CAMDEN, NJ—Three New York residents pleaded guilty today to their roles in a conspiracy to commit a million-dollar mortgage fraud involving residential properties in Atlantic City, New Jersey, U.S. Attorney Paul J. Fishman announced.
Tula Rampersaud, 31, her husband, Sudesh Rampersaud, 31, both from Hollis, New York, and Steven Boswell, 60, of Flushing, New York, each pleaded guilty before United States District Judge Renée M. Bumb to separate one-count informations charging them with conspiracy to commit wire fraud. The three guilty pleas are the latest phase in an ongoing investigation by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation Division into fraudulent mortgage loans in southern New Jersey.
According to the informations to which the defendants pleaded guilty, other documents filed in this and related cases, and statements made in court:
The Rampersauds and Boswell conspired with Jong Shin and others, from June through December 2006, to obtain more than a million dollars of mortgage loans for unqualified borrowers in order to purchase seven houses in Atlantic City at inflated prices. Shin was indicted with conspiracy to commit wire fraud and conspiracy to commit money laundering on March 24, 2010. The case against Shin is pending.
At their guilty plea hearings, Tula Rampersaud, Sudesh Rampersaud, and Boswell admitted that they served as “straw purchasers” for Shin, falsifying financial information on mortgage documents and purchasing properties in return for promises of cash payments. Tula Rampersaud stated that she met Jong Shin while they were colleagues at a home health care company, and that she was promised $5,000 in return for purchasing a property. Boswell admitted that he had previously been married to Shin, and was promised $3,000 in return for his role in the scheme.
In exchange for purchasing properties in their names, Shin promised the Rampersauds and Boswell that they would not have to pay deposits or closing costs to acquire the properties, would not have to make monthly mortgage payments, and would receive cash after the closing for allowing their names and credit information to be used to buy the properties. In completing the borrowers’ loan applications, the coconspirators claimed fake employers, inflated incomes, false bank account balances, and fictitious assets in order to induce the lenders to extend the mortgage loans. The count of conspiracy to commit wire fraud to which the defendants pleaded guilty carries a maximum sentence of 30 years in prison and a maximum fine of not more than $1 million. Sentencing for all three defendants is scheduled for August 2, 2010, before Judge Bumb. Pending sentencing, all three defendants were released on a personal recognizance bond of $100,000.
In determining the actual sentences, Judge Bumb will consult the advisory U.S. Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the offense, a defendant’s criminal history, if any, and other factors. The Judge, however, is not bound by those Guidelines in determining a sentence. Parole has been abolished in the federal system and thus defendants who are given custodial terms must serve nearly all the time imposed by the court.
Fishman credited Special Agents of the Federal Bureau of Investigation’s Atlantic City Resident Agency, under the direction of Special Agent in Charge Michael Ward in Newark, New Jersey, and Special Agents of the Internal Revenue Service – Criminal Investigation Division’s May’s Landing Office, under the direction of Special Agent in Charge William P. Offord, for their investigation leading to the guilty pleas.
The Government is represented by Assistant U.S. Attorney Diana Carrig of the Criminal Division in Camden.
The charges and allegations contained in the Indictment against Jong Shin are merely accusations, and the defendant is considered innocent unless and until proven guilty.
Defense Attorneys:
Tula Rampersaud is represented by Kalman Geist, Esq., West Patterson, N.J.
Sudesh Rampersaud is represented by Joseph T. Afflito, Sr., Esq., Wayne, N.J.
Steven Boswell is represented by Mark Musella, Esq., Hasbrouck Heights, N.J.

Mortgage fraud has become more prevalent throughout the nation and especially so in Georgia, particularly the Atlanta metropolitan area. Mortgage fraud has wreaked havoc on neighborhoods, ruined individuals’ credit standing, and caused many millions of dollars of losses in Georgia. Don’t be a victim of mortgage fraud or fall prey to becoming unwitting participants in a fraud scheme. Ensure that you are dealing with a reputable entity, ask questions about unusual or suspicious transactions, and be aware of any deal that sounds “too good to be true”. If any loan officer or mortgage broker asks you to sign any document that you know contains a false statement or misrepresentation – WALK AWAY from the transaction and report the incident to the Department of Banking and Finance!

The Department wants to ensure that you are aware of some of the common fraud schemes that have come to our attention. Most of the fraud schemes involve variations of several of the following elements in which the “fraudsters”:

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Induce appraisers to inflate property values in order to obtain a larger mortgage loan for the “straw borrower.”
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Submit bogus invoices for phantom “upgrades” or “renovations” that falsely inflate the value of the property. This allows the fraudster, “straw borrower” or “investor” to obtain a larger mortgage.
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Promise “investors” that their properties will be leased or rented and all mortgage, insurance, property tax and home owner association payments will be paid for them. In actuality, these payments are not made and there may or may not be any tenants.
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Pay “straw borrowers” or “investors” to sign and submit documents containing false qualifying information such as false and counterfeit drivers’ licenses, pay stubs, tax returns, W-2 tax forms, rent checks, bank statements, earnest money checks, Social Security numbers, and verifications of deposit, employment, rent and mortgage.
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Pay “straw sellers” to falsely claim ownership of a property, appear at a closing where the property is sold to “straw borrowers”, disburse the sale proceeds at the fraudsters’ direction and thereafter appear at another closing to purchase the same property at a lesser amount with a portion of the sale proceeds, a practice sometimes called “flipping.” Some flips are the same day and others within days, weeks or months.
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Advance down payment amounts which are falsely represented as being paid by the borrower.
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Cause “straw sellers” and “straw borrowers” to assume the identity of other people for the purpose of fraudulently obtaining mortgage loan proceeds.
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Quit claim the property back to the seller or to a co-conspirator without notice to or permission from the lender.
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File false satisfaction, cancellation and assignment of security deeds on a number of properties to eliminate the security interest of legitimate lenders, by either fraudulently transferring interest to a co-conspirator’s company or showing the property to be free of all mortgage liens before obtaining additional mortgage loans on the property.
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File false and forged Quit Claim deeds transferring property from true owners to “straw sellers” and “straw borrowers”, thereby gaining control of the property to use as security for fraudulent loans.

More Information

Residential mortgage fraud continues to receive much attention and has been more prevalent in Georgia. An FBI assistant director testified that fraud is “pervasive” in the mortgage market and is growing fast. With sophisticated electronic document-preparation programs, unethical mortgage loan officers, brokers, real estate agents and lawyers can create fake FICO scores, fake tax returns, fake identities and obtain inflated appraisals. According to the FBI, based on existing investigations and mortgage fraud reporting, 80% of all reported fraud losses involve collaboration or collusion by industry insiders.

The chairman of a House financial services subcommittee cited industry studies suggesting that “between 10 and 15 percent of all home loan applications involve some fraud or misrepresentation.” The potential costs – to home buyers and mortgage lenders – could be in the billions of dollars a year. According to a recent report by the Federal Bureau of Investigation (FBI), each mortgage fraud scheme contains some type of “material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.”

Frequently, mortgage fraud ends up hurting not only lenders but innocent consumers too. One mortgage company cited the following example of mortgage fraud: A first-time buyer was persuaded to purchase a property that was significantly overvalued because of a fraudulent appraisal. The seller pocketed big profits, but now the buyer is unable to refinance and unable to pay off the loan by selling the house because the property is worth less than the mortgage amount. Some possible signs of fraud in the application – unusually high FICO scores combined with high incomes, higher-than-average mortgage amounts and home values for the neighborhood. That may sound odd since all these characteristics would normally be associated with problem-free applicants. But unfortunately, the crooks know this too, and they often try to make a loan application good enough to pass cleanly through automated loan underwriting systems.

Georgia Real Estate Fraud Prevention & Awareness Coalition (GREFPAC)

The GREFPAC works to:

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Prevent real estate and mortgage fraud;
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Facilitate cooperation among and between industry partners, regulators and law enforcement agencies;
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Pursue compliance with, and enforcement of, existing regulations and statutes;
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Develop and promote industry practices and regulatory and statutory reforms that will benefit consumers and industry partners; and
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Promote public awareness through information and education.

You will find valuable information about preventing mortgage fraud on GREFPAC’s website – http://www.grefpac.org/

Of particular interest is their “You Can Prevent Mortgage Fraud – DO’s & DON’Ts” brochure. The prevention brochure is broken down into two index cards. The brochure is provided in English and in Spanish.

For quick access to the DO’s brochure in English – http://www.grefpac.org/downloads/Do Card 5×8.doc
For quick access to the DON’Ts brochure in English – http://www.grefpac.org/downloads/Dont Card 5×8.doc
See the Spanish version of the brochure

If you suspect mortgage fraud, please go to the following page on MBA’s website to learn more about reporting procedures:
Reporting Mortgage Fraud in Georgia

You may report suspected mortgage fraud in Georgia to the Department by downloading our Reporting Mortgage Fraud form. Doe not use this form if you are a consumer with an issue or complaint regarding your own home loan.

Additional Resources for Mortgage Fraud Prevention:

Stop Mortgage Fraud website

Mortgage Asset Research Institute, Inc.

Online-Home-Mortgages.Net

As expected in a distressed housing market, cases of mortgage fraud referred to U.S. law enforcement agencies increased 36 percent to 63,713 during fiscal year (FY) 2008, compared to 46,717 reports in FY 2007, according to a new report from the Federal Bureau of Investigation (FBI). Nationwide, lending institutions reported losses related to mortgage fraud of at least $1.4 billion, an increase of 83.4 percent from FY 2007.

According to the FBI’s 2008 Mortgage Fraud Report, mortgage fraud is a material misstatement, misrepresentation, or omissions relied upon by an underwriter or lender to fund, purchase, or insure a loan.

Commonly reported types of mortgage fraud reported included property flipping, builder-bailouts, short sales, and bogus foreclosure rescue schemes. Additionally, in response to tighter lending practices, criminals facilitated new schemes, such as reverse mortgage fraud, credit enhancements, condo conversion, loan modifications, and pump and pay, reported the FBI.

Some key findings from the 2008 Mortgage Fraud Report include:

* Foreclosure Bad News: More than 3.1 million foreclosure filings were reported nationally during FY 2008, up 81 percent from FY 2007 and 225 percent from FY 2006.
* Sixty-three percent (1,035) of all pending FBI mortgage fraud investigations during FY 2008 involved dollar losses totaling more than $1 million.
* The top 10 mortgage fraud states for 2008 were California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York.

“Mortgage fraud hurts borrowers, financial institutions, and legitimate homeowners,” said Assistant FBI Director Kevin Perkins, in a press release. “The FBI, in conjunction with our law enforcement, regulatory, and industry partners, continues to diligently pursue perpetrators of mortgage fraud schemes.”

The FBI works in conjunction with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to safeguard the U.S. financial system from the abuses of financial crime, including financing of terrorism. On July 7, FinCEN released its 2008 Suspicious Activity Report Review, detailing all forms of financial fraud reported to law enforcement during FY 2008.

Redemption / Strawman / Bond Fraud

Proponents of this scheme claim that the U.S. government or the Treasury Department control bank accounts—often referred to as “U.S. Treasury Direct Accounts”—for all U.S. citizens that can be accessed by submitting paperwork with state and federal authorities. Individuals promoting this scam frequently cite various discredited legal theories and may refer to the scheme as “Redemption,” “Strawman,” or “Acceptance for Value.” Trainers and websites will often charge large fees for “kits” that teach individuals how to perpetrate this scheme. They will often imply that others have had great success in discharging debt and purchasing merchandise such as cars and homes. Failures to implement the scheme successfully are attributed to individuals not following instructions in a specific order or not filing paperwork at correct times.

This scheme predominately uses fraudulent financial documents that appear to be legitimate. These documents are frequently referred to as “bills of exchange,” “promissory bonds,” “indemnity bonds,” “offset bonds,” “sight drafts,” or “comptrollers warrants.” In addition, other official documents are used outside of their intended purpose, like IRS forms 1099, 1099-OID, and 8300. This scheme frequently intermingles legal and pseudo legal terminology in order to appear lawful. Notaries may be used in an attempt to make the fraud appear legitimate. Often, victims of the scheme are instructed to address their paperwork to the U.S. Secretary of the Treasury.

