A former mortgage broker was sentenced to 78 months in federal prison for a fraud scheme that involved buying houses in some of Southern California’s most ritzy neighborhoods and selling them to fake buyers at inflated prices.

Mark Alan Abrams of Los Angeles was also ordered Friday to pay more than $41 million in restitution to two federally insured banks.

Abrams, 49, had pleaded guilty to bank fraud, conspiracy to commit bank fraud and loan fraud, making a false statement on a tax return and obstruction of justice.

In issuing the sentence, U.S. District Court Judge Dean D. Pregerson noted that Abrams’ willingness to defraud banks, utilize credit information belonging to unknowing victims and compel employees to participate in the scheme was “particularly evil.”

Abrams and his business partner, Charles Elliott Fitzgerald, bought homes in neighborhoods like Beverly Hills, Bel Air, Malibu, La Jolla and Carmel, and then used fraudulent appraisal information to resell them for inflated amounts to fake buyers who purchased the properties with loans, prosecutors said.

Fitzgerald, a real estate developer, was sentenced last year to 14 years in federal prison. He had pleaded guilty to conspiracy to commit bank fraud and loan fraud, running a continuing financial crimes enterprise, money laundering, obstruction of justice and three counts of bank fraud.

The pair recruited the borrowers, repeatedly lied about the homes’ value and ran escrow companies to promote the scheme, according to prosecutors.

Over three years, Lehman Brothers Bank funded 80 loans worth $137 million — $50 million more than what was actually needed to pay for the homes, prosecutors said.

Fitzgerald and Abrams reaped millions of dollars from the inflated loans and passed kickbacks on to their associates through commissions.

When Lehman Brothers sued Fitzgerald and others involved in the scheme in April 2003, Fitzgerald hid his assets and fled the country.

He lived in Samoa until being extradited to Los Angeles in December 2006.

A total of 11 real estate professionals have been convicted of federal charges related to the scheme.

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

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

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

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

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

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

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

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner, FBI Special Agent in Charge Drew S. Parenti, and IRS Special Agent in Charge Scott O’Briant announced that a federal grand jury in Sacramento returned an indictment on Thursday, charging eight persons in a real estate investment fraud scheme operated under the name of Heaven Investments. The following individuals are charged in the indictment:

* Akbar Bhamani, 56, of Carmichael, CEO, Heaven Investments
* Aly Khan Bhamani, 28, of Carmichael, Vice President, Heaven Investments
* Zainulabidin Akbar Bhamani, 30, of Sherman Oaks, Vice President, Heaven Investments
* Laila Bhamani, 57, of Tracy, Finance Department, Heaven Investments
* Feroza Bhamani, 55, of Carmichael, Finance Department, Heaven Investments
* Ken Sarna, 46, of Vallejo, Director of Operations, Heaven Investments
* John Pierre Quintana, 30, of Dixon, Director of Marketing, Heaven Investments
* Shaun Bhamani, 26, of Valencia, Loan Officer, Global Financial & Assets Inc.

The first seven defendants are charged with 15 counts of mail fraud and wire fraud in connection with the scheme to defraud investors of over $11.4 million through a company called Heaven Investments Holding Co. (HIHC). HIHC was a family-run real estate development company in Sacramento that offered investors two principal types of investments. The first was called the Planned Income Program that promised to use investor money to acquire residential single-family dwellings that would be renovated and resold for a profit. The second was the Tenants in Common program that promised to use investor money to develop four pieces of property known as Mission Manor, Alder Heights, Walnut Acres, and the Hegenberger Hotel. Investors were promised a 12 - 15 percent annual return.

According to the indictment, the defendants claimed that the investment was safe because it would be secured by a deed of trust on the property in which the investor would be in no worse than second or third position and that the indebtedness on the property would never exceed 70 percent of the value of the property. In fact, the indictment alleges, HIHC had acquired the properties through 100 percent financing from private lenders. Further, the defendants’ promise was illusory because either HIHC failed to actually place the investor on the deed as promised or on those occasions when HIHC did put an investor’s name on the deed, the property frequently had multiple investor names and was leveraged by as much 300 to 400 percent.

The indictment also charges that the defendants led investors to believe that HIHC was more efficient than other development companies of its kind because it had its own in-house architectural staff and construction company. As a consequence, the defendants would routinely make promises that a particular property such as Mission Manor or Alder Heights would be completed within a few months. In fact, HIHC did not have a team of architects or a construction company and, after nearly three years of soliciting investors’ money, HIHC had not moved beyond the permit stage on any of the TIC properties.

The indictment also alleges that HIHC operated like a Ponzi scheme in that the source of the funds used to make interest payments to investors was not from profits but rather from money obtained from new investors. Because of this, a recurring problem at HIHC was a scramble for money with which to pay investors. The defendants would use various devices to stall investors including intentionally failing to sign the check and telling the investor that the check had been lost in the mail.

The indictment charges that in an attempt to raise money for HIHC, three of the defendants—Zain Bhamani, Aly Bhamani and Shaun Bhamani—engaged in a separate mortgage fraud scheme. They are charged with eight counts of mail fraud in connection with that scheme. Zain Bhamani is alleged to have recruited two straw buyers to purchase eight properties owned by HIHC. Shaun Bhamani, who is a mortgage broker in Los Angeles and a cousin of Zain and Aly Bhamani, handled all the transactions. Seven of the eight properties involved in the scheme went into foreclosure resulting in losses to the lenders of approximately $775,000. The remaining property is currently in foreclosure. Zain Bhamani and Aly Bhamani are also charged with seven counts of money laundering.

