Westport Man Indicted for Alleged Role in Fairfield County Mortgage Fraud Scheme

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 following three Maryland defendants were indicted today for mail and wire fraud arising from a scheme to defraud lenders and a title insurance company of over $4 million:

* Stephen J. Troese, Sr., age 71, of Davidsonville;
* James Kevin Hughes, age 52, of Crownsville; and
* Brenda Lukenich, age 60, of Hughesville.

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 12-count indictment, Troese was an attorney and owned or controlled title companies that he created in the 1980s and 1990s that did business in the Baltimore, Annapolis, and Washington, D.C. metropolitan areas, including Troese Title Services, Inc. (Troese Title), located in Camp Springs, Maryland; Troese/Hughes Title Services, Inc. (Troese/Hughes), located in Greenbelt, Maryland; and Troese/Prestige Title Services, Inc. (Troese/Prestige), located in Ellicott City, Maryland. Troese entered into agency agreements with Chicago Title Company which authorized the Troese title companies to sell its title insurance policies to lenders and buyers. While the title insurance policies obligated Chicago Title to pay losses resulting from undiscovered defects in the title of the property, the agency agreements expressly provided that Troese and the Troese title companies were responsible to Chicago Title for any losses associated with fraud, dishonesty, or theft.

The indictment alleges that beginning at least as far back as 2004, a substantial shortfall began to develop in an escrow account maintained by Troese Title and Troese/Hughes for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies. This shortfall is alleged to have been partly the result of mistakes made during the closing process on several transactions that required costly pay-outs to resolve, and partly from several large and long-undetected thefts by individual employees, although these factors did not account for all of the deficit. In the spring of 2005, Lukenich, the escrow accountant for the title companies, advised others at Troese Title and Troese/Hughes that the shortfall totaled at least $2 million. The shortfalls were further aggravated in 2006 through 2008 as the real estate and refinancing boom that had started in approximately 2002 first cooled, then collapsed.

Because of these shortfalls, both Troese Title and Troese Hughes allegedly delayed making the required payoffs to the original lenders after each closing in order to generate a “float,” whereby funds coming into the escrow accounts from later transactions could be used to make the payments due on transactions that had already closed. Initially, funds were held for periods of three to five days, but this “hold” allegedly later grew to 10 days and even longer. By mid-2008, payments were being held for three weeks or more.

The indictment further alleges that instead of disclosing the shortfalls to Chicago Title, the defendants concealed the shortfalls. In an effort to generate cash to cover at least part of the shortfall, Troese and Hughes refinanced their homes, using Troese/Hughes as their title company. Instead of using the money from the new lenders to pay off their old mortgages as required, they allegedly used most of the money to attempt to cover the shortfall, which continued to grow over time. Although they caused the HUD-1 settlement statements to state that funds from the new lenders were used to pay off the outstanding debts, Troese allegedly caused the funds from the new lender to be used to make mortgage pay-offs on other closings previously handled by Troese Title. Because the original lenders were never paid off, the new lenders on the defendants’ residences did not have a first lien on the homes to secure the repayment of funds that the new lenders had advanced. To keep the original lenders from realizing that the homes had been refinanced, Troese and Hughes allegedly continued to make the monthly mortgage payments to the original lenders. Using this same scheme, Troese also allegedly caused a Troese employee, a manager, and a president of Troese Title to refinance their three homes.

Although Chicago Title remained unaware of the scheme to cover up the shortfalls, the indictment alleges that Troese Title and Troese/Hughes employees failed on a number of occasions to uncover title defects and also had made other mistakes that resulted in numerous claims being filed against Chicago Title. In the spring of 2008, Chicago Title determined that its relationships with Troese Title and Troese/Hughes were no longer profitable, and notified Troese that as of May 31, 2008, it was terminating its relationship with Troese individually, and with Troese Title and Troese/Hughes. Chicago Title was, however, willing to continue its relationship with certain other Troese-related title companies, including Troese/Prestige, whose insurance policies had not generated a similarly high volume of claims. Accordingly, a new agency agreement was concluded that covered just those other entities.

According to the indictment, by May of 2008, Troese Title and Troese/Hughes were at least $1.5 million behind in paying off the outstanding mortgages on transactions they had already closed. The defendants knew that if these companies were unable to conduct settlements and stopped receiving additional infusions of loan proceeds to replenish the shortfall, they would quickly find it impossible to make the remaining unpaid mortgage pay-offs still owed by each company, and the entire scheme would be revealed. Troese allegedly decided that Troese Title and Troese/Hughes would continue to operate from their old offices in Camp Springs and Greenbelt, but that without informing Chicago Title, they would operate under the Troese/Prestige name and would issue title insurance policies under the new agreement between Chicago Title and Troese/Prestige. Troese allegedly hid the fact that Troese Title and Troese/Hughes had started conducting operations under the Troese/Prestige name not only from Chicago Title, but also from the manager and employees of the original Troese/Prestige office in Ellicott City. Chicago Title believed that the title insurance policies that were still being sold by the former Troese Title and Troese/Hughes offices were actually originating from the Troese/Prestige office in Ellicott City.

The indictment alleges that the defendants agreed that the initial funds generated by the secret continuation of Troese Title and Troese/Hughes under the Troese/Prestige name would be used to cover the outstanding mortgage pay-offs still owed by each company. From approximately early June until the end of the first week of August 2008, following each closing conducted under the name Troese/Prestige, an employee of Troese Title or Troese/Hughes would send a copy of the HUD-1 by Federal Express to the new lender, falsely representing that the proceeds of the loan had been disbursed to the original lender.

As a result of the scheme, Chicago Title allegedly suffered a loss of over $4 million.

The defendants face a maximum sentence of 20 years in prison on each of the eight counts for mail fraud and on each of the four counts for wire fraud. Troese and Hughes are scheduled to have their initial appearances on January 28, 2011, and Lukenich is scheduled for her initial appearance on February 4, 2011, all in federal court in Baltimore.

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.

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

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

United States Attorney Rod J. Rosenstein commended the FBI for its investigative work, and thanked Assistant U.S. Attorneys Tonya Kelly Kowitz and Jefferson M. Gray, who are prosecuting the case.