Tips for Avoiding Redemption/Strawman/Bond Fraud:

* Be wary of individuals or groups selling kits that they claim will inform you on to access secret bank accounts.
* Be wary of individuals or groups proclaiming that paying federal and/or state income tax is not necessary.
* Do not believe that the U.S. Treasury controls bank accounts for all citizens.
* Be skeptical of individuals advocating that speeding tickets, summons, bills, tax notifications, or similar documents can be resolved by writing “acceptance for value” on them.
* If you know of anyone advocating the use of property liens to coerce acceptance of this scheme, contact your local FBI office.

Advance Fee Schemes

An advance fee scheme occurs when the victim pays money to someone in anticipation of receiving something of greater value—such as a loan, contract, investment, or gift—and then receives little or nothing in return.

The variety of advance fee schemes is limited only by the imagination of the con artists who offer them. They may involve the sale of products or services, the offering of investments, lottery winnings, “found money,” or many other “opportunities.” Clever con artists will offer to find financing arrangements for their clients who pay a “finder’s fee” in advance. They require their clients to sign contracts in which they agree to pay the fee when they are introduced to the financing source. Victims often learn that they are ineligible for financing only after they have paid the “finder” according to the contract. Such agreements may be legal unless it can be shown that the “finder” never had the intention or the ability to provide financing for the victims.

Tips for Avoiding Advanced Fee Schemes:

If the offer of an “opportunity” appears too good to be true, it probably is. Follow common business practice. For example, legitimate business is rarely conducted in cash on a street corner.

* Know who you are dealing with. If you have not heard of a person or company that you intend to do business with, learn more about them. Depending on the amount of money that you plan on spending, you may want to visit the business location, check with the Better Business Bureau, or consult with your bank, an attorney, or the police.
* Make sure you fully understand any business agreement that you enter into. If the terms are complex, have them reviewed by a competent attorney.
* Be wary of businesses that operate out of post office boxes or mail drops and do not have a street address. Also be suspicious when dealing with persons who do not have a direct telephone line and who are never in when you call, but always return your call later.
* Be wary of business deals that require you to sign nondisclosure or non-circumvention agreements that are designed to prevent you from independently verifying the bona fides of the people with whom you intend to do business. Con artists often use non-circumvention agreements to threaten their victims with civil suit if they report their losses to law enforcement.

For more information:
- Work-at-Home Advance Fee Scheme
- Cancer Research Advance Fee Scheme

Identity Theft

Identity theft occurs when someone assumes your identity to perform a fraud or other criminal act. Criminals can get the information they need to assume your identity from a variety of sources, including by stealing your wallet, rifling through your trash, or by compromising your credit or bank information. They may approach you in person, by telephone, or on the Internet and ask you for the information.

The sources of information about you are so numerous that you cannot prevent the theft of your identity. But you can minimize your risk of loss by following a few simple hints.

Tips for Avoiding Identity Theft:

* Never throw away ATM receipts, credit statements, credit cards, or bank statements in a usable form.
* Never give your credit card number over the telephone unless you make the call.
* Reconcile your bank account monthly, and notify your bank of discrepancies immediately.
* Keep a list of telephone numbers to call to report the loss or theft of your wallet, credit cards, etc.
* Report unauthorized financial transactions to your bank, credit card company, and the police as soon as you detect them.
* Review a copy of your credit report at least once each year. Notify the credit bureau in writing of any questionable entries and follow through until they are explained or removed.
* If your identity has been assumed, ask the credit bureau to print a statement to that effect in your credit report.
* If you know of anyone who receives mail from credit card companies or banks in the names of others, report it to local or federal law enforcement authorities.

Investment-Related Scams

Letter of Credit Fraud

Legitimate letters of credit are never sold or offered as investments. They are issued by banks to ensure payment for goods shipped in connection with international trade. Payment on a letter of credit generally requires that the paying bank receive documentation certifying that the goods ordered have been shipped and are en route to their intended destination. Letters of credit frauds are often attempted against banks by providing false documentation to show that goods were shipped when, in fact, no goods or inferior goods were shipped.

Other letter of credit frauds occur when con artists offer a “letter of credit” or “bank guarantee” as an investment wherein the investor is promised huge interest rates on the order of 100 to 300 percent annually. Such investment “opportunities” simply do not exist. (See Prime Bank Notes for additional information.)

Tips for Avoiding Letter of Credit Fraud:

* If an “opportunity” appears too good to be true, it probably is.
* Do not invest in anything unless you understand the deal. Con artists rely on complex transactions and faulty logic to “explain” fraudulent investment schemes.
* Do not invest or attempt to “purchase” a “letter of credit.” Such investments simply do not exist.
* Be wary of any investment that offers the promise of extremely high yields.
* Independently verify the terms of any investment that you intend to make, including the parties involved and the nature of the investment.

Prime Bank Note Fraud

International fraud artists have invented an investment scheme that supposedly offers extremely high yields in a relatively short period of time. In this scheme, they claim to have access to “bank guarantees” that they can buy at a discount and sell at a premium. By reselling the “bank guarantees” several times, they claim to be able to produce exceptional returns on investment. For example, if $10 million worth of “bank guarantees” can be sold at a two percent profit on 10 separate occasions—or “traunches”—the seller would receive a 20 percent profit. Such a scheme is often referred to as a “roll program.”

To make their schemes more enticing, con artists often refer to the “guarantees” as being issued by the world’s “prime banks,” hence the term “prime bank guarantees.” Other official sounding terms are also used, such as “prime bank notes” and “prime bank debentures.” Legal documents associated with such schemes often require the victim to enter into non-disclosure and non-circumvention agreements, offer returns on investment in “a year and a day”, and claim to use forms required by the International Chamber of Commerce (ICC). In fact, the ICC has issued a warning to all potential investors that no such investments exist.

The purpose of these frauds is generally to encourage the victim to send money to a foreign bank, where it is eventually transferred to an off-shore account in the control of the con artist. From there, the victim’s money is used for the perpetrator’s personal expenses or is laundered in an effort to make it disappear.

While foreign banks use instruments called “bank guarantees” in the same manner that U.S. banks use letters of credit to insure payment for goods in international trade, such bank guarantees are never traded or sold on any kind of market.

Tips for Avoiding Prime Bank Note Fraud:

* Think before you invest in anything. Be wary of an investment in any scheme, referred to as a “roll program,” that offers unusually high yields by buying and selling anything issued by “prime banks.”
* As with any investment, perform due diligence. Independently verify the identity of the people involved, the veracity of the deal, and the existence of the security in which you plan to invest.
* Be wary of business deals that require non-disclosure or non-circumvention agreements that are designed to prevent you from independently verifying information about the investment.

“Ponzi’ Schemes

“Ponzi” schemes promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, however, the con artist pays “dividends” to initial investors using the funds of subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.”

This type of fraud is named after its creator—Charles Ponzi of Boston, Massachusetts. In the early 1900s, Ponzi launched a scheme that guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.

Tips for Avoiding Ponzi Schemes:

* Be careful of any investment opportunity that makes exaggerated earnings claims.
* Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework.
* Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing.

For more information:
- Bernie Madoff Case
- Stanford Case
- Wholesale Grocery Distribution Ponzi Scheme
- ATM Ponzi Scheme
- Victims Turn Tables with Ponzi Scheme

Pyramid Schemes

As in Ponzi schemes, the money collected from newer victims of the fraud is paid to earlier victims to provide a veneer of legitimacy. In pyramid schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions.

More specifically, pyramid schemes—also referred to as franchise fraud or chain referral schemes—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product. The real profit is earned, not by the sale of the product, but by the sale of new distributorships. Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses. At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment. Promoters fail to tell prospective participants that this is mathematically impossible for everyone to do, since some participants drop out, while others recoup their original investments and then drop out.

Tips for Avoiding Pyramid Schemes:

* Be wary of “opportunities” to invest your money in franchises or investments that require you to bring in subsequent investors to increase your profit or recoup your initial investment.
* Independently verify the legitimacy of any franchise or investment before you invest.

Market Manipulation or “Pump and Dump” Fraud

This scheme—commonly referred to as a “pump and dump”—creates artificial buying pressure for a targeted security, generally a low-trading volume issuer in the over-the-counter securities market largely controlled by the fraud perpetrators. This artificially increased trading volume has the effect of artificially increasing the price of the targeted security (i.e., the “pump”), which is rapidly sold off into the inflated market for the security by the fraud perpetrators (i.e., the “dump”); resulting in illicit gains to the perpetrators and losses to innocent third party investors. Typically, the increased trading volume is generated by inducing unwitting investors to purchase shares of the targeted security through false or deceptive sales practices and/or public information releases.

A modern variation on this scheme involves largely foreign-based computer criminals gaining unauthorized access to the online brokerage accounts of unsuspecting victims in the United States. These victim accounts are then utilized to engage in coordinated online purchases of the targeted security to affect the pump portion of a manipulation, while the fraud perpetrators sell their pre-existing holdings in the targeted security into the inflated market to complete the dump.

Tips for Avoiding Market Manipulation Fraud:

* Don’t believe the hype.
* Find out where the stock trades.
* Independently verify claims.
* Research the opportunity.
* Beware of high-pressure pitches.
* Always be skeptical.

For more information:
- Operation Shore Shells investigation

Telemarketing Fraud

When you send money to people you do not know personally or give personal or financial information to unknown callers, you increase your chances of becoming a victim of telemarketing fraud.

Here are some warning signs of telemarketing fraud—what a caller may tell you:

* “You must act ‘now’ or the offer won’t be good.”
* “You’ve won a ‘free’ gift, vacation, or prize.” But you have to pay for “postage and handling” or other charges.
* “You must send money, give a credit card or bank account number, or have a check picked up by courier.” You may hear this before you have had a chance to consider the offer carefully.
* “You don’t need to check out the company with anyone.” The callers say you do not need to speak to anyone including your family, lawyer, accountant, local Better Business Bureau, or consumer protection agency.
* “You don’t need any written information about their company or their references.”
* “You can’t afford to miss this ‘high-profit, no-risk’ offer.”

If you hear these or similar “lines” from a telephone salesperson, just say “no thank you” and hang up the telephone.

Tips for Avoiding Telemarketing Fraud:

It’s very difficult to get your money back if you’ve been cheated over the telephone. Before you buy anything by telephone, remember:

* Don’t buy from an unfamiliar company. Legitimate businesses understand that you want more information about their company and are happy to comply.
* Always ask for and wait until you receive written material about any offer or charity. If you get brochures about costly investments, ask someone whose financial advice you trust to review them. But, unfortunately, beware—not everything written down is true.
* Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, state attorney general, the National Fraud Information Center, or other watchdog groups. Unfortunately, not all bad businesses can be identified through these organizations.
* Obtain a salesperson’s name, business identity, telephone number, street address, mailing address, and business license number before you transact business. Some con artists give out false names, telephone numbers, addresses, and business license numbers. Verify the accuracy of these items.
* Before you give money to a charity or make an investment, find out what percentage of the money is paid in commissions and what percentage actually goes to the charity or investment.
* Before you send money, ask yourself a simple question. “What guarantee do I really have that this solicitor will use my money in the manner we agreed upon?”
* Don’t pay in advance for services. Pay services only after they are delivered.
* Be wary of companies that want to send a messenger to your home to pick up money, claiming it is part of their service to you. In reality, they are taking your money without leaving any trace of who they are or where they can be reached.
* Always take your time making a decision. Legitimate companies won’t pressure you to make a snap decision.
* Don’t pay for a “free prize.” If a caller tells you the payment is for taxes, he or she is violating federal law.
* Before you receive your next sales pitch, decide what your limits are—the kinds of financial information you will and won’t give out on the telephone.
* Be sure to talk over big investments offered by telephone salespeople with a trusted friend, family member, or financial advisor. It’s never rude to wait and think about an offer.
* Never respond to an offer you don’t understand thoroughly.
* Never send money or give out personal information such as credit card numbers and expiration dates, bank account numbers, dates of birth, or social security numbers to unfamiliar companies or unknown persons.
* Be aware that your personal information is often brokered to telemarketers through third parties.
* If you have been victimized once, be wary of persons who call offering to help you recover your losses for a fee paid in advance.
* If you have information about a fraud, report it to state, local, or federal law enforcement agencies.