The maximum statutory penalty for the indicted charges are as follows: 20 years for each count of wire fraud, 20 years for each count of mail fraud, and 20 years for each count of money laundering. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

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

This case is the product of an investigation by the FBI and the IRS, Criminal Investigation. Assistant United States Attorney R. Steven Lapham is prosecuting the case.

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

The California Attorney General has just joined the Department of Real Estate and the State Bar to issue a warning to homeowners about what they termed an ‘alarming rise’ in short sale fraud in California in a field “rife with scam artists.” Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees.

As banks are taking back fewer homes and new federal programs (HAFA) are put in place to encourage homeowners to consider a short sale as an alternative to foreclosure, all the mortgage fraud, loan mod fraud and other real estate fraud scam artists are coming out of the woodwork to exploit yet another niche as desperate homeowners struggle with their options.

These scams generally take one of three tracks:

The homeowner is approached by a so-called “short-sale negotiator, expeditor, consultant” etc. With limited exceptions, short sale negotiations can only be conducted by a licensed real estate agent or an attorney. Even a real estate agent who subsequently hires one of these short sale negotiators is putting their license at risk. As a seller, you should never be charged an up-front fee for your short-sale transaction. Buyers should also be wary if the seller’s agent or negotiator demands a surcharge or hidden fee before your offer is even submitted or prior to close of the transaction. These fees are typically demanded outside of escrow so no paper trail is generated. Unlicensed “experts” and unusual fee demands should be reported immediately to 1-800-952-5225 or www.ag.ca.gov/consumers/general.php.

While there is nothing inherently wrong with property flipping, many scam artists employ “straw buyers” to complete a fraudulent transaction. They will “game” the lender holding the mortgage by submitting only low-ball offers; then, when that lender agrees to the lower price, will immediately sell the house to a higher bidder. Many times they will attempt to use a “concurrent close” so they have no money out of pocket – the lender funding the mortgage pays off the lender selling the property and the middle-man just scrapes off the excess. Not only is this a form of fraud but may result in the holder of a first or second mortgage to pursue recourse action against the original homeowners for the difference.

Fraudulent rental scams. Imagine you are one of the thousands of local homeowners who got caught in the pinch and lost your home. You scrape together your last few dollars to come up with first and last month’s deposit on a rental house and the cost of a moving truck. You sign a year lease but four months down the road you find a notice tacked to your door informing you the property is going back to the bank because the owner is delinquent. That’s right – you’ve been making your payments to the owners and they’ve just been pocketing the cash and you’re the one who’s out of luck.

Good luck finding somebody to help you with that one. In fact, if you quit making payments to the landlord they can come after you because you signed a lease agreement with them – never mind that they lied and are scamming their lender. Best bet – do your homework up front. Demand a current property profile from your rental agent showing that there is no notice of delinquency or foreclosure filed on the property. Remember, if the deal sounds too good to be true there’s a better than average chance it is. There’s no shortage of unscrupulous scam artists out there who will tell you what you want to hear instead of what you need to hear. For any real estate transaction, purchase or rent, always deal with a professional.

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced that last Thursday a federal grand jury returned a 48-count indictment charging 10 defendants with conspiracy to commit mortgage fraud, mail fraud, and making false statements in mortgage applications to federally insured banks. The indictment was unsealed yesterday.

The defendants are as follows:

* Hoda Samuel, 58, of Elk Grove,
* Connie Devers, 40, of Elk Grove,
* Dana Faulkner, 43, of Oakland,
* Charles Robert Maness, 32, of Elk Grove,
* Tracy Painter, 50, of Lodi,
* Sean Patrick Gjerde, 34, of Elk Grove,
* Ronald Burris, 36, of Elk Grove,
* Ygnacia Bradford, 34, of Oakland,
* Nicole Dawson, 40, of Oakland, and
* Daniel Harrison, 40, of San Diego.

This case is the product of an extensive investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney Philip Ferrari is prosecuting the case.

According to the indictment, Hoda Samuel, a licensed real estate broker, was the head of two Elk Grove companies engaged in residential real estate transactions: Liberty Real Estate and Investment Company and Liberty Mortgage Company. From April 2006 through February 2007, Liberty was involved in approximately 30 residential real estate transactions in which the mortgage lenders were given false information as to the income of the purchasers and/or the value of the homes being purchased. At least 28 of the properties have since gone into foreclosure, resulting in a loss to lenders of over 5.5 million dollars.

As part of the scheme, conspirators at Liberty Mortgage Company prepared loan applications for borrowers that contained false employment information and inflated income. Connie Devers and Dana Faulkner, both of whom were unlicensed by the Department of Real Estate, would help prepare such loan applications. When a mortgage lender would attempt to verify this information by calling the purported employer, the lender often spoke to a Liberty employee or associate who falsely verified the information. Ygnacia Bradford, Tracy Painter and Nicole Dawson are all alleged to have provided false verifications of information in loan applications to lenders. On more than one occasion, such false verifications were provided by Sean Gjerde, an Elk Grove attorney, who wrote letters to lenders falsely claiming to have prepared tax returns for individual purchasers and falsely verifying the employment information in their applications.

The indictment alleges that Liberty typically offered sellers $15,000 to 40,000 more than the asking prices for properties. At times the purchase agreements would come with addendums that called for the difference between the two prices to be diverted at closing to contracting companies so that the homes could be remodeled and rendered compliant with the Americans with Disabilities Act. Charles Robert Maness, a licensed real estate broker with Liberty, is charged with falsely assuring a seller’s agent that a particular transaction was financed by a special program for persons with disabilities to make changes to their homes. In fact, such remodeling was seldom if ever done, and the payments were funneled indirectly back to Liberty clients. Because the addendums calling for these payments were usually withheld both from appraisers and mortgage lenders, the lenders were typically unaware that the true purchase price for each property was below the total amount funded by the lender.