CHICAGO—A Downers Grove man who purported to offer financial investment services to the public was sentenced today to 200 months (16 years, eight months) in prison for engaging in a two-year Ponzi scheme that caused more than 250 victims to lose approximately $6.4 million when it collapsed in June 2009. The defendant, David J. Hernandez, fraudulently induced more than 300 victims to invest approximately $13 million through his business, NextStep Financial Services, Inc., and several related companies. Hernandez, 50, pled guilty to mail fraud in January 2010.
U.S. District Judge Robert Gettleman told Hernandez that he “is nothing but a con man and a thief,” who obstructed justice and has engaged in a “long-pattern of deceit,” when he imposed the sentence in federal court. Judge Gettleman also ordered Hernandez to pay restitution of $6.4 million, and a preliminary forfeiture order was entered in which Hernandez agreed to relinquish the same amount, as well as a 2009 Audi and a 2007 Mercedes Benz ML350, and his interest in his suburban home. The judge was informed, however, that Hernandez has no assets and the victims will likely never be repaid.
The sentence was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. Mr. Fitzgerald and Mr. Grant thanked the Downers Grove and Normal, Ill., police departments, as well as the Securities and Exchange Commission, which has a civil enforcement case pending against Hernandez.
Hernandez was charged in June 2009 shortly after FBI agents executed a search warrant at NextStep’s offices on the 22nd floor at 225 West Washington Street. Hernandez fled briefly but was located later that month in Normal, Ill.
Between July 2007 and June 2009, Hernandez defrauded prospective investors and investors in a NextStep Financial Services product described as a “Guaranteed Investment Contract.” He made false representations and promises regarding the risk of investing with NextStep, the manner in which the victims’ funds would be used, the returns that NextStep generated, and his background.
Hernandez falsely promised investors monthly returns of 10 to 16 percent, with no risk of loss to their principal, through investing their funds in Check ‘n Go stores, which offered short-term “payday advance” loans, and which Hernandez claimed were owned or financed by NextStep. In fact, Hernandez knew that no NextStep investor funds were used to purchase or finance the operation of Check ‘n Go stores.
Hernandez also fraudulently represented to investors that their principal was protected through insurance that NextStep obtained from various insurance companies, knowing that victims’ investments were not insured in any manner. And, knowing that victims’ funds were not earning any interest whatsoever, Hernandez converted the investors’ funds to his own benefit and used their money to make Ponzi-style “interest” payments to other NextStep investors.
Hernandez also lied to investors about his background and experience, including falsely representing that he had a law degree and a master’s degree in business administration, and that he had 26 years of experience in the financial industry, while failing to disclose pertinent material information about his personal background, including a previous federal investment fraud conviction.
The government is being represented by Assistant United States Attorneys Brian Hayes and Michael Sterling.

A former Chicago hedge fund manager was taken into federal custody today after he turned himself in for allegedly engaging in an investment fraud scheme in which he swindled more than $3.5 million from approximately 48 victims who invested in funds he purported to operate. The defendant, James Brandolino, was charged with mail fraud in a criminal complaint filed in U.S. District Court, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
Brandolino, 42, of Joliet and formerly of Chicago, obtained about $4.7 million from 48 high net worth investors since 2003 for purported managed futures trading accounts and a commodity pool investment. He provided about $1.1 million in investor redemptions and allegedly lost roughly half of the total invested funds through trading and misused most of the remaining funds for his own benefit. Most of the misappropriated funds were spent, with his only remaining assets consisting of a luxury automobile, a watch and an interest in an unbuilt condominium in Greece on which he put down 80,000 Euros, or more than $107,000.
Brandolino appeared this afternoon before U.S. Magistrate Judge Michael Mason and asked to remain in federal custody.
According to the charges, Brandolino has held various National Futures Association registrations in the commodities brokerage business, with exchange floor trading privileges at the Chicago Board of Trade, now part of the CME Group. He has also been a principal of several commodities trading businesses, including Brandolino Investment Group, Lloyd Lewis Capital, Inc., Falcon Trading Group, Inc., and Falcon Capital Partners LLC.
Since 2003, Brandolino allegedly told investors that their funds, minus a commission, would be used to trade futures contracts, and always told them that the trading was profitable, even though often it was not. Despite trading losses and misusing the funds, as recently as October 2010, he falsely represented in a statement to all investors that their total equity was approximately $7.5 million, the complaint alleges.
Between 2003 and 2007, Brandolino allegedly accepted approximately $1.5 million from roughly 20 investors and routinely generated false statements showing steady returns even though by mid-2007 he had lost most of the money through trading and misused most of the remaining funds for himself. In mid-2007, he started a commodity pool known as Falcon Stock Index LP, without disclosing that he had previously defrauded investors. Until this fund closed in July 2008, Brandolino allegedly traded equity index futures and earned actual net returns of about 15.5 percent, but he did not tell any of his investors that he had stopped trading in mid-2008 and failed to return their money, according to the charges.
The government is being represented by Assistant U.S. Attorney Samuel B. Cole.
The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which 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. For more information on the task force, visit: www.StopFraud.gov.
Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, however, the court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.
A complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Manhattan U.S. Attorney Charges Lawyer with Multi-Million-Dollar Mortgage Fraud, Money Laundering and Obstruction of Justice

PREET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment yesterday charging LOUIS CHERICO, a lawyer who practiced in New York City and Westchester County, with participating in a wide-ranging scheme to commit mortgage fraud, obstruction of justice, and money laundering.

According to the Indictment filed in Manhattan federal court:

From July through December of 2002, CHERICO participated in a fraudulent real estate investment scheme which had, as its primary objective, the purchase of multimilliondollar residential properties in various communities in Westchester County, New York, including Purchase, Eastchester, and Rye, with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were equal to or in excess of one hundred percent of a property’s actual sale price, so that the defendant and his coconspirators did not have to put any of their own money at risk in the transaction.

CHERICO served as the attorney for various coconspirators in negotiating and closing the fraudulent purchases that were part of the scheme. CHERICO and his co-conspirators submitted to numerous federally-insured banks various documents, including loan applications, contracts of sale, deeds, real estate transfer documents, and title reports. Those documents contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home, as well as the borrower’s intent to reside in the property as a primary residence, when, in fact, the properties were typically purchased for investment purposes. As a result of the scheme to defraud, CHERICO and his co-conspirators obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance.

