting loss) were pre-meditated. The subject turns around and sells the house for full value

Operation Stolen Dreams is the government’s largest mortgage fraud takedown to date. But FBI Director Robert S. Mueller cautioned that there is still much work to be done. The Bureau is currently pursuing more than 3,000 mortgage fraud cases, he said, which is almost double the number from the last fiscal year.

“The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” Attorney General Holder said. “We have seen mortgage fraud take on all shapes and sizes—from schemes that ensnared the elderly to fraudsters who targeted immigrant communities.”

A few examples:

* In Miami yesterday, two people were arrested for targeting the Haitian-American community, claiming they would assist them with immigration and housing issues. Instead, they used victims’ personal information to produce false documents to obtain mortgage loans.
* In California, a prominent home builder used straw buyers to sell his houses at inflated prices. The scheme inflated prices on other homes in the area, creating artificially high comparable sales and affecting the overall new-home market.
* And in Detroit yesterday, FBI agents arrested several individuals in a $130 million scheme orchestrated by the local chapter of a motorcycle gang. The conspirators posed as mortgage brokers, appraisers, real estate agents, and title agents and used straw buyers to obtain around 500 mortgages on only 180 properties.

To combat the problem, the Bureau’s National Mortgage Fraud Task Force helps identify mortgage frauds such as loan origination schemes, short sales, property flipping, and equity skimming.
2009 Mortgage Fraud report
2009 Mortgage Fraud Report

In addition, we have 23 mortgage fraud task forces in “hot spots” around the country, from California and Texas to Florida and New York. Our investigators and analysts also participate in 67 working groups nationwide that share intelligence and industry data to identify emerging threats.

“FBI agents and analysts are using intelligence, enhanced surveillance, and undercover operations to identify emerging trends and to find the key players behind large-scale fraud,” Mueller said.

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement and restitution for victims. Federal agencies participating included the Department of Housing and Urban Development, the Treasury Department, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, and the U.S. Secret Service. Many state and local agencies were also involved in the operation.

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

United States Attorney Kenneth J. Gonzales announced that Anthony Moya, 34, and his wife Eunice Moya, 37, both residents of Santa Fe, were arraigned this morning before United States Magistrate Judge Robert Hayes Scott on a federal indictment charging them with bank fraud. The 11-count indictment charges both defendants with eight counts of bank fraud and aiding and abetting bank fraud. The indictment also charges Anthony Moya, the former manager of a branch office of CitiFinancial Inc. in Santa Fe (“CitiFinancial” or “the bank”), with three counts of misapplication by a bank employee.
According to the indictment, between June 2004 and October 2005, Anthony Moya and Eunice Moya devised a scheme to defraud CitiFinancial and obtain the bank’s money through the fraudulent use of nominee borrowers. The indictment alleges that the defendant recruited nominee borrowers to sign loan documents for the benefit of persons who did not qualify for bank loans and representing that the nominee borrowers would not be responsible for repaying the loans. After the loans were approved by CitiFinancial, Anthony Moya and Eunice Moya received substantial portions of the loan proceeds which they spent for their own benefit. Counts 1 through 8 of the indictment allege that Anthony Moya and Eunice Moya unlawfully obtained loan proceeds totaling $176,788.99 from the nominee borrowers by facilitating the processing of fraudulent loan applications. Counts 9, 10, and 11 charge Anthony Moya, in his capacity as an official of CitiFinancial, with wilfully misappropriating bank funds in the aggregate amount of $269,721.90.
If convicted of any one of the bank fraud charges, Anthony Moya and Eunice Moya each face up to 30 years’ imprisonment, a maximum $1,000,000 fine and up to five years’ supervised release. If convicted of any one of the misapplication charges, Anthony Moya faces up to 30 years’ imprisonment, a maximum $1,000,000 fine, and up to five years’ supervised release.
The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Jonathon M. Gerson.

OKLAHOMA CITY—Today BURT L. HALL, 50, of Maysville, Oklahoma, pled guilty to defrauding banks through a check kiting scheme, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma. Mr. Hall has been the president of Steve Hall Oil Company for the last 10 years.
On October 14, 2010, the United States Attorney’s Office filed a one-count Information charging Mr. Hall with defrauding American Exchange Bank and Legacy Bank, both of which are insured by the Federal Deposit Insurance Corporation. Mr. Hall controlled an account of Steve Hall Oil Company at American Exchange Bank in Lindsay, Oklahoma, and an account of B&D Cattle Company at Legacy Bank in Newcastle, Oklahoma. According to the Information, from approximately the beginning of 2006 until February 2, 2009, he wrote checks between these accounts when he knew that the accounts did not have sufficient funds to cover the checks, a practice known as “check kiting.” The check kite artificially inflated the balances in the accounts and allowed Mr. Hall to use the banks’ money without their authorization.
Today, Mr. Hall pled guilty to the Information pursuant to a plea agreement. He admitted that beginning in 2006, he was writing insufficient checks between accounts on a daily basis. He also admitted that the check kite involved an account at Pauls Valley National Bank, which was able to prevent its own losses after the fraud came to light.
At sentencing, Mr. Hall faces a maximum potential penalty of 30 years in prison, a fine of up to $1,000,000, and restitution to the victim banks. As part of his plea agreement, he has agreed to pay restitution to American Exchange Bank and Legacy Bank in the total amount of $2,818,113.48.
The case is the result of an investigation conducted by the United States Secret Service and the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Scott E. Williams.