Of the 30 properties that are the subject of the indictment, 20 of them were purchased by buyers who bought more than one residence, representing that they intended to live in each. Ronald Burris Jr. bought three properties over the 11-month period. When a single purchaser bought more than one residence, Liberty would typically arrange for the transactions to be handled by separate title companies, and submit the loan applications to separate mortgage lenders. In addition, the purchases would be scheduled to occur close in time to each other so that one purchase would not appear in a credit report run in connection with a subsequent purchase.

The maximum statutory penalty for mortgage fraud committed through use of the mails is a sentence of 20 years in prison. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

In a separate mortgage fraud case, the U.S. Attorney’s Office arrested two defendants in Kern County. The defendants, Eric Ray Hernandez, 34, Monica Marie Hernandez, 29, and Evelyn Brigget Sanchez, 27, all of Bakersfield, were charged in an indictment returned last Thursday by a federal grand jury in Fresno. The defendants made their initial appearances before a U.S. Magistrate Judge in Fresno yesterday. That case was investigated by the FBI and the IRS, Criminal Investigation, and is being prosecuted by Assistant US Attorney Kirk Sherriff.

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

FRESNO—United States Attorney Benjamin B. Wagner announced today that a federal grand jury returned a 30-count indictment charging Tony Huy Havens, 36, of Modesto, California, with wire fraud and criminal forfeiture.

According to the indictment, Havens targeted victims in at least eight states who were seeking multi-million-dollar loans for large construction projects that were in danger of foreclosure. Havens provided the victims with fraudulent documents that showed a third-party lender was prepared to make a loan to the victim. On Havens’ instructions, the victims wire transferred money into a bank account controlled by Havens to pay in advance certain costs associated with the loans. No loans were ever made. In total, Havens represented that he could arrange at least $1.1 billion in financing for at least 15 victim borrowers, and collected at least $248,750 by wire transfers from these victim borrowers.

The maximum statutory penalty for a violation of wire fraud is 20 years in prison and a $250,000 fine on each count. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an extensive/joint investigation by the Federal Bureau of Investigations and the Stanislaus County District Attorney’s Office. Assistant United States Attorney Mark J. McKeon is prosecuting the case.

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

SACRAMENTO - United States Attorney Benjamin B. Wagner announced today that Ralondria Stafford, 36, and Necole Ward, 31, both formerly of Vallejo, pleaded guilty today before United States District Judge Morrison C. England, Jr., to Bank Fraud.

According to court documents, from 2004 through 2006, Stafford and Ward, who are sisters, operated RN Realty, a real estate office located in Vallejo, California, from which they carried out a scheme to commit mortgage fraud by using straw buyers to purchase properties at inflated prices. The straw buyers were approached and offered $5,000 for the use of their names, credit histories, and financial information. The defendants represented to the straw buyers that the purchases would be in name only and that the properties would be repurchased by Stafford and Ward from the straw buyers in 6 to 12 months. With one of the straw buyers, the defendants signed a document called the “The $5,000 Deal,” with the terms of the straw buyer agreement.

In August 2005, Stafford and Ward sold a property in Vallejo, owned by Stafford’s husband to straw buyer “J.G.” “J.G.” received a loan based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Attached to the application were falsified Internal Revenue Service W-2 forms and a lease agreement.

As a result of these false statements, a mortgage company funded a $475,000 loan to the straw buyer for the purchase of the property. Neither Stafford or Ward ever repurchased the property from the straw buyer. Public records indicate that one year after the sale, in August 2006, the property was foreclosed upon and resold for approximately $400,000.

In April 2006, Stafford and Ward sold Ward’s house in Vallejo to straw buyer “C.S.” A mortgage company funded a $1,000,000 loan to the straw buyer for the purchase of the property based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Among the false representations on the application were the fact that the straw buyer had a monthly salary of $6,000 and earned $13,000 in rental income; neither of these statements were true.

On April 17, 2006, a title company wired $97,279.00 to Ward. This money represented Ward’s equity in the property and her profit from the sale. Ward directed that this money be deposited into accounts controlled by Stafford and Ward and that it be disbursed to pay Ward’s creditors.

Neither Stafford or Ward repurchased the property from the straw buyer. Public records indicate that eight months after the sale to the straw buyer, the property was sold in a foreclosure sale for approximately $800,000.

The defendants are scheduled to be sentenced by Judge England on August 26, 2010, at 9:00 a.m. The maximum statutory penalty for Bank Fraud is 30 years’ imprisonment, a $1,000,000, a term of supervised release of five years, and a special assessment of $100. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney Kyle Reardon is prosecuting the case.

SACRAMENTO, Calif. - The California Department of Real Estate (DRE) continues to unearth and close down unscrupulous and unlicensed loan modification companies who prey on financially stressed homeowners. These companies seek out homeowners who are facing foreclosure and promise to obtain a loan modification, but once the homeowner pays a fee, little or nothing is done to get the homeowner’s loan modified.

In 2009, the DRE filed actions against nearly 600 persons and entities that were providing loan modification services illegally. Another 150 such actions were filed in the first four months of 2010. For a complete list of actions filed by the DRE involving loan modification complaints visit http://www.dre.ca.gov/cons_drs.asp.