The Indictment also charges CHERICO with laundering the illegal proceeds obtained from the sale of one of the properties used in the mortgage fraud scheme by transferring the proceeds from a bank account controlled by CHERICO to an account that was controlled by one of his co-conspirators, DOMINICK DeVITO. The transaction was designed to conceal and disguise the nature, location, source, ownership, and control of the illegal proceeds.

The Indictment further charges CHERICO with obstruction of justice, and conspiracy to obstruct justice, in connection with the 2003 sentencing of DOMINICK DeVITO, following DeVITO’s conviction in United States v. Pasquale Parello, et al.,(01 Cr. 1120) in United States District Court for the Southern District of New York on charges of racketeering and mortgage fraud. Specifically, CHERICO assisted DeVITO in concealing profits that DeVITO earned from the sale of a property located in Purchase, New York, and in submitting an affidavit containing false and misleading information about the sale to the United States Probation Office.

CHERICO, 69, of Eastchester, New York, was arrested this morning and was presented and arraigned this afernoon in Manhattan federal court. The case has been assigned to United States District Judge COLLEEN McMAHON.

If convicted, CHERICO faces a maximum sentence of 30 years in prison on each of the six counts of mortgage fraud, 20 years in prison on the money laundering count, 10 years in prison on the obstruction count, five years in prison on the conspiracy to obstruct justice, and a fine of the greater of $1,000,000, or twice the gross gain or loss resulting from the crime.

Mr. BHARARA praised the work of the FBI.

This case is being prosecuted by the Office’s Organized Crime Unit. Assistant United States Attorney JONATHAN B. NEW is in charge of the prosecution.

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

CHICAGO—A Downers Grove man who purported to offer financial investment services to the public was sentenced today to 200 months (16 years, eight months) in prison for engaging in a two-year Ponzi scheme that caused more than 250 victims to lose approximately $6.4 million when it collapsed in June 2009. The defendant, David J. Hernandez, fraudulently induced more than 300 victims to invest approximately $13 million through his business, NextStep Financial Services, Inc., and several related companies. Hernandez, 50, pled guilty to mail fraud in January 2010.
U.S. District Judge Robert Gettleman told Hernandez that he “is nothing but a con man and a thief,” who obstructed justice and has engaged in a “long-pattern of deceit,” when he imposed the sentence in federal court. Judge Gettleman also ordered Hernandez to pay restitution of $6.4 million, and a preliminary forfeiture order was entered in which Hernandez agreed to relinquish the same amount, as well as a 2009 Audi and a 2007 Mercedes Benz ML350, and his interest in his suburban home. The judge was informed, however, that Hernandez has no assets and the victims will likely never be repaid.
The sentence was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. Mr. Fitzgerald and Mr. Grant thanked the Downers Grove and Normal, Ill., police departments, as well as the Securities and Exchange Commission, which has a civil enforcement case pending against Hernandez.
Hernandez was charged in June 2009 shortly after FBI agents executed a search warrant at NextStep’s offices on the 22nd floor at 225 West Washington Street. Hernandez fled briefly but was located later that month in Normal, Ill.
Between July 2007 and June 2009, Hernandez defrauded prospective investors and investors in a NextStep Financial Services product described as a “Guaranteed Investment Contract.” He made false representations and promises regarding the risk of investing with NextStep, the manner in which the victims’ funds would be used, the returns that NextStep generated, and his background.
Hernandez falsely promised investors monthly returns of 10 to 16 percent, with no risk of loss to their principal, through investing their funds in Check ‘n Go stores, which offered short-term “payday advance” loans, and which Hernandez claimed were owned or financed by NextStep. In fact, Hernandez knew that no NextStep investor funds were used to purchase or finance the operation of Check ‘n Go stores.
Hernandez also fraudulently represented to investors that their principal was protected through insurance that NextStep obtained from various insurance companies, knowing that victims’ investments were not insured in any manner. And, knowing that victims’ funds were not earning any interest whatsoever, Hernandez converted the investors’ funds to his own benefit and used their money to make Ponzi-style “interest” payments to other NextStep investors.
Hernandez also lied to investors about his background and experience, including falsely representing that he had a law degree and a master’s degree in business administration, and that he had 26 years of experience in the financial industry, while failing to disclose pertinent material information about his personal background, including a previous federal investment fraud conviction.
The government is being represented by Assistant United States Attorneys Brian Hayes and Michael Sterling.

