GRAND RAPIDS, MI—Roger Lee Clark, 66, formerly of Wyoming, Michigan, received a sentence of 6 ½ years in prison for committing a multi-million-dollar Ponzi scheme and filing false income tax returns, U.S. Attorney Donald A. Davis announced today. U.S. Attorney Davis was joined in the announcement by FBI Special Agent in Charge Andrew Arena and IRS Criminal Investigation Special Agent in Charge Erick Martinez. Special agents of the FBI and of the IRS Criminal Investigation Division had investigated the case.

The Honorable Janet T. Neff, U.S. District Judge, presided over the sentencing. Judge Neff expressed her concern regarding the seriousness of the “knowing and willing theft” by Clark and the trail of financial ruin he left behind. “The pain of that financial ruin for older people is particularly reprehensible.” In a terse attempt to explain the $9.3 million fraud, Clark said, “things happened.” Judge Neff replied, “Wow, that takes the cake.” Judge Neff also ordered Clark to pay restitution to the victims and serve a combined total of four years of supervised release. Clark also agreed to a money judgment of $9,162,380.99 and the forfeiture of undeveloped real property in Byron Center as well as numerous vehicles.

Clark claimed that he owned and operated CRM Investors Corporation for the past 16 years, despite never having any training in financial planning or any related financial fields. Clark used CRM, along with other fictitious businesses that he created, to hide money and assets from victims and evade his income taxes.

In 2007, Clark instructed a California investor to wire transfer $1,001,500 into a bank account controlled by him. Clark explained to the investor that she was investing in the T-Bill trading program and that her investment was 100 percent secure. Clark admitted that in September and October of 2007, he sent the victim two wire transfers of $180,000 each and lied to her that the payments represented earnings from her investment, when in fact, the first payment came from her own principle and the second payment was from the principle of another investor. On January 29, 2009, Clark e-mailed the California investor indicating that all of her money was lost, but never stated where the money actually went.

Clark filed a 2007 tax return that reported his total income to be slightly over $11,000 when he knew that his actual total income was significantly higher. As part of his sentence, Clark was also ordered to pay total of $163,646.00 in back taxes.

“Investment fraudsters prey on trusting investors by enticing them with a ‘can’t miss’ deal and then stealing their hard earned money,” said Special Agent in Charge Erick Martinez.

“IRS Criminal Investigation is committed to investigating investment schemes in an effort to protect the financial well being of the American investor.”

FBI Special Agent in Charge Andrew G. Arena added, “The public should be aware that even though the FBI continues to vigilantly pursue these types of criminal violations, we live in a buyer-beware investment environment. Investors should vigorously investigate the background information of all investments and the individuals handling them.”

ORLANDO, FL—United States Attorney Robert E. O’Neill announces that Christopher Michael Paladino (35) and Patrick Michael Micheletti (31), both of Melbourne, Florida, pleaded guilty today to an information charging them with conspiracy to commit wire fraud. Paladino and Micheletti each face a maximum penalty of 20 years in federal prison and a fine of $250,000 or two times the gross gain or loss attributable to their conduct, whichever is greater.

According to the plea agreements, Paladino and Micheletti conspired together from December 2006 through September 2007 to defraud certain financial institutions by submitting false loan applications to purchase six homes in Melbourne and Palm Bay, Florida. The loan applications contained false information about their employment, income, and the fact that they intended each home to be their primary residence. The loan applications were approved, the loan money was wired from the financial institutions to the closing agents, and Paladino and Micheletti purchased the properties. Each property has since gone into foreclosure.

This case was investigated by the Federal Bureau of Investigation and the Florida Office of Financial Regulation, Bureau of Financial Investigations. It is being prosecuted by Assistant United States Attorney Bruce S. Ambrose.

A Staten Island man was arrested earlier this morning on charges arising out of his alleged operation of a $12 million Ponzi scheme from 2007 to 2010. Joseph Mazella, the founder and president of the Great Atlantic Group, Inc., a Staten Island-based real estate and financial consulting company, was charged with securities fraud, wire fraud, and money laundering in a federal indictment that was unsealed earlier today in federal court in Brooklyn. The case has been assigned to Chief United States District Court Judge Carol B. Amon. The defendant is scheduled to be arraigned later today before United States Magistrate Judge Lois Bloom at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York. The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge of the Federal Bureau of Investigation, New York Field Office.

