Acting United States Attorney Robert S. Cessar announced today, April 6, 2010, that on April 1, 2010, Jeanette Gray, a resident of Yeadon, Pennsylvania, pleaded guilty in federal court to a charge of wire fraud conspiracy in connection with a mortgage fraud scheme.

Gray, age 24, pleaded guilty to one count before United States District Judge Joy Flowers Conti.

In connection with the guilty plea, Assistant United States Attorney Brendan T. Conway advised the court that Gray was a licensed appraiser. She participated in a conspiracy with an individual associated with the mortgage broker company First Capital Home Equity in which First Capital Home Equity submitted appraisals to lending institutions representing that Gray had actually done the appraisals, when, in fact, she neither prepared nor reviewed the appraisals. In exchange, First Capital Home Equity paid Gray $4,000 per month.

Judge Conti scheduled sentencing for July 23, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the criminal history, if any, of the defendant.

The Mortgage Fraud Task Force conducted the investigation that led to the prosecution of Gray. 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 Investigations; 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.

CHICAGO—A Chicago options trader 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 $600,000 from approximately 10 victims who invested with him. The defendant, Kent R.E. Whitney, was charged with wire fraud in a criminal complaint filed in U.S. District Court on February 14, 2011, announced 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.

According to the criminal complaint Whitney, 29, of Chicago, obtained over $600,000 from approximately 10 investors since 2009, both for a purported commodity pool investment, and for trading in futures accounts to be held jointly between Whitney and the victims. He returned approximately $200,000 as so-called investor redemptions and misused most of the remaining funds for his own benefit and for the benefit of acquaintances. Whitney appeared this afternoon before U.S. Magistrate Judge Jeffrey Cole and was released on bond.

The CME Group, Inc. (CME) owns and operates the three U.S. futures exchanges that formerly went by the names Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange. Prior to and during 2009, Whitney had trading privileges on CME markets.

According to the charges, from mid-2009 through late 2010, Whitney made false representations to investors concerning, among other things: (1) the use of investors’ funds; (2) the returns investors could expect to make, and already had made, on their invested funds; and (3) the risks involved in the investments. According to the charges, Whitney misappropriated most of the invested funds and concealed his misappropriation by creating and distributing phony account statements and making Ponzi-type payments of returns to investors.

In October 2009, one victim invested $40,000 with Whitney to trade options through Lone Star. According to the charges, Whitney told the victim that Whitney would earn a 50 percent annual return trading options, and Whitney deposited the victim’s $40,000 check into a Lone Star bank account. Whitney gave the victim a phony document that purported to be a Lone Star account statement showing that the victim’s investment had grown to $47,250 in just over one month. Whitney did not use the victim’s funds to trade options, but instead used the funds for his own purposes, and ultimately most of the funds were used to buy a Maserati M128 GT Coupe.

In December 2009, another victim invested $15,500 from her daughter’s college fund in Lone Star through Whitney. According to the charges, Whitney told the victim that Whitney had earned approximately 22 percent to 26 percent per month trading her funds in Lone Star, when he actually misappropriated most of the funds.

Between January and November 2010, the CME Group suspended Whitney from trading on CME markets three times as a result of his unrelated options trading activity. Each trading suspension prohibited Whitney from trading, placing, or taking trading orders for others, or soliciting any business concerning CME products. Nonetheless, according to the charges, Whitney solicited $240,000 from another victim between January 2010 through August 2010, purportedly for Whitney to trade options on behalf of the victim. Whitney did not disclose to the victim that Whitney was currently subject to a trading suspension. Whitney did not use the victim’s funds to trade options. However, Whitney provided the victim with phony documents purporting to be account statements from a trading firm showing the use of his funds to trade options. Whitney returned to the victim approximately $44,000 that Whitney claimed to be “returns” from the trading, but these “returns” were not profits from his trading but rather a return of some of the victim’s own funds invested with Whitney. The remainder of the victim’s invested funds were not traded, but were misappropriated by Whitney and were also used to make Ponzi-type payments to earlier investors.

According to the charges, in July 2010, another victim invested $50,000 with Whitney so Whitney could trade options on behalf of the victim. Whitney did not disclose to the victim that Whitney was currently subject to a trading suspension. Whitney guaranteed a five percent monthly return to the victim, and told him that the only way he would not receive his monthly returns was in the case of a “nuclear war.” Whitney did not trade options with the victim’s funds, but instead misappropriated the funds and used them for his own purposes and to make Ponzi-type payments to earlier investors.

The government is being represented by Assistant U.S. Attorney Clifford C. Histed. The U.S. Attorney’s Office acknowledges the contributions made to this investigation by the CME Group, Inc. and the U.S. Commodity Futures Trading Commission.

Wire 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.