Six defendants were indicted today on federal charges alleging that they participated in a $15 million mortgage fraud scheme involving more than 40 residential properties located in Chicago and south suburbs, federal law enforcement officials announced today. The defendants include two licensed realtors and a licensed loan officer who bought and sold homes, recruited others to act as residential purchasers, and allegedly caused various financial institutions to lose approximately $4.5 million on mortgage loans that were not repaid by the borrowers or fully recovered through subsequent foreclosure sales.
The lead defendant, Wanda Rivera-Burton, a licensed realtor, was employed as a loan originator and also owned a real estate company, Options-R-Us Realty, as well as co-owned B&W Investments and Property management, Inc., with co-defendant and loan officer Brenda Tibbs. Another defendant, Lynette Johnson, was a licensed realtor employed by Options-R-Us Realty and owned World Investment and Management.
River-Burton, 39, of Chicago, was charged with seven counts of bank fraud, two counts of wire fraud, and one count of mail fraud in a 10-count indictment that was returned today by a federal grand jury. Tibbs, 55, of Tinley Park, was charged with two counts of bank fraud, and Johnson, 55, of Chicago, was charged with three counts of bank fraud and one count each of wire and mail fraud. Also indicted on one count of bank fraud each were Viktor Blanks, 51, of Oak Lawn, Dina Dunn, 48, of Chicago; and Nathaniel Maxwell, 34, of Chicago. All six defendants will be ordered to appear for arraignment in U.S. District Court.
The indictment also seeks forfeiture of $4.5 million in alleged fraud proceeds.
The scheme allegedly ran between October 2004 and early 2007, said Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, who announced the charges with Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The investigation is continuing, they said.
According to the indictment, Rivera-Burton, Tibbs, Johnson, Blanks, Dunn, and others, including an attorney, purchased homes or caused them to be purchased from new home builders and other sellers, either individually or through nominees at inflated prices. The home builders and other sellers agreed to pay Rivera-Burton and Tibbs finders fees and commissions on the sale of properties, knowing that a portion of those funds were paid to nominees to complete the purchases of newly-constructed residences. Some of the homes were located in south suburban Country Club Hills, Crete, and Manteno.
Rivera-Burton, Tibbs, Johnson, and others allegedly recruited nominees to buy homes with promises that they would not have to put any money down, would receive cash back at closing, would not have to make any mortgage payments, their names would be removed from the title after a year and that the defendants would rent the residences. Rivera-Burton, Tibbs, the unnamed attorney, and others prepared and caused to be prepared fraudulent mortgage loan application packages on behalf of the nominees, containing false information about the borrowers’ employment, income, assets, liabilities, and intention to occupy the premises as a primary residence, the indictment alleges. They also failed to disclose that the nominees had purchased multiple residences and obtained mortgages from other lenders in a short span of time, it adds.
Rivera-Burton and Tibbs paid nominee purchasers, including Blanks, Dunn, and Maxwell, using the proceeds from the real estate transactions. All six defendants and others allegedly used the loan proceeds to enrich themselves and to buy and sell additional residences. Rivera-Burton, Tibbs, and others who controlled the residences without making mortgage payments, allegedly caused the loans obtained by the nominees to go into default. After the defendants allegedly fraudulently obtained approximately $15 million in mortgage loans, various lenders lost approximately $4.5 million when the homes were foreclosed and resold for amounts less than the outstanding mortgage balances.
The government is being represented by Assistant U.S. Attorneys Daniel May.
Each count of bank fraud, or mail or wire fraud affecting a financial institution, carries a maximum penalty of 30 years in prison and a $1 million fine and restitution is mandatory. The court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, however, the court must determine a reasonable sentence to impose under the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

ROBERT ERNEST BRANDT, 42, a former Kirkland attorney and escrow officer, was convicted in U.S. District Court in Seattle yesterday of conspiracy and four counts of wire fraud. The jury deliberated approximately one day following an eight-day trial. When sentenced by U.S. District Judge Richard A. Jones on June 25, 2010, BRANDT faces up to 20 years in prison and a $250,000 fine.
The federal case was indicted in June of 2008, as part of Operation Malicious Mortgage, and the overall investigation was conducted jointly with the Washington State Department of Financial Institutions, the King County Prosecuting Attorney’s Office, and the Kirkland Police Department.
According to records in the case and testimony at trial, over a dozen people, including BRANDT, were linked to an extensive mortgage fraud scheme operating in 2004 and 2005. Those who have already pleaded guilty in the scheme include a former bank employee, mortgage brokers, as well as the owner of shell companies involved in “flipping” dozens of properties as part of the fraud.
Ten members of the scheme were charged, six in federal and four in state court. All of the charged defendants pleaded guilty except for BRANDT. A number of the charged co-conspirators testified at trial. These included William Anderson, 49, of Bellevue, who worked at the same escrow company as BRANDT and operated some of the shell companies involved in the purchases. Anderson admitted conspiring with BRANDT and Mustafa “Marc” Khosraw, 48, a real estate agent and mortgage broker; Kristyn Jupiter Moss, 40, a branch manager for Viking Bank; Zachary Joseph Namie, 32, a loan officer with a mortgage company; and Patrick Williams, (prosecuted in state court) who recruited straw buyers, found properties, and provided false employment verifications to the lenders.
The conspirators would identify houses and would use shell companies or third parties to purchase the homes. At the same time they recruited “straw buyers” who would enter into a purchase agreement to buy the same home from the conspirators at an inflated price (a “flip”). The conspirators assisted the straw buyers with phony paperwork for the home loans, making it appear that they were qualified for the mortgage loans and planned to occupy the houses. Members of the conspiracy allegedly falsified numerous documents including appraisals, verifications of deposits, employment verification and closing documents. In fact, the conspirators simply split the proceeds from the fraudulent mortgages, and the straw buyers defaulted on the loans after pocketing as much as $20,000 for their fee. The homes were foreclosed and financial institutions and mortgage lenders suffered substantial losses, estimated to exceed $7 million dollars.
For his part, BRANDT ran a company called “Escrow Authority,” that closed all of the sales of the flipped properties. He permitted other members of the scheme to use money out of his lawyer’s trust account to acquire properties. The same properties were then quickly resold to straw buyers for significantly higher prices, and fraudulent loans were obtained to finance the fictitious resales. BRANDT also helped create shell companies used as part of the scheme, and signed off on fraudulent settlement statements (HUD forms) provided to lenders that failed to disclose the fraudulent nature of the transactions. BRANDT was disbarred in 2006, after the Washington State Bar Association concluded he had allowed the improper use of his client trust account in the mortgage fraud scheme, and had improperly engaged in transactions in which he had a conflict of interest.
In asking the jury to find BRANDT guilty, Assistant United States Attorney Vince Lombardi urged jurors to do two things: “follow the money;” and evaluate the lies BRANDT told under oath to try to cover up his role in the scheme.
The case was investigated by the FBI, the King County Prosecuting Attorney’s Office, the Washington State Department of Financial Institutions (DFI), and the Kirkland Police Department.
The case is being prosecuted by Assistant United States Attorneys Vincent T. Lombardi and Nicholas W. Brown.
For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110. For more information on Operation Malicious Mortgage, please review the Department of Justice Website at http://www.usdoj.gov.