“These scammers are good at what they do. They promise to save your home; offer financial relief. Instead, they take your money and provide little or no services,” stated Real Estate Commissioner Jeff Davi. “Homeowners seeking loan modification services must exercise caution and due diligence to ensure they do not fall victim to a scam.”

If you are seeking a loan modification or looking for alternatives to foreclosure, taking the following precautions can prevent you from falling for a scam:

Never pay an upfront fee. A recent change to the law makes it illegal to collect advance fees for loan modification services. The advance fee prohibition extends to attorneys, real estate licensees and foreclosure consultants.

Look for free alternatives. The U.S. Department of Housing and Urban Development (HUD) offers Foreclosure Avoidance Counseling through non-profit agencies. Go to HUD’s web site at www.hud.gov or call 800-569-4287. The HOPE NOW Alliance, which consists of a cooperative effort of home loan counselors and lenders, offers free loan modification assistance and can be contacted at 888-995-HOPE or visit its web site at www.hopenow.com.

Do it yourself. The DRE has some practical tips for homeowners who want some practical guidance in obtaining a loan modification with their lender.

Check Credentials. Do not engage the services of an unlicensed loan modification firm! Persons or companies who charge a fee for loan modification services generally must be a licensed as a real estate broker or a lawyer. Check out a broker’s credentials at the DRE’s web site at www.dre.ca.gov. Check out lawyers at www.calbar.ca.gov. And remember, never pay an advance fee for loan modification services! Also check with the local Better Business Bureau.

SAN DIEGO—A 10-count indictment has been unsealed charging six individuals with conspiracy to commit wire fraud and wire fraud, announced U.S. Attorney Karen P. Hewitt. The defendants are charged with submitting false and fraudulent mortgage loan applications and related documents to banks and other lending institutions, thereby inducing the institutions to make approximately 36 loans totaling approximately $20,800,000.

The defendants charged with participating in the conspiracy are: Brian Andrew La Porte; Daniel John Schuetz; Michael Wayne Wickware; Roxanne Yvette Hempstead; Darryl Anthony Wallace, aka Darryl Anthony White; and Terrence Smith, aka Terry Lee Smith. The indictment alleges that the defendants devised a scheme to defraud mortgage lenders and to obtain money and property by false and fraudulent means and diverted the proceeds for their personal use and benefit.

According to the indictment, from May 2008, the defendants agreed to submit false loan applications to mortgage lenders to obtain financing to purchase residential properties. The defendants recruited “straw buyers” who had sound credit histories but who otherwise would not have qualified to purchase the residential properties selected by the defendants. The indictment further alleges that, as part of the conspiracy, Brian Andrew La Porte and Daniel John Schuetz prepared fraudulent loan applications on behalf of the straw purchasers, falsely stating the employment and monthly salaries of the straw purchasers.

The indictment further alleges that the defendants submitted fraudulent loan applications on behalf of the straw purchasers to mortgage lenders, including OwnIt Mortgage Solutions Inc., WMC Mortgage Corp., Argent Mortgage Company, Countrywide Home Loans, First Franklin, Finance America LLC, and other mortgage lenders. The defendants then caused escrow agents to disburse the funds to the defendants and others so that the defendants could divert to themselves and others the proceeds of the fraud.

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 to launch 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 Special Inspector General for the Troubled Asset Relief Program co-chairs the task force’s Rescue Fraud Working Group.

The case is the product of an investigation by agents of the FBI and is being prosecuted in San Diego federal court by Assistant U.S. Attorney Jonathan I. Shapiro.

An indictment itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

Additional Information:

Case Number: 10cr1863LAB

Brian Andrew La Porte Age: 34 San Diego, California

Daniel John Schuetz Age: 37 San Diego, California

Michael Wayne Wickware Age: 54 Temecula, California

Roxanne Yvette Hempstead Age: 53 Chula Vista, California

Darryl Anthony Wallace Age: 47 San Diego, California

Terrence Smith Age: 45 San Diego, California

Summary of Charges:

Count 1:
Title 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud
Maximum Penalties: 20 years in custody, $250,000 fine

Counts 2-10:
Title 18, United States Code, Section 1343 - Wire Fraud
Maximum Penalties: 20 years in custody, $250,000 fine

The defendants are next scheduled to be in court on June 28, 2010 at 2:00 p.m. before United States District Court Judge Larry A. Burns.

San Diego - United States Attorney Karen P. Hewitt announced that Michael Alexander, the owner of several San Diego telemarketing companies involved in a real estate investment fraud scheme, was sentenced today in federal court in San Diego to serve 30 months in prison and three years of supervised release based on his previous convictions for mail and tax fraud. U.S. District Court Judge Roger T. Benitez also ordered Alexander to pay restitution in the amount of $1,799,580.78 to the victims of the fraud scheme and to the Internal Revenue Service (IRS) for unpaid taxes.

According to court records, Alexander pled guilty on April 24, 2008, to charges of mail fraud and filing a false tax return. In his plea, he admitted that he formed the Rose Fund, LLC, to solicit investor money to fund loans secured by real property and that he formed TRF Holdings, Inc., a related entity, to provide “seed money” to capitalize the Rose Fund. Alexander hired a convicted felon, William Wright, to be his lead salesman.

Alexander further admitted that, in order to make sales, they misrepresented to investors, among other things, that investor funds were safe and would be used to make loans secured by real estate; they would receive a 5 percent sales commission; and that the businesses were well-established, successful, and operated by experienced real estate professionals. They also intentionally misled TRF Holdings, Inc. investors into believing that their investments would be used to fund real estate loans rather than provide seed money for the Rose Fund. In addition, they concealed from investors that Wright had been previously convicted of mail and wire fraud and that the Securities and Exchange Commission (SEC) had begun an investigation of the Rose Fund in April 2003. After learning of the April 2003 SEC investigation, Alexander solicited more than $2 million from new and existing investors by concealing the existence of the SEC investigation.