GRAND RAPIDS, MI—Joseph Carr, 56, of Lansing, Michigan, pled guilty to one count of bank fraud, U.S. Attorney Donald A. Davis announced today. Carr admitted as part of his plea before U.S. Magistrate Judge Hugh W. Brenneman Jr. that he defrauded Bank of America by recruiting “straw buyers” to apply for a mortgage loan for a home that he himself intended to occupy, and inflated the value of that home in order to increase the amount of the loan. In this manner, he was able to secure a loan of $175,000 for his own use. In his plea agreement, Carr also acknowledged that other related fraudulent activities resulted in losses of $1,147,250.

Bank fraud is punishable by 30 years in prison and other penalties. Carr’s sentence will be imposed by U.S. District Judge Janet T. Neff at a date to be announced.

The case is being investigated by the Federal Bureau of Investigation as part of the Western District of Michigan’s Mortgage Fraud Task Force. This group was created to investigate and prosecute the growing number of mortgage fraud cases that have recently come to light. U.S. Attorney Davis stated, “Mortgage fraud has played a significant role in the mortgage crisis that has brought so much misery to Michigan citizens. Federal law enforcement will vigorously pursue the perpetrators of these frauds to face the punishment they have earned.”

OKLAHOMA CITY—Today, BURT L. HALL, 50, of Maysville, Oklahoma, was sentenced to serve 51 months in federal prison for defrauding banks through a check kiting scheme, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma. In addition, Mr. Hall was ordered to pay restitution to American Exchange Bank and Legacy Bank in the total amount of $2,818,113.48. He will serve three years of supervised release after his prison term.

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 has been the president of Steve Hall Oil Company for the last 10 years. Mr. Hall controlled an account of Steve Hall Oil Company at American Exchange Bank in Lindsay, Oklahoma, and an account of D&B 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.

On November 16, 2010, 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.

The case was the result of an investigation conducted by the United States Secret Service and the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorney Scott E. Williams.

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced today that United States District Judge William B. Shubb sentenced Iftikhar Ahmad, 40, of Stockton, to 21 months in prison, to be followed by three years of supervised release, and restitution in the amount of $382,750 for multiple counts of mail fraud relating to a scheme involving the fraudulent submission of mortgage loan applications. Ahmad pleaded guilty on April 28, 2008.

This case was the product of a joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney Laurel Lomis Rimon prosecuted the case.

Ahmad admitted that through his company I&R Investment Properties LLC, he bought and sold numerous properties that were funded with loan proceeds fraudulently obtained from Long Beach Mortgage Company. Specifically, Ahmad secretly provided down payments to many of the buyers of the homes he was selling and aided the buyers in submitting loan applications that he knew contained false information about their income and employment. He also inflated the sales price of the properties.

Other participants in this mortgage fraud scheme have already pleaded guilty and been sentenced. John Ngo, a loan processor with Long Beach Mortgage Company, pleaded guilty on December 17, 2007 to perjury and was sentenced to nine months in prison. William Bridge, a loan broker operating The Loan Center in San Francisco, pleaded guilty on June 16, 2008 to tax charges and was sentenced to 21 months in prison, and Paul Bridge, also a loan broker at The Loan Center, pleaded guilty on June 16, 2008 to paying kickbacks and was sentenced to three years of probation.

Joel Blanford, a former account executive at Long Beach Mortgage, is charged in this investigation with mail fraud in connection with the submission of fraudulent loan applications and is awaiting trial.

U.S. Attorney Wagner stated, “This case revealed a chain of fraud running from home buyers through loan brokers and an employee of the mortgage lender. This office will continue to work with our law enforcement partners to investigate and prosecute those industry insiders who manipulated the mortgage loan process for their own financial gain.”

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

Melody C. Redondo, 32, and Paul G. Redondo, 33, both of Meridian, Idaho, entered guilty pleas today in U.S. District Court in Boise, U.S. Attorney Wendy J. Olson announced. Melody Redondo pleaded guilty to making a false statement to a financial institution, a felony. Paul Redondo pleaded guilty to misdemeanor theft from a financial institution.

Melody Redondo admitted that in July 2007, she submitted a false application to obtain financing from Washington Mutual Bank on a $200,000 loan. Redondo represented on the loan application that she had monthly gross income of $13,000; however, her total income in 2007 was substantially less. Redondo submitted the loan application to Washington Mutual Bank to obtain a home equity line of credit. The bank relied upon the loan application, which contained the defendant’s materially false statement, and authorized funding of the loan. The charge of making a false statement to a financial institution is punishable by a term of imprisonment of 30 years, a term of supervised release of up to five years, and a maximum fine of $1 million.

Paul Redondo admitted that in August 2007, he submitted a consumer loan application to obtain financing on a $100,000 home equity line of credit on a home in Eagle, Idaho. He also admitted to falsely represented his monthly gross income on the loan application that was submitted to Washington Trust Bank. Misdemeanor theft from a financial institution carries a maximum punishment of one year in prison, a $100,000 fine, and a term of supervised release of not more than one year.

Sentencing for Melody Redondo is scheduled for May 3, 2011, before Chief U.S. District Judge B. Lynn Winmill in Boise. Sentencing for Paul Redondo is scheduled for May 4, 2011, before U.S. Magistrate Judge Ronald E. Bush.

