MINNEAPOLIS—Earlier today in federal court in the District of Minnesota, two people pleaded guilty to their roles in a scheme that defrauded mortgage lenders out of approximately $4.2 million. My Dinh Lam, age 30, of Minneapolis, and Ashley Elizabeth Prasil, age 27, of Eden Prairie, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the scheme. The defendants, who were charged on April 21, 2011, entered their pleas before United States District Court Judge Susan Richard Nelson in St. Paul.

In their plea agreements, the defendants admitted that from December 18, 2006, through December of 2007, they conspired to defraud mortgage lenders in connection with the marketing of the Cloud 9 Sky Flats (“Cloud 9″), a Minnetonka development. The defendants admitted that the scheme involved finding buyers to apply for mortgage loans to purchase units in the development, knowing that each buyer would receive a kickback of approximately 30 percent of the reported purchase price of any unit. The application forms submitted to the lenders did not disclose these kickbacks. The kickback payments were returned to the buyers through an account controlled by a co-conspirator, with a portion skimmed off and shared among the defendants. More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted. In excess of $4.2 million was transferred to accounts controlled by Sheri Lynn Delich, a person who has been charged by Information in this case.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Nelson will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Robert M. Lewis.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, 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.

Defendants Targeted Low-Income Buyers, Falsely Inflated Buyer Assets In Loan Applications

SAN JOSE—A federal grand jury in San Jose indicted Norma Valdovinos, Claudia Valdovinos, Linda Dung Tran, Elaine “Queenie” Ly, and Pablo Curiel, of San Jose, California, and Jesus Chavez, of Gilroy, California on May 11, 2011, with conspiracy to commit bank fraud, bank fraud, and making a false statement to a bank, United States Attorney Melinda Haag announced yesterday. Norma Valdovinos and Linda Tran were also charged with conspiracy to commit money laundering and money laundering. According to the indictment, the defendants ran a multi-million-dollar mortgage fraud scheme, fraudulently inducing banks to extend millions of dollars in loans to unqualified buyers, while the defendants pocketed over one million dollars in real-estate and mortgage commissions for themselves.

According to the 32-count indictment, from 2004 through August 2007, Ms. Norma Valdovinos, age 45, and Chavez, age 52, were real estate agents with Century 21 Golden Hills Real Estate and solicited primarily low-income home buyers to purchase homes, typically single-family residences, usually priced in excess of $500,000. They knew that the borrowers they solicited had insufficient incomes and assets to qualify for the mortgages they needed in order to buy the properties.

The indictment further alleges that Norma Valdovinos and Chavez referred their clients to Palacio Mortgage, owned by Linda Tran, age 33, knowing that Palacio Mortgage would falsely inflate and misrepresent the borrowers’ income, assets, and employment information so as to enable the borrowers to qualify for the loan or loans needed to buy a property. Linda Tran and “Queenie” Ly, age 32, with the assistance of Claudia Valdovinos, age 27, falsified the borrowers’ income, assets, employment, and the source of the borrowers’ down payments in the Uniform Residential Loan Applications (“URLAs”) they submitted to the banks. Tran and Ly also submitted false documents such as fake bank statements and letters from tax preparers falsely stating that the buyer owned his or her own business. The Palacio Mortgage defendants also made many of the same misrepresentations on behalf of borrowers seeking to refinance existing mortgages.

According to the indictment, Linda Tran also arranged for Pablo Curiel, age 71, to secretly provide funds for the down payment required on the borrowers’ loans, without the banks’ knowledge. This scheme resulted in upwards of $40 million in loans being provided to buyers that, but for the defendants’ fraud, would not have been loaned.

This indictment is the fifth indictment brought in this investigation, resulting in a total of 10 defendants that have been charged to date. In late 2010, the United States separately charged Lita Delara, 10-00465 JF, Guadalupe Perez Nieto, 10-00842 JF, John Nguyen, 10-00467 JF, and Zosimo Reyes, 10-00468 JF, for conspiracy to commit bank fraud, in violation of 18 U.S.C. § 849.

Norma Valdovinos, Claudia Valdovinos, and “Queenie” Ly were arrested on May 18, 2011, in San Jose, California, and made their initial appearances in federal court in San Jose that same day. Each was released on bond. Norma Valdovinos’ bond was set at $125,000, Claudia Valdovinos’ bond at $50,000, and Ly’s bond at $75,000. Chavez, Tran, and Curiel are expected to make their initial appearances before The Honorable Howard Lloyd, United States Magistrate Judge, on May 26, 2011, at 1:30 a.m.

The maximum statutory penalty for count one, conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349, and counts two through 11, bank fraud, in violation of 18 U.S.C. § 1344, is 30 years’ imprisonment, a $1 million fine, and restitution; for counts 12 through 21, making a false statement to a bank, in violation of 18 U.S.C. § 1014, is 30 years’ imprisonment, a $1 million fine, and restitution; count 22, conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), is 20 years’ imprisonment, a fine of $500,000 fine (or twice the gross gain or gross loss), and restitution; counts 23 through 28, engaging in monetary transactions using criminally derived property, in violation of 18 U.S.C. § 1957, is 10 years’ imprisonment, a $250,000 fine (or twice the amount of the criminally derived property involved in the transaction), and restitution; and counts 29 through 32, money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and (B)(i), is 20 years’ imprisonment, $500,000 fine (or twice the gross gain or gross loss), and restitution. The United States is also seeking the forfeiture of defendants’ real property and other assets derived from their fraudulent scheme. 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.

Grant Fondo and David Callaway are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Kamille Singh and Jeanne Carstensen. The prosecution is the result of a three-year investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation.

Please note, an indictment contains only allegations against an individual and, as with all defendants, Norma Valdovinos, Claudia Valdovinos, Jesus Chavez, Linda Dung Tran, Elaine “Queenie” Ly, and Pablo Curiel must be presumed innocent unless and until proven guilty.