In pleading guilty, Alexander admitted that he fraudulently obtained more than four million dollars from more than 100 investors during the one year that the fraud scheme operated between October 2002 and October 2003. Although investors were promised that their investments would be used to make secured real estate loans, Alexander funded only 16 loans totaling $1.8 million. By contrast, Alexander fraudulently diverted more than $1.4 million of investor funds to himself and $665,000 to Wright.

In May 2008, Wright was indicted in San Diego on federal fraud charges stemming from his involvement in the Rose Fund/TRF fraud scheme. In February 2010, Wright pled guilty in a federal court in New York to conspiracy to commit mail and wire fraud and is scheduled to be sentenced on May 25, 2010.

This case was investigated by Special Agents of the Internal Revenue Service - Criminal Investigation, the United States Postal Inspection Service, and the Federal Bureau of Investigation.

DEFENDANT
Case Number: 07Cr1237BEN
Michael Alexander

SUMMARY OF THE CHARGES
Count 1 - Title 18, United States Code, Section 1341 - Mail Fraud
Count 2 - Title 26, United States Code, Sections 7206(1) - Filing a False Tax Return

PARTICIPATING AGENCIES
Internal Revenue Service - Criminal Investigation
United States Postal Inspection Service
Federal Bureau of Investigation

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner and Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division announced today that Anthony B. Ghio, 43, of Stockton, pleaded guilty today before United States District Judge Edward J. Garcia to conspiring to rig bids at public real estate foreclosure auctions held in San Joaquin County.

These charges arose from an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the U.S. Attorney’s Office for the Eastern District of California, the Antitrust Division’s San Francisco Office, the Federal Bureau of Investigation, and the San Joaquin County District Attorney’s Office.

According to Assistant United States Attorneys Robin R. Taylor and Russell L. Carlberg, who are prosecuting the case with assistance from Barbara Nelson and Richard Cohen of the Antitrust Division, Ghio admitted in his guilty plea that he conspired with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices.

Court documents show that after the conspirators’ designated bidder bought a property at a public auction, they would hold a second private auction. Each participating conspirator would submit bids in the private auction above the public auction price. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the noncompetitive price at the public auction and the winning bid at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs. Ghio participated in the bid-rigging scheme from April 2009 until October 2009.

Ghio is charged with bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The investigation is continuing. Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm, or the FBI’s Sacramento Division at 916-481-9110, or the U.S. Attorneys Office for the Eastern District of California at 916-554-2900.

Media inquiries to the U.S. Attorney’s Office should be directed to Lauren Horwood at 916-554-2706. Media inquiries regarding the department’s Antitrust Division should be directed to Gina Talamona at 202-514-2007.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.

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

One component of the FFETF is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner.

Michael Chou was sentenced today to 21 months in prison and ordered to pay $360,800 in forfeiture as a result of his conviction for conspiring to commit wire fraud, United States Attorney Joseph P. Russoniello announced.

Mr. Chou pleaded guilty to the wire fraud conspiracy charge on October 30, 2009. In pleading guilty, Chou admitted that from in or before 2003 until approximately April 2009, he participated in a scheme to defraud mortgage lenders and financial institutions by providing false and fraudulent information in support of mortgage loan applications. Working for San Francisco, Calif., based company known as “United Investments,” Chou and his co-conspirators assisted individuals who wanted to obtain mortgages from mortgage lenders so they could purchase residential properties in the Northern District of California and elsewhere.

As a part of this scheme, Chou routinely transmitted fraudulent loan applications to mortgage lenders that contained false employment information and false and inflated income and bank account information. The information was intended to inflate the borrowers’ creditworthiness. In addition, the loan applications were supported by false and forged documents that purported to verify the borrowers’ employment, income, and assets. Chou and other members of the scheme used a network of co-conspirators who agreed to pose as the borrowers’ employers and to falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications. As a result of Chou’s participation in this conspiracy, he illegally earned at least $360,800.

The sentence was handed down by U.S. District Court Judge Susan Illston. Judge Illston also sentenced the defendant to a five-year period of supervised release. The defendant will begin serving the sentence on July 30, 2010.

Twelve other defendants have been charged in connection with the mortgage fraud scheme related to United Investments. Jeffrey Rabkin and Jeffrey Finigan are the Assistant U.S. Attorneys who are prosecuting these cases with the assistance of Elizabeth Garcia and Rayneisha Booth. The prosecutions are the result of an investigation by the Federal Bureau of Investigation.

A former Bakersfield real estate agent and her father face 15 felony counts each of money laundering, conspiracy and grand theft in connection with an alleged multi-million dollar mortgage fraud scheme, newly filed court charges show.

Guadalupe Ramirez, 31, and Augustine Ramirez, 60, each are wanted on $1 million arrest warrants. The father and daughter were not in custody as of Thursday morning. They face more than 19 years in prison each if convicted on all charges.

The younger Ramirez was a Realtor with Bakersfield’s Touchstone Real Estate before the company merged with Watson Realty. Calls to several managers at Touchstone/Watson Realty Wednesday were not returned.

Augustine Ramirez purchased five homes in the span of six weeks near the end of 2006, according to county documents. In applying for loans, Ramirez indicated each house was to be his principal residence, mortgage fraud prosecutor Gordon Isen alleges in court documents.