The case is part of the ongoing Crestwood mortgage fraud case, which involved multiple defendants who bought and sold real estate in order to “flip” it, or gain profits from the sales. The financial institutions and mortgage lenders incurred losses of approximately $1.6 million dollars.

To date, eight other people have been sentenced or pleaded guilty in the case: Michael J. Hymas, formerly of Boise, was sentenced to 21 months in federal prison for wire fraud and ordered to pay $544,647 in restitution; Shauntee K. Ferguson, of Boise, was sentenced to probation for five years, 80 hours of community service, and ordered to pay $365,829.69 in restitution for making a false statement to a financial institution; Christopher R. Georgeson, formerly of Boise, currently of Phoenix, Arizona, was sentenced to one month in federal prison for wire fraud and ordered to pay $103,356.64 in restitution; Stanley J. Ferguson, of Boise, was sentenced to 12 months plus one day in federal prison and ordered to pay $676,826 in restitution; and Brent Bethers, of Eagle, Idaho, was sentenced to one month in federal prison for wire fraud, ordered to pay $23,913 in restitution, and fined $6,000.

Travis Hymas, formerly of the Boise area, currently of Cedar Hills, Utah, pleaded guilty to false statement to a bank in March 2010. Shane Hymas and Laurie Krechelle Hymas, both formerly of the Boise area, currently of American Fork, Utah, pleaded guilty to bank fraud in April 2010. Sentencings for all three have been rescheduled to April 11, 2011, in Boise before U.S. District Judge Edward J. Lodge. Each faces a maximum sentence of 30 years in federal prison, a fine of up to $1 million, and supervised release of up to five years.

“Homeowners, the economy and financial institutions all suffer from fraudulent housing transactions,” said Olson. “The Crestwood mortgage fraud cases demonstrate federal and state law enforcement agencies’ commitment to aggressively investigate and prosecute fraud in the housing finance industry.”

The case was investigated by the Federal Bureau of Investigation and was prosecuted by the United States Attorney’s Office and the State of Idaho Office of the Attorney General.

Defendant Allegedly Embezzled More Than $2.7 Million from Employer

DALLAS—A federal grand jury in Dallas has returned an indictment against Ellis County resident Tracey Buckley, 44, charging her with one count of embezzlement of funds by a bank officer, announced U.S. Attorney James T. Jacks of the Northern District of Texas.

Buckley was arrested by FBI agents yesterday at her home in Palmer, Texas and appeared later in the day before U.S. Magistrate Judge Irma C. Ramirez and pleaded not guilty to the charge. Judge Ramirez released her on a personal recognizance bond; a trial date has not been set.

According to the indictment, between September 2008 and September 2010, while she was a bank officer with the Bank of New York Mellon, Buckley fraudulently initiated 40 wire transfers of approximately $2,719,674 from internal Bank of New York Mellon accounts to her own personal bank account at JP Morgan Chase.

An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, Buckley faces a maximum statutory sentence of 30 years in prison and a $1 million fine. She could also be ordered to pay restitution. The indictment also includes a forfeiture allegation which would require Buckley, if convicted, to forfeit several vehicles, real estate in Palmer and Ennis, Texas, and real estate in Custer, Montana.

The case is being investigated by the FBI. Assistant U.S. Attorney Stephen P. Fahey is in charge of the prosecution.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; and J. Thomas Cardwell, Commissioner, State of Florida Office of Financial Regulation, announced that defendant Anson Joachin, 39, of Parkland, Florida, was sentenced today to 41 months’ imprisonment, to be followed by three years of supervised release for his role in a multi-million-dollar mortgage fraud scheme. In addition, U.S. District Judge Ursula Ungaro ordered Joachin to pay $2,352,310 in restitution.

Four other defendants were previously sentenced in the case. John Fisher, 35, of Jupiter, Florida, a licensed mortgage broker, was sentenced to 20 months’ imprisonment and was ordered to pay $1,614,927 in restitution. In addition, Fisher agreed to surrender his mortgage broker license. Tracey Balli, 35, of Pembroke Pines, Florida, a loan processor, was sentenced to three years’ probation, one year of home detention, and was ordered to pay $1,187,082 in restitution; Justina Bryan, 35, of Hollywood, Florida, a loan processor, was sentenced to three years’ probation, one year of home detention, and was ordered to pay $1,165,227 in restitution; and Delano McLennon, 33, of North Lauderdale, Florida, a straw buyer, who was sentenced to three years’ probation, six months home detention, and was ordered to pay $489,405 in restitution.

Defendants Anson Joachin and John Fisher previously pled guilty to conspiracy to commit mail and wire fraud and to one count of mail fraud, respectively, in violation of Title 18, United States Code, Sections 1349 and 1341 in connection with a mortgage fraud scheme. Defendants Tracey Balli, Justina Bryan, and Delano McLennon previously pled guilty to one count of making false statements on a HUD-1 Real Estate Settlement Form in connection with a mortgage fraud scheme, in violation of Title 18, United States Code, Section 1001.