For More information:
- Telemarketing Fraud Targeting Seniors

Nigerian Letter or “419” Fraud

Nigerian letter frauds combine the threat of impersonation fraud with a variation of an advance fee scheme in which a letter mailed from Nigeria offers the recipient the “opportunity” to share in a percentage of millions of dollars that the author—a self-proclaimed government official—is trying to transfer illegally out of Nigeria. The recipient is encouraged to send information to the author, such as blank letterhead stationery, bank name and account numbers, and other identifying information using a fax number provided in the letter. Some of these letters have also been received via e-mail through the Internet. The scheme relies on convincing a willing victim, who has demonstrated a “propensity for larceny” by responding to the invitation, to send money to the author of the letter in Nigeria in several installments of increasing amounts for a variety of reasons.

Payment of taxes, bribes to government officials, and legal fees are often described in great detail with the promise that all expenses will be reimbursed as soon as the funds are spirited out of Nigeria. In actuality, the millions of dollars do not exist, and the victim eventually ends up with nothing but loss. Once the victim stops sending money, the perpetrators have been known to use the personal information and checks that they received to impersonate the victim, draining bank accounts and credit card balances. While such an invitation impresses most law-abiding citizens as a laughable hoax, millions of dollars in losses are caused by these schemes annually. Some victims have been lured to Nigeria, where they have been imprisoned against their will along with losing large sums of money. The Nigerian government is not sympathetic to victims of these schemes, since the victim actually conspires to remove funds from Nigeria in a manner that is contrary to Nigerian law. The schemes themselves violate section 419 of the Nigerian criminal code, hence the label “419 fraud.”

Tips for Avoiding Nigerian Letter or “419″ Fraud:

* If you receive a letter from Nigeria asking you to send personal or banking information, do not reply in any manner. Send the letter to the U.S. Secret Service, your local FBI office, or the U.S. Postal Inspection Service. You can also register a complaint with the Federal Trade Commission’s Complaint Assistant.
* If you know someone who is corresponding in one of these schemes, encourage that person to contact the FBI or the U.S. Secret Service as soon as possible.
* Be skeptical of individuals representing themselves as Nigerian or foreign government officials asking for your help in placing large sums of money in overseas bank accounts.
* Do not believe the promise of large sums of money for your cooperation.
* Guard your account information carefully.

For More information:
- Related Online Rental Ads Scheme
- Related Spanish Lottery Scam

Health Care Fraud or Health Insurance Fraud

Medical Equipment Fraud:

Equipment manufacturers offer “free” products to individuals. Insurers are then charged for products that were not needed and/or may not have been delivered.

“Rolling Lab” Schemes:

Unnecessary and sometimes fake tests are given to individuals at health clubs, retirement homes, or shopping malls and billed to insurance companies or Medicare.

Services Not Performed:

Customers or providers bill insurers for services never rendered by changing bills or submitting fake ones.

Medicare Fraud:

Medicare fraud can take the form of any of the health insurance frauds described above. Senior citizens are frequent targets of Medicare schemes, especially by medical equipment manufacturers who offer seniors free medical products in exchange for their Medicare numbers. Because a physician has to sign a form certifying that equipment or testing is needed before Medicare pays for it, con artists fake signatures or bribe corrupt doctors to sign the forms. Once a signature is in place, the manufacturers bill Medicare for merchandise or service that was not needed or was not ordered.

Tips for Avoiding Health Care Fraud or Health Insurance Fraud:

* Never sign blank insurance claim forms.
* Never give blanket authorization to a medical provider to bill for services rendered.
* Ask your medical providers what they will charge and what you will be expected to pay out-of-pocket.
* Carefully review your insurer’s explanation of the benefits statement. Call your insurer and provider if you have questions.
* Do not do business with door-to-door or telephone salespeople who tell you that services of medical equipment are free.
* Give your insurance/Medicare identification only to those who have provided you with medical services.
* Keep accurate records of all health care appointments.
* Know if your physician ordered equipment for you.

For more information:
- Heath Care Fraud webpage

According to the Federal Bureau of Investigation’s 2009 Mortgage Fraud Report, released today, mortgage fraud suspicious activity reports referred to law enforcement increased 5 percent to 67,190 during fiscal year (FY) 2009. The total dollar loss attributed to mortgage fraud is unknown. It’s estimated that $14 billion in fraudulent loans originated in 2009.

“Mortgage fraud is an insidious crime that has devastating economic effects on families, communities and the nation,” said FBI Director Robert S. Mueller, III. “The FBI remains committed to working with our law enforcement, regulatory, and industry partners to unravel these complicated fraud schemes driven by greed and bring their perpetrators to justice.”

Other key findings presented in the report include:

* There are more than 2.8 million properties with foreclosure filings, a 120 percent increase from 2007 to 2009. The Las Vegas area reported the most significant rate of foreclosures, with more than 12 percent of housing units there receiving a foreclosure notice.
* The top 10 states ranked by the number of foreclosure filings per housing unit were California, Florida, Arizona, Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey. In April 2010, one in every 386 housing units received a foreclosure filing.
* Prevalent mortgage fraud schemes in fiscal year 2009 include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications. Emerging trends include fraud involving economic stimulus plans/programs, property theft/fraudulent leasing of foreclosed properties and tax-related fraud.

The entire report is available on the FBI’s website. While there, sign up for e-mail alerts to ensure you receive the latest information about the FBI.

***

Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today that four informations have been filed against Russell E. Krouse, Jason E. Davis, Harry L. Gongloff, and Steven M. Taylor, charging them with multiple counts of wire fraud in connection with mortgage fraud schemes which caused $710,000 in losses to Aegis Funding Corporation and New Century Mortgage.

Russell E. Krouse, age 45, currently resides in Ontario, Canada. Jason E. Davis, age 35, currently resides in Lorain, Ohio. Harry L. Gongloff, age 35, currently resides in Lorain, Ohio. Steven M. Taylor, age 35, currently resides in Elyria, Ohio.

The informations allege that Davis, Gongloff, and Taylor (“the sellers”) purchased depressed homes in the cities of Elyria and Lorain, Ohio, which were later renovated to resell to prospective home buyers. The sellers advertised their homes for sale in local publications and represented that there would be no money down and no closing costs to the buyer. Krouse, a mortgage broker with Majors Financial Group, processed the loans for the sellers.

The informations allege that the defendants made fraudulent misrepresentations to the mortgage lenders by providing undisclosed down payment assistance to the buyers and by submitting fictitious bank statements and verifications of rent to the mortgage companies in support of the loans.

If convicted, the defendants’ sentences will be determined by the Court after review of factors unique to this case, including the defendants’ prior criminal records, if any, the defendants’ roles in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

This case is being prosecuted by Assistant United States Attorney Vasile C. Katsaros, following an investigation by the Federal Bureau of Investigation, HUD-OIG and the Lorain County Prosecutor’s Office.

An information is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

PREET BHARARA, the United States Attorney for the Southern District of New York, JOSEPH M. DEMAREST JR., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and BRIAN G. PARR, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service (“USSS”), announced today the arrests of three defendants—SHAHEID BILAL, RHONDA PAYNE, and RICHARD BRITT—on charges stemming from a subprime mortgage fraud scheme involving $3 million worth of mortgages on residential properties in and around Orange and East Orange, New Jersey.

According to the five-count Indictment filed in Manhattan federal court:

From 2005 through 2007, the defendants targeted residential properties in Orange and East Orange, New Jersey. To purchase the properties, the defendants submitted mortgage loan applications, in the name of straw purchasers, that contained false information regarding, for example, the applicant’s creditworthiness and intention to live in the residence. The defendants recruited such straw purchasers by, among other things, paying them thousands of dollars in fees. The defendants told several of these straw purchasers that they would not have to pay the mortgages because the defendants would make payments for several months, and/or that the defendants would make money to pay the mortgages by renting out the properties. The defendants involved in each transaction distributed the proceeds from the fraudulently obtained home mortgage loans among themselves and their co-conspirators for their personal gain.

The defendants involved in each transaction further profited by renting out the fraudulently mortgaged properties to tenants while failing to make mortgage payments on behalf of the straw purchasers. Certain affected straw purchasers have gone into default on their mortgages, and mortgage lenders have foreclosed on certain properties.

BILAL, 33, of Lawrenceville, Georgia, supervised and coordinated the recruitment of straw purchasers and the preparation of fraudulent loan applications and other documents for submission to the lenders, among other things.

PAYNE, 36, of Queens, New York, recruited straw purchasers to participate in the fraudulent scheme and assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

BRITT, 48, of McDonough, Georgia, assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

A chart setting forth the charges contained in the Indictment and the maximum potential penalties for each offense is below.

All three defendants were arrested yesterday. This case has been assigned to United States District Judge DENNY CHIN. PAYNE was presented yesterday before United States Magistrate Judge THEODORE H. KATZ in Manhattan federal court;

BILAL and BRITT were presented yesterday before United States Magistrate E. CLAYTON SCOFIELD III in the Northern District of Georgia.

Mr. BHARARA praised the work of the FBI, USSS, FDICOIG, and USPIS. He also thanked the New York State Banking Department for their outstanding work in the investigation.

U.S. Attorney PREET BHARARA stated: “In a time when real families are having difficulties obtaining mortgages honestly, it is all the more important to stop schemes to obtain mortgages fraudulently. The money stolen from banks in mortgage fraud schemes is money that could be going to enable working families to buy homes. We will continue to work with our partners at the FBI, the USSS, and the FDIC-OIG, as well as the New York State Banking Department, to bring mortgage fraudsters to justice.”

FBI Assistant Director JOSEPH M. DEMAREST, JR., stated: “Vigorous enforcement to thwart mortgage fraud is an FBI priority. The health of the economy is affected by the vitality of the housing market, and steps to ensure integrity in mortgage financing reduce the risks of failed banks and foreclosed properties.”

USSS Special Agent-in-Charge BRIAN G. PARR stated: “Mortgage Fraud continues to be a priority investigative area for the United States Secret Service. Our partnership with the other agencies allows us to maximize our resources to combat this type of fraud.”

According to the indictment, Michael Ohayon, 41, and David Papera, 47, allegedly recruited thirteen straw buyers who used their good credit scores to nab $19.6 million in fraudulent mortgage loans from Washington Mutual Bank, with no intention of making either down payments or mortgage payments on the properties.

A mortgage broker and real estate developer on Friday were charged in San Francisco, California with conspiracy to commit a $19.6 million bank fraud, fraud, and money laundering, prosecutors said.

The indictment further alleges that Ohayon, with Papera’s knowledge, told the straw buyers that an entity controlled by Ohayon and Papera would use the loan proceeds to make the down payments and mortgage payments. Ohayon and Papera created and submitted to Washington Mutual Bank loan applications with numerous misstatements as to the straw buyers’ income and assets.

The maximum penalty for each count of conspiracy to commit bank fraud and bank fraud is 30 years in prison, a $1,000,000.00 fine, and restitution. The maximum penalty for each count of money laundering is 10 years in prison, a $250,000 fine, and restitution.

This case is the result of an investigation by the Federal Bureau of Investigation.

Solomon Dwek’s credibility is key in Beldini corruption trial Defense lawyer puts focus on deal failed mogul made

NEWARK – A federal jury’s answer to that question is likely to decide the fate of the government’s extortion and bribery case against suspended Jersey City deputy mayor Leona Beldini. Beldini, 74, is the first of the 44 people arrested in a July 2009 FBI public corruption and money-laundering sting to go to trial.

Dwek, 37, admitted career criminal, is the government’s witness. He spent almost five full days on the witness stand. At times stoic and subdued, at others angry and annoyed, and once moved nearly to tears, the disgraced land mogul who had ruled over a $400 million empire, testified before spectators that often included defense attorneys for others arrested in the FBI operation.

They heard him admit to bilking his uncle of $100 million in a real estate scheme and stealing millions more from a close family friend. They watched him choke up as he admitted under questioning that his mother and father are no longer his friends. They heard him admit to breaking several of the Ten Commandments.

