Bay Area Mortgage Broker and Real Estate Agent Among Those Charged with Conspiring to Defraud Four Different Banks of More Than One Million Dollars

SACRAMENTO, Calif.—Acting United States Attorney Lawrence G. Brown announced today that a federal grand jury has returned an eight-count indictment charging DENNIS AARON MOORE, 50, of Hillsborough, Calif., VERONIKA WRIGHT, 33, of San Ramon, Calif., MITCHELL WRIGHT, 36, of San Ramon, Calif., HAIYING FAN, 42, of Millbrae, Calif., and GARY LORENZO GEORGE, 50, of Olivehurst, Calif., with various crimes in connection with their participation in a mortgage fraud scheme with respect to the purchase of a series of homes in South Lake Tahoe and Nevada City, Calif. Each defendant is charged with one count of conspiring to commit bank fraud and mail fraud; defendants MOORE, VERONIKA WRIGHT, MITCHELL WRIGHT, and FAN are further charged with two counts of bank fraud; and MOORE, VERONIKA WRIGHT and GEORGE are each charged with making false statements on loan applications. MOORE and FAN are also charged with two counts of money laundering. The indictment alleges that the victim lending institutions suffered over $1,000,000 in losses as a result of the defendants’ conduct.

This case is the product of a joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation.

“Aggressive pursuit of those who engaged in mortgage fraud during the boom and bust of the region’s housing market remains a top priority for federal law enforcement. These scams hurt not just the lending institutions, but area homeowners and taxpayers alike,” said acting U.S. Attorney Brown.

According to Assistant United States Attorney Sean C. Flynn, who is prosecuting the case, the indictment alleges that between June 2005 and April 2007, the defendants conspired to defraud Washington Mutual Bank, doing business as Long Beach Mortgage, Countrywide Bank, FSB, and other lenders through a “cash-back-to-buyer” mortgage fraud scheme. MOORE purchased five separate properties in South Lake Tahoe and Nevada City, each of which was funded with large primary loans or first mortgages from various lending institutions. It is alleged that as part of each purchase agreement, MOORE insisted that each seller agree that a substantial “commission” – sometimes in excess of 20 percent of the purchase price – be paid from the sale proceeds to MOORE’s real estate agent, defendant FAN. In order to induce the seller to agree to such a commission, MOORE often offered to purchase the properties at prices above the respective list prices.

MOORE further collaborated with his mortgage broker, VERONIKA WRIGHT, and his other co-conspirators to submit to the lending institutions home mortgage loan applications that contained various false statements with respect to MOORE’s income, employment, liquid assets, and compliance with tax obligations. MITCHELL WRIGHT is alleged to have created a bogus Web site to substantiate MOORE’s false employment claims, and GEORGE, a tax professional, created false letters to support MOORE’s false financial claims. The banks relied on these false statements in disbursing funds pursuant to the loans. It is further alleged that once the funds were disbursed, FAN kicked back the majority of her “commission” to MOORE, completing the cashback-to-buyer mortgage fraud scheme.

The maximum statutory penalty on the conspiracy charge is five years in prison, while the bank fraud and false statement charges carry a 30-year maximum sentence. The maximum sentence that can be imposed with respect to the money laundering charges against MOORE and FAN is 10 years in prison. However, the actual sentence will be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed at the discretion of the court.

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

Dante DeMiro, 43, of Milford, pled guilty today to five counts of bank and wire fraud, United States Attorney Barbara McQuade announced. Joining in the announcement was Special Agent in Charge Andrew Arena, Federal Bureau of Investigation (FBI).

According to court documents, DeMiro was an investment adviser to various municipalities, credit unions, school districts, and trade unions through his Southfield-based companies MuniVest Financial Group and MuniVest Services LLC. From August 2007 to September 2010, DeMiro used the MuniVest entities to operate a bank and wire fraud Ponzi scheme. DeMiro falsely promised investor clients that he would invest their funds in various certificates of deposit. He did not invest their funds as promised, but instead, used their funds to purchase personal items and real property, to gamble, to make payments to other investors in the same scheme, and to make loans to several individuals and a local jewelry store. DeMiro stipulated that the loss caused by his fraud exceeds $7 million, and that he abused a position of trust in his fiduciary capacity as an investment adviser.

“We have seen more and more of these investment schemes, which prey upon school districts, municipalities, and unions,” McQuade said. “Our hope is that cases like this one will deter other investment advisors from stealing from these vulnerable investors.”

Special Agent in Charge Arena stated, “Today’s swindlers artfully conceal their greed with sophisticated marketing and numerous misrepresentations. Investors and pension plan participants must remain diligent in following their money.”

Sentencing is scheduled for July 12, 2011 at 10:00 am before the Honorable Lawrence P. Zatkoff in Port Huron.

The case is being prosecuted by Assistant United States Attorney Erin Shaw.

David B. Fein, United States Attorney for the District of Connecticut, announced that STEVEN J. KOTTAGE, 45, of Weston, pleaded guilty today before United States District Judge Mark R. Kravitz in New Haven to two counts of conspiracy stemming from mortgage fraud schemes in which KOTTAGE participated.

According to court documents and statements made in court, KOTTAGE conspired with others to commit wire fraud by making materially false statements to H&R Block Home Mortgage, Inc., including a false loan application, W-2, employment verification, and pay stub, in connection with a mortgage on a home on Fire Island, New York. In addition, KOTTAGE admitted that he conspired with others to commit bank fraud by submitting a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. A co-defendant, Mary Ellen Durso, served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of KOTTAGE and another co-conspirator. Through both schemes, KOTTAGE and others defrauded Wells Fargo and Freddie Mac of more than $600,000.

Judge Kravitz has scheduled sentencing for July 11, 2011, at which time KOTTAGE faces a maximum term of imprisonment of 30 years on each count. He also will be ordered to pay restitution in the amount of at least $616,547.93.

KOTTAGE is currently detained.

On December 14, 2010, Durso pleaded guilty to one count of conspiracy and five counts of filing false tax returns. On March 9, 2011, she was sentenced to three years of probation, the first six months of which she must serve in home confinement.

This case is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney David T. Huang and Senior Litigation Counsel Richard J. Schechter.

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. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, 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; 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.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

WASHINGTON—Paul Allen, the former chief executive officer (CEO) at Taylor, Bean & Whitaker (TBW), pleaded guilty today to making false statements and conspiring to commit bank and wire fraud for his role in a $1.5 billion fraud scheme that contributed to the failure of TBW.

The guilty plea was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F.O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.

Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21, 2011.

According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas, and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.

According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.

Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank, and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.

Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP). Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name. This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.

In court today, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank. Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.

To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, the FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG, and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.

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

WASHINGTON—Lee Bentley Farkas, the former chairman of a private mortgage lending company, Taylor, Bean & Whitaker (TBW), was convicted today for his role in a more than $2.9 billion fraud scheme that contributed to the failures of Colonial Bank, one of the 25 largest banks in the United States in 2009, and TBW, one of the largest privately held mortgage lending companies in the United States in 2009.