According to records filed with the court and statements made during court hearings, the defendants and other conspirators engaged in a scheme to enrich themselves by fraudulently causing houses in Fort Lauderdale, Jupiter, Cape Coral, and Royal Palm Beach, Florida to be bought and sold through straw buyers who obtained high value mortgages based upon fraudulent mortgage loan applications. Defendant Anson Joachin orchestrated the scheme, in which defendant John Fisher, a licensed mortgage broker, Tracey Balli, and Justina Bryan, both loan processors, joined. Balli and Bryan, along with other conspirators, recruited straw buyers, including Delano McLennon, to join the scheme.

In order to obtain mortgages on these properties, the defendants submitted and caused to be submitted fraudulent documents to various mortgage lenders across the United States. Based on these false documents, the mortgage lenders issued approximately $2,350,000 in loans to the defendants and their co-conspirators.

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

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

CHICAGO—A suburban Chicago man was charged with allegedly engaging in an investment fraud scheme, swindling more than $105 million from approximately 400 victims who invested in funds he purported to operate. Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Tom Brady, Inspector-in-Charge of the United States Postal Inspection Service, Chicago; and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation announced that Daniel Spitzer was charged with eight counts of mail fraud in a criminal indictment filed yesterday. Spitzer allegedly misused money he raised from investors for his own benefit, and to make Ponzi-type payments to investors.

Spitzer, 51, formerly of the U.S. Virgin Islands, currently resides in Barrington, Illinois, and will be arraigned at a later date in U.S. District Court. The indictment alleges that Spitzer was the principal officer and sole shareholder of Kenzie Financial Management, a U.S. Virgin Islands corporation; the sole manager and member of Kenzie Services, LLC (“Kenzie Services”), a corporation located in Charlestown, Nevis, West Indies; the president of Draseena Funds Group, Corp., an Illinois corporation; the manager of DN Management Company, LLC (“DN”), a Nevada limited liability company, and the manager of Nerium Management Company, an Illinois corporation.

According to the charges, through these corporate entities, defendant Spitzer controlled twelve investment funds collectively known as “the Kenzie Funds.” Spitzer offered and sold to the public investments in the various Kenzie Funds in the form of membership interests and limited partnership interests. Through sales agents and various marketing materials, he informed investors and potential investors in the Kenzie Funds that their investments would be used primarily in foreign currency trading, that the Kenzie Funds had never lost money, and had achieved profitable historical returns. The defendant had to continually raise funds through the solicitation of new investors in the Kenzie Funds to make payments on investments made by earlier investors, all of which the defendant concealed and intentionally failed to disclose to both new and earlier investors. Although Spitzer falsely represented to prospective investors and investors that different Kenzie Funds had different levels of risk and different investment strategies, the defendant commingled the money invested in all twelve of the Kenzie Funds, then misappropriated a significant portion, and only invested less than one third of the approximately $105 million raised from investors.

The indictment further alleges that Spitzer represented to investors that the Kenzie Funds had rates of returns ranging from 4.52 percent to 13.54 percent over the prior five years, although the bank accounts for the Kenzie Funds reflected that the total net return over the five year period on the approximately $105 million investors contributed to all of the Kenzie Funds was less than 1 percent. As of June 30, 2009, Spitzer represented that the Kenzie Funds were worth approximately $250 million, at a time when the Funds collectively had only approximately $4 million in its bank accounts. As a part of the alleged Ponzi scheme, the defendant fraudulently obtained over $105 million from approximately 400 investors. The information alleges that as a result of his Ponzi scheme, Spitzer fraudulently obtained over $105 million.

The government is being represented by Assistant U.S. Attorney Madeleine Murphy. The United States Attorney’s Office acknowledges the assistance of the Securities and Exchange Commission, Chicago Regional office. The investigation was conducted by the United States Postal Inspection Service and the FBI.

Each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. In addition to the charges, the government is also seeking forfeiture in the amount of approximately $34 million in funds, the approximate amount of loss to the victims. 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.

An information 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.

Defendant Faces Up to 20 Years in Federal Prison

DALLAS—David Boles, 52, of Colleyville, Texas, who owned Metro Buy Homes, LLC., pleaded guilty this afternoon before U.S. Magistrate Judge Irma C. Ramirez to one count of mail fraud, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Boles faces a maximum statutory sentence of 20 years in prison and a $250,000 fine. In addition, as part of his plea agreement with the government, Boles agrees to pay restitution for losses resulting from all of his criminal conduct and not just limited to losses stemming from his conviction offense. Boles is scheduled to be sentenced by U.S. District Judge Jane J. Boyle on May 26, 2011.

