There’s no telling why the FBI chooses to highlight one real estate fraud bust over another, but buried deep within a recent report about Operation Homewrecker–an extensive mortgage fraud investigation by the FBI and IRS–was a very telling piece of information. According to Drew Parenti, Special Agent in Charge of the FBI’s Sacramento office:
“Mortgage Fraud has recently been elevated to the FBI’s highest financial crime priority, and we are attempting to address the numerous reports of fraud within the real estate industry that have occurred across the country.”
Parenti went on to say that the FBI is focusing more attention than ever on industry professionals, the insiders “who have manipulated the mortgage loan process for their own financial gain.”
Parenti’s comments come on the heels of one of the FBI’s latest real estate fraud-related indictments. According to Assistant U.S. Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi, who are prosecuting the case, the charges are broken out into two separate indictments, “Head One” and “Head Two.”
Two days ago, the FBI announced the indictment of 19 individuals for mortgage fraud-related offenses under Operation Homewrecker. The leader of the nationwide scam was Charles Head, 33, of Los Angeles, California, who targeted homeowners in dire financial straits, fraudulently obtaining title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages.
According to the trio of Assistant U.S. Attorneys prosecuting the case, a federal grand jury returned the first set of charges in a 13-count indictment against 16 defendants with violations of mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering and other related offenses. “Head One” involved a “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all of whom were located in California.
From January 2004 to mid-March 2006, the defendants contacted desperate homeowners, offering two options allowing them to avoid foreclosure and obtain thousands of dollars up-front to help pay mounting bills. If the homeowner could not qualify for the first option, which virtually none could, they would be offered the second option. Under the latter option, an “investor” would be added to the title of the home, to whom the homeowner would make a rental payment of an amount allegedly less than their mortgage payment, thereby allowing the homeowner to repair their credit by having the mortgage payments made in a timely fashion.
Unfortunately all of this was a scam. The defendants would recruit straw buyers as the investors and oftentimes these individuals would in fact replace the homeowners on the titles of the properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants would then share the proceeds of the ill-gotten equity and rent being paid by the victim homeowner. When the defendants ultimately would sell the home, stop making the mortgage payment, and/or pursue an eviction proceeding, the victim homeowner was left without their home, equity, or repaired credit.
The following defendants were charged in the February 28, 2008 “Head One” indictment:
- Charles Head, 33, of La Habra, California
- Jeremy Michael Head, 30, of Huntington Beach, California
- Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California
- Leonard Bernot, 51, of Laguna Hills, California
- Akemi Bottari, 28, of Los Angeles, California
- Joshua Coffman, 29, of North Hollywood, California
- John Corcoran, aka Jack Corcoran, 52, of Anaheim, California
- Sarah Mattson, 27, of Phoenix, Arizona
- Domonic McCarns, 33, of Brea, California
- Anh Nguyen, 36, of Los Angeles, California
- Omar Sandoval, 32, of Rancho Cucamonga, California
- Xochitl Sandoval, 29, of Rancho Cucamonga
- Eduardo Vanegas, 28, of Phoenix, Arizona
- Andrwe Vu, 39, of Santa Ana, California
- Justin Wiley, 28, of Irvine, California
- Kou Yang, 32, of Corona, California
On March 13, the federal grand jury returned a five-count indictment in “Head Two” against seven defendants, including:
- Charles Head, John Corcoran, Kou Yang, each also charged in “Head One”
- Keith Brotemarkle, 42, of Johnstown, Pennsylvania
- Benjamin Budoff, 41, of Colorado Springs, Colorado
- Domonic McCarns, 33, of Brea, California
- Lisa Vang, 24, of Westminster, California
“Head Two” involved an equity-stripping scheme that netted approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. While still targeting distressed homeowners and defrauding mortgage lenders through the use of straw buyers, this time Charles Head altered the scheme so that he would receive approximately 97% of the stolen equity, while his employees, and the other defendants, would receive either the remaining 3% of equity or a salary from the fraudulently-obtained funding.
Instead of recruiting friends and family members as straw buyers, as in “Head One,” in “Head Two” the defendants recruited strangers via the Internet. They also used referrals from mortgage brokers to identify and solicit new victim homeowners. Beyond advertising on the Internet, the defendants also would send blast faxes to mortgage brokers throughout the United States and generate mass emails to potential victims. Through material misrepresentations and omissions, victim homeowners would be offered what appeared to be their last best chance to save their homes. Unfortunately, as in “Head One,” these victims also were left without their homes, equity, or repaired credit.