The conviction was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Acting Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F.O. Song, Chief of the Internal Revenue Service Criminal Investigation (IRS-CI).

After a 10-day trial, a federal jury in the Eastern District of Virginia found Farkas guilty of one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud. At sentencing, scheduled for July 1, 2011, Farkas faces a maximum prison term of 30 years for the conspiracy charge and for each count of bank fraud, 20 years for each count of wire fraud related to TARP, 30 years for each count of wire fraud affecting a financial institution and 25 years for each securities fraud count. Farkas was remanded into custody.

According to court documents and evidence presented at trial, Farkas and his co-conspirators engaged in a scheme that misappropriated more than $1.4 billion from Colonial Bank’s Mortgage Warehouse Lending Division in Orlando, Fla., and approximately $1.5 billion from Ocala Funding, a mortgage lending facility controlled by TBW. Farkas and his co-conspirators misappropriated this money to, among other things, cover TBW’s operating expenses. The fraud scheme contributed to the failures of Colonial Bank and TBW.

Six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW; Raymond Bowman, former president of TBW; Desiree Brown, former treasurer of TBW; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD; and Sean Ragland, a former senior financial analyst at TBW.

“Lee Farkas, the former chairman of TBW, masterminded one of the largest bank fraud schemes in history,” said Assistant Attorney General Breuer. “His shockingly brazen scheme poured fuel on the fire of the financial crisis. It not only led to the downfall of TBW, one of the largest private mortgage lending companies in the United States, but also contributed to the failure of one of the country’s largest commercial banks. Mr. Farkas may have thought he could steal nearly $3 billion from investors and taxpayers and sail into the sunset. But now a jury has told him otherwise, and he must face the severe consequences.”

“Today a jury convicted Lee Farkas of orchestrating one of the longest and largest bank fraud schemes in the country,” said U.S. Attorney Neil H. MacBride. “In 2008, Lee Farkas boasted that he ‘could rob a bank with a pencil.’ And he did just that. His staggering greed led him to steal nearly $3 billion from Colonial Bank and other investors. Farkas’s mammoth fraud contributed to the toppling of a financial institution and the ripple effects were felt from Wall Street to Main Street. Now he’s being held responsible for the financial ruin he left in his wake.”

“This investigation required thousands of hours of work by investigators, forensic accountants and analysts to sort through complex mortgage and lending documents,” said Assistant Director in Charge McJunkin. “I’d like to thank the many other agencies who worked with FBI personnel to build a strong investigative team; a team still out there working today to protect federal funds and innocent victims.”

“Today’s verdict ensures that Farkas will pay for his crime—an unprecedented scheme to defraud regulators during the height of the financial crisis and to steal over $550 million from the American taxpayers through TARP,” said Acting Special Inspector General Romero for SIGTARP. “SIGTARP and its partners in the Financial Fraud Enforcement Task Force stopped the scheme dead in its tracks and will continue to bring to justice those criminals who seek to profit by exploiting TARP through fraud.”

According to court documents and evidence presented at trial, the fraud scheme began in 2002, when Farkas and his co-conspirators ran overdrafts in TBW bank accounts at Colonial Bank in order to cover TBW’s cash shortfalls. Farkas and his co-conspirators at TBW and Colonial Bank transferred money between accounts at Colonial Bank to hide the overdrafts. Evidence presented at trial showed that after the overdrafts grew to more than $100 million, Farkas and his co-conspirators covered up the overdrafts and operating losses by causing Colonial Bank to purchase from TBW over time more than $1.5 billion in what amounted to worthless mortgage loan assets, including loans that TBW had already sold to other investors and fake pools of loans supposedly being formed into mortgage-backed securities. Farkas and his co-conspirators caused Colonial Bank to report these assets on its books at face value when in fact the mortgage loan assets were worthless. By August 2009, approximately $500 million in fake pools of loans remained on Colonial Bank’s books.

According to court documents and evidence presented at trial, Farkas and his co-conspirators at TBW also misappropriated more than $1.5 billion from Ocala Funding. Ocala Funding sold asset-backed commercial paper to financial institution investors, including Deutsche Bank and BNP Paribas Bank. Ocala Funding, in turn, was required to maintain collateral in the form of cash and/or mortgage loans at least equal to the value of outstanding commercial paper.

Evidence presented at trial established that Farkas and his co-conspirators diverted cash from Ocala Funding to TBW to cover its operating losses, and as a result, created significant deficits in the amount of collateral Ocala Funding possessed to back the outstanding commercial paper. To cover up the diversions, the conspirators sent false information to Deutsche Bank, BNP Paribas Bank and other financial institution investors and led them to falsely believe that they had sufficient collateral backing the commercial paper they had purchased. When TBW failed in August 2009, the banks were unable to redeem their commercial paper for full value. Farkas and his co-conspirators also caused approximately $900 million in loans to be held on Colonial Bank’s books when in fact the loans had already been sold to Freddie Mac and other investors.

According to court documents and evidence at trial, in the fall of 2008, Colonial Bank’s holding company, Colonial BancGroup Inc., applied for $570 million in taxpayer funding through the Capital Purchase Program (CPP), a sub-program of the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loans and securities held by Colonial Bank as a result of the fraudulent scheme perpetrated by Farkas and his co-conspirators. Colonial BancGroup’s TARP application was conditionally approved for $553 million contingent on the bank raising $300 million in private capital.

Evidence at trial established that Farkas and his co-conspirators falsely informed Colonial BancGroup that they had identified sufficient investors to satisfy the TARP capital contingency. Farkas and his TBW co-conspirators diverted $25 million from Ocala Funding into an escrow account and falsely represented that the money was on behalf of capital raise investors. Farkas and his TBW co-conspirators caused Colonial BancGroup to issue a false and misleading financial statement to the Securities and Exchange Commission (SEC) and press release announcing the success of the capital raise. Ultimately, Colonial BancGroup did not receive any TARP funds.

Evidence at trial also established that Farkas and his co-conspirators caused Colonial BancGroup to file materially false financial data with the SEC regarding its assets in annual reports contained in Forms 10-K and quarterly filings contained in Forms 10-Q. Colonial BancGroup’s materially false financial data included overstated assets for mortgage loans that had little to no value that Farkas and his co-conspirators caused Colonial Bank to purchase. Farkas and his co-conspirators also caused TBW to submit materially false financial data to the Government National Mortgage Association (Ginnie Mae) in order to extend TBW’s authority to issue Ginnie Mae mortgage-backed securities.

According to court documents and evidence presented at trial, Farkas also personally misappropriated more than $20 million from TBW and Colonial Bank to finance his lifestyle, including purchasing multiple homes, scores of cars, a jet and sea plane, and restaurants and bars.

In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.

“The successful prosecution of Farkas and his associates highlights the commitment and combined efforts of DOJ and federal law enforcement to hold those responsible from all levels of a mortgage company,” said Acting Inspector General Stephens for HUD-OIG. “Efforts to protect FHA and Ginnie Mae are strengthened by this verdict.”