According to documents filed in the case, from January 2008 through August 2010, Boles ran a scheme to defraud a number of investors by making materially false representations to them. For instance, he advised that invested money would be used to buy real estate and that investments would be secured by real estate. To further the scheme, Boles sent Deeds of Trust and Real Estate Liens that purportedly gave investors liens against specific properties in exchange for their investment. However, Boles did not own a number of the properties that were supposedly used to secure the investments, and some of the Deeds of Trust and Real Estate Lien Notes that he sent investors were fraudulent. Boles also sent checks to investors and advised them that the checks represented profits from their investments. However, in many cases the checks were simply drawn from the principal investments made by the investor. On other occasions, Boles funded checks written to one investor with money received from other investors. Boles believed that telling the investors that the checks represented earnings on their investments would encourage them to invest more money.

Boles also set up a website which he occasionally used to deceive investors by posting fictitious figures showing investments to be profitable when they were not, again to encourage investors to invest more money.

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.

ANCHORAGE, AK—United States Attorney Karen L. Loeffler announced that on August 21, 2009, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name. Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2,360,185. Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.60. Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.24. Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.77. Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day. Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066.390. Gary Paterna. Mr. Lockard’s father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.86. Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.53. The defendants pled to a total of 64 counts charging conspiracy, wire fraud, bank fraud, and false statements to a financial institution.

The pleas and sentencing bring to a close the largest mortgage fraud scheme ever prosecuted in the District of Alaska. The fraud was perpetrated by professionals in all areas of the real estate industry. Between on or about December 23, 2003, and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudlent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified down payments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved. The effect and result of this conduct was to transfer the investment risk from Lockard and the other co-conspirators to the mortgage lenders and to provide inflated profit and fraudulently obtained loan funds to Lockard and the other co-conspirators. The charges in the indictment to which the defendants pled guilty outlined a total of five separate schemes, involving properties in numerous Anchorage subdivisions, and two large undeveloped properties in the Talkeetna area.

According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no down payments had been made.

The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Company as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.

The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA. Finally, the indictment alleges that Lockard engaged in a “bust out” scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.

At Friday’s sentencing hearing, Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudeulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million dollars. Judge Beistline commented that Mr. Lockard’s crimes were motivated by greed and had an impact on our community. In addition to the financial institutions that were defrauded, one of the individual victims testified at setencing about his personal financial losses, and his struggles to pay the mortgages on three duplexes he had unwittingly purchased for grossly inflated prices. Judge Besitline admonished that there was “no excuse for lying and deception, and no excuse for breaking the law,” and that Mr. Lockard was going to have to “face the consequences of the very poor choices he made.”

United States Attorney Karen L. Loeffler noted that these convictions and sentences point out the vast harm that can be done to an industry and the public when a handful of dishonest individuals are willing to falsify the documents and information on which the mortgage market relies.

Ms. Loeffler also commended the diligent and extensive investigation by special agents of the Federal Bureau of Investigation for their investigation that lead to this result.

PHOENIX—April J. Lucero, 46, of Phoenix, Ariz. was sentenced on May 10, 2010 to two years in prison for her conviction in August 2009 for her involvement in a mortgage fraud scheme in Phoenix, Ariz. Lucero pleaded guilty to one count of Conspiracy to Commit Mail, Wire and Bank Fraud, a felony, related to her participation in a two year conspiracy involving the purchase of 37 properties using fraudulent loan documents. Seven other co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy.

“Lucero worked the system by conspiring with home loan straw buyers who had no intention of ever taking up residence,” said Dennis K. Burke. “This type of fraud scheme undermined the Valley housing market leading up to its collapse.”

The case against Lucero was based on an investigation by the FBI, which indicated that from 2005 through March 2007 she conspired to commit mortgage fraud in Phoenix. Lucero fraudulently submitted mortgage loan applications, on behalf of straw buyers, under false pretenses, obtaining and disbursing the proceeds of fraudulently obtained loans, including directing portions of the proceeds in the amount of $735,000 to a bank account in Lucero’s control. Lucero used her skill as a loan officer to prepare the mortgage loan applications for a borrower misrepresenting salary, assets and liabilities. Lucero used the proceeds from the fraud for personal expenses. Lucero received a lesser sentence due to her early guilty plea and cooperation. The entire conspiracy resulted in a loss to lending institutions of approximately $9.5 million.

The investigation in this case was conducted by the FBI. The prosecution is being handled by Kevin M. Rapp and Charles W. Galbraith Assistant U.S. Attorneys, District of Arizona, Phoenix.

PHOENIX—Four defendants—Jeffrey Todd Crandell, 32, of Gilbert, Ariz., Jake David Abegg Whitman, 33, of Gilbert, Ariz., Frederic Charles Crum, 37, of Gilbert, Ariz., and Tyson Kent Young, 30, of San Tan Valley, Ariz.—were sentenced on March 26, 2010, by U.S. District Judge G. Murray Snow for their respective roles in a multi-million dollar mortgage fraud scheme.