But they also listened as he repeatedly contended that Beldini had only continued to meet with him because her motives were corrupt: she wanted the cash he was offering for Mayor Jerramiah T. Healy’s election campaign, and she wanted to be the exclusive real estate agent for the fictitious condominium complex Dwek claimed he was going to build.

“If she didn’t want to talk about it, she could have got up and left . . .,” Dwek responded testily to one series of questions from Beldini’s attorney, Brian J. Neary.

Neary implied that Beldini was simply too courteous to walk away from the meeting.

“She is courteous enough to simply talk to you. . .,” Neary said.

“And accept the money, yes,” Dwek shot back. “She was courteous for her own good, not for my own good.”

The government called only three other witnesses in the Beldini trial, while the defense presented no testimony at all. Should Beldini be acquitted, it is likely to encourage other defendants to take their chances at trial instead of agreeing to a plea deal.

The jury is expected to begin deliberations as early as Monday.

Posing as corrupt developer David Esenbach, Dwek wore a wire and secretly videotaped several meetings with Beldini, Healy, former Housing Commissioner Edward Cheatam and political consultant Jack Shaw. The black-and-white videotapes, along with wiretapped conversations from Shaw’s telephone, were the government’s key evidence at the trial.

Beldini is charged with funneling $20,000 in cash that Dwek gave to Cheatam and Shaw, into Healy’s 2009 mayoral campaign. Beldini served as campaign treasurer for Healy, who has not been charged with any wrongdoing.

Under cross examination by Neary, Dwek admitted that he never gave Beldini any cash directly. But on one videotape, Dwek can be heard asking the deputy mayor if Mayor Healy knows that Dwek had given Cheatam and Shaw $10,000 in cash to secretly purchase tickets for a Healy fundraiser.

“The mayor knows, you know, where the tickets came from?” Dwek asks, adding “. . .He appreciates the way I do business, right?’ ” Dwek asks.

“Absolutely,” Beldini answers.

Shaw died of an overdose of Valium on July 28, five days after his July 23 arrest. Two more people have since been arrested in the case, 12 have so far pleaded guilty, including Cheatam, who admitted to taking about $70,000 from Dwek.

Dwek admitted under questioning by Neary that he did not initially know that Beldini’s $66,000-a-year job as deputy mayor was an appointed position, and that she had no vote and did not sit on the city’s planning or zoning boards.

He had been told by Cheatam and Shaw, he said, that Beldini was the mayor’s “right-hand man,” and Jersey City’s second-most powerful public official.

Dwek began cooperating with the FBI only months after he was arrested on $50 million in bank fraud charges in May 2006. During more than two years working undercover as a government informant, Dwek drove all over New Jersey and into New York City in a Lexus, meeting with public officials and Sephardic rabbis.

The $1,753 monthly rental and insurance fee for his car was paid for by the federal government, which also reimbursed him for tens of thousands of dollars he spent on mileage, meals, tolls and parking

The jury is expected to begin deliberations as early as Monday.

Posing as corrupt developer David Esenbach, Dwek wore a wire and secretly videotaped several meetings with Beldini, Healy, former Housing Commissioner Edward Cheatam and political consultant Jack Shaw. The black-and-white videotapes, along with wiretapped conversations from Shaw’s telephone, were the government’s key evidence at the trial.

Beldini is charged with funneling $20,000 in cash that Dwek gave to Cheatam and Shaw, into Healy’s 2009 mayoral campaign. Beldini served as campaign treasurer for Healy, who has not been charged with any wrongdoing.

Under cross examination by Neary, Dwek admitted that he never gave Beldini any cash directly. But on one videotape, Dwek can be heard asking the deputy mayor if Mayor Healy knows that Dwek had given Cheatam and Shaw $10,000 in cash to secretly purchase tickets for a Healy fundraiser.

“The mayor knows, you know, where the tickets came from?” Dwek asks, adding “. . .He appreciates the way I do business, right?’ ” Dwek asks.

“Absolutely,” Beldini answers.

Shaw died of an overdose of Valium on July 28, five days after his July 23 arrest. Two more people have since been arrested in the case, 12 have so far pleaded guilty, including Cheatam, who admitted to taking about $70,000 from Dwek.

Dwek admitted under questioning by Neary that he did not initially know that Beldini’s $66,000-a-year job as deputy mayor was an appointed position, and that she had no vote and did not sit on the city’s planning or zoning boards.

He had been told by Cheatam and Shaw, he said, that Beldini was the mayor’s “right-hand man,” and Jersey City’s second-most powerful public official.

Dwek began cooperating with the FBI only months after he was arrested on $50 million in bank fraud charges in May 2006. During more than two years working undercover as a government informant, Dwek drove all over New Jersey and into New York City in a Lexus, meeting with public officials and Sephardic rabbis.

The $1,753 monthly rental and insurance fee for his car was paid for by the federal government, which also reimbursed him for tens of thousands of dollars he spent on mileage, meals, tolls and parking.

SALT LAKE CITY — Officials are warning Utahns to be watchful this year because a number of mortgage scams are surfacing, costing homeowners and lenders thousands of dollars.

The Federal Bureau of Investigation in Salt Lake City and the Utah Division of Real Estate recently issued an alert detailing the top mortgage scams to look out for this year.

The list is released annually to keep Utahns up to date on the most common and newest frauds.

“Fraudsters are modifying their schemes,” said Michelle Pickens, an FBI special agent.

“They’re doing some of the same things, but they’re coming up with different ways to apply them.”

Although homeowners are most often the target, one recent scam highlighted in the report, known as Short Sale Fraud, is also duping banks.

The scam works this way: A bank will strike a deal with a homeowner who is facing foreclosure to sell the home for a lesser amount than is owed. The homeowner then negotiates a different price that allows them to pocket some of the money.

“The homeowner is part of the fraud,” Pickens said. “Say there’s $300,000 owed on a mortgage. The homeowner approaches the bank and says, ‘I can’t pay for the home, but I have someone who will pay $250,000 for it.’ ”

If the bank agrees, Pickens said, the homeowner then sells the home for a price in between the two figures, pocketing the difference without reporting it.

Pickens said authorities are also very concerned about a fast-growing scam aimed at seniors.

Reverse mortgages are legitimate and allow a homeowner to convert home equity into cash. The arrangement is sometimes attractive to seniors, who can use the extra money to supplement income from retirement savings or Social Security.

Con artists persuade seniors they can live in a home for free, while at the same time taking out loans under the occupant’s name and collecting equity on the home. The homeowner is then responsible to repay the mortgage.

The FBI released a similar alert in November that warned homeowners to be wary of companies that promise foreclosure rescue plans at a high cost.

Officials say they received positive feedback from that campaign.

Pickens said, “We received a lot of calls from people asking things like, ‘How do I know if this is legitimate?’”

Tampa, FL – Craig Adams, orchestrator of one of the largest real estate fraud rings in Florida history, has secretly spent more than a year and a half as an FBI informant, helping build cases against the people he once recruited into his schemes, the Herald-Tribune has learned.

Federal court records show Adams has agreed to plead guilty to conspiracy charges at a later date and has pledged his help in an attempt to earn leniency. In at least one instance, Adams wore a wire to record a conversation with a key business associate.

So far he has laid bare at least $200 million in fraudulent property deals, incriminated more than 30 of his former business partners and given the FBI enough evidence to arrest his longtime title agent, Lisa Rotolo, the court records show.

Adams’ role as informant is described in a federal criminal complaint related to Rotolo’s April arrest. Those documents, filed in U.S. District Court in Tampa, do not name Adams as the informant, referring to him only as the “confidential defendant” or “CD.”

Using descriptions of the defendant, particularly the mention of a relative in the court documents, the Herald-Tribune concluded that Adams was the informant. Lisa Rotolo’s husband, Jay, and others familiar with the investigation confirmed Adams’ identity this week.

David Oriente, a Sarasota investor who reported Adams to the FBI in March 2008, said he became irate when he learned two months ago that Adams might get a deal.

He said he complained to FBI officials who told him Adams had jeopardized his deal by not being completely honest.

“He didn’t say he was the ringleader,” Oriente said. “He blew the lid on the whole thing and underplayed his role. Now the FBI is finding out he is the man.”

Federal court records show Adams has agreed to plead guilty to conspiracy charges at a later date and has pledged his help in an attempt to earn leniency. In at least one instance, Adams wore a wire to record a conversation with a key business associate.

So far he has laid bare at least $200 million in fraudulent property deals, incriminated more than 30 of his former business partners and given the FBI enough evidence to arrest his longtime title agent, Lisa Rotolo, the court records show.

Adams’ role as informant is described in a federal criminal complaint related to Rotolo’s April arrest. Those documents, filed in U.S. District Court in Tampa, do not name Adams as the informant, referring to him only as the “confidential defendant” or “CD.”

Using descriptions of the defendant, particularly the mention of a relative in the court documents, the Herald-Tribune concluded that Adams was the informant. Lisa Rotolo’s husband, Jay, and others familiar with the investigation confirmed Adams’ identity this week.

David Oriente, a Sarasota investor who reported Adams to the FBI in March 2008, said he became irate when he learned two months ago that Adams might get a deal.

He said he complained to FBI officials who told him Adams had jeopardized his deal by not being completely honest.

“He didn’t say he was the ringleader,” Oriente said. “He blew the lid on the whole thing and underplayed his role. Now the FBI is finding out he is the man.”

Rotolo, contacted at the Target store where she now works, would not comment. Adams did not respond to phone calls and e-mails.

Jay Rotolo told the Herald-Tribune his wife is also cooperating with what U.S. Attorney Brian Albritton’s office calls an ongoing investigation.

“My wife has been working with the FBI for a year now,” Jay Rotolo said. “Do you know what kind of a position this story puts her in? Yes, she got her finger in a mess, but we have never profited from any of this.”

The Rotolo complaint and supporting affidavit provide a glimpse into what could become the FBI’s largest mortgage fraud case in Florida.

Ultimately, dozens of Sarasota real estate investors could be caught up in the investigation. Adams’ list of associates includes mortgage brokers, Realtors, real estate appraisers, attorneys and developers.

During a conversation Adams allowed the FBI to secretly record, Rotolo predicted a wave of legal trouble for Adams’ business associates and for others who flipped property in Sarasota, the criminal complaint shows.

“I think that, you know, you’re gonna see 90 percent of the people in this town have a problem,” Rotolo said. “I don’t think there’s gonna be very many people that are gonna be unscathed by it.”

FAKE SET OF DOCUMENTS

The Herald-Tribune first exposed Adams and his network of property flippers in July as part of a yearlong investigation into real estate fraud. FBI officials would not confirm at the time that they were investigating Adams or his associates. In fact, federal agents and the U.S. Attorney’s Office suppressed information about Rotolo’s arrest and the investigation during interviews throughout 2009.

Federal court records show Adams has agreed to plead guilty to conspiracy charges at a later date and has pledged his help in an attempt to earn leniency. In at least one instance, Adams wore a wire to record a conversation with a key business associate.

So far he has laid bare at least $200 million in fraudulent property deals, incriminated more than 30 of his former business partners and given the FBI enough evidence to arrest his longtime title agent, Lisa Rotolo, the court records show.

Adams’ role as informant is described in a federal criminal complaint related to Rotolo’s April arrest. Those documents, filed in U.S. District Court in Tampa, do not name Adams as the informant, referring to him only as the “confidential defendant” or “CD.”

Using descriptions of the defendant, particularly the mention of a relative in the court documents, the Herald-Tribune concluded that Adams was the informant. Lisa Rotolo’s husband, Jay, and others familiar with the investigation confirmed Adams’ identity this week.

David Oriente, a Sarasota investor who reported Adams to the FBI in March 2008, said he became irate when he learned two months ago that Adams might get a deal.

He said he complained to FBI officials who told him Adams had jeopardized his deal by not being completely honest.

“He didn’t say he was the ringleader,” Oriente said. “He blew the lid on the whole thing and underplayed his role. Now the FBI is finding out he is the man.”

Rotolo, contacted at the Target store where she now works, would not comment. Adams did not respond to phone calls and e-mails.