“Today’s verdict confirms that the former chairman of one of the leading mortgage lending firms in the Southeast engaged in criminal conduct during the mid-2000s,” said Inspector General Rymer of FDIC-OIG. “We are proud to work with our partners at the Justice Department’s Criminal Division and in the U.S. Attorney’s Office for the Eastern District of Virginia to bring to justice individuals whose fraud contributed significantly to the financial crisis and the failure of a major financial institution.”

“This conviction represents a victory for Freddie Mac and American taxpayers, who have invested $64.2 billion in Freddie Mac to date,” said Inspector General Linick of the FHFA-OIG. “ The fraud that Farkas perpetrated on Freddie Mac directly affected its bottom line and, in turn, American taxpayers. FHFA-OIG looks forward to future cooperative efforts with law enforcement partners to combat fraud against Freddie Mac, Fannie Mae, and the Federal Home Loan Banks.”

The case was prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by the FBI’s Washington Field Office, SIGTARP, FDIC-OIG, HUD-OIG, FHFA-OIG, and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation. The Department of Justice would like to thank the SEC for their assistance.

This conviction is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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. For more information about the task force visit: www.stopfraud.gov.

LAS VEGAS—A man who owned and operated numerous now-defunct Nevada investment companies, and two of his former employees, were indicted by the federal grand jury today on mortgage fraud charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Brett Depue, 36, a former resident of Las Vegas, but currently a resident of Gilbert, Arizona, Brian Barney, 36, of Fairfield, California, and Maria Ornelas, 32, of Las Vegas, are charged with conspiracy to commit bank fraud, mail fraud, and wire fraud, 11 counts of wire fraud, and criminal forfeiture.

Warrants have been issued for the arrests of Depue and Barney. Ornelas was summoned, and is scheduled for an initial appearance before a United States Magistrate Judge in Las Vegas on Friday, March 26, 2010, at 8:30 a.m.

The Indictment alleges that from about February 1, 2005, to May 31, 2007, in Nevada and elsewhere, the defendants participated in a mortgage fraud conspiracy in which they used “third party disbursements” and “double escrow” methods to fraudulently obtain monies from the financial institutions. A third party disbursement is the issuance of money at the closing of a mortgage loan to a person or entity that is not typically entitled to the money. A double escrow is where two sales of the same property are conducted at the same time. Typically, the property is sold to a middleman, who then sells the property to a straw buyer at a substantially inflated price. The difference between the first sale price and second price is distributed to a conspirator as seller proceeds. The paperwork on the second sale is concealed from the seller, and the paperwork on the first sale is concealed from the lender.

Brett Depue operated a number of Nevada businesses including, ABS Investments Group, LLC, Liberty Group Investments, LLC, and a number of other companies registered with the Nevada Secretary of State. Depue employed Brian Barney, Maria Ornelas, and a number of others who allegedly assisted in the mortgage fraud conspiracy. The defendants recruited home owners in the Las Vegas area and elsewhere who agreed to sell their property at a price substantially above the asking price. The home owners were told that the difference would go to Depue for improvements. The defendants then recruited straw buyers to apply for mortgage loans to purchase the homes using false and fraudulent information concerning the straw buyers’ income, assets, employment, and intent to occupy the homes. In some instances, the defendants had the straw buyers apply for mortgages for more than one house at a time and concealed from the lenders that they were purchasing more than one property.

The Indictment specifically discusses 17 homes in Las Vegas and Henderson which were purchased fraudulently between April 2005 and April 2007 at the direction of and for the benefit of the defendants.

If convicted, the defendants face up to 30 years in prison and a $1,000,000 fine on each count, and may be required to forfeit up to $8.5 million in properties or proceeds from the crimes.

This investigation is being led by the FBI, IRS Criminal Investigation, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the U.S. Postal Inspection Service, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Secret Service, the Las Vegas Metropolitan Police Department, the Nevada Attorney General’s Office, and Office of the Inspector General for the Social Security Administration. The case is being prosecuted by Assistant United States Attorney Brian Pugh.

Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

This law enforcement action is sponsored 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.

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.

MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that David R. Scholfield, 84, of Wausau, Wis., pleaded guilty today in U.S. District Court in Madison to one count of conspiracy to commit bank fraud.

U.S. District Judge William M. Conley scheduled sentencing for June 14, 2011 at 1:00 p.m. Scholfield faces a maximum penalty of five years in prison, a $250,000 fine, and the entry of an appropriate restitution order.

At the plea hearing, Scholfield admitted that he submitted forged insurance premium financing notes to River Valley Bank, Wausau. In addition, in the plea agreement, Scholfield agreed that the court could consider the embezzlement of credits due Manson Insurance Agency customers and the providing of fraudulent loan notes to Acqua Finance, Wausau, as part of the criminal pattern of conduct.

The charge against Scholfield was the result of an investigation conducted by the Wausau office of the Federal Bureau of Investigation. The prosecution of the case has been handled by Assistant U.S. Attorney Grant C. Johnson.

David B. Fein, United States Attorney for the District of Connecticut, announced that KEVIN J. O’KEEFE, 51, of Simsbury, was sentenced today by Chief United States District Judge Alvin W. Thompson in Hartford to one day of imprisonment, time served, and three years of supervised release, for his role in two fraud schemes.

According to court documents and statements made in court, O’KEEFE was a vice president at Fleet Bank (and Bank of America after it acquired Fleet Bank) in Hartford. From approximately October 2001 to February 2007, O’KEEFE conspired with Paul Aparo, an attorney, and Richard R. Girouard, a real estate developer, to enrich themselves through the use of O’KEEFE’s position at the bank and by corrupting the bidding process on distressed loans that Fleet Bank was selling. As part of the scheme, O’KEEFE, Aparo, and Girouard created shell companies through which to submit bids on distressed loans being sold by Fleet Bank and with which to receive and distribute proceeds from the scheme. O’KEEFE had access to and obtained confidential information belonging to Fleet Bank and provided that information to Aparo and Girouard so that it could be used to submit winning bids on distressed loans. O’KEEFE also intentionally provided outdated information to other bidders involved in the bidding process in order to cause those bidders to submit artificially low bids. O’KEEFE provided Aparo and Girouard with access to the most up-to-date information. O’KEEFE also excluded bidders who he, Aparo, and Girouard believed would submit competitive bids for a distressed loan on which O’KEEFE, Aparo, and Girouard sought to bid.

Girouard paid O’KEEFE and Aparo approximately $100,000 on one loan that Girouard obtained through the corrupt assistance of O’KEEFE and Aparo. In addition, Girouard agreed to pay a shell company, called “Lexington Associates,” 15 percent of the profits on another distressed loan on which Girouard, with O’KEEFE and Aparo’s corrupt assistance, had submitted a winning bid. The 15 percent of the profits on the loan that Girouard (through his own shell company) paid to Lexington Associates amounted to more than $1.4 million, which O’KEEFE and APARO essentially split evenly.