“These prosecutions assist in demanding accountability from an adrift mortgage industry, which caused great stress to our economy,” said Dennis K. Burke, U.S. Attorney for the District of Arizona. “We are grateful to the FBI-led Mortgage Fraud Task Force that continues to investigate these matters.”

Crandell and Whitman were the leaders of the scheme. In 2005, they obtained the rights to various parcels of real estate located in Chandler, Gilbert, and Queen Creek, Ariz., obscured their interest in those properties by placing them in the name of relatives or in corporate shells, and then recruited friends and acquaintances to buy the properties for inflated prices—often hundreds of thousands of dollars more than the cost of the land. Crandell or Whitman also acted as the mortgage broker in most of the transactions. In that capacity, they were responsible for preparing the buyers’ loan applications. They included multiple lies in the applications in order to persuade the lender to approve the loans. Among other things, they inflated the buyers’ incomes and assets and stated—falsely—that the buyers would be making the down payment. In fact, at closing, Crandell or Whitman would supply the down payment on behalf of the buyer and also provide a cash kickback to the buyer. All told, this scheme caused federally-insured banks to provide more than $6 million in loans and to suffer more than $1 million in losses after the properties fell into foreclosure.

The remaining defendants played supporting roles in the conspiracy. Crum acted as the mortgage broker for three properties and, in that capacity, prepared false loan applications and created doctored financial statements that overstated the buyers’ assets. Young agreed to pose as the owner of several properties in order to obscure Crandell’s interest.

Judge Snow sentenced the two leaders of the conspiracy, Crandell and Whitman, to 62 months’ imprisonment and 10 months’ imprisonment, respectively, with Whitman receiving a lesser sentence due to his early guilty plea and cooperation with the prosecution. Meanwhile, Crum received a sentence of four months’ imprisonment and Young received deferred prosecution. (One remaining defendant, Erin Michelle Leastman, 28, of Gilbert, Ariz., is scheduled to be sentenced on April 1, 2010. Leastman acted as the escrow agent in all but one of the transactions.)

This prosecution is part of an initiative called “Operation Cash Back” in which dozens of defendants—including many real estate professionals—were indicted between 2007 and 2009. To date, 49 have been convicted through guilty pleas or following trial.

Operation Cash Back is part of a nationwide initiative under the Financial Fraud Enforcement Task Force established by President Obama. In Arizona, Operation Cash Back represents the efforts of the U.S. Attorney’s Office, FBI, Internal Revenue Service-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, Department of Housing and Urban Development Office of the Inspector General, U.S. Marshals Service, U.S. Postal Inspection Service, U.S. Secret Service, the FDIC-OIG, Arizona Department of Financial Institutions, Arizona Attorney General’s Office, county attorneys and local police departments.

The investigation in this case was conducted by the Federal Bureau of Investigation. The prosecution was being handled by Dominic Lanza, Raymond Woo, and Kevin Rapp, Assistant U.S. Attorneys, District of Arizona, Phoenix.

TUCSON—U.S. Attorney Dennis K. Burke announced a federal grand jury in Tucson returned a six-count indictment against Scott Tyson, age 43, and Susan Levy, age 69, of Tucson, Arizona. The indictment charges the defendants with wire fraud and conspiracy to commit wire fraud.

According to the indictment, Levy, a licensed Arizona real estate agent, received approximately $1.2 million dollars in loans to purchase multiple real estate properties between February, 2006 and July, 2007. In obtaining her loans, Levy failed to disclose that she had purchased other properties during this time period and/or understated her liabilities, thus constituting a material omission of fact submitted to the lenders. Scott Tyson was the loan officer used by Levy in each of these transactions.

“The defendants conspired to obtain multiple mortgages based upon fraudulent representations. The goal of the conspiracy was to profit from either the commissions received from the loans or the future sale of the properties or ‘flip’,” said U.S. Attorney Dennis K. Burke. “This office is dedicated to prosecuting mortgage fraud related offenses and this indictment is another example of our partnership with the FBI to prosecute and hold industry insiders accountable.”

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

“Arizona has been greatly impacted by all facets of mortgage fraud in the last few years,” said FBI Special Agent in Charge Nate Gray. “The indictment of Tyson and Levy illustrates the FBI’s commitment to investigate those within the mortgage industry who allegedly conspired to profit from mortgage fraud. The FBI will continue to make mortgage fraud a priority and will pursue those who participate in various mortgage fraud schemes.”

A conviction for conspiracy to commit wire fraud and wire fraud carries a maximum penalty of 20 years’ imprisonment, a $250,000 fine or both for each count. In determining the actual sentence, the judge will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

The investigation preceding the Indictment was conducted by the Federal Bureau of Investigation’s Mortgage Fraud Task Force. The prosecution is being handled by Assistant U.S. Attorney Jonathan Granoff of the U.S. Attorney’s Office for the District of Arizona in Tucson.

The fourth defendant in a mortgage fraud scheme that fraudulently collected more than $1 million in loan proceeds was convicted today on federal charges for acting as a “straw borrower” who posed as the purchaser of one of the properties.