Jay Rotolo told the Herald-Tribune his wife is also cooperating with what U.S. Attorney Brian Albritton’s office calls an ongoing investigation.

“My wife has been working with the FBI for a year now,” Jay Rotolo said. “Do you know what kind of a position this story puts her in? Yes, she got her finger in a mess, but we have never profited from any of this.”

The Rotolo complaint and supporting affidavit provide a glimpse into what could become the FBI’s largest mortgage fraud case in Florida.

Ultimately, dozens of Sarasota real estate investors could be caught up in the investigation. Adams’ list of associates includes mortgage brokers, Realtors, real estate appraisers, attorneys and developers.

During a conversation Adams allowed the FBI to secretly record, Rotolo predicted a wave of legal trouble for Adams’ business associates and for others who flipped property in Sarasota, the criminal complaint shows.

“I think that, you know, you’re gonna see 90 percent of the people in this town have a problem,” Rotolo said. “I don’t think there’s gonna be very many people that are gonna be unscathed by it.”

FAKE SET OF DOCUMENTS

The Herald-Tribune first exposed Adams and his network of property flippers in July as part of a yearlong investigation into real estate fraud. FBI officials would not confirm at the time that they were investigating Adams or his associates. In fact, federal agents and the U.S. Attorney’s Office suppressed information about Rotolo’s arrest and the investigation during interviews throughout 2009.

“We did not discuss it because of the ongoing nature of the investigation,” said Steve Cole, spokesman for the U.S. Attorney’s Office for the Middle District of Florida. “I cannot comment further.”

Sarasota County Sheriff’s Detective Jeffrey Harris is also involved in the criminal investigation, but a spokeswoman for his agency referred questions to the U.S. Attorney’s Office.

The newspaper’s investigation revealed how Adams recruited friends, family members and business associates to trade houses back and forth for phony prices. With each sale, the price of the house was artificially increased, allowing buyers to qualify for oversized mortgages.

Sources familiar with the deals told the Herald-Tribune “profits” generated from the mortgages were split among those who participated in the sales.

The Herald-Tribune also revealed that Adams or his associates forged his aunt’s signature to obtain a loan, hid outstanding loans from banks in order to borrow more money and sold properties without repaying attached mortgages.

The criminal complaint against Rotolo describes similar schemes. It lays out how Rotolo and the confidential defendant worked together to artificially inflate home values and help buyers qualify for fraudulent mortgages.

Instead of selling houses on the open market, they used “friendly sellers” so they could inflate values and hide false statements.

When a friendly seller could not be found, Rotolo, Adams and others involved in the scheme would create a fake set of closing documents. One set would go to the seller and another would go to the bank in order to hide how money was manipulated, the complaint states.

In at least one case, Rotolo took loan money that was supposed to be used to repay previous mortgages and funneled it to Adams, the complaint states.

The documents list 37 addresses and related mortgages that Adams told the FBI were fraudulent. Using mortgage records filed with the clerk of court, the Herald-Tribune determined the names of those involved.

About half of those implicated by Adams were previously named in the Herald-Tribune’s flipping series this summer. The rest were additional Adams associates, meaning Adams’ group is nearly twice as large as the Herald-Tribune originally reported.

A review of all of those names shows that the people Adams regularly used for real estate deals have defaulted on more than $123 million in mortgage loans in recent years.

Rotolo’s arrest documents describe in detail the real estate transactions on the house at 1636 Baywood Way in Sarasota.

Using his 80-year-old mother, Jocelyn Adams, as a straw buyer, Adams bought the house in March 2005 and began borrowing more money than his mother’s income could justify, the criminal complaint states.

Although Jocelyn Adams’ name is on the deed, Craig Adams and an unnamed investor retained ownership, the complaint says.

They inflated the original purchase price from $1.65 million to $1.85 million and kept the excess proceeds from the mortgages obtained in Jocelyn Adams’ name.

Federal court records show Adams has agreed to plead guilty to conspiracy charges at a later date and has pledged his help in an attempt to earn leniency. In at least one instance, Adams wore a wire to record a conversation with a key business associate.

So far he has laid bare at least $200 million in fraudulent property deals, incriminated more than 30 of his former business partners and given the FBI enough evidence to arrest his longtime title agent, Lisa Rotolo, the court records show.

Adams’ role as informant is described in a federal criminal complaint related to Rotolo’s April arrest. Those documents, filed in U.S. District Court in Tampa, do not name Adams as the informant, referring to him only as the “confidential defendant” or “CD.”

Using descriptions of the defendant, particularly the mention of a relative in the court documents, the Herald-Tribune concluded that Adams was the informant. Lisa Rotolo’s husband, Jay, and others familiar with the investigation confirmed Adams’ identity this week.

David Oriente, a Sarasota investor who reported Adams to the FBI in March 2008, said he became irate when he learned two months ago that Adams might get a deal.

He said he complained to FBI officials who told him Adams had jeopardized his deal by not being completely honest.

“He didn’t say he was the ringleader,” Oriente said. “He blew the lid on the whole thing and underplayed his role. Now the FBI is finding out he is the man.”

Rotolo, contacted at the Target store where she now works, would not comment. Adams did not respond to phone calls and e-mails.

Jay Rotolo told the Herald-Tribune his wife is also cooperating with what U.S. Attorney Brian Albritton’s office calls an ongoing investigation.

“My wife has been working with the FBI for a year now,” Jay Rotolo said. “Do you know what kind of a position this story puts her in? Yes, she got her finger in a mess, but we have never profited from any of this.”

The Rotolo complaint and supporting affidavit provide a glimpse into what could become the FBI’s largest mortgage fraud case in Florida.

Ultimately, dozens of Sarasota real estate investors could be caught up in the investigation. Adams’ list of associates includes mortgage brokers, Realtors, real estate appraisers, attorneys and developers.

During a conversation Adams allowed the FBI to secretly record, Rotolo predicted a wave of legal trouble for Adams’ business associates and for others who flipped property in Sarasota, the criminal complaint shows.

“I think that, you know, you’re gonna see 90 percent of the people in this town have a problem,” Rotolo said. “I don’t think there’s gonna be very many people that are gonna be unscathed by it.”

FAKE SET OF DOCUMENTS

The Herald-Tribune first exposed Adams and his network of property flippers in July as part of a yearlong investigation into real estate fraud. FBI officials would not confirm at the time that they were investigating Adams or his associates. In fact, federal agents and the U.S. Attorney’s Office suppressed information about Rotolo’s arrest and the investigation during interviews throughout 2009.

“We did not discuss it because of the ongoing nature of the investigation,” said Steve Cole, spokesman for the U.S. Attorney’s Office for the Middle District of Florida. “I cannot comment further.”

Sarasota County Sheriff’s Detective Jeffrey Harris is also involved in the criminal investigation, but a spokeswoman for his agency referred questions to the U.S. Attorney’s Office.

The newspaper’s investigation revealed how Adams recruited friends, family members and business associates to trade houses back and forth for phony prices. With each sale, the price of the house was artificially increased, allowing buyers to qualify for oversized mortgages.

Sources familiar with the deals told the Herald-Tribune “profits” generated from the mortgages were split among those who participated in the sales.

The Herald-Tribune also revealed that Adams or his associates forged his aunt’s signature to obtain a loan, hid outstanding loans from banks in order to borrow more money and sold properties without repaying attached mortgages.

The criminal complaint against Rotolo describes similar schemes. It lays out how Rotolo and the confidential defendant worked together to artificially inflate home values and help buyers qualify for fraudulent mortgages.

Instead of selling houses on the open market, they used “friendly sellers” so they could inflate values and hide false statements.

When a friendly seller could not be found, Rotolo, Adams and others involved in the scheme would create a fake set of closing documents. One set would go to the seller and another would go to the bank in order to hide how money was manipulated, the complaint states.

In at least one case, Rotolo took loan money that was supposed to be used to repay previous mortgages and funneled it to Adams, the complaint states.

MANY MORE INVOLVED

Several of Adams’ business associates, contacted by the Herald-Tribune this week, were shocked to learn that Adams was cooperating with federal investigators.

When informed by phone, Adams’ associate Heather Kabobel began crying. “I feel sick to my stomach,” she said.

Kabobel, a Sarasota real estate appraiser, is one of more than 30 people Adams implicated as a participant in real estate fraud, the Rotolo criminal complaint shows. Her husband, Jonathan Glucker, a mortgage broker with Prospect Mortgage, also appears on loan documents that Adams said were fraudulent, the complaint shows. Glucker did not return phone calls.

The documents list 37 addresses and related mortgages that Adams told the FBI were fraudulent. Using mortgage records filed with the clerk of court, the Herald-Tribune determined the names of those involved.

About half of those implicated by Adams were previously named in the Herald-Tribune’s flipping series this summer. The rest were additional Adams associates, meaning Adams’ group is nearly twice as large as the Herald-Tribune originally reported.

A review of all of those names shows that the people Adams regularly used for real estate deals have defaulted on more than $123 million in mortgage loans in recent years.

Rotolo’s arrest documents describe in detail the real estate transactions on the house at 1636 Baywood Way in Sarasota.

Using his 80-year-old mother, Jocelyn Adams, as a straw buyer, Adams bought the house in March 2005 and began borrowing more money than his mother’s income could justify, the criminal complaint states.

Although Jocelyn Adams’ name is on the deed, Craig Adams and an unnamed investor retained ownership, the complaint says.

They inflated the original purchase price from $1.65 million to $1.85 million and kept the excess proceeds from the mortgages obtained in Jocelyn Adams’ name.

Rotolo played a key role in the fraud, according to the criminal complaint against her. It says she prepared two sets of closing documents — one for the unwitting sellers and another for the bank that provided a loan on the inflated value.

Rotolo prepared the legal documents for several more loans on the property over the years, the complaint says. In most of the paperwork, Adams forged his mother’s signature and Rotolo notarized it, the complaint shows.

APPROACHING THE FBI

The criminal complaint filed by investigators against Rotolo does not explain what led Adams to turn FBI informant.

The documents show that in May 2008, a Tampa attorney contacted the FBI’s Sarasota office and expressed “his client’s desire to provide information to law enforcement about his and other individuals’ involvement in wide spread (sic) mortgage fraud in Sarasota, Florida.”

The informant agreed in principle to plead guilty to criminal conspiracy on condition that prosecutors not pursue any additional charges. Federal sentencing guidelines show criminal conspiracy carries a sentence of up to five years.

At the time Adams approached the FBI in 2008, his real estate career had come crashing down, with at least six of his multimillion-dollar properties falling into foreclosure. In April that year, Oriente, a business associate who had lent Adams $700,000, sued Adams and went to police and FBI agents, hoping to spark a mortgage fraud investigation.

Oriente said he thought the case had stalled until two months ago, when he learned about Rotolo’s arrest and read the court documents mentioning a confidential defendant.

Special Agents and State Investigators Warn Utahns to Beware

• Is someone letting you live in a home for free?
• Did a builder offer you deep discounts to move into a newly constructed house?
• Has a company offered to refinance your mortgage for a fee?

If the answer to any of these questions is “yes,” then you may be a victim of a scam. FBI special agents and the state investigators with the Utah Division of Real Estate have compiled a list of top five mortgage related scams in 2010.

1. Reverse Mortgage Scam: Reverse mortgages can be a legitimate way for senior citizens to take equity from their homes without a monthly payment. However, con artists convince senior citizens they can live in a home for free, obtain a home loan under the occupant’s name, and disappear with the equity, leaving the victim to repay the mortgage.

2. Short Sale Fraud: A “short sale” transaction involves a lender agreeing to sell a property for less than the mortgage amount. Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference.

3. Builder Bailouts: Simply put, builder bailouts are a “kick-back” scheme. They may be more common in a troubled real estate market where builders may have a surplus of unsold properties. The builder offers excessive “incentives” to the purchaser. These incentives are disclosed as a down payment which leads the lender to believe there is equity in a home. Under these circumstances the builder and the buyer are committing fraud.

4. Loan Modifications: The FBI Salt Lake City Field Office issued a consumer alert about loan modifications in the fall of 2009. Special agents and state investigators are concerned homeowners may fall for this same scam in 2010. Companies charge up to $2000, promising to make a homeowner’s mortgage payment more affordable. But some homeowners report that they didn’t get what they paid for.

