New York business attorneys-Washington Mutual target of $92 million mortgage fraud scam

Federal attorneys filed charges against 9 people for $92 million WaMu mortgage fraud scheme.

New York, NY(JusticeNewsFlash.com)–The U.S. Attorney’s Office in Brooklyn filed federal charges against, real estate developer Thomas Kontogiannis plus eight other defendants in U.S. District Court in Brooklyn, New York on Thursday. Reuters reported lawyers for the federal government charged nine persons with conspiracy to commit bank and wire fraud through an orchestrated $92 million mortgage fraud scheme aimed at Washington Mutual Bank and a subsidiary of Credit Suisse Group AG, DLJ Mortgage Capital Inc.

Agents with the U.S. Federal Bureau of Investigation (FBI) www.fbi.gov and prosecuting attorneys allege Kostogiannis used New York City property developments in Brooklyn and Queens to defraud Washington Mutual and Credit Suisse Group of $92 million through fraudulent loans. Federal court documents claim the nine defendants, charged with federal fraud, sold properties with values based on false appraisals to finance projects. The defendants were so blatant as to provide appraisals of properties not even built and listed fake addresses. Government lawyers say the real estate developer used loans, financed by lenders under their control, and then sold the bogus mortgage loans to Washington Mutual and DLJ. The defendants will be arraigned in U.S. District Court in Brooklyn before the judge, on Thursday afternoon, plus face additional charges of bank fraud and money laundering.

This is another legal and financial blow which has come to light recently since former Washington Mutual Bank (WaMu), now Washington Mutual Inc., was seized by the U.S. Office of Thrift Supervision (OTS) and placed into the hands of the Federal Deposit Insurance Corporation (FDIC) http://www.fdic.gov on September 25, 2008. A 10-day bank run, which resulted in $16.4 billion in withdrawals, caused the federal government to step in, take over, and then sell off the banking subsidiaries to JPMorgan Chase for a mere $1.9 billion. JPMorgan chase acquired the bank with $33 billion in assets, minus its unsecured debt or equity claims as outlined by Wiki. On September 26, 2008, the very next day, JPMorgan Chase filed for Chapter 11 bankruptcy protection in Delaware. Washington Mutual Bank was the largest United States’ savings and loan association, and its closure and receivership, by the federal government, remains the largest bank failure in American history. The United States District Court, for the District of Columbia, received a lawsuit filing by lawyers representing Washington Mutual Inc., on March 20, 2009, demanding $13 billion in damages. Business litigation attorneys representing WaMu accuse the OTC and FDIC with the unjustified seizure of the bank and the ridiculously low sale price to JPMorgan Chase as part of its legal complaint. The U.S. Federal Bankruptcy Court in Delaware, in turn, received a counterclaim by attorneys representing JPMorgan Chase.

JusticeNewsFlash.com news for New York bank fraud attorneys.

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

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

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

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

A few examples:

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

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

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

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

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

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