In exchange for buying the homes at an inflated price, Ramirez received a kickback from the seller, in one case totaling $100,000, Isen writes.

Bakersfield Police Financial Crimes Detective Frank Wooldridge said Ramirez took out $4.1 million in fraudulent loans, and with his daughter, received about $385,000 in kickbacks. The homes went into default a few months after they were purchased, indicating Augustine Ramirez never made a single payment, Wooldridge said.

It’s one of the first cases handled by the new mortgage fraud division of the District Attorney’s Office but, Isen said, it’s just the beginning.

“I wouldn’t want to give you the impression this is the only real estate fraud case that we’re looking into, or the only one of this magnitude that we are looking into,” Isen said, declining to provide specifics.

“The victim is all of us, all of us who own homes and have to pay our mortgages,” Det. Wooldridge said. “We have to deal with these types of matters because it results in homes that are going to be foreclosed upon.”

SAN FRANCISCO—John A. Bui was sentenced today to 41 months in federal prison and ordered to pay $3,500,000 in forfeiture as a result of his convictions for conspiring to commit wire fraud, destruction of records in a federal investigation, and witness tampering, United States Attorney Joseph P. Russoniello announced.

Mr. Bui pleaded guilty to these charges on August 21, 2009. In pleading guilty, Bui admitted that, in a scheme that began no later than 2003 and continued until approximately April 30, 2009, he defrauded mortgage lenders and financial institutions by providing false and fraudulent information in support of mortgage loan applications.

Working out of an office in Milpitas, Calif., Bui and his employees assisted individuals who wanted to obtain mortgages from mortgage lenders so they could purchase residential properties in the Northern District of California and elsewhere. As a part of this scheme, Bui routinely transmitted fraudulent loan applications to mortgage lenders that contained false employment information and false and inflated income and bank account information.

The information was intended to inflate the borrowers’ creditworthiness. In addition, the loan applications were supported by false and forged documents that purported to verify the borrowers’ employment, income, and assets. Bui and other members of the scheme used a network of co-conspirators who agreed to pose as the borrowers’ employers and to falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications.

As a result of Bui’s participation in this conspiracy, he illegally earned at least $3.5 million. To date, Bui has paid $460,000 in forfeiture toward the $3.5 million he has been ordered to repay.

Bui, 46, of San Jose, Calif., also admitted at the time of his guilty plea that on or about May 2, 2009, after learning that agents of the Federal Bureau of Investigation had executed a search warrant on the San Francisco office of a co-conspirator, he destroyed and caused to be destroyed substantially all of the loan files in his possession with the intent of preventing the FBI from obtaining evidence of his mortgage fraud activities.

Bui also admitted that on or about May 28, 2009, he caused a letter to be delivered to an individual located within the Northern District of California who he believed was cooperating with the FBI’s investigation. Bui’s letter asked the individual not to provide information to the FBI agents assigned to the investigation.

The sentence was handed down by U.S. District Court Judge Susan Ilston. Judge Illston also sentenced the defendant to a three year period of supervised release to follow his prison term. Bui has been in custody since May 2009.

Jeffrey Rabkin and Jeffrey Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Elizabeth Garcia and Rayneisha Booth. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

Merced County’s stock of empty, foreclosed homes can be a magnet for criminal activity: metal theft, tagging, vandalism, illegal squatting. On Thursday, Merced County law enforcement officials gathered in North Merced to call attention to another crime gaining traction in our community: real estate fraud.

Last year, a joint federal, state and county real estate fraud task force, headed by the FBI, was created to confront the Central Valley’s dramatic increase in fraud reports. Merced County District Attorney Larry Morse’s fraud team has been up and running since 2009, but used this event to call attention to the crackdown.

“While our local economy wrestles with the financial fallout from a real estate depression, and thousands of homeowners are wracked with worry about losing everything, others have seized on an opportunity,” Morse said. “Those of us in law enforcement know all too well that in every tragedy there are criminal profiteers that will seek to exploit the misery of others.”

The Merced County fraud investigators have submitted eight cases for prosecution, half of them involved manipulation of elderly homeowners, Morse said. Two of the cases were settled when the defrauders pleaded to the crimes, he added.

If a fraud case spans several counties, the U.S. Attorney’s office will lead the prosecution. If a fraud scheme is confined to Merced County, Morse’s office will take the case.

The real estate fraud investigators here have 20 active investigations right now. The U.S. Attorney’s office in Fresno has several current fraud investigations, said Benjamin Wagner, U.S. Attorney for the Eastern District of California. Two years ago, the Eastern District led the country in mortgage fraud indictments, with nearly 50 cases, he added.

The Merced task force has two district attorney’s investigators dedicated full time to real estate fraud issues. Anna Hazel, one of the investigators, said most of the fraud crimes in Merced involve foreclosure rescue promises. More sophisticated schemes that originate outside of the county also hit people here, she said.

“By the number of foreclosures and the fact that we have so many people underwater, I can say the victim potential is great here,” Hazel said. “We get lots of complaints. We also have individuals in this county that are victims of much larger statewide plots.”

Authorities warned residents about the two most common schemes:

Foreclosure prevention fraud is an offer to help homeowners in foreclosure, but the criminal is actually looking to eventually get a large sum of money or the property itself.

In a loan modification fraud scheme, a businessman might promise to change a borrower’s loan terms for a fee.

Charging advance fees for loan modification workouts became illegal in California in October 2009.

Homeowners who need help should call a foreclosure avoidance counselor approved by the U.S. Department of Housing and Urban Development, or their bank. One local avoidance counselor, No Homeowner Left Behind, is at (559) 234-1492.