5. Affinity Fraud: Affinity fraud is an ongoing concern for the Salt Lake City FBI Field Office and the Utah Division of Real Estate. Fraudsters who promote affinity scams frequently are, or pretend to be, members of a particular religious, ethnic, or professional group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme. They convince those people that a fraudulent investment is legitimate and worthwhile. Many times those leaders become unwitting victims of the fraudster’s ruse.

SHREVEPORT, LA—William Everett Nichols, 56, of Alexandria, La., President and sole shareholder of First Fidelity Mortgage, Inc., was sentenced to six years in federal prison and ordered to pay $3,903,071.00 in restitution for bank fraud, Acting United States Attorney William J. Flanagan announced today. Today’s sentence was imposed by U.S. District Court Judge Donald E. Walter in Shreveport.

Nichols pleaded guilty to bank fraud in November 2009. The FBI investigation of Nichols and First Fidelity Mortgage, Inc., doing business as Southern Funding, showed that Southern Funding was involved in the mortgage lending business and provided mortgages to customers in central Louisiana. Sabine State Bank and Peoples State Bank of Many, Louisiana, provided credit to Southern Funding for mortgages which were secured by customer notes pledged by Southern Funding to the banks. Nichols also had private investors as a funding source.

Nichols forged signatures of borrowers and provided the forged notes as collateral. He is responsible for a total amount of loss to banks and private investors of $3,903,071.00.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Alexander C. Van Hook.

MICHAEL HERSHKOWITZ, Manhattan Real Estate Developer Sentenced to Four Years in Prison for $27 Million Mortgage Fraud and Ponzi Scheme

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that Manhattan real estate developer MICHAEL HERSHKOWITZ was sentenced today to four years in prison for his participation in a $27 million Ponzi scheme involving fraudulent loans secured by nonexistent mortgages.

According to the documents filed in the case in Manhattan federal court:

HERSHKOWITZ, working through a Manhattan real estate development company, The Kingsland Group, Inc., and related entities (collectively, “The Kingsland Group”), fraudulently induced approximately 100 individuals to lend the Kingsland Group over $27 million to fund the renovation of approximately sixteen multi-family apartment buildings located in upper Manhattan. HERSHKOWITZ and a co-conspirator, IVY WOOLF-TURK, falsely represented that the lenders would hold, as collateral for the loans, interests in bona fide first mortgages in the various properties in which they thought they were investing. In truth and in fact, HERSHKOWITZ did not record mortgages on behalf of the lenders. Some interest was paid to some of the defrauded lenders with loans made by other victims, and HERSHKOWITZ or WOOLF TURK made false statements to investors about the status of their loans. Ultimately the principal on the loans was not repaid when due, and the lenders learned that they did not have valid first mortgages on the properties in question, as had been falsely promised to them.

Numerous victims wrote letters to the Court, describing the impact of HERSHKOWITZ and WOOLF-TURK’s Ponzi scheme. One stated that she had “lost my life savings of a little over $200,000 because I trusted MICHAEL HERSHKOWITZ’s integrity,” and that her “life had changed completely, and I fight depression every day.” Another victim stated that because of the fraud, she “can no longer afford health insurance,” and “ha[s] no way to get decent health care despite having spinal cord and health problems.” Another complained that HERSHKOWITZ “preyed upon unsuspecting retirees, such as myself, with promises of safe, secure investments supported by New York City real estate.” Victims also complained that the fraud had decimated their retirement savings and their childrens’ college funds, and made them unable to make mortgage payments.

HERSHKOWITZ, 53, of New York, New York, previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. He was sentenced today by United States District Judge P. KEVIN CASTEL. In addition to the four-year prison term, Judge CASTEL ordered forfeiture of $27,184,750, representing the funds obtained through the fraud.

In sentencing HERSHKOWITZ, Judge CASTEL said, “this was a systematic course of criminal conduct.”

WOOLF TURK, of Port Washington, New York, previously pleaded guilty to a related charge and was sentenced on November 23, 2009, to five years in prison and restitution of $27,184,750.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation.

“Michael Hershkowitz and Ivy Woolf Turk defrauded nearly 100 victims out of more than $27 million dollars. Their victims entrusted sometimes a lifetime’s worth of hard-earned savings, only to lose everything. We will continue to work with our partners at the FBI to combat fraud and to bring those responsible to justice,” said U.S. Attorney PREET BHARARA.

Orlando Man Sentenced to 22 Years for Arranging Fraudulent Mortgages

ORLANDO, FL—United States Attorney A. Brian Albritton announces that U.S. District Judge Anne C. Conway today sentenced Garry S. Martin (age 36, of Orlando) for conspiring to commit money laundering in connection with various mortgage fraud schemes and violating the terms of his supervised release. As part of his sentence, the court also ordered that Martin pay more than $1 million in restitution to his victims. Martin pleaded guilty to the charges on July 16, 2009.

According to the plea agreement, Martin was convicted in the United States District Court for the Eastern District of New York in 2006 for engaging in mortgage fraud. Martin had made several applications to secure mortgages from Citimortgage, Inc., a subsidiary of CitiBank. Those applications contained several false statements, including inflated values for the borrower’s income and assets.

The terms of Martin’s supervised release for his 2006 conviction prohibited him from offering various real estate services. After Martin had been placed on supervised release in the Middle District of Florida, however, he maintained his real estate sales agent license and obtained his real estate brokers license. He also formed various companies, including Antigua Housing and Management, Inc. (“Antigua H&M”), Antigua Real Estate, Antigua Abstract LLC (“Antigua Abstract”), GSM Financial LLC, and Savvy Professional Title Company (“Savvy”), each with its principal office listed as 5449 South Semoran Boulevard, Suite 200, Orlando, Florida. Through those companies, and up until August 2008, Martin conducted various schemes, including foreclosure fraud, reverse mortgage fraud, and completely sham transactions, to defraud financial institutions out of more than $5 million.

Through Antigua H&M, Martin obtained money from people facing foreclosure by promising that Antigua would bring their past due mortgages current through refinancing and forward their payments to their lenders. He then used the foreclosure payments himself and did not pay the banks.

Through Savvy and Antigua Abstract, Martin marketed reverse mortgages to seniors, sent fraudulent financing packages to support the mortgage applications, arranged the mortgage closings himself, and then diverted mortgage proceeds to his personal use.

Martin also created wholly fictitious agreements between fake buyers and fake sellers to receive mortgage proceeds.

This case was investigated by the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and Orange County Sheriff’s Office. It was prosecuted by Assistant United States Attorney Vincent A. Citro.

This case was brought as part of the Middle District of Florida’s Mortgage Fraud Surge, a joint effort by the U.S. Attorney’s Office for the Middle District of Florida, the Federal Bureau of Investigation, Tampa and Jacksonville Divisions, and numerous other federal, state, and local law enforcement agencies. The Surge, which ended October 31, focused intensive investigative and prosecutorial resources on the mortgage fraud crisis that plagues middle Florida and has contributed to the current economic situation nationwide. The Surge accelerated mortgage fraud cases to bring perpetrators to justice quickly and provide maximum deterrence, and it was the first step in an ongoing effort to prosecute mortgage fraud of all types throughout the Middle District. For more information on the Middle District of Florida’s Mortgage Fraud Surge, please contact Steve Cole, Public Affairs Officer for the United States Attorney’s Office

 Garry S. Martin   Garry S. Martin  Garry S. Martin  Garry S. Martin   Garry S. Martin  Garry S. Martin

MTSU Professor Sentenced to 12 Months and a Day for Mortgage Fraud Scheme

NASHVILLE, TN—Edward M. Yarbrough, United States Attorney for the Middle District of Tennessee, and My Harrison, Special Agent in Charge, Memphis Division, Federal Bureau of Investigation, announced that, on November 13, 2009, U.S. District Judge Aleta Trauger sentenced Pamela Gail Holder to 12 months and one day in prison for her role in a mortgage fraud scheme. Dr. Holder had been found guilty of bank fraud and wire fraud offenses related to that scheme following a one-week jury trial in April 2009.

Dr. Holder, a professor of nursing at Middle Tennessee State University and the former coordinator of the statewide Tennessee Board of Regents On-Line Degree Program, was originally charged in a four-count indictment in June 2008. At trial, the jury heard evidence that Dr. Holder and others helped orchestrate a multi-million dollar mortgage-fraud scheme that involved a “straw buyer” with a good credit score, who was deceived by Dr. Holder into borrowing $2.4 million for the purpose of purchasing a $1.5 million dollar home in Hendersonville, Tennessee. In the months leading up to the purchase, Dr. Holder helped prepare or send false documents that, among other things, falsely claimed that the straw buyer was president of “Team Fat Man,” an automotive-sales business owned by Dr. Holder’s deceased husband, and greatly inflated the straw buyer’s income. Through those documents and other fraudulent misrepresentations, Dr. Holder was able to qualify the straw buyer for large loans well beyond what the straw buyer could afford. The scheme involved loans obtained at Bank of Nashville, Countrywide Home Loans, and First Tennessee Bank. After the straw buyer purchased the lavish home, Dr. Holder and her husband moved in and spent the excess loan funds on various purchases, including several pieces of diamond jewelry. When the straw buyer was unable to make the monthly mortgage payments of approximately $10,000, the mortgage defaulted and the property was foreclosed upon.

At the sentencing hearing, the government focused on the profound damage that Dr. Holder’s crime caused an innocent victim and the negative effect of mortgage fraud on the banking industry and the lending process. After the sentencing, United States Attorney Edward Yarbrough remarked, “Mortgage fraud is a serious crime, and we are pleased that the Court has imposed an appropriately serious sentence in this case. The United States Attorney’s Office and our law-enforcement partners will continue to investigate such frauds and bring those who commit them to justice.” In addition, My Harrison, Special Agent in Charge of the FBI’s Memphis Division, stated, “The FBI will continue to target those who criminally manipulate our financial system for personal gain and keep working to bring criminals like this to justice to ensure that they pay for their crimes.”

The investigation of the case was conducted by the Federal Bureau of Investigation. Assistant U.S. Attorney Ty E. Howard of the Middle District of Tennessee and Trial Attorney Peter A. Frandsen of the U.S. Department of Justice Fraud Section represented the United States.

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When I first read about John Pistole’s Congressional testimony before the House Committee on the Judiciary, I figured I’d take an hour or so to read through his testimony myself and summarize it for readers here on Flipping Frenzy. Little did I know that Pistole, who currently serves as the FBI’s Deputy Director, would have so much to say.

Rather than attempt to summarize Pistole’s remarks about real estate and mortgage fraud’s role in our current economic tsunami, here is the Deputy Director’s comments in full (emphasis/bold is of my own doing):

John S. Pistole

April 1, 2009

Good morning Mr. Chairman, Ranking Member, and Members of the Committee. I want to thank you for the opportunity to testify before you today about the Federal Bureau of Investigation’s (FBI) efforts to combat mortgage fraud and other financial frauds. Much the same as the Savings and Loan (S&L) Crisis of the 1980s crippled our economy, so too has the current financial crisis. Many of the lessons learned and best practices from our work during the past decade, such as the Enron investigation, will clearly help us navigate the expansive crime problem currently taxing law enforcement and regulatory authorities.

In the late 1980s and early 1990s, the United States experienced a similar financial crisis with the collapse of the savings and loans. The Department of Justice (DOJ), and more specifically the FBI, were provided a number of tools through the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and Crime Control Act of 1990 (CCA) to combat the aforementioned crisis. As stated in Senate Bill 331 dated January 27, 2009, “in the wake of the Savings and Loan crisis of the 1980s, a series of strike forces based in 27 cities was staffed with 1000 FBI agents and forensic experts and dozens of federal prosecutors. That effort yielded more than 600 convictions and $130,000,000 in ordered restitution.”

However, today’s financial crisis dwarves the S&L crisis as financial institutions have reduced their assets by more than $1.2 trillion related to the current global financial crisis compared to the estimated $160 million lost during the S&L crisis. Mortgage and related corporate fraud were not the sole sources of the current financial crisis; however, it would be irresponsible to neglect mortgage fraud’s impact on the U.S. housing and financial markets.