Lisa Lievanos, 45, was convicted of five felony counts – conspiracy, two counts of wire fraud, money laundering and making false statements to special agents with the Federal Bureau of Investigation.

As a result of today’s convictions, Lievanos faces up to 60 years in federal prison when she is sentenced on July 13 by United States District Judge Florence- Marie Cooper.

Three other defendants in this case previously pleaded guilty for their roles in the mortgage fraud scheme. They are:

* Angela Cotton, 39, of Fontana, who ran a bogus title company and is scheduled to be sentenced by Judge Cooper on June 15;
* Terral Toole, 41, of Irvine (formerly of Lake Elsinore), who is scheduled to be sentenced by Judge Cooper on June 1; and
* Miles Davis, 46, of Glendale (formerly of Reseda), a loan processor, who was sentenced by Judge Cooper to three years of probation, including six months of home detention.

The evidence presented at Lievanos’ trial showed that Cotton found properties in Rancho Cucamonga and, with the assistance of real estate professionals and people such as Lievanos who agreed to sell their personal information, fraudulently “purchased” one of the properties and obtained a $635,000 loan.

A second loan involved a refinance of Lievanos’ residence, which netted the defendants $526,500. In the loan application, Lievanos included false employment information, income information, occupancy declarations, and rental agreements relating to her financial condition.

On the loan applications, the four defendants allegedly included false employment information, which included verifying the amounts of income of the straw buyer. As part of the scheme, Cotton established fraudulent escrow companies to complete the fraudulent sale transactions.

As a result of the fraudulent conduct related to the scheme, banks suffered losses of nearly $2 million.

This case is a result of an investigation by the FBI’s Southern California Mortgage (SCAM) Task Force.

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced today that a 13-count indictment was unsealed today charging Douglas Heald, of Sacramento; Brandon Hanly, of Redding; and Jerad Maggi in a scheme to defraud mortgage lenders.

This case is the product of an extensive investigation by the FBI. Assistant United States Attorneys Matthew D. Segal and Jared C. Dolan are prosecuting the case.

The indictment alleges that in 2005 and 2006, the defendants altered appraisal documents and title reports in order to obtain $5 million in mortgage loans with $1.5 million in “cash out” loans that would not have been made but for their fraud. Nine of the mortgaged properties were in Redding and one was in Lodi.

Heald and Hanley self-surrendered today and were arraigned before United States Magistrate Judge Gregory G. Hollows today. They pleaded not guilty and are set to appear before U.S. District Judge William B. Shubb on December 21, 2010. Maggi is sought by the FBI.

The case stems from the successful prosecution of Joshua Gervolstad, a Redding mortgage broker who on July 12, 2010 was sentenced to three years in prison and ordered to pay $1.4 million in restitution.

The maximum statutory penalty for a violation of mail fraud and wire fraud is 20 years in prison and a $250,000 fine. The maximum statutory penalty for money laundering is 10 years in prison and a $250,000 fine. 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.

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

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that DAVID RAMNAUTH, the former president of the Queens mortgage brokerage GuyAmerican Funding Corp. (“GuyAmerican”), was sentenced today to 30 months in prison for his role in a massive mortgage fraud scheme in which over $23 million in fraudulent loans were processed in connection with over 44 properties in the New York metropolitan area. RAMNAUTH pled guilty to his role in the mortgage fraud scheme in August 2010.

Manhattan U.S. Attorney PREET BHARARA said: “As the president of a mortgage brokerage that was little more than a fraud mill, David Ramnauth abdicated his professional responsibility just to make a quick buck. Today’s sentence makes clear that corrupt gatekeepers like Ramnauth who perpetrated these schemes will be punished for their crimes. Along with our law enforcement partners, we will continue to investigate and punish those who perpetrate and profit from mortgage fraud.”

According to the Indictment and other documents previously filed in Manhattan federal court and statements made in court:

RAMNAUTH, the President of GuyAmerican, facilitated a massive mortgage fraud scheme that was conducted through a GuyAmerican branch office located in Jamaica, New York. RAMNAUTH permitted his state-approved mortgage brokerage license to be used by the loan officers of GuyAmerican to submit fraudulent applications for millions of dollars of loans. In return, RAMNAUTH received hundreds of thousands of dollars in commissions from the federally insured financial institutions that were deceived by the fraudulent scheme.

RAMNAUTH was one of eleven defendants charged in connection with the fraudulent scheme that was run through GuyAmerican. Four defendants, PEGGY PERSAUD, ORETTE KILLIKELLY, TARAMATEE SINGH, and GEORGE ESSO, were loan officers at GuyAmerican who collectively submitted dozens of loans containing false statements as to the borrowers’ employment, income, and assets, among other things. The loan officers also each received tens, and in some cases hundreds, of thousands of dollars in commissions based on the fraudulent loans.