Between December 2005 and January 2006, as part of a second scheme, O’KEEFE and Aparo defrauded Bank of America and Aparo’s client out of money. In that scheme, a client contacted Aparo about getting a mortgage release from Bank of America for an old mortgage. Aparo contacted O’KEEFE about it, and O’KEEFE checked Bank of America’s internal records for the mortgage. O’KEEFE found that no record of the mortgage existed within the bank. However, Aparo and O’KEEFE conspired to defraud the client and the bank by telling the client that the bank would release the mortgage for $55,000, which the client paid to Aparo through his law firm’s trust account. Aparo then paid the $55,000 to O’KEEFE, and a mortgage release on behalf of Bank of America was provided to the client.

On June 11, 2008, O’KEEFE pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud.

On November 24, 2009, Girouard pleaded guilty to one count of conspiracy to commit financial institution bribery. On April 30, 2010, he was sentenced to 30 months of imprisonment and was ordered to pay a fine in the amount of $15,000.

On July 24, 2008, Aparo pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud. On March 8, 2011, he was sentenced to 24 months of imprisonment and was ordered to pay a fine of $20,000.

This case was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Eric J. Glover.

BALTIMORE—Richard Wayne Hope, age 53, of Denham, Louisiana, formerly of Hagerstown, Maryland, pleaded guilty today to conspiracy to commit bank fraud in connection with a $1.75 million loan he obtained on behalf of a company.

The plea agreement was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office.

According to his plea agreement, Richard Hope and his brother, Otis Hope, the senior pastor for Montrose Baptist Church located in Rockville, Maryland, formed a “religious company” called Shiloh Ministries of Hagerstown, Inc. (Shiloh). The company operated the Shiloh Conference and Retreat Center in a building that Shiloh owned at 149 North Potomac Street in Hagerstown. The company renovated and maintained the building and leased the space to groups for conferences and retreats.

On June 21, 2006 the building was significantly damaged by a fire. The fire marshal and building inspector advised the Hopes that no one could occupy the building until numerous code violations were corrected and an occupancy certificate from the fire marshal was obtained. According to former employees of Shiloh and other witnesses, Shiloh stopped conducting business and no more conferences or retreats were ever held after that date. Insurance proceeds went directly to a fire remediation company and to Kabel Company, a construction company associated with the Hopes, which had been incorporated about a month after the fire, for repairs allegedly made to the building.

In September 2006, the Hopes applied to a bank for a commercial loan in the amount of $1.75 million to refinance the mortgage and to release approximately $175,000 being held in escrow by the previous lender for renovations made to the building prior to the fire. The brothers engaged a mortgage broker to assist with the refinancing. Richard Hope falsely represented to the broker that Kabel Company repaired the damage caused by the fire, and that Shiloh was open for business and holding conferences and retreats again. In fact, Shiloh never reopened for business after the fire. A city inspection revealed numerous code violations and found wires that were unattached to new electrical outlets or to an inoperable sprinkler system. Additionally, beginning in October 2006, the monthly utility payments were not paid. A sole occupant of the building was ejected a few months later because the building was deemed uninhabitable. The Hopes never asked the city to inspect the renovation work purportedly performed by Kabel Company so that Shiloh could obtain an occupancy permit, nor did they ever bring the building up to code.

Based on the misinformation provided by the Hopes, the bank mailed Otis Hope an initial commitment letter to fund the loan and asked for Shiloh’s past and current financial statements before making a final commitment. Richard Hope submitted fraudulent financial statements to the bank overstating the company’s assets and monthly cash flow, and falsely reflecting five months of operations during which time the business was in fact not operating. Richard Hope submitted a phony letter from a certified public accountant purporting to attest that the accountant had compiled the financial statements, when in fact Richard Hope had created the statements. Richard Hope also supplied the bank with a bogus corporate resolution giving him authority to borrow $1.75 million. The resolution purported to be signed by an individual identified as “secretary,” who in fact was not a company officer and had not signed the document.

Relying on the misrepresentations, on February 28, 2007 the bank loaned $1.75 million to Shiloh. Neither the Hopes nor anyone else from Shiloh ever made a monthly loan payment to the bank. The Hopes refused to respond to the bank’s correspondence and phone calls. Thereafter, the Shiloh building was abandoned and went into foreclosure.

Richard Hope faces a maximum sentence of 30 years in prison. As part of his plea agreement, Richard Hope agrees to the entry of an order to pay restitution to the bank of $1.5 million, the amount of loss remaining after the bank sold the building at an auction. U.S. District Judge William M. Nickerson has scheduled sentencing for June 28, 2011 at 10:00 a.m.

Otis Ray Hope, age 55, of Aiken, South Carolina, formerly of Hagerstown, Maryland, pleaded guilty to tax evasion, subscribing to a false document in connection with the filing of a federal tax exemption for Shiloh Company, and to conspiracy to commit bank fraud in connection with the $1.75 million bank loan obtained on behalf of Shiloh Ministries. Otis Hope was sentenced to 37 months in prison and ordered to pay restitution of $2,422,320.

United States Attorney Rod J. Rosenstein thanked the FBI and the IRS – Criminal Investigation for their investigative work. Mr. Rosenstein commended Assistant United States Attorneys Martin J. Clarke and Sujit Raman, who are prosecuting the case.

Admitted Laundering Millions of Dollars in Proceeds of Stolen Over-the-Counter Medicines, Health and Beauty Aid Products, Gift Cards, DVDs, Tools, and Other Items

BALTIMORE—U.S. District Judge Benson E. Legg sentenced Louis Leitch, Sr., age 62, of Baltimore, today to 33 months in prison followed by three years of supervised release for conspiring to commit money laundering and attempting to evade taxes.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service – Washington Division; Chief James W. Johnson of the Baltimore County Police Department; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Baltimore Police Commissioner Frederick H. Bealefeld III; and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation.

According to his plea agreement, from 2007 to March 2010, Leitch conspired with others to launder the proceeds of the sale of mass quantities of stolen over-the-counter medications, health and beauty aid products, gift cards, DVDs, tools, and other merchandise. Shoplifters, also known as “boosters,” stole products from Target, Safeway, Wal-Mart, Kohl’s and other retailers in Maryland and other states. Pawn shops bought large amounts of stolen items from the boosters. Louis Leitch, Sr. and others were owners of E-Z Money Pawn Shop and 2Brothers Liquidators, Inc. Leitch and others would receive stolen products at E-Z Money. The stolen items were “cleaned,” meaning that the security labels and retail tags from the stolen product were removed. Sometimes a heat gun and lighter fluid would be used to peel away the plastic security labels. In addition, Leitch worked with co-defendants to purchase and transport stolen material. Leitch knew that many of his co-defendants and others participated in the scheme. Some of the defendants also used on-line auctions sites, such as eBay and Amazon.com, to sell the stolen products far below normal retail value. The stolen products were then delivered to unsuspecting customers via the United States mail. The defendants received payment by interstate wire transfers using PayPal accounts and through various financial institutions in Maryland.