The task force agencies also stressed that they would look into frauds perpetrated by borrowers. Homeowners should never let someone talk them into making false statements — like overstating their income — on loan documents, the agencies warned.

To report suspected real estate fraud, or to get more information, contact the Merced County District Attorney’s real estate fraud unit at 1944 M Street, Merced, or by phone at (209) 385-7383. Spanish speakers can call (209) 385-7383, ext. 4229.

Greed and financial desperation drove an El Sobrante man to orchestrate the murder of a wealthy San Ramon mortgage lender who had long mentored him in the real estate business, a prosecutor told jurors Thursday during opening statements in Reginald Robinson\’s murder trial.

Robinson, 33, was running a real estate fraud scam involving two North Richmond townhouses financed by Kasmir Billon in 2008 when he either hired someone to kill Billon, or committed the killing himself, deputy district attorney Ken McCormick said.

Robinson, who was deep in personal debt and at risk of losing his home and cars, hoped to reap the profits from the sales of the over-appraised townhouses to straw buyers that he created once Billon was out of the picture, prosecutors say. Robinson has pleaded not guilty to one count of murder, two counts of solicitation of murder, forgery and being a felon in possession of a handgun.

Robinson\’s attorney denied that his client had any part in killing Billon. It was Billon who was the puppet master in all legitimate and fraudulent real estate deals involving Robinson, who had no opportunity to make money if Billon was dead, deputy public defender Jonathan Laba said.

Billon, 42, was found shot dead in his BMW 745 on April 27, 2008, on a frontage road near the San Ramon Marriott. The car was in park, the engine was still running and Billon\’s foot was on the gas pedal. Three .44 Magnum bullets had been fired at the car, one passing through Billon\’s heart, causing him to bleed to death.

Investigators did not find any evidence at the scene pointing to the killer\’s identity.

The attorneys agree that Billon met Robinson at a Walnut Creek gas station about 9 p.m. and gave him a $1,750 check for tree-cutting services at a house they were flipping on Giaramita Street in Richmond. Laba said that Robinson returned home to his wife and children about the same time Billon was shot to death, and he was shocked to learn about the killing the next day.

Two men, strangers to each other, will testify that Robinson had solicited each of them to kill his business associate by April 27, the day before escrow was to close on the first North Richmond townhouse, McCormick said.

The second man called police April 28 to report Robinson\’s proposition after seeing a TV news report about Billon\’s death. Richard Rogers, a felon who met Robinson through the Jevohah\’s Witness community, said Robinson offered him $50,000 to masquerade as a tree-cutter and kill Billon at the Giaramita Street house, according to McCormick. Rogers backed out after Robinson refused to pay him half the money upfront. He told police that Robinson came to him after Derek Wheat, the first person he solicited, bailed on their deal.

Laba said both men have a motive to lie.

The trial will continue for several weeks in the courtroom of Contra Costa Superior Court Judge John Laettner.

By Malaika Fraley<–>

Struggling homeowners on the verge of foreclosure are being warned by the state Attorney General’s Office of the latest mortgage-relief scam known as “forensic loan audits.”

Forensic loan audits are what state Attorney General Jerry Brown calls “phony mortgage relief services” that charge upfront fees for a forensic review of loans but will never lead to lowered monthly payments or loan principle.

California is a minefield for scams, because it accounted for 22 percent of the nation’s 632,573 foreclosures in 2009. The metropolitan Stockton area has ranked at or near the top of the nation in foreclosure filings since the housing bubble burst in 2007.

To get help

• Nonprofit housing counselors certified by the U.S. Department of Housing and Urban Development provide help free. Call (800) 569-4287.

• Attorney General Jerry Brown’s office will take complaints of mortgage relief fraud at (800) 952-5225.

• For complaints against a lawyer, contact the State Bar complaint hot line at (800) 843-9053.

The most recent scam is in a mortgage consultant’s claim that a forensic audit could find whether a homeowner’s lender is violating state and federal laws, and a sales pitch that locating a violation in a mortgage agreement could offer an opportunity for them to void the loan and force a modification.

“Forensic loan audits are yet another phony foreclosure-relief service hawked by loan modification consultants trying to cash in on the desperation of homeowners facing foreclosure,” Brown said this week. “The foreclosure relief industry continues to be long on promises but short on results.”

Evan Westrup, a spokesman for the attorney general, said Brown’s office has received about 3,500 complaints against mortgage modification professionals in the past six months. The Department of Real Estate has investigated more than 2,000 cases in 2009, with more than 350 companies have been delivered desist and refrain order to stop all illegal activity.

“The DRE has aggressively pursued loan modification scammers who prey on vulnerable and financially stressed homeowners and those peddling false hope by promising mortgage relief with a forensic audit will be scrutinized,” Department of Real Estate Commissioner Jeff Davi said in a statement.

Brown offered the following tips to struggling homeowners:

» Don’t pay fees up front. Foreclosure consultants are prohibited by law from collecting money before services are performed.

» Respond to all letters from lenders and loan services. Working with your lender is the best opportunity to modify your loan.

» Don’t transfer title or sell your house to a “foreclosure rescuer.” The attorney general says this is a scam to convince homeowners they can stay in their house as renters and buy it back later, only to be evicted.

» Don’t make a mortgage payment to anybody but your lender or bank. A mortgage consultant will keep the money.

» Don’t sign any documents without reading them thoroughly. Scammers often convince victims to sign their house over to them in a sea of paperwork that has not been properly vetted.