Deputy Attorney General Mark Filip and FBI Director Robert Mueller announced the results of “Operation Malicious Mortgage,” a massive multiagency takedown of mortgage fraud schemes involving more than 400 defendants nationwide who have been charged over the past three and a half months.
The operation focused primarily on three types of mortgage fraud—lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes. “To persons who are involved in such schemes, we will find you, you will be investigated, and you will be prosecuted,” said Mueller. “To those who would contemplate misleading, engaging in such schemes, you will spend time in jail.”
Among the 400-plus subjects of Operation Malicious Mortgage, there have been 173 convictions and 81 sentencings so far for crimes that have accounted for more than $1 billion in estimated losses. Forty-six of our 56 field offices around the country took part in the operation, which has secured more than $60 million in assets.
During its investigative phase, we worked closely with our partner agencies—including the Postal Inspection Service, Internal Revenue Service, Immigration and Customs Enforcement, Secret Service, U.S. Trustee Program, and the Inspector General Offices of the Department of Housing and Urban Development, Department of Veterans Affairs, and Federal Deposit Insurance Corporation.
The FBI’s mortgage fraud caseload has doubled in the past three years to more than 1,400 pending cases. To address this steady growth, Mueller noted that every FBI field office focuses on this criminal priority. The Bureau also takes part in 42 mortgage fraud task forces and working groups. And we continue our joint efforts with federal, state, and local agencies.
“Our objective, as always,” said Mueller, ”is to protect the consumer and stabilize our economic markets.”
Among the Bureau’s mortgage fraud cases are 19 sub-prime-related corporate fraud investigations. Most of these corporate fraud investigations, said Mueller, deal with accounting fraud, with insider trading, and with criminal intent, the failure to disclose the proper valuations of the securitized loans and derivatives.
Deputy Attorney General Filip also said that the Justice Departments remains committed to investigating and prosecuting cases of mortgage-related securities fraud, noting today’s announcement of an indictment against two senior managers of failed Bear Stearns hedge funds.

SACRAMENTO—United States Attorney Benjamin B. Wagner announced today that Ralondria Stafford, 36, and Necole Ward, 31, both formerly of Vallejo, pleaded guilty today before United States District Judge Morrison C. England, Jr., to Bank Fraud.
According to court documents, from 2004 through 2006, Stafford and Ward, who are sisters, operated RN Realty, a real estate office located in Vallejo, California, from which they carried out a scheme to commit mortgage fraud by using straw buyers to purchase properties at inflated prices. The straw buyers were approached and offered $5,000 for the use of their names, credit histories, and financial information. The defendants represented to the straw buyers that the purchases would be in name only and that the properties would be repurchased by Stafford and Ward from the straw buyers in 6 to 12 months. With one of the straw buyers, the defendants signed a document called the “The $5,000 Deal,” with the terms of the straw buyer agreement.
In August 2005, Stafford and Ward sold a property in Vallejo, owned by Stafford’s husband to straw buyer “J.G.” “J.G.” received a loan based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Attached to the application were falsified Internal Revenue Service W-2 forms and a lease agreement.
As a result of these false statements, a mortgage company funded a $475,000 loan to the straw buyer for the purchase of the property. Neither Stafford or Ward ever repurchased the property from the straw buyer. Public records indicate that one year after the sale, in August 2006, the property was foreclosed upon and resold for approximately $400,000.
In April 2006, Stafford and Ward sold Ward’s house in Vallejo to straw buyer “C.S.” A mortgage company funded a $1,000,000 loan to the straw buyer for the purchase of the property based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Among the false representations on the application were the fact that the straw buyer had a monthly salary of $6,000 and earned $13,000 in rental income; neither of these statements were true.
On April 17, 2006, a title company wired $97,279.00 to Ward. This money represented
Ward’s equity in the property and her profit from the sale. Ward directed that this money be deposited into accounts controlled by Stafford and Ward and that it be disbursed to pay Ward’s creditors.
Neither Stafford or Ward repurchased the property from the straw buyer. Public records indicate that eight months after the sale to the straw buyer, the property was sold in a foreclosure sale for approximately $800,000.
The defendants are scheduled to be sentenced by Judge England on August 26, 2010, at
9:00 a.m. The maximum statutory penalty for Bank Fraud is 30 years’ imprisonment, a $1,000,000, a term of supervised release of five years, and a special assessment of $100. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney Kyle Reardon is prosecuting the case.

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.

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

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.”

Schemes Involved More Than 400 Victims and 20 Fraudulently Acquired Properties

SAN FRANCISCO—The founder and head of Chicago Development and Planning was sentenced yesterday to 15 years and eight months in prison, and ordered to pay more than $9 million in restitution for wire fraud, mail fraud, and money laundering, U.S. Attorney Joseph P. Russoniello announced.
Patricia Morgen pleaded guilty on Dec. 16, 2009. According to the plea agreement, she admitted creating a scheme to solicit investors for a company called Chicago Development and Planning, with the promise of substantial guaranteed return profit payments. Morgen falsely promised investors that their funds would be used to purchase real property to be rented or resold for profit, and that their guaranteed returns would come from profits earned on the real estate investments. In fact, Morgen paid investors largely with money obtained from new investors, rather than from real estate-related profits. Morgen admitted that there were more than 400 victims of this Ponzi scheme.
“Patricia Morgen intentionally preyed on unsuspecting victims in order to obtain money she wasn’t entitled to,” said U.S. Attorney Russoniello. “This sentence demonstrates the legal consequences perpetrators of these schemes will face when they are caught—and they will be caught.”
In another scheme, Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself. The fraudulent loan applications included lies as to the borrowers’ employment and income. Morgen’s co-defendant in the mortgage fraud scheme pleaded guilty in January 2010.
Morgen, 63, most recently of Chicago, was indicted by a federal grand jury on Nov. 20, 2008. She fled to Mexico when she learned that federal authorities were investigating Chicago Development and Planning. After spending several months in Mexico, Morgen returned to the United States, but made continued efforts to avoid law enforcement: she did not have a valid driver’s license in her name, did not have a phone in her name, and she cut off contact with family members whose whereabouts were known to federal investigators. Morgen was apprehended in Chicago in June 2009, while threatening to jump from the top of a multi-story building. Morgen’s son, Shalom Gibson, has been indicted in Reno, Nev., in connection with his efforts to shred and burn documents relating to Chicago Development and Planning; his whereabouts remain unknown.
In sentencing Morgen, U.S. District Judge Charles R. Breyer commented on the devastation suffered by the unsophisticated victims, noting that Morgen victimized “people who by and large could least afford it,” and that she “ruined people’s lives.” Judge Breyer further stated his belief that a “severe punishment” was warranted because Morgen was “still a very dangerous person” who posed a substantial risk to society.
“We are pleased by the resolution of this matter,” said FBI Special Agent in Charge Stephanie Douglas. “Ms. Morgen betrayed the trust of hundreds of investors, injected bad debt into the economy, and fled the country when faced with the prospect of being held accountable for her actions. The sentence she received today underscores the severity and impact of this sort of crime on our entire community.”
“Today’s sentence sends a clear message to those committing investment fraud: Your greed will not go undetected and unpunished,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation. “IRS-CI will continue to use all the tools at its disposal to investigate these types of schemes.”
The sentence was handed down by U.S. District Court Judge Breyer following a guilty plea to two counts of mail fraud, two counts of wire fraud in violation, and one count of money laundering in violation. Judge Breyer also sentenced the defendant to a five-year period of supervised release. The defendant has been in custody since June 2009.
Tracie L. Brown and Jeffrey R. Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of an investigation by the Securities and Exchange Commission, the Internal Revenue Service – Criminal Investigation, and the Federal Bureau of Investigation.
This case is part of President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF 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 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.