As alleged in the indictment, Mazella solicited investments in Third Millennium Enterprises, Inc. and 150 West State Street Corp., both of which were associated with the Great Atlantic Group that supposedly invested in real estate projects and provided private mortgages. Mazella told prospective investors that he would invest their money in real estate projects, including projects in Trenton, New Jersey, a warehouse in Utica, New York, and a golf course development project. From approximately January 2007 until approximately December 2010, investors contributed a total of nearly $12 million to Third Millennium and 150 West State Street. As of December 2010, the combined closing balance of the bank accounts associated with the two companies was less than $15,000.

According to the indictment, Mazella described the investments as an opportunity to receive the returns of mutual funds and stocks, without any significant loss of liquidity, and at a fixed rate during the entire time period of investment. Solicitation materials distributed by Mazella characterized the investments as “geared toward individuals who are interested in earning more than traditional bank savings and CD rates but without the risk of the stock market.” Some investors were encouraged to obtain mortgages on their homes and to invest the mortgage proceeds with Third Millennium or 150 West State Street, and other investors, typically senior citizens, were encouraged to apply for reverse mortgages on their residences and to invest the proceeds with the two companies.

The indictment charges that, by as early as January 2007, Mazella had virtually stopped investing in real estate projects, and instead operated Third Millennium and 150 West State Street as a Ponzi scheme, in which he paid returns to investors from existing investors’ deposits or money paid by new investors. Many of the properties in which the companies held any mortgage or ownership interest were abandoned and in various states of disrepair, and the property taxes owed on several of those properties had fallen into arrears. Mazella also allegedly used investors’ money to pay his personal expenses, including payments for a Porsche, a mortgage on his personal residence, and family expenses.

“Perhaps the most egregious aspect of this case is that the defendant allegedly encouraged victims—some, senior citizens—to obtain mortgages on their homes and to invest the proceeds in what the indictment charges was nothing more than a Ponzi scheme,” stated United States Attorney Lynch. “We will aggressively investigate and prosecute those who perpetrate these crimes.” Ms. Lynch thanked the United States Postal Inspection Service, the Financial Industry Regulatory Authority, the Internal Revenue Service, and the Department of Housing and Urban Development (OIG), for their assistance.

FBI Assistant Director in Charge Fedarcyk stated, “Mazella lured investors with the promise of steady rates of return without market risk. In fact, because the investment scheme allegedly was an investment scam, the only one guaranteed to get rich quick was Mazella himself. The FBI is committed to protecting the investing public.”

If convicted, Mazella faces a maximum sentence of 20 years’ imprisonment for each count of securities fraud, wire fraud, and money laundering.

The government’s case is being prosecuted by Assistant United States Attorneys John P. Nowak and Evan Weitz.

The FBI has established a telephone hotline for victim investors in Third Millennium Enterprises and 150 West State Street Corp. The number is 212/384-1300.

The Defendant:
JOSEPH MAZELLA
Age: 52

ORLANDO, FL—United States Attorney Robert E. O’Neill announces that Christopher Michael Paladino (35) and Patrick Michael Micheletti (31), both of Melbourne, Florida, pleaded guilty today to an information charging them with conspiracy to commit wire fraud. Paladino and Micheletti each face a maximum penalty of 20 years in federal prison and a fine of $250,000 or two times the gross gain or loss attributable to their conduct, whichever is greater.

According to the plea agreements, Paladino and Micheletti conspired together from December 2006 through September 2007 to defraud certain financial institutions by submitting false loan applications to purchase six homes in Melbourne and Palm Bay, Florida. The loan applications contained false information about their employment, income, and the fact that they intended each home to be their primary residence. The loan applications were approved, the loan money was wired from the financial institutions to the closing agents, and Paladino and Micheletti purchased the properties. Each property has since gone into foreclosure.

This case was investigated by the Federal Bureau of Investigation and the Florida Office of Financial Regulation, Bureau of Financial Investigations. It is being prosecuted by Assistant United States Attorney Bruce S. Ambrose.