- Keith Reid

A Placer County man who hosted hotel seminars promising his audience certain wealth has been charged with fraud by the Securities and Exchange Commission.

The civil complaint, filed Tuesday in Sacramento federal court, charges Lawrence “Lee” Loomis and his father-in-law, John Hagener, with taking at least $10 million from more than 100 investors by promising them a 12 percent return with no risk.  SEC investigators said the money was instead used to prop up Loomis’ failing businesses.

News10 obtained videotape of one of the “Loomis Wealth Solutions” seminars hosted at a Sacramento hotel in December 2007.  On the tape, Loomis promised investors they would become rich.  “At a minimum, this is my vision for you. To have a net worth of at least ten million dollars. At least ten million. And many of you will have more, but at a minimum have a net worth of ten million,” Loomis told his audience.

In addition to the civil complaint, sources told News10 Loomis still faces a criminal probe in a $100 million multi-state real estate Ponzi scheme.  Three former associates have already been charged and two are in custody.

In 2008, FBI agents raided Loomis’ Roseville offices and his Granite Bay home, and later seized his bank accounts.  Placer County tax records show that Loomis’ home, valued at $1.6 million, was taken by the bank last summer.

by George Warren,

In the fourth quarter of 2009, California had the highest mortgage fraud risk, according the quarterly Mortgage Fraud Risk Report released Friday by Agoura Hills, California-based Interthinx, a provider of risk mitigation and regulatory compliance tools for the financial services industry.With an index value of 222, California took the No.1 spot from Nevada, which had topped the rankings over the last five consecutive quarters.

Nevada dropped to second place with an index of 220 and was closely followed by Arizona with an index of 211. Florida remained in fourth place with an index of 179, and Colorado was ranked fifth with an index of 153. With indices between 55 and 71, West Virginia, Maine, Kansas, South Dakota, and Montana were named as the five states with the lowest mortgage fraud risk.

According to Interthinx, its fraud risk indices have proven to be a leading indicator of foreclosure activity. As a result, the company said regions that currently have high fraud risk indices are likely to have high foreclosure rates going forward, particularly if housing prices continue on their downward trajectory and if there is no significant improvement in general economic conditions.

The Mortgage Fraud Risk Report also included an analysis of national mortgage fraud and indices for the four most common types of mortgage fraud, including property valuation fraud, occupancy fraud, employment/income fraud, and identify fraud. The findings showed that most fraud types are on the rise.

Despite a 4 percent quarter-to-quarter decrease, the property valuation fraud risk index was up 40 percent over the fourth quarter in 2008 and jumped more than

100 percent from the same period in 2007. Interthinx said this index will continue to be driven by schemes involving short sales, REO inventories, wholesale flipping, and refinancing by borrowers whose equity has been impaired by falling real estate values.

The occupancy fraud risk in the fourth quarter of 2009 rose 16 percent from the third quarter, marking the first significant increase in the index since the fourth quarter of 2006. The magnitude of the quarter-to-quarter increase suggests that occupancy fraud risk will be a serious issue going forward, Interthinx said. The company explained that this will be especially true as continuing price declines and “get-rich-quick” schemes lure investors back into the market and as builders face continuing difficulty in moving unsold inventory.

While employment/income fraud was down 29 percent over the previous year, it increased 3.4 percent from the third quarter — the first increase since the index peaked in the third quarter of 2007. Interthinx said it is too soon to tell whether this uptick signifies a rebound in employment/income fraud risk or whether it reflects a temporary “blip” associated with schemes involving the federal homebuyer tax credit.

Identity fraud, which is frequently used in mortgage fraud schemes in order to hide the identity of the perpetrators and/or to obtain a credit profile that will meet lender guidelines, was the only type of mortgage fraud that showed no increase in the quarterly report. According to Interthinx, the identity fraud risk index has remained relatively constant over the last two years, declining 2 percent from the previous quarter and 4 percent from a year ago.

Going Forward, Interthinx projects that if interest rates remain low, the predominant fraud type will continue to be related to property valuation, as speculative investors and “flipping” return to the market and as consumers attempt to refinance their mortgages despite reduced equity in their properties. Interthinx also expects a rebound in occupancy fraud, particularly in light of investor demand, fueled by ample inventories and the expected release of shadow inventory. In addition, the company said it is likely that the fraud risk index will continue to rise through 2011, as a wave of adjustable-rate mortgages recast for the first time.

Two Sacramento-area men were charged today by securities regulators with running a massive Ponzi scheme that might be the largest mortgage fraud case in the history of the region.

The Securities and Exchange Commission said it charged Lawrence Leland “Lee” Loomis and his father-in-law, John Hagener, in a civil complaint, “with misappropriating approximately $10 million from more than 100 investors who were falsely promised that their money would be loaned to homebuyers and secured by real estate deeds of trust.”

Investors were promised 12 percent rates of return, the SEC said, but federal officials say Loomis actually used the money to prop up other failing businesses.

The SEC says Loomis paid himself hundreds of thousands of dollars with investor funds and that Hagener received more than $190,000 for managing the funds.

The SEC complaint charges Loomis and Hagener with violating antifraud provisions of federal securities laws and seeks “injunctive relief, disgorgement of ill-gotten gains, and monetary penalties.”

Loomis’ attorney has said he is not guilty.

The probe began in 2009 after officials received tips from investors and former Loomis workers, and in August FBI agents raided Loomis Wealth Solutions offices in Roseville.

Three men charged in the case earlier fled the country. One was captured in Barcelona, Spain. Another was arrested as he entered the United States from Canada with $70,000 stuffed in his shoe. A third remains at large.

Sam Stanton