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.

DAYTON—Four participants in an extensive mortgage fraud scheme that affected 210 residential properties, including 205 in Montgomery County, were sentenced today in federal court by U.S. District Judge Michael R. Barrett.
Carter M. Stewart, United States Attorney for the Southern District of Ohio, Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation; Jose Gonzalez, Special Agent in Charge, Internal Revenue Service Criminal Investigation, and other members of the Dayton Mortgage Fraud Task Force announced the sentences handed down today by U.S. District Judge Michael A. Barrett.
Edward McGee, 76, was sentenced to three years’ probation and fined $140,000. Edward McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit money laundering.
His son, Kenneth O. McGee, 50, was sentenced to 32 months in prison and fined $12,500. Kenneth McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud, and money laundering, and one count of conspiracy to commit money laundering.
Robert Mitchell, 43, Vandalia, was sentenced to 32 months in prison and fined $12,500. Mitchell pleaded guilty on March 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.
Kamal J. Gregory, 36, Centerville, was sentenced to 10 months in prison and fined $12,500. Gregory pleaded guilty April 14, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.
These cases stem from a 13-count indictment involving six defendants which was originally handed down on June 25, 2008. The four sentenced today were part of a conspiracy that operated and controlled various Dayton-based real estate mortgage and title insurance related businesses and corporations that schemed to defraud 33 mortgage lending institutions out of over $7 million in loan proceeds and other things of value. This scheme involved arranging, facilitating, and manipulating documents associated with real estate sales and closings in order to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties for the personal benefit of the co-conspirators.
Two others involved in the scheme were previously sentenced. Julian M. Hickman, 32, formerly of Centerville and now living in East Cleveland, pleaded guilty on December 15, 2008 to conspiracy and tax crimes. Hickman was sentenced on December 10, 2009 to 33 months’ imprisonment. Jessica A. Zbacnik, 42, of Monroe, pleaded guilty on July 29, 2009 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud, and money laundering. She was sentenced on December 3, 2009 to 30 months’ imprisonment.
Agencies participating in the Greater Dayton Mortgage Fraud Task Force in addition to the FBI and IRS include the Ohio Department of Commerce Division of Financial Institutions, the Ohio Attorney General’s Office, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, and the Perry Township Police Department.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that CHEDDI GOBERDHAN, a real estate attorney, pled guilty yesterday before U.S. District Judge SHIRA A. SCHEINDLIN in Manhattan federal court to a seven-count Indictment charging him with conspiracy to commit bank and wire fraud, and six counts of bank fraud, in connection with a scheme that defrauded banks out of more than $23 million in home mortgage loans. GOBERDHAN made hundreds of thousands of dollars in illicit profits from the scheme, in which he worked closely with corrupt loan officers of GuyAmerican Funding, a mortgage brokerage firm in Queens, New York. GOBERDAN is the ninth defendant convicted of participating in this mortgage fraud scheme.
Manhattan U.S. Attorney PREET BHARARA said: “Cheddi Goberdhan carried out an elaborate subterfuge designed to steal millions of dollars in home mortgage loans. Instead of serving as the gatekeeper whom the banks relied upon to prevent fraud, he abused his position of trust to line his own pockets. We will continue working with our law enforcement partners to prosecute those who commit mortgage fraud and jeopardize the stability of our financial institutions.”
According to the Superseding Indictment and statements made during the proceedings in this case:
GOBERDHAN participated in a massive mortgage fraud scheme operated through a branch office of GuyAmerican Funding located on Liberty Avenue, in Jamaica, New York. GOBERDHAN’s coconspirators in the scheme included, among others, the president of GuyAmerican Funding (DAVID RAMNAUTH), GuyAmerican loan officers (PEGGY PERSAUD, ORETTE KILLIKELLY, GEORGE ESSO), individuals who recruited homeowners and “straw buyers” (ELTON LORD, RAFICK BAKSH, MAHAMOOD HUSSAIN), and another real estate lawyer (RAVI PERSAUD). As part of the scheme, the coconspirators arranged home sales between “straw buyers”—persons who posed as home buyers, but who had no intention of living in the mortgaged properties—and homeowners in financial distress who were willing to sell their homes. The GuyAmerican loan officers obtained mortgage loans for the sham deals by submitting fraudulent applications to banks and lenders, and using fraudulent representations about the supposed buyers’ net worth, employment, income, and plans to live in the properties. Frequently, the co-conspirators used the same straw buyer to obtain multiple mortgage loans. The co-conspirators kept some or most of mortgage proceeds for themselves, while the “straw buyers” ultimately defaulted on the mortgages, causing millions in losses to the banks and lenders.
GOBERDHAN acted as the closing attorney and the straw buyers’ attorney on numerous mortgage loans originated through GuyAmerican Funding, including loans in which the same straw buyer was used to purchase multiple properties within a short period of time. GOBERDHAN sent false documents to the banks, received the loan money from the banks into his attorney account, and made illicit payments from the sales proceeds to himself and his co-conspirators. GOBERDAN’s wife also owned the title company that was used for many of the transactions, in violation of New York disciplinary rules, which allowed him to further profit from the scheme.
GOBERDHAN, 57, of Elmont, New York, faces a maximum sentence of 210 years in prison. He will also be required to pay restitution to the victims of his offense and to forfeit the proceeds of his crimes. GOBERDHAN is scheduled to be sentenced by Judge SCHEINDLIN on April 13, 2011.
DAVID RAMNAUTH, PEGGY PERSAUD, ORETTE KILLIKELLY, RAJNARINE SINGH, ELTON LORD, and TARAMATEE SINGH previously pled guilty, and RAVI PERSAUD and GEORGE ESSO were convicted after trial. Two charged defendants, RAFICK BAKSH and MAHAMOOD HUSSAIN are fugitives.
Manhattan U.S. Attorney PREET BHARARA praised the investigative work of the Federal Bureau of Investigation and thanked it for its assistance in this case.
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 prosecution of the cases arising from “Operation Bad Deeds” is being overseen by the Office’s Complex Frauds Unit. The prosecution of this case is being handled by Assistant U.S. Attorneys REBECCA ROHR, NICOLE FRIEDLANDER, and ANTONIA APPS.