As the FBI’s Assistant Director for the Criminal Division testified in 2004 before the House Financial Services Sub-Committee:

“If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market. Investors may lose faith and require higher returns from mortgage backed securities. This may result in higher interest rates and fees paid by borrowers and limit the amount of investment funds available for mortgage loans.”

He also noted that the FBI supported new approaches to address mortgage fraud and its effects on the U.S. financial system, to include:

• a mechanism to require the mortgage industry to report fraudulent activity, and
• the creation of “Safe Harbor” provisions to protect the mortgage industry under a mandatory reporting mechanism.

What has occurred has been far worse than predicted. Mortgage fraud and related financial industry corporate fraud have shaken the world’s confidence in the U.S. financial system. The fraud schemes have adapted with the changing economy and now individuals are preyed upon even as they are about to lose their homes. But what is mortgage fraud?

Although there is no specific statute that defines mortgage fraud, each mortgage fraud scheme contains some type of material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.

The FBI delineates mortgage fraud in two distinct areas: 1) Fraud for Profit; and 2) Fraud for Housing. Fraud for Profit uses a scheme to remove equity, falsely inflate the value of the property or issue loans relating to fictitious property(ies). Many of the Fraud for Profit schemes rely on “industry insiders”, who override lender controls. The FBI defines industry insiders as appraisers, accountants, attorneys, real estate brokers, mortgage underwriters and processors, settlement/title company employees, mortgage brokers, loan originators, and other mortgage professionals engaged in the mortgage industry.

Fraud for Housing represents illegal actions perpetrated by a borrower, typically with the assistance of real estate professionals. The simple motive behind this fraud is to acquire and maintain ownership of a house under false pretenses. This type of fraud is typified by a borrower who makes misrepresentations regarding the borrower’s income or employment history to qualify for a loan.

The FBI compiles data on mortgage fraud through Suspicious Activity Reports (SARs) filed by financial institutions and through the Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) reports. The FBI also receives complaints from the industry at large.

While a significant portion of the mortgage industry is void of any mandatory fraud reporting and there is presently no central repository to collect all mortgage fraud complaints, SARs from financial institutions have indicated a significant increase in mortgage fraud reporting. For example, during Fiscal Year (FY) 2008, mortgage fraud SARs increased more than 36 percent to 63,173. The total dollar loss attributed to mortgage fraud is unknown. However, 7 percent of SARs filed during FY 2008 indicated a specific dollar loss, which totaled more than $1.5 billion. Only 7 percent of SARs report dollar loss because of the time lag between identifying a suspicious loan and liquidating the property through foreclosure and then calculating the loss amount. As of February 28, 2009, there were 28,873 mortgage fraud SARs filed in fiscal year 2009.

Fraud Trends

The current financial crisis has produced one unexpected consequence: it has exposed prevalent fraud schemes that have been thriving in the global financial system. These fraud schemes are not new but they are coming to light as a result of market deterioration. For example, current market conditions have helped reveal numerous mortgage fraud, Ponzi schemes and investment frauds, such as the Bernard Madoff scam. These schemes highlight the need for law enforcement and regulatory agencies to be ever vigilant of White Collar Crime both in boom and bust years.

The FBI has experienced and continues to experience an exponential rise in mortgage fraud investigations. The number of open FBI mortgage fraud investigations has risen from 881 in FY 2006 to more than 2,000. In addition, the FBI has 566 open corporate fraud investigations, including matters directly related to the current financial crisis. These corporate and financial institution failure investigations involve financial statement manipulation, accounting fraud and insider trading. The increasing mortgage, corporate fraud, and financial institution failure case inventory is straining the FBI’s limited White Collar Crime resources.

Although there are many mortgage fraud schemes, the FBI is focusing its efforts on those perpetrated by industry insiders who are part of organized enterprises engaged in Mortgage Fraud for Profit. Industry insiders are of priority concern as they are, in many instances, the facilitators that permit the fraud to occur. The FBI utilizes SAR data to help identify fraud schemes perpetrated by insiders. However, SAR data does not capture suspicious activity identified by the entire mortgage industry. Requiring the entire industry to report suspicious activity would give us a more complete data set to exploit. The FBI is engaged with the mortgage industry in identifying fraud trends and educating the public. Some of the current rising mortgage fraud trends include: equity skimming, property flipping, mortgage identity related theft, and foreclosure rescue scams.

Equity skimming is a tried and true method of committing mortgage fraud and criminals continue to devise new schemes. Today’s common equity skimming schemes involve the use of corporate shell companies, corporate identity theft and the use or threat of bankruptcy/foreclosure to dupe homeowners and investors.

Property flipping is nothing new; however, once again law enforcement is faced with an educated criminal element that is using identity theft, straw borrowers and shell companies, along with industry insiders to conceal their methods and override lender controls.

Identity theft in its many forms is a growing problem and is manifested in many ways, including mortgage documents. The mortgage industry has indicated that personal, corporate, and professional identity theft in the mortgage industry is on the rise. Computer technology advances and the use of online sources have also assisted the criminal in committing mortgage fraud. However, the FBI is working with its law enforcement and industry partners to identify trends and develop techniques to thwart illegal activities in this arena.

Foreclosure rescue scams are particularly egregious in that fraudsters take advantage and illegally profit from other individuals’ misfortunes. As foreclosures continue to rise across the country, so too have the number of foreclosure rescue scams that target unsuspecting victims. These scams include victims losing their home equity or paying thousands of dollars in fees, and then receiving little or no services, and ultimately losing their home to foreclosure. The FBI is again working with our law enforcement and regulatory partners along with industry partners to target, disrupt and dismantle the individuals and/or companies engaging in these fraud schemes.

Proactive Approach to Financial Frauds

The FBI has implemented new and innovative methods to detect and combat mortgage fraud. One of these proactive approaches was the development of a property flipping analytical computer application, first developed by the Washington Field Office, to effectively identify property flipping in the Baltimore and Washington areas. The original concept has evolved into a national FBI initiative which employs statistical correlations and other advanced computer technology to search for companies and persons with patterns of property flipping. As potential targets are analyzed and flagged, the information is provided to the respective FBI field office for further investigation. Property flipping is best described as purchasing properties and artificially inflating their value through false appraisals. The artificially valued properties are then sold at a higher price to an associate of the “flipper” at a substantially inflated price. Often flipped properties go into foreclosure and are ultimately repurchased for a fraction of their original value.

Other methods employed by the FBI include sophisticated investigative techniques, such as undercover operations and wiretaps. These investigative measures not only result in the collection of valuable evidence, they also provide an opportunity to apprehend criminals in the commission of their crimes, thus reducing loss to individuals and financial institutions. By pursuing these proactive methods in conjunction with historical investigations, the FBI is able to realize operational efficiencies in large scale investigations.

In December 2008, the FBI dedicated resources to create the National Mortgage Fraud Team at FBI headquarters in Washington, D.C. The Team has the specific responsibility for all management of the mortgage fraud program at both the origination and corporate level. This Team will be assisting the field offices in addressing the mortgage fraud problem at all levels. The current financial crisis, however, has required the FBI to move resources from other white collar crime and criminal programs in order to appropriately address the crime problem. Since January 2007, the FBI has increased its agent and analyst manpower working mortgage fraud investigations. The Team provides tools to identify the most egregious mortgage fraud perpetrators, prioritize pending investigations, and provide information to evaluate where additional manpower is needed.

Partnerships

One of the best tools the FBI has in its arsenal for combating mortgage fraud is its long-standing partnerships with other federal, state and local law enforcement. This is not a new tool employed by the FBI. Collaboration, communication, and information-sharing have long been a proven solution to the nation’s most difficult crimes. In response to a growing gang problem, for example, the FBI stood up Safe Streets Task Forces across the country. In response to crimes in Indian Country, the FBI developed the Safe Trails Task Force Program. In response to this new threat, the FBI stood up Mortgage Fraud Task Forces across the country.

Presently, there are 18 mortgage fraud task forces and 47 working groups in the country. With representatives of federal, state, and local law enforcement, these task forces are strategically placed in areas identified as high threat areas for mortgage fraud. Partners are varied but typically include representatives of HUD-OIG, the U.S. Postal Inspection Service, the Internal Revenue Service, FinCEN, the Federal Deposit Insurance Corporation, as well as State and local law enforcement officers across the country.

While the FBI has increased the number of agents around the country who investigate mortgage fraud cases from 120 Special Agents in FY 2007 to currently over 250 Special Agents as of February 28, 2009, this multi-agency model serves as a force-multiplier, providing an array of resources to adequately identify the source of the fraud, as well as finding the most effective way to prosecute each case, particularly in active markets where fraud is widespread. We are pleased to report that the model is working.

Last June, for example, we worked closely with our partners on “Operation Malicious Mortgage” – a massive multiagency takedown of mortgage fraud schemes involving more than 400 defendants nationwide. That operation focused primarily on three types of mortgage fraud: lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes. Among the 400-plus subjects of “Operation Malicious Mortgage”, there have been 164 convictions and 81 sentencings so far for crimes that have accounted for more than $1 billion in estimated losses. Forty-six of our 56 field offices around the country took part in the operation, which has resulted in the forfeiture and/or seizure of more than $60 million in assets.

In addition to the effort placed in standing up mortgage fraud task forces, the FBI is one of the DOJ participants in the national Mortgage Fraud Working Group (MFWG), which DOJ chairs. The MFWG represents the collaborative effort of multiple Federal agencies and facilitates the information sharing process across the aforementioned agencies, as well as private organizations. Together, we are building on existing FBI intelligence databases to identify large industry insiders and criminal enterprises conducting systemic mortgage fraud.

The FBI is also a member of the President’s Corporate Fraud Task Force which is comprised of investigators from the Securities and Exchange Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the Commodity Futures Trading Commission, and the FinCEN. The purpose of the Corporate Fraud Task Force is to maximize intelligence sharing between membership agencies and to ensure the violations related to corporate fraud are appropriately addressed. The FBI also participates in the Securities and Commodities Fraud Working Group, a national interagency coordinating body established by DOJ to provide a forum for exchanging information and discussing violation trends, law enforcement issues and techniques. In addition, since April 2007, FBI headquarters personnel have met with representatives from the Securities and Exchange Commission once a month to coordinate the respective Corporate Fraud inventories focused on the current financial crisis and to share intelligence.

Industry Liaison

In addition to its partners in law enforcement and regulatory areas, the FBI also continues to foster relationships with representatives of the mortgage industry to promote mortgage fraud awareness. The FBI has spoken at and participated in various mortgage industry conferences and seminars, including those sponsored by the Mortgage Bankers Association (MBA).

To raise awareness of this issue and provide easy accessibility to investigative personnel, the FBI has provided contact information for all FBI Mortgage Fraud Supervisors to relevant groups including the MBA, Mortgage Asset Research Institute, Fannie Mae, Freddie Mac and others. Additionally, the FBI is collaborating with industry to develop a more efficient mortgage fraud reporting mechanism for those not mandated to report such activity. The FBI supports providing a “safe harbor” for lending institutions, appraisers, brokers and other mortgage professionals similar to the provisions afforded to financial institutions providing SAR information. The “ Safe Harbor” provision would provide necessary protections to the mortgage industry under a mandatory reporting mechanism. This will also better enable the FBI to provide reliable mortgage fraud information based on a more representative population in the mortgage industry.

Lenders are painfully aware that fraud is affecting their bottom line. Through routine interaction with FBI personnel, industry representatives are aware of our commitment to address this crime problem. The FBI frequently participates in industry sponsored fraud deterrence seminars, conferences and meetings which include topics such as quality control and industry best practices to detect, deter, and prevent mortgage fraud. These meetings play a significant role in training and educating industry professionals. Companies share current and common fraud trends, loan underwriting weaknesses and best practices for fraud avoidance. These meetings also increase the interaction between industry and FBI personnel.