LAS VEGAS—A former Las Vegas resident has been charged with federal conspiracy and fraud charges for his involvement in a Nevada mortgage fraud scheme involving straw buyers and falsified mortgage loan documents, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Brian K. Jackson, 38, currently of Anaheim, California, was indicted by the Federal Grand Jury in Las Vegas on October 21, 2009, and charged with Conspiracy to Commit Bank Fraud, Mail Fraud, and Wire Fraud. On Tuesday, November 10, 2009, Jackson was arrested in the Los Angeles area, and appeared before a U.S. Magistrate Judge there and was released on a $50,000 surety bond. Jackson is scheduled to be arraigned by U.S. Magistrate Judge George W. Foley in Las Vegas on Friday, November 20, 2009, at 8:30 a.m.

The Indictment alleges that from about 2002 to May 14, 2008, Jackson, owner of Unlimited Properties, a now-revoked Nevada limited liability corporation, participated in a conspiracy to defraud financial institutions by causing money from mortgage loans to be diverted to his own use and benefit. Jackson solicited and paid persons (straw buyers) to apply for mortgage loans in their name. The loans were processed through Sapphire Mortgage, located in Henderson, Nevada. Jackson caused false and fraudulent information to be placed in the straw buyers’ mortgage loan applications concerning their employment, income, assets, intent to occupy property, etc. Jackson caused the same home to be purchased multiple times by different straw buyers at ever increasing prices. Jackson caused the “equity” to be diverted to himself personally or his company, Unlimited Properties. Jackson also placed renters in the properties, and caused the mortgages to default.

The Indictment specifically discusses several transactions involving a home located at 2061 Scenic Sunrise Drive in Las Vegas. Between March 2002 and late 2004, Jackson twice orchestrated the sale of the property using two straw buyers and the placement of false information in their loan applications. In June 2004, Jackson also orchestrated the sale of the Scenic Sunrise property to himself and falsely stated in his loan application that he intended to reside in the property when he knew he did not. During this period, Jackson also leased the Scenic Sunrise property to another individual and accepted money from the individual as guarantee that he would purchase it in the future, even though Jackson knew that the property at the time was owned by the first straw buyer and was in the process of being sold to the second straw buyer. The indictment alleges that Jackson or his company received about $179,000 from these fraudulent transactions.

In May 2008, the owner of Sapphire Mortgage, Cindy Birkland, was arrested and charged in state court in Las Vegas with mortgage fraud related offenses. If convicted, Jackson faces up to 30 years in prison and a $1,000,000 fine.

This investigation is being led by IRS Criminal Investigation and the FBI, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the Las Vegas Metropolitan Police Department, the Nevada Attorney General’s Office, Office of the Inspector General for the Social Security Administration, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Postal Inspection Service, and the U.S. Secret Service. The case is being prosecuted by Assistant United States Attorney Brian Pugh. Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Receives 18 Months in Prison and Ordered to Pay Over $337,000 in Restitution

TYLER, TX—U.S. Attorney John M. Bales announced today that a 47-year-old Tyler, Texas woman has been sentenced to federal prison for a mortgage fraud scheme in the Eastern District of Texas.

TAHMEANE ELROD pleaded guilty on Nov. 4, 2009, to conspiracy to commit wire fraud and was sentenced to 18 months in federal prison on Mar 24, 2010 by U.S. District Judge Michael H. Schneider. Elrod was also ordered to pay restitution in the amount of $337,709.58.

According to information presented in court, in September 2007, Elrod devised a scheme to defraud mortgage financing companies by submitting false documents in order to qualify for mortgages for the purchase of a residential property. Elrod falsely inflated levels of earned income and forged signatures on a Request for Verification of Employment form as part of a loan application package. A federal grand jury returned an indictment on May 6, 2009, charging Elrod with conspiracy to commit wire fraud.

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

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

This case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Frank Coan.

PLANO, TX—U.S. Attorney John M. Bales announced today that 40 individuals have been arrested and charged in connection with a major mortgage fraud scheme in the Eastern District of Texas.

The 16-count indictment was returned by a federal grand jury on March 10, 2010, and includes one count of conspiracy to commit mail and wire fraud, 12 counts of mail fraud, and three counts of money laundering. All 40 defendants, from Texas, Florida, Massachusetts, Tennessee, and Georgia, are charged with one count of conspiracy to commit mail and wire fraud. Many of the defendants are also charged with various counts of mail fraud and money laundering.