PHILADELPHIA—Brian Geller, 32, of Sewell, New Jersey, pled guilty today to a multi-year bank fraud scheme that netted him over $1.8 million between the summer of 2005 and the summer of 2009 from JP Morgan Chase Bank, announced United States Attorney Zane David Memeger. Geller also admitted to engaging in transactions over $10,000 with the proceeds of the fraud and to one count of tax fraud. While an employee of JPMorgan Chase Services, Geller manipulated the bank’s internal books and records and caused the bank to wire transfer money to his account, to accounts of his family, and to accounts in which his life partner had right, title, interest, or control.
Sentencing is scheduled for April 7, 2011 before U.S. District Court Judge John R. Padova. Geller faces a statutory maximum possible sentence of 240 years in prison, a fine of $6.25 million, $2,200 in special assessments, and up to five years’ supervised release.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Division and is being prosecuted by Assistant United States Attorney Pamela Foa.

BOSTON—A former West Boylston resident was charged today in federal court with conspiring with a mortgage broker and various property buyers to defraud numerous mortgage lenders who financed the purchase of homes in the Worcester area.
ROWLAND KOJO ADJEI SAPONG, 40, a citizen of Ghana who formerly lived in West Boylston, was charged in an Information with conspiring to commit wire fraud.
The Information alleges that, between March 2002 and March 2008, SAPONG bought approximately 17 multi-family homes in the Worcester area, and secured financing for most of them by making false statements on loan applications. These false statements usually concerned SAPONG’s employment and monthly income, and each application also falsely stated that SAPONG was a United States citizen. The Information further alleges that SAPONG divided each of the properties into condominium units—over 50 in all—and sold the units, usually to friends and acquaintances, at inflated prices. Working with a local mortgage brokerage business, SAPONG allegedly arranged for these buyers to make false statements on their own loan applications to secure the financing necessary to buy SAPONG’s condominium units. The Information alleges that SAPONG made an average of about 100 percent profit on each of the homes in a matter of months, and that, after the units had been sold off to buyers, all eventually went into foreclosure. According to the Information, the government estimates that SAPONG caused losses to mortgage lenders of over $1 million.
If convicted on these charges, SAPONG faces up to 20 years’ imprisonment, to be followed by three years of supervised release and a $250,000 fine.
The case was investigated by the Federal Bureau of Investigation, the U.S. Secret Service, and the U.S. Postal Inspection Service. It is being prosecuted by Assistant U.S. Attorney Andrew E. Lelling of Ortiz’s Economic Crimes Unit.
U.S. Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge the Federal Bureau of Investigation – Boston Field Division; Steven Ricciardi, Special Agent in Charge of the United States Secret Service; and Robert Bethel, Inspector in Charge of the U.S. Postal Inspection Service made the announcement today.
The details contained in the Information are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