Additionally, the FBI continues to train its personnel and conduct joint training with HUD-OIG and industry on mortgage fraud. As a training model, the FBI seeks industry experts to assist in its internal training programs. For example, industry has assisted training FBI personnel on mortgage industry practices, documentation, laws and regulations. Industry partners have offered to assist the FBI in developing advanced mortgage fraud investigative training material and fraud detection tools.

Conclusion

Mr. Chairman, the FBI remains committed to its responsibility to aggressively investigate significant financial crimes which include mortgage fraud. We will continue to work with the Office of Management and Budget, and the Congress to ensure that adequate resources are available to address these threats. To maximize our current resources, we are relying on intelligence collection and analysis to identify emerging trends to target the greatest threats. We also will continue to rely heavily on the strong relationships we have with both our law enforcement and regulatory agency partners.

The FBI looks forward to working with you and other members of this committee on solving this serious threat to our nation’s economy. Thank you for allowing me the opportunity to testify before you today. I look forward to taking your questions.

The U.S. Attorney’s Office for the Eastern District of Michigan has finally created a multiagency task force to deal with real estate and mortgage fraud in eastern Michigan. As mortgage fraud continues to have significant consequences that affect the housing market, law enforcement in Michigan has decided now is the time to formally step up its commitment to fighting what for the last three years has been the fastest-growing white collar crime in America.

Participating agencies and financial institutions include:

• Bank of America
• Federal Bureau of Investigation (FBI)
• Federal Deposit Insurance Corp. – Inspector General Office
• Flagstar Bank
• Internal Revenue Service
• JP Morgan Chase Bank
• Oakland County Register of Deeds
• Small Business Administration- Office of Inspector General
• State of Michigan Attorney General’s Office
• State of Michigan Office of Financial Regulation
• U.S. Department of Agriculture- Office of Inspector General
• U.S. Dept. of Housing & Urban Dev. – Office Inspector General
• U.S. Trustee Program
• United States Postal Inspection Service
• Washtenaw County Clerk/Register of Deeds
• Wayne County Register of Deeds – Deed Fraud Unit
• Wayne County Sheriff’s Department
• Wayne County Prosecuting Attorney

The acting U.S. Attorney for the District, Terrence Berg, issued a press release stating:

“I want to commend the leadership of the FBI in Detroit for taking the initiative on this project, and also recognize the participation of our private sector partners. I am very encouraged by the commitment of the Task Force members.“

Rather than congratulating themselves for the task force’s formation, as Berg does above, perhaps the U.S. Attorney’s office for the Eastern District of Michigan — along with the other agencies and the banks involved in this new effort — should apologize to the residents of Michigan for taking this long to act in a coordinated way.

As Flipping Frenzy has relentlessly reported over the years, Michigan’s real estate and mortgage fraud woes are legendary. In August of this year, the Mortgage Asset Research Institute (MARI) reported Michigan ranked 3rd in the nation for loans containing alleged fraud or serious material misrepresentation (and just in case you’re wondering, MARI ranked the state #12 in 2001, #8 in 2003, and #5 in 2004). For its part, the FBI’s most recent index of the worst states for mortgage fraud puts Michigan in the slot: #3.

Recognizing that roughly 90% of all reported real estate and mortgage fraud losses involve collaboration or collusion by real estate industry insiders, the Mulit-Agency Mortgage Fraud Task Force will concentrate their efforts on fraud for profit, which everyone knows by now involves the skimming of equity, falsely inflating the value of the property through false appraisals, and the issuance of loans on fictitious properties.

To report real estate and mortgage fraud in Detroit or anywhere in Michigan, Flipping Frenzy readers can call the Detroit Metro Mortgage Fraud Hotline at (313) 237-4530, or contact the Wayne County Register of Deeds’ Deed Fraud Hotline at (313) 224-5869.

In a recent Los Angeles Times article about the FBI’s role in the run-up to the current housing crisis, staff writer Richard Schmitt wrote:

Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it’s also clear that the FBI failed to avert a problem it had accurately forecast.

The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.

As you can see from their response, the FBI didn’t take too kindly to Schmitt’s assessment:

Letter to the Editor Regarding the Mortgage Crisis

Your 8/25 story on the mortgage crisis (“FBI saw threat of mortgage crisis,” L.A. Times, August 25, 2008) implied that if the FBI had made more arrests for mortgage fraud, the crisis could have been averted. To even suggest that is a cry for a lesson in both civics and basic economics.

The story’s premise was built around a 2004 quote from an FBI official who said he was confident the FBI could prevent fraud from becoming a massive problem. In context, Assistant Director Chris Swecker meant he believed the FBI could stay focused on mortgage fraud to prevent fraud from becoming the major driver that would cause a collapse of credit in the housing market. We believe by a good measure, the Bureau did that.

The FBI’s Criminal Division has arrested 1000 suspects and targeted 180 criminal enterprises since 2004. We targeted those lenders and buyers involved in multiple frauds or cases where the profits went to drug crews, gangs or organized crime. More investigations are ongoing. But the FBI is a law enforcement and intelligence agency, we are not banking regulators.

In the end, most economists have attributed the crisis to very aggressive lending practices and too little risk management throughout the financial services industry. As far as mortgage fraud was concerned, the FBI had the right intelligence and provided the right warnings to the industry, but fraud alone does not appear to be the straw that broke the mortgage camel’s back.

In the boom and bust of the mortgage business, to suggest that making more arrests would have averted the mortgage crisis is to confuse the root cause with the side-effects. It is not a fair or realistic assessment.

Kenneth Kaiser, Assistant Director
Criminal Investigative Division
Federal Bureau of Investigation

If you missed the Los Angeles Times article that Assistant Director Kaiser refers to above, here it is in its entirety:

FBI saw threat of mortgage crisis
A top official warned of widening loan fraud in 2004, but the agency focused its resources elsewhere.

By Richard B. Schmitt, Los Angeles Times Staff Writer
August 25, 2008

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.

“It has the potential to be an epidemic,” Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.

Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it’s also clear that the FBI failed to avert a problem it had accurately forecast.

Banks and brokerages have written down more than $300 billion of mortgage-backed securities and other risky investments in the last year or so as homeowner defaults leaped and weakness in the real estate market spread.

In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.

Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn’t just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.

Now that the problems are out in the open, the government’s response strikes some veteran regulators as too little, too late.

Swecker, who retired from the FBI in 2006, declined to comment for this article.

But sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance to take on the mortgage scoundrels.

They ended up with fewer resources, rather than more.

In 2007, the number of agents pursuing mortgage fraud shrank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and ’90s, said Anthony Adamski, who oversaw financial crime investigations for the FBI at the time.

The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.

“The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal,” said William K. Black, who was a federal regulator during the S&L crisis and now teaches economics and law at the University of Missouri-Kansas City.

“It used everyday procedures and woefully inadequate resources to deal with an epidemic,” he said. “The approach was certain to bring symbolic prosecutions and strategic defeat.”

The mortgage debacle has laid bare a system marked by dubious practices at every stage of the process. Lenders often made loans to borrowers who had limited ability to repay them but little desire to pass up the dream of homeownership. Many loans lacked basic documentation, such as information about borrowers’ incomes.

Still, mortgage companies could hardly sell them fast enough, packaging the loans as investment securities and peddling them to eager buyers on Wall Street.

The FBI defends its handling of the crisis, with officials contending that as home prices were rising several years ago, the trouble brewing in the mortgage market — and the potential crimes behind it — was not immediately apparent.

Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money. Black says that in many cases, they were part of the fraud.

“Nobody wanted to listen,” Sharon Ormsby, the chief of the FBI’s financial crimes section, said in an interview. “We were dealing with the issue as best we could back then.”

Over the last three years, the FBI and other agencies have brought dozens of mortgage-fraud cases. The bureau has rooted out foreclosure rescue schemes in which homeowners are tricked into signing over the deeds to their homes to operators who buried the properties even deeper in debt. Agents have disrupted cases of identity theft in which criminals open — and exhaust — home equity lines of credit and leave homeowners stuck with the bill.

Many of the cases have been relatively small, however, with about half the investigations involving losses of less than $1 million — the size of two or three loans.

But the tepid response also reflects a broad realignment of law-enforcement priorities at the Justice Department in which mortgage fraud and other white-collar crimes have been subordinated to other Bush administration priorities.

That has reflected, in part, the ramp-up in national security and terrorism investigations after the Sept. 11 attacks. But the administration has also put more support behind efforts against illegal immigration and child pornography.

In a way, the mortgage debacle could not have come onto the FBI radar screen at a worse time. Just as Swecker was making his doomsday forecast, the FBI, under pressure from Congress and the White House, was creating a crime-fighting brain drain, transferring hundreds of agents from its criminal investigations unit into its anti-terrorism program. About 2,500 agents doing criminal work — 20% or so of the entire force — were affected.

Even as the number of new white-collar cases started declining, the Justice Department did pursue some high-profile corporate prosecutions, such as those arising from the collapse of Enron Corp. But some former prosecutors question the administration’s current commitment to pursuing complex, high-stakes cases.

“I think most sitting U.S. attorneys now staring at the subprime crisis find scant resources available to pursue sophisticated financial crimes,” said John C. Hueston, a Los Angeles lawyer who was a lead federal prosecutor in the trials of Enron executives Kenneth L. Lay and Jeffrey K. Skilling.

Absent a major shift in priorities and resources, he said, it is likely that the Justice Department and the FBI will continue on their current path of focusing on simple cases “that don’t go to the heart of the problem.”

The FBI says it has 21 open investigations into possible large-scale fraud related to the subprime meltdown. The Times reported last month that a federal grand jury in Los Angeles had subpoenaed records from three large California lenders: Countrywide Financial Corp. (now part of Bank of America Corp.), New Century Financial Corp. and IndyMac Federal Bank.

Among other possible targets, the FBI has said, are investment firms that sold billions in securities backed by shaky subprime mortgages and credit rating agencies that gave high marks to the now-worthless securities and failed to protect investors.

But it may be hard to jump-start such probes. Trying to prove that a major mortgage company intended to defraud buyers of its securities, for example, could take years of digging into records and testimony.

Moreover, some of those involved may have special legal protection: Credit rating firms have in other cases successfully asserted that their opinions about the values of securities are protected by the 1st Amendment.

“I am happy to have investigations going on, but these investigations should have taken place years ago,” said Blair A. Nicholas, a San Diego lawyer representing investors who lost money in the collapse of several subprime mortgage lenders. “They seem to always get involved after the horse has left the barn. It is always cleaning up the mess rather than being proactive.”

Could the crisis have been averted, or at least mitigated, if the FBI had intervened more forcefully?

“Until there is a catastrophic loss, there is no incentive to investigate criminal conduct,” said Cynthia Monaco, a former federal prosecutor in New York. “Nor are there people coming forward with evidence” such as angry investors or whistle-blowing corporate employees, she said.

Even now, Monaco added, it is far from clear whether the damage — suffered by investors and homeowners alike — was the product of clear-cut fraud.

Ormsby says the FBI is more actively working with other federal investigative agencies in the hope they will pick up the slack. The Secret Service, for example, in a departure from its traditional missions of protecting presidents and heads of state and investigating counterfeiting, has assigned more than 100 agents to examine mortgage fraud, said spokesman Edwin Donovan.

The Justice Department is also starting to mobilize. The department offered what it described as a “basic seminar” on mortgage fraud cases to about 100 prosecutors last week at its national training academy in South Carolina.

According to the Federal Bureau of Investigation (FBI), which earlier today issued yet another Mortgage Fraud Advisory, here are the latest Real Estate Fraud statistics:

• Estimated Annual Losses: $4 billion to $6 billion
• Total Mortgage Fraud Suspicious Activity Reports in Fiscal Year 2007: 46,717, with $813 million in losses
• Total FBI Mortgage Fraud Task Forces/Working Groups (June 2008): 42
• Pending FBI Mortgage Fraud Investigations (May 2008): 1,380
• Cases opened in Fiscal Year 2007: 462 (compared to 295 in Fiscal Year 2003)
• Successes in Fiscal Year 2007: 321 indictments/informations; 260 convictions
• States with Significant Mortgage Fraud problems in 2008:

1. Florida
2. Nevada
3. Michigan
4. California
5. Utah
6. Georgia
7. Virginia
8. Illinois
9. New York
10. Minnesota