On March 25, 2010, agents from the U.S. Postal Inspection Service, Baltimore County

Police Department and the Federal Bureau of Investigation executed search warrants at E-Z Money and the other pawn shops in this case. Agents recovered well over $1 million in stolen merchandise, approximately $1 million in bank accounts and over $140,000 in cash, and 44 firearms. Although the entire conspiracy involved approximately $20 million in stolen merchandise, $2.5 million in stolen product was reasonably foreseeable to Leitch.

Thirteen defendants have pleaded guilty to the money laundering conspiracy to date.

In addition, Leitch failed to file income tax returns for tax years 2005 and 2006, although he received substantial income through his pawn shop and other business. During 2005 through 2006, Leitch withdrew from his bank accounts more than $2.5 million of his gross income, with each withdrawal being less than $10,000. During 2007, Leitch made cash deposits of more than $200,000 of his gross income into bank accounts, with each deposit being less than $10,000. By making deposits and withdrawals in amounts less than $10,000, Leitch was able to avoid bank reporting requirements and conceal from the Internal Revenue Service substantial income on which he knowingly failed to pay taxes. The amount of unpaid taxes as a result of this conduct is $401,600.

United States Attorney Rod J. Rosenstein thanked the U.S. Postal Inspection Service; Baltimore County Police Department; Federal Bureau of Investigation; Baltimore Police Department; and Internal Revenue Service – Criminal Investigation for their work in this investigation and commended Assistant United States Attorneys Kwame J. Manley and Richard Kay, who prosecuted the case.

TRENTON, NJ—Mordchai Fish, the principal rabbi of Congregation Sheves Achim in Brooklyn, N.Y., admitted today to conspiring to launder approximately $900,000 he believed was criminal proceeds, U.S. Attorney Paul J. Fishman announced.

Fish, 58, of Brooklyn, N.Y., pleaded guilty before U.S. District Judge Joel A. Pisano to an Information charging him with money laundering conspiracy.

According to documents filed in this case and statements made in Trenton federal court:

Fish admitted that beginning in early 2008, he met with Solomon Dwek, an individual he now knows was a cooperating witness with the United States. For a fee of approximately 10 percent, Fish agreed to launder and conceal Dwek’s funds through a series of purported charities, also known as “gemachs,” which Fish controlled or to which he had access. Fish admitted that prior to laundering Dwek’s funds, Dwek repeatedly told him the money was the proceeds of illegal activity—including bank fraud, trafficking in counterfeit goods, and bankruptcy fraud.

In order to hide the source of the money, Fish directed Dwek to make the checks payable to several gemachs—including Boyoner Gemilas Chesed, Beth Pinchas, CNE and Levovous—which were purportedly dedicated to providing charitable donations to needy individuals. Once Dwek gave him the checks, Fish passed them to a coconspirator who deposited them into bank accounts held in the names of the purported charities. Fish would then arrange to make cash available through an underground money transfer network. Other individuals, including David S. Golhirsh, Naftoly Weber, Avrohom Y. Polack, Binyamin Spira, and Yoely Gertner, would provide Fish and Dwek with the cash.

Fish admitted that he engaged in approximately 15 money laundering transactions with Dwek, helping to convert approximately $900,000 in checks into more than $800,000 in cash, keeping a cut.

At the time of his arrest, Fish was charged in three separate criminal complaints along with his brother, Rabbi Lavel Schwartz. Weber, Polack, and Spira each pleaded guilty in November 2010 to operating illegal money transmitting businesses, admitting that they transferred thousands of dollars in cash to Fish and Dwek. The charges against Gertner, Schwartz, and Goldhirsh remain pending; Schwartz and Goldhirsh were indicted last week for money laundering conspiracy and related offenses.

The charge to which Fish pleaded guilty carries a maximum statutory penalty of 20 years in prison and a $250,000 fine. In addition, Fish agreed to forfeit approximately $90,000 by the date of sentencing, scheduled for July 28, 2011.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, with the investigation leading to today’s plea.

The government is represented by Assistant U.S. Attorney Mark McCarren of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

As for the complaint and Indictment charging Gertner, Schwartz, and Goldhirsh, the charges and allegations are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Defense counsel: Michael Bachner, Esq., New York

URBANA, IL—A Chicago-area man, Salvatore DiBenedetto, 52, of Downers Grove, appeared in federal court in Urbana today after his arrest on a 16-count indictment charging him with defrauding an Arcola, Illinois bank of approximately $2.5 million from April 2008 to February 2010. The indictment had remained sealed pending DiBenedetto’s arrest and court appearance. DiBenedetto was ordered detained in the custody of the U.S. Marshals Service pending a hearing scheduled on Apr. 12.

The indictment alleges that from April 2008 to February 2010, DiBenedetto and others engaged in a fraudulent real estate scheme that defrauded the Arcola Homestead Savings Bank of Arcola of approximately $2.5 million. According to the indictment, DiBenedetto was the president and shareholder of two businesses, Avanti Equity Group, LLC and X Factor LLC, both of Lombard, Ill. DiBenedetto allegedly represented that the businesses provided various mortgage services, including brokerage services, marketing, underwriting, and payment collection. During the period of the alleged scheme, DiBenedetto represented to the bank that he was performing mortgage management services on its behalf and for its benefit and the bank allowed DiBenedetto to perform activities related to the issuing of mortgages.

As part of the scheme, the indictment alleges DiBenedetto engaged in various false representations to owners of distressed residential and commercial properties to transfer the property to a third party who would obtain financing, rehabilitate the property and sell to interested buyers. The owners released their ownership of the properties and DiBenedetto recruited small business owners to buy various real estate in Chicago. DiBenedetto allegedly caused false representations to be made on loan applications and falsely represented to the title company that he was an authorized representative of the bank. Based on DiBenedetto’s false representations, the title company disbursed the funds to accounts controlled by DiBenedetto and another. DiBenedetto allegedly used loan proceeds to pay the expense of the properties and to convert the loan proceeds to his personal use and benefit.

The charges are the result of an investigation by the Federal Deposit Insurance corporation (FDIC); the Federal Bureau of Investigation; and the U.S. Postal Inspection Service. The case is being prosecuted by Assistant U.S. Attorney Elly M. Peirson.

If convicted, each offense of bank fraud (four counts); wire fraud (four counts); and making a false statement on a loan application (four counts) carries a maximum statutory penalty of up to 30 years’ imprisonment and a fine of $1,000,000. Each count of money laundering (four counts) carries a statutory maximum penalty of 10 years in prison.

Members of the public are reminded that an indictment is merely an accusation; the defendant is presumed innocent unless proven guilty.

CINCINNATI—Four more participants in a mortgage fraud scheme involving luxury homes in the Cincinnati area have been sentenced in U.S. District Court here for their crimes. Seven people have now been sentenced as a result of the investigation.

Carter M. Stewart, United States Attorney for the Southern District of Ohio; Ohio Attorney General Mike DeWine; Warren County Prosecuting Attorney David P. Fornshell; Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI); Daniel M. McDermott, U.S. Trustee, Region 9; and other Cincinnati Mortgage Fraud Task Force participants today announced the sentences imposed by U.S. District Judge Timothy S. Black.