According to the indictment, beginning in 2004, John Barry, 41, of Windemere, Fla., owned and operated, TKI Group, Inc. and JAB Consulting, businesses out of Florida through which he solicited real estate agents, property finders, mortgage brokers, title company attorneys or escrow officers, property appraisers, and straw buyers to facilitate this scheme. The purpose of the scheme was to defraud lending institutions by convincing them to approve mortgage loans for residential properties for which the property values had been fraudulently inflated. The indictment specifically lists 114 residential properties located in the Texas cities of Allen, Arlington, Cedar Hill, Coppell, Corinth, Cypress, Dallas, Flower Mound, Fort Worth, Frisco, Granbury, Heath, Highland Village, Houston, Keller, Lantana, Lewisville, Little Elm, Lubbock, Magnolia, McKinney, Plano, Roanoke, Southlake, Spring, The Woodlands, and Willis.

In announcing the indictment, U.S. Attorney Bales specifically noted the breadth of the financial scheme, “This indictment brings to light a criminal scheme that is quite breathtaking in its scope and beyond disturbing as far as the boldness of the fraud. The agents have done a remarkable job putting together this investigation and we look forward to presenting all of the evidence in court. Hopefully, others involved in mortgage fraud will be taking notice—we will be relentless in discovering, exposing and holding accountable those who have committed similar crimes.”

If convicted, the defendants face up to 20 years in federal prison for the conspiracy charge, up to 20 years in federal prison for each count of mail fraud charge, and up to 10 years in federal prison for each count of money laundering.

“Mortgage fraud creates so much harm to individuals, businesses and our economy, but today’s indictment is a strong reminder how serious our system considers this criminal activity,” said Erick Martinez, Assistant Special Agent in Charge, IRS-Criminal Investigation, Dallas Field office. “Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable.”

“Evidence collected by the FBI to support today’s indictments proves that financial crime conspiracies, particularly mortgage fraud, still threaten our economic stability,” said Robert E. Casey, Jr., Special Agent in Charge of the FBI Office in Dallas. “This investigation illustrates the North Texas law enforcement community’s commitment to root out those who perpetrate mortgage fraud. Although increased prosecutions alone will not solve the mortgage crisis, we hope these prosecutions will help deter future fraud.”

This case is being investigated by the FBI and the Internal Revenue Service and is being prosecuted by Assistant U.S. Attorney Shamoil Shipchandler.

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

An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that IGOR POTEROBA, a former investment banker in the Healthcare Group of UBS Securities LLC (“UBS”), was sentenced today to 22 months in prison for his participation in an insider trading scheme in which he passed material, non-public information regarding six mergers and acquisitions that certain UBS clients were contemplating to a co-conspirator, ALEXEI P. KOVAL, who then traded on this information, generating hundreds of thousands of dollars in illicit profits. POTEROBA, 37, was sentenced in Manhattan federal court by U.S. District Judge PAUL A. CROTTY.

Manhattan U.S. Attorney PREET BHARARA said: “The message of today’s sentence of Igor Poteroba should be crystal clear—this office, along with our law enforcement partners, will not abide corrupt insiders who use their privileged positions to steal their companies’ valuable secrets and cash in on them. Professionals who engage in insider trading will be punished to the full extent of the law.”

According to documents previously filed in Manhattan federal court:

Since 2006, POTEROBA served as an executive director at UBS where he obtained material, non-public information (the “UBS Inside Information”) regarding certain mergers and acquisitions involving the following six publicly traded health care companies: Guilford Pharmaceuticals, Inc., Molecular Devices Corporation, PharmaNet Development Group, Inc., Via Cell, Inc., Millennium Pharmaceuticals, Inc., and Indevus Pharmaceuticals, Inc. (collectively, the “Health Care Companies”). In violation of his duties of trust and confidence, he then disclosed the UBS Inside Information to KOVAL, who in turn disclosed the UBS Inside Information to another co-conspirator (“CC-1”).