RIVERSIDE, CA—A former official with Chase Bank has been found guilty of disclosing the existence of a suspicious activity report (SAR) filed with federal officials, and then soliciting thousands of dollars in bribes to help the borrower deal with a possible criminal investigation related to the illegally disclosed SAR.
Frank E. Mendoza, 45, of Victorville, was convicted yesterday afternoon of three counts of bank bribery and one count of unlawfully disclosing a SAR. The federal jury deliberated about 30 minutes before issuing its verdict, which included a not guilty finding on a charge of attempted economic extortion.
Following a one-week trial in United States District Court, the jury determined that Mendoza demanded a $25,000 bribe, ultimately accepted $10,000 in bribes from the customer, and disclosed the existence of a SAR. The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department that receives SARs from financial institutions around the country, believes Mendoza is the first bank official in the nation to be convicted of criminal charges for revealing the filing of a SAR.
The evidence presented during the trial showed that Mendoza, who worked as a loss mitigation specialist for Chase Bank, conducted an investigation of a delinquent borrower on mortgage loans made in relation to seven properties in Palmdale. In the fall of 2008, Mendoza reported to Chase that he suspected fraud in relation to the mortgages, and the bank in late November 2008 filed a SAR with FinCEN.
Several months later, Mendoza approached the borrower and suggested that he pay $25,000 in exchange for Mendoza’s assistance with Chase and a possible federal criminal investigation related to the loans. In these conversations, Mendoza disclosed the filing of the SAR and asserted that a federal criminal investigation of the borrower was imminent.
Mendoza’s bribery solicitation in May 2009 caused the borrower to contact the FBI. After the borrower delayed paying any bribe money, Mendoza ultimately agreed to accept $10,000 in cash. During two meetings in the borrower’s car in the parking lot of the Mall of Victor Valley, the borrower made two $5,000 payments to Mendoza. Following the second payment on June 29, 2009, special agents with the FBI arrested Mendoza, recovered the second $5,000 payment, and recovered from Mendoza’s wallet two $100 bills that were part of the first bribe payment.
Steven Martinez, Assistant Director in Charge of the FBI in Los Angeles, said: “Dishonest practices by bank employees corrode our banking system and, as evidenced by Mr. Mendoza’s conviction, can have serious consequences.”
Mendoza is scheduled to be sentenced by United States District Judge Robert H. Whaley on May 25. As a result of yesterday’s guilty verdicts, Mendoza faces a statutory maximum penalty of 95 years in federal prison.
“Suspicious activity reports filed by financial institutions with FinCEN provide some of the most useful information available to government authorities in criminal, tax or regulatory investigations or proceedings,” according to FinCEN Director James H. Freis, Jr. “This flow of highly confidential information among financial professionals, FinCEN, and law enforcement depends on the training and trust placed on industry and government officials alike. This case demonstrates the severe consequences that come with betraying that trust, disregarding the Bank Secrecy Act, and ignoring one’s duty as an employee of a financial institution.”
The Financial Crimes Enforcement Network is a bureau within the Treasury Department charged with partnering with the financial industry, law enforcement and regulators to protect the U.S. financial system from criminal abuse. FinCEN administers the Bank Secrecy Act, which is the federal anti-money laundering and counter-terrorism financing statute. The Bank Secrecy Act and FinCEN regulations require certain financial institutions, including all banks, to have Anti-Money Laundering programs in place and to report suspicious transactions and large currency transactions. FinCEN receives approximately one million SARs every year.
The case against Mendoza was investigated by the Federal Bureau of Investigation, which received assistance from FinCEN.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that CHEDDI GOBERDHAN, a real estate attorney, pled guilty yesterday before U.S. District Judge SHIRA A. SCHEINDLIN in Manhattan federal court to a seven-count Indictment charging him with conspiracy to commit bank and wire fraud, and six counts of bank fraud, in connection with a scheme that defrauded banks out of more than $23 million in home mortgage loans. GOBERDHAN made hundreds of thousands of dollars in illicit profits from the scheme, in which he worked closely with corrupt loan officers of GuyAmerican Funding, a mortgage brokerage firm in Queens, New York. GOBERDAN is the ninth defendant convicted of participating in this mortgage fraud scheme.
Manhattan U.S. Attorney PREET BHARARA said: “Cheddi Goberdhan carried out an elaborate subterfuge designed to steal millions of dollars in home mortgage loans. Instead of serving as the gatekeeper whom the banks relied upon to prevent fraud, he abused his position of trust to line his own pockets. We will continue working with our law enforcement partners to prosecute those who commit mortgage fraud and jeopardize the stability of our financial institutions.”
According to the Superseding Indictment and statements made during the proceedings in this case:
GOBERDHAN participated in a massive mortgage fraud scheme operated through a branch office of GuyAmerican Funding located on Liberty Avenue, in Jamaica, New York. GOBERDHAN’s coconspirators in the scheme included, among others, the president of GuyAmerican Funding (DAVID RAMNAUTH), GuyAmerican loan officers (PEGGY PERSAUD, ORETTE KILLIKELLY, GEORGE ESSO), individuals who recruited homeowners and “straw buyers” (ELTON LORD, RAFICK BAKSH, MAHAMOOD HUSSAIN), and another real estate lawyer (RAVI PERSAUD). As part of the scheme, the coconspirators arranged home sales between “straw buyers”—persons who posed as home buyers, but who had no intention of living in the mortgaged properties—and homeowners in financial distress who were willing to sell their homes. The GuyAmerican loan officers obtained mortgage loans for the sham deals by submitting fraudulent applications to banks and lenders, and using fraudulent representations about the supposed buyers’ net worth, employment, income, and plans to live in the properties. Frequently, the co-conspirators used the same straw buyer to obtain multiple mortgage loans. The co-conspirators kept some or most of mortgage proceeds for themselves, while the “straw buyers” ultimately defaulted on the mortgages, causing millions in losses to the banks and lenders.
GOBERDHAN acted as the closing attorney and the straw buyers’ attorney on numerous mortgage loans originated through GuyAmerican Funding, including loans in which the same straw buyer was used to purchase multiple properties within a short period of time. GOBERDHAN sent false documents to the banks, received the loan money from the banks into his attorney account, and made illicit payments from the sales proceeds to himself and his co-conspirators. GOBERDAN’s wife also owned the title company that was used for many of the transactions, in violation of New York disciplinary rules, which allowed him to further profit from the scheme.
GOBERDHAN, 57, of Elmont, New York, faces a maximum sentence of 210 years in prison. He will also be required to pay restitution to the victims of his offense and to forfeit the proceeds of his crimes. GOBERDHAN is scheduled to be sentenced by Judge SCHEINDLIN on April 13, 2011.
DAVID RAMNAUTH, PEGGY PERSAUD, ORETTE KILLIKELLY, RAJNARINE SINGH, ELTON LORD, and TARAMATEE SINGH previously pled guilty, and RAVI PERSAUD and GEORGE ESSO were convicted after trial. Two charged defendants, RAFICK BAKSH and MAHAMOOD HUSSAIN are fugitives.
Manhattan U.S. Attorney PREET BHARARA praised the investigative work of the Federal Bureau of Investigation and thanked it for its assistance in this case.
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 prosecution of the cases arising from “Operation Bad Deeds” is being overseen by the Office’s Complex Frauds Unit. The prosecution of this case is being handled by Assistant U.S. Attorneys REBECCA ROHR, NICOLE FRIEDLANDER, and ANTONIA APPS.

PHILADELPHIA—Brian Geller, 32, of Sewell, New Jersey, pled guilty today to a multi-year bank fraud scheme that netted him over $1.8 million between the summer of 2005 and the summer of 2009 from JP Morgan Chase Bank, announced United States Attorney Zane David Memeger. Geller also admitted to engaging in transactions over $10,000 with the proceeds of the fraud and to one count of tax fraud. While an employee of JPMorgan Chase Services, Geller manipulated the bank’s internal books and records and caused the bank to wire transfer money to his account, to accounts of his family, and to accounts in which his life partner had right, title, interest, or control.
Sentencing is scheduled for April 7, 2011 before U.S. District Court Judge John R. Padova. Geller faces a statutory maximum possible sentence of 240 years in prison, a fine of $6.25 million, $2,200 in special assessments, and up to five years’ supervised release.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Division and is being prosecuted by Assistant United States Attorney Pamela Foa.