Eric D. Duke, 36, of Cincinnati, was sentenced today to 60 months in prison and ordered to pay $2,094,609.50 in restitution and forfeiture in the same amount. Duke pleaded guilty on September 14, 2010 to three counts of conspiracy and four counts of lying to a bank (“loan fraud”). Duke was a self-employed tax preparer and interior designer. He also owned a property management company called Rivendale Property Management Group, L.P., in Maineville, Ohio. Duke admitted that he fraudulently obtained more than $6 million in mortgages for four luxury homes by filing fraudulent loan applications in the names of others.

Bernard J. Kurlemann, 57, of Mason, was sentenced on Friday, April 1 to 24 months in prison and ordered to pay $1,115,409.50 in restitution for his role in the scheme in which he was able to walk away from $3.5 million in mortgage debt and in addition receive $500,000 in seller’s proceeds. His restitution order is based on the amount the lenders lost as a result of the fraud.

A jury convicted Kurlemann on November 11, 2010 following an approximate three-week trial on one count of conspiracy to commit loan fraud or lying to a bank and two counts of loan fraud (lying to a bank) in connection with the false statements Kurlemann made on purchase contracts and settlement statements when selling two of his companies’ luxury homes to straw buyers. The jury also convicted Kurlemann of bankruptcy fraud and other crimes connected with lying in his filings in Kurlemann Builders, Inc.’s (KBI) bankruptcy.

Terrence J. Monahan Jr., 36, of Cincinnati, a bank executive who ran the Exclusive Capital Management group at Huntington National Bank and participated in a loan fraud scheme in order to sell his Maineville house, was sentenced April 1 to 18 months in prison, fined $5,000 and ordered to pay $264,000 in restitution. Monahan pleaded guilty on October 28, 2010 to one count of making false statements on documents submitted to the U.S. Department of Housing and Urban Development (HUD).

Others involved in the scheme include:

Bryan Sanneman, 38, of Mason, owner of Sanneman Homes, Inc. Sanneman pleaded guilty on September 3, 2010 to two counts, conspiracy to commit loan fraud or lying to a bank and loan fraud (lying to a bank). He was sentenced on February 8, 2011 to 12 months and one day in prison and ordered to pay $369,000 in restitution.

Pam Sanneman, 62, of Mason, a former Sibcy Cline realtor and mother of Bryan Sanneman pleaded guilty on March 25, 2010 to one count of misprision of felony for knowledge of her son’s crime and failure to report it. She was sentenced on February 8, 2011 to three years’ probation, the first six months to be served on house arrest.

Two of the straw buyers also pleaded guilty to charges connected with their roles in the scheme. Christopher Gagnon, 37, of Florence, Kentucky, pleaded guilty to loan fraud. He was sentenced on February 8, 2011 to one day of time served and three years of supervised release. He was also ordered to pay $930,000 in restitution. Francisca Webster, 46, of Cincinnati, was sentenced today, also to one day of time served and three years of supervised release. Webster pleaded guilty to conspiracy to commit wire fraud.

The charges were the result of a two-year investigation by the Greater Cincinnati Mortgage Fraud Task Force.

Stewart commended the investigation by the Greater Cincinnati Mortgage Fraud Task Force. The Greater Cincinnati Mortgage Fraud Task Force is a multi-agency, multi-jurisdictional initiative dedicated to combating the mortgage fraud problem in the Southern District of Ohio.

The case was prosecuted by Assistant United States Attorney Jennifer C. Barry and Special Assistant United States Attorney Bruce A. McGary of the Warren County Prosecutor’s Office.

MCALLEN, TX—The former president and vice president of a McAllen-area bank and an area homebuilder have been convicted of bank fraud after pleading guilty yesterday, United States Attorney José Angel Moreno announced today.

Arsenio Alfaro, 45, and Elizabeth Aguirre 41, the former president and vice-president of Texas National Bank (TNB), and John Guzman, 33, a McAllen area homebuilder, each pleaded guilty to conspiracy to commit bank fraud as alleged in a superseding indictment returned by a federal grand jury on Dec. 28, 2010. Chief U.S. District Judge Ricardo Hinojosa, who accepted the guilty pleas and convicted each defendant, has set sentencing for July 1, 2011. All three face a maximum of 30 years in federal prison without parole and a $1 million fine. A fourth defendant charged in this case is set for trial in 2011, and is presumed innocent unless and until convicted through due process of law.

According to information presented in court, Guzman and one of his business associates—an alleged co-conspirator—owned several bank accounts at TNB beginning in December 2005. By the fall of 2006, the accounts had become overdrafted by thousands of dollars. Accordingly, then-TNB president Alfaro met with the alleged co-conspirator—with whom he had maintained a personal relationship—about resolving the overdrafted accounts and explained that an overdraft report, which listed all of the bank’s overdrafted accounts, was computer generated and circulated to TNB’s board of directors at the end of every month.

To conceal the overdrafts from the board, Alfaro agreed to allow checks from a closed account, previously held by Guzman’s alleged co-conspirator at another bank, to be deposited into the overdrafted accounts at the end of every month. The checks were to be made out in an amount greater than the negative balances in each account. While Alfaro knew these checks would be returned by the other bank for insufficient funds, the check deposits would make the accounts appear to be positive at the end of the month and, therefore, not reflected on the overdraft reports.

From September 2006 through May 2007, numerous checks were deposited into the overdrafted accounts to avoid the accounts being listed on the overdraft reports. Moreover, the accounts’ negative balances increased every month as a result of numerous debit transactions that were initiated, in part, by Guzman and approved by both Alfaro and Aguirre, who served as vice president at TNB. By May 2007, each account was overdrawn in excess of $100,000 which ultimately caused a loss of nearly $350,000 to TNB.

The investigation leading to the charges was conducted by FBI. Assistant United States Attorneys Greg Saikin and Jason Honeycutt are prosecuting the case.

WASHINGTON—Paul Allen, the former chief executive officer (CEO) at Taylor, Bean & Whitaker (TBW), pleaded guilty today to making false statements and conspiring to commit bank and wire fraud for his role in a $1.5 billion fraud scheme that contributed to the failure of TBW.

The guilty plea was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F.O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.

Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21, 2011.

According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas, and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.

According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.

Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank, and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.

Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP). Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name. This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.

In court today, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank. Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.

To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, the FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG, and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.

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

FORT MYERS, FL—United States Attorney Robert E. O’Neill announces the return by a grand jury of an indictment charging Jerry J. Williams (51, Forth Worth, Texas), formerly of Naples, Florida, with conspiracy to commit bank fraud and deceive federal and state bank examiners. Williams is also charged with two counts of misapplication of bank funds; two counts of making false entries in the reports of Orion Bank; mail fraud; wire fraud; and money laundering. If convicted, Williams faces the following maximum penalties in federal prison, respectively.