Three other defendants charged in the scheme, ELTON LORD, RAFICK BAKSH, and MAHAMOOD HUSSAIN, worked with GuyAmerican loan officers to recruit homeowners in financial distress who were willing to sell their homes. They used “straw buyers” – persons who posed as home buyers in exchange for a fee, but who had no intention of living in the mortgaged properties—to perpetrate the scheme. The defendants arranged home sales between the distressed sellers and these straw buyers, and obtained mortgage loans using fraudulent representations. The defendants re-sold, or flipped, properties multiple times between different straw buyers, stripping the equity from these properties as they were resold with inflated market values.

RAMNAUTH entered into an arrangement with the loan officers submitting the fraudulent loans, such that they could continue to use his mortgage brokerage license provided the “real buyers” of the properties—LORD, BAKSH, and HUSSAIN—held back six months of mortgage payments from the closings, thereby concealing the fraudulent scheme from the banks. RAMNAUTH also submitted his own fraudulent loans to banks, falsifying employment information on the loan applications, including for the purchase of a property by his wife.

* * *

RAMNAUHTH, 55, of Levittown, New York, previously pled guilty to one count of conspiring to commit bank and wire fraud. In addition to the prison term, U.S. District Judge SHIRA A. SCHEINDLIN also sentenced RAMNAUTH to a term of three years of supervised release.

LORD, who pled guilty on August 4, 2010, was sentenced on January 13, 2011, to 46 months in prison. GEORGE ESSO, who was found guilty after a two-week trial on August 26, 2010, was sentenced on February 4, 2011, to one year and one day in prison and three years of supervised release.

PEGGY PERSAUD, KILLIKELLY, TARAMATEE SINGH, CHEDDI GOBERDHAN, and RAJNARINE SINGH previously pled guilty but have not yet been sentenced. RAVI PERSAUD was found guilty after a trial and is awaiting sentencing.

* * *

Mr. BHARARA praised the work of the FBI and thanked them for their assistance in the case.

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

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys ANTONIA M. APPS and REBECCA ROHR are in charge of the prosecution.

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

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

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

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

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

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

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

FRESNO, CA—United States Attorney Benjamin B. Wagner announced today that a federal grand jury returned an indictment charging Eric Ray Hernandez, 34, Monica Marie Hernandez, 29, and Evelyn Brigget Sanchez, 27, all of Bakersfield, with conspiracy to commit mail fraud, wire fraud, and bank fraud, and with 15 counts of mail fraud, relating to their alleged operation of a scheme to defraud mortgage lending institutions. The indictment also charges Eric Hernandez and Monica Hernandez with money laundering. The indictment was unsealed Monday following the arrests and initial appearances in court of Eric Hernandez and Monica Hernandez. Evelyn Sanchez’s initial appearance in court was Tuesday.

The indictment alleges that in brokering loans for the purchase or refinance of homes, primarily in the Bakersfield area, the defendants submitted loan applications to lenders containing false and fraudulent information, and caused lenders to fund mortgage loans based on such fraudulent applications. The indictment further alleges that the defendants caused false statements to be submitted to lenders concerning buyers’ income, assets, and liabilities, buyers’ employment status, and buyers’ intent to occupy the properties as their personal residences. Additionally, the defendants are alleged to have submitted false supporting documentation in support of mortgage loan applications, including false pay stubs, false letters purporting to be from the buyers’ tax accountant, false customer letters purporting to support the buyers’ self-employment status, and false verifications of the buyers’ bank funds on deposit. The indictment alleges that the defendants defrauded lenders of in excess of $2.5 million through this scheme.

This case is the product of an extensive investigation by the IRS-Criminal Investigation and the Federal Bureau of Investigation, working jointly through the San Joaquin Valley Mortgage Fraud Task Force. The U.S. Attorney’s Office and the FBI created the San Joaquin Valley Mortgage Fraud Task Force in 2009 to further the prosecution of mortgage fraud cases arising out of the southern half of the Central Valley. The Task Force is comprised of both federal and local law enforcement agents and prosecutors. This case is being prosecuted by Assistant U.S. Attorney Kirk Sherriff.

In a separate mortgage fraud case, the U.S. Attorney’s Office charged Hoda Samuel, 58, of Elk Grove; Connie Devers, 40, of Elk Grove; Dana Faulkner, 43, of Oakland; Charles Robert Maness, 32, of Elk Grove; Tracy Painter, 50, of Lodi; Sean Patrick Gjerde, 34, of Elk Grove; Ronald Burris, 36, of Elk Grove; Ygnacia Bradford, 34, of Oakland; Nicole Dawson, 40, of Oakland; and Daniel Harrison, 40, of San Diego with conspiracy to commit mortgage fraud, mail fraud, and making false statements in mortgage applications to federally insured banks. The 48- count indictment was unsealed yesterday. That case is the product of an investigation by the FBI and the IRS-Criminal Investigation and is being prosecuted by Assistant U.S. Attorney Philip Ferrari.

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

If convicted of the charges, the defendants face a maximum penalty of 30 years in prison, five years’ supervised release, and a $1 million fine.

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

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.