Conspiracy—five years
Misapplication of Bank Funds (two counts)—30 years (for each count)
Making False Entries (two counts)—30 years (for each count)
Making False Statements—five years
Mail Fraud—20 years
Wire Fraud (two counts)—30 years (for each count)
Money Laundering—10 years

According to the indictment, Williams was the president, chief executive officer, and chairman of the board of Orion Bancorp, Inc. and the former Orion Bank, a federally insured financial institution, that was headquartered in Naples, Florida. The indictment alleges that Williams orchestrated a complex conspiracy to fraudulently raise capital and falsify bank records in order to mislead state and federal regulators as to the bank’s true financial condition.

According to the indictment, beginning in May 2009, Williams directed executives and officers of Orion Bank to provide financing for two stock purchases, the results of which were large capital infusions into Orion Bancorp, Inc. These two capital infusions created the illusion to regulators that Orion Bank’s capital position had improved considerably.

The indictment states that the first round-trip transaction occurred in June 2009. Williams directed Orion Bank executives to increase, to $82 million, the amount of loans-inprocess to straw borrowers on behalf of Francesco “Frank” Mileto. Williams also directed the increase in loan proceeds in order to provide and conceal $15 million for Mileto’s purchase of Orion Bancorp, Inc. stock, despite knowing that banking laws and regulations prohibited Orion Bank from financing the purchase of its own stock.

Mileto allegedly provided fraudulent financial documents to Orion Bank, reporting millions of dollars of annual income from an Italian family trust. The indictment alleges that top Orion Bank executives discovered that Mileto had submitted fraudulent documents to support the June 2009 loans, as well as prior loans. However, Williams directed that the loans close despite this information, in order to secure the capital infusion to the bank. The stock was purchased through a series of transactions designed to conceal the true source of the funds from federal regulators. Williams was the only Orion Bank employee who had the authority to approve loans over $10 million for submission to the Orion Bank Board of Directors Loan Committee.

The second round-trip transaction occurred in June and July 2009. Williams directed Orion Bank employees to increase the amounts of loans-in-process to an Orion Bank depositor to $18 million, in order to provide and conceal $7 million of financing for the purchase of Orion Bancorp, Inc., despite knowing that banking laws and regulations prohibited the bank from financing the purchase of its own stock.

The indictment further alleges that Williams caused Orion Bank Executive Vice President Thomas Hebble to present loan packages regarding the round-trip transactions for approval to the Orion Bank Board Loan Committee, despite knowing that the loan packages contained materially false and misleading information. After Senior Vice President Angel Guerzon signed the fraudulent loans on behalf of Orion Bank, Williams lied to regulators about the true source of the funds, fraudulently categorizing the stock purchases as new capital, despite knowing that $22 million of the capital raised was financed by the bank. Further, the indictment alleges that when questioned about the transactions by state and federal examiners, Williams and other bank executives provided false documentation to examiners, designed to mislead the regulatory authorities as to the source of the capital infusion, and the true financial condition of Orion Bank.

The indictment also alleges that during June 2009, Williams sold personal shares of his Orion Bancorp, Inc. stock to three different individuals for $765,600 under false and fraudulent pretenses for his own personal gain. The indictment also notifies Williams that the United States is seeking a monetary judgment in the amount of $765,600.00, the proceeds from the stock purchases, as well as restitution to the victims as determined by the Court.

The State of Florida Office of Financial Regulation closed Orion Bank on November 13, 2009, and named the Federal Deposit Insurance Corporation (FDIC) as Receiver. The FDIC estimates that the cost to the Deposit Insurance Fund as a result of Orion Bank’s failure will exceed $600 million.

On March 31, 2011, Francesco Mileto (40, Tamarac), Thomas Hebble (50, Naples), and Angel Guerzon (42, West Palm Beach) were separately charged as a result of their participation in the scheme. Mileto was charged with conspiracy to commit bank fraud, while Hebble and Guerzon were charged with conspiracy to commit bank fraud and obstruction of a federal bank examination. If convicted, Mileto faces a maximum penalty of 30 years in federal prison. Hebble and Guerzon each face a maximum penalty of five years in federal prison.

“Financial institutions and their principals, in doing business with the public, are governed by specific laws and regulations,” said U.S. Attorney Robert O’Neill. “When these practices are breached, they undermine an entire system of accountability. Wherever found, such allegations must be investigated thoroughly and prosecuted to the fullest extent of the law.”

Elizabeth Coleman, Inspector General of the Federal Reserve Board Office of Inspector General (FRB – OIG) stated, “The FRB OIG is strongly committed to exercising its full authority to pursue criminal conduct. In addition, we are proud of the broad participation of our federal partners in combating fraud in the financial sector.”

“The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) is pleased to join the United States Attorney’s Office for the Middle District of Florida and our law enforcement colleagues in announcing this indictment,” said Inspector General Jon T. Rymer. “We are particularly concerned when senior bank officials, who have held positions of trust within their institutions, are either alleged to have been involved in criminal activity or admit their involvement in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions.”

“High-ranking bank executives hold positions of trust not only in their financial institutions but also in the eyes of the public. That trust is broken when such executives allegedly abuse their power and commit crimes,” said Tracey Montaño, Assistant Special Agent-in-Charge, Tampa Field Office. “IRS Criminal Investigation is proud to join with our law enforcement partners in announcing today’s indictment. We are committed to following the money and bringing to justice individuals who violate the law.”

An indictment is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.

This case was investigated by the Federal Reserve Board – Office of Inspector General, the Federal Deposit Insurance Corporation – Office of Inspector General, the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, and Special Inspector General for the Troubled Asset Relief Program. It will be prosecuted by Assistant United States Attorney Nicole H. Waid.

WASHINGTON—Sean W. Ragland, a former senior financial analyst at Taylor, Bean & Whitaker (TBW), pleaded guilty today to conspiring to commit bank and wire fraud for his role in a scheme that defrauded approximately $1.5 billion from financial investors in TBW’s mortgage lending facility, Ocala Funding.

The guilty plea was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA OIG); and Victor F.O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.

Ragland, 37, of San Antonio, Texas, pleaded guilty before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Ragland faces a maximum penalty of five years in prison when he is sentenced on June 21, 2011.

According to a statement of facts submitted with his plea agreement, in 2005 TBW established a wholly owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas, and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.

Ragland had tracking and reporting responsibilities with respect to Ocala Funding, and today he admitted that from 2006 through August 2009, he and other co-conspirators engaged in a scheme to mislead investors and auditors as to the financial health of the lending facility. According to court records, shortly after Ocala Funding was established, Ragland learned there were inadequate assets backing its commercial paper. Ragland tracked this deficiency, which was referred to internally at TBW as a “hole” in Ocala Funding. He reported the status of the “hole” to senior TBW executives, including its CEO and CFO. Ragland was also aware that TBW co-conspirators were improperly transferring hundreds of millions of dollars from Ocala Funding to TBW accounts. At the time that TBW ceased operations, the hole was approximately $1.5 billion.

Ragland admitted that, at the direction of other co-conspirators, he prepared documents that inaccurately and intentionally inflated figures representing the aggregate value of the loans held in Ocala Funding or under-reported the amount of outstanding commercial paper. He sent this false information to the financial institution investors, other third parties, and an outside audit firm.

To date, four other individuals have pleaded guilty to charges for their roles in this and related fraud schemes.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC OIG, HUD OIG, FHFA OIG, and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.

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

PHILADELPHIA—Marisol Morales, 40, of Philadelphia, was sentenced today to two years and one day in prison for bank fraud and aggravated identity theft stemming from her role in a scheme that defrauded her employer, Wachovia Bank, of more than $300,000, announced United States Attorney Zane David Memeger. Morales pleaded guilty on May 11, 2009 to four counts of aggravated identity theft and one count of bank fraud.

From July 2006 through January 2007, while working as a Wachovia Bank customer service representative, Morales sold confidential bank account information and signature cards to another person enabling fraudulent checks to be written and withdrawals to be made on those accounts. The face value of all of the fraudulent checks and withdrawal slips was $532,279.11. Because some of the checks were cashed for less than face value or tellers stopped the transaction, the total amount stolen from Wachovia Bank was $367,003.43.

In addition to the prison term, U.S. District Court Judge Berle M. Schiller ordered Morales to pay restitution in the amount of $367,003.43, pay a $500 special assessment, and complete five years of supervised release.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Emily McKillip.

Defendants Paid Bribes to a Bank Employee to Obtain $2.45 Million in Loans

PREET BHARARA, the United States Attorney for the Southern District of New York, JANICE FEDARCYK, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and CHARLES PINE, Special Agent in Charge of the New York Field Office of the Internal Revenue Service (“IRS”), announced the filing of charges against CHRISTOPHER CAVOUNIS and JAGDESH COOMA for orchestrating a scheme to defraud several banks of at least $10 million by obtaining commercial loans and lines of credit using false and fraudulent documents. As part of the scheme, CAVOUNIS and COOMA allegedly submitted applications for loans in the names of shell companies with no assets, and with straw owners, using fraudulent documents created to trick the banks into believing those entities were real. The defendants also paid bribes totaling over $135,000 to an employee of Citibank to obtain $2.45 million worth of loans.

Manhattan U.S. Attorney PREET BHARARA stated: “The defendants engaged in a breathtaking array of elaborate financial schemes, obtaining millions of dollars from banks using fraudulent documents and misappropriated identity information. These charges should send a message that, along with our partners at the FBI and IRS, we will vigorously pursue those who make it harder for law-abiding companies to obtain credit during these difficult economic times.”

FBI Assistant Director in Charge JANICE K. FEDARCYK stated: “The defendants concocted an intricate scheme using false documents and identity theft to fraudulently obtain $10 million in bank loans. By further using bribery and threats of violence, the defendants showed that their only objective was to make a profit themselves. Committing financial crimes of this magnitude undermines the integrity of the financial process created to help American businesses succeed.”

IRS Special Agent in Charge CHARLES PINE stated: “Bank fraud, like all financial crimes, adds to the underground economy, erodes the integrity of our tax system and threatens the financial health of our communities. IRS-Criminal Investigation is always ready to work with our law enforcement partners and lend its financial investigative expertise to investigations like this one.”

According to the indictment and the complaint previously filed in Manhattan federal court:

From at least 2009 to November 2010, CAVOUNIS and COOMA allegedly obtained, through fraud, at least 16 commercial loans and/or lines of credit, totaling at least $10 million, from eight different lenders—Capital One Bank, N.A.; Citibank, N.A. (“Citibank”); First Republic Bank; Herald National Bank; New York Commercial Bank; Signature Bank; Sovereign Bank; and TD Bank, N.A. (collectively, the “Lenders”). All of these loans are presently in default. To trick the Lenders into providing the loans, CAVOUNIS and COOMA engaged in an elaborate scheme in which they prepared and then submitted applications and supporting documentation for commercial loans that contained false and misleading information on behalf of empty shell companies with no existing business or assets.

As part of the alleged scheme, CAVOUNIS and COOMA recruited straw borrowers who provided personal identifying information to the defendants in exchange for future payment. With the information in hand, the defendants represented these individuals to be the owners or executives of various companies in applications for loans from the Lenders. In addition, CAVOUNIS and COOMA provided the Lenders with fraudulent documentation in support of those applications, which they had created, and which purported to accurately reflect the personal and financial information of each straw owner, and/or corresponding company. This documentation included falsified tax returns, identification documents, and bank or other financial statements. Unbeknownst to the Lenders, however, the straw borrowers were in no way affiliated with those companies, which were themselves complete shams with neither existing businesses nor actual earnings and income. CAVOUNIS, in connection with certain applications, also assumed the identity of another individual himself and provided financial institutions with a fraudulent driver’s license in the name of that individual.

Furthermore, to help obtain the loans, over the course of an approximately four month period in 2010, CAVOUNIS paid a Citibank employee in excess of $135,000 in bribes to secure approval for several lines of credit, in the total approximate amount of $2.45 million, which were issued to empty shell companies he controlled.

When one of the banks froze a line of credit obtained through the scheme, CAVOUNIS allegedly resorted to threats in an attempt to obtain the loan. For example, in October 2010, after Citibank approved a $450,000 line of credit but subsequently froze funding when CAVOUNIS attempted to withdraw that entire amount within mere days of approval, he threatened two Citibank bankers with physical violence unless the loan proceeds were made immediately available to him.

CAVOUNIS, 30, of Fresh Meadows, New York, and COOMA, 27, of Fresh Meadows, New York, are each charged with one count of conspiracy to commit bank fraud and four substantive counts of bank fraud, each of which carry a maximum sentence of 30 years in prison, as well as one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison which must run consecutively to any other sentence imposed. CAVOUNIS and COOMA were previously charged in a complaint and were arrested on November 26, 2010. The case is assigned to U.S. District Judge ROBERT P. PATTERSON.

BIRMINGHAM—A federal grand jury today indicted an Odenville man and former employee of First Financial Bank for bank fraud, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley, FDIC Office of Inspector General Special Agent in Charge Jason Moran, and Postal Inspector/Domicile Coordinator Frank Dyer.

The one-count indictment charges MARC COREY MITCHELL, 41, a former manager of the First Financial Bank branch in McCalla, with bank fraud related to his solicitation of money from a bank customer while the customer was attempting to conduct bank business.

“While most bank employees are honest and helpful, those who aren’t must be held to account,” Vance said. “My office will continue to prosecute these individuals,” she said.

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the United States Attorney’s Office and our law enforcement colleagues from the FBI in announcing this indictment,” said FDIC Inspector General Jon T. Rymer. “We are particularly concerned when former senior bank officials, who have held positions of trust within their institutions, are alleged to have been involved in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions,” Rymer said.

Upon conviction, Mitchell faces a maximum sentence of 30 years in prison and a $1 million fine.

This case was investigated by the FBI, the Inspector General’s Office of the Federal Deposit Insurance Corporation, and the U.S. Postal Inspection Service. Assistant U.S. Attorney Melissa K. Atwood is prosecuting the case.