As part of the scheme, POTEROBA typically tipped KOVAL by telephone in advance of a public announcement that one of the Health Care Companies was to be acquired. Shortly after receiving such a call, KOVAL and CC-1 purchased securities in the company. Following the public announcement of the acquisition, KOVAL and CC-1 quickly sold the securities they had purchased. KOVAL and CC-1 executed dozens of securities transactions based on UBS Inside Information provided by POTEROBA. POTEROBA then received a portion of the profits from KOVAL.

In addition to his prison term, Judge CROTTY sentenced POTEROBA, of Darien, Connecticut, to three years of supervised release and ordered him to forfeit $465,095.21, representing the amount of foreseeable proceeds obtained as a result of the securities fraud offenses. Judge CROTTY also ordered POTEROBA to pay a $25,000 fine and will determine the amount of restitution at a later date.

POTEROBA’s co-defendant, ALEXEI KOVAL, 37, of Chicago, Illinois and Pasadena, California, pled guilty to related charges on January 7, 2011, and is scheduled to be sentenced on May 24, 2011, at 4:00 p.m., before Judge CROTTY.

Mr. BHARARA praised the investigative work of the FBI. Mr. BHARARA also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation.

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

This case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney MARISSA MOLÉ is in charge of the prosecution.

Failed Stockbridge Bank Allegedly Fleeced Before Being Seized By Feds

ATLANTA—An indictment unsealed today charges two former top officers of FirstCity Bank of Stockbridge, Georgia—MARK A. CONNER, 44, formerly of Canton, Georgia, and CLAYTON A. COE, 44, of McDonough, Georgia—with a variety of offenses, including conspiracy to commit bank fraud and bank fraud in connection with misconduct at FirstCity Bank in the years before the bank’s seizure by state and federal authorities on March 20, 2009. In addition to the conspiracy and bank fraud charges, the indictment charges CONNER with conducting a continuing financial crimes enterprise at the bank between February 2006 and February 2008, during which CONNER’s and his co-conspirators’ crimes allegedly generated over $5 million in unlawful gross proceeds.

A federal grand jury in Atlanta returned the sealed indictment against CONNER and COE on March 16, 2011. CONNER was arrested on the charges and taken into custody by federal agents at Miami International Airport yesterday morning, the two-year anniversary of FirstCity Bank’s failure, upon his arrival in Miami from the Turks and Caicos Islands in the West Indies. CONNER made his initial appearance today before a federal magistrate judge in Miami, who preliminarily ordered CONNER to be detained as a flight risk pending his transfer by Deputy U.S. Marshals from Miami to Atlanta for trial. A formal detention hearing will take place in Miami on Thursday, March 24, 2011, at 1:30 p.m. COE’s initial appearance on the indictment in the Northern District of Georgia has not yet been scheduled.

United States Attorney Sally Quillian Yates said, “The entire country has felt the deep economic impact of failed banks. At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense. Along the way, these defendants also allegedly defrauded state and federal bank regulators and examiners, and at least 10 other federally insured banks in Florida and Georgia that invested in the fraudulent multi-million-dollar loans.”

FDIC Inspector General Jon Rymer said, “The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) is pleased to join the United States Attorney’s Office for the Northern District of Georgia and our law enforcement colleagues in announcing this indictment. We are particularly concerned when former senior bank officials, who have held positions of trust within their institutions, are alleged to have been involved in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions.”

Neil Barofsky, SIGTARP Special Inspector General for the Troubled Asset Relief Program said, “Today’s indictment marks yet another occasion where bank executives are alleged to have turned to criminal fraud in the midst of the financial crisis, including an attempt to obtain millions of dollars from the American taxpayer through the Troubled Asset Relief Program. SIGTARP will continue to work with our law enforcement partners to bring those who engage in such crimes to justice.”

IRS-Criminal Investigation Special Agent in Charge Reginael McDaniel said of the case, “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money. Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”

According to United States Attorney Yates, the charges, and other information presented in court: CONNER served in a variety of top positions at FirstCity Bank between 2004 and 2009, including as vice-chairman of the board of directors, as a member of the banks’ loan committee, as president, and later as acting chairman and chief executive officer. COE served as a vice-president and as FirstCity Bank’s senior commercial loan officer. While serving in these positions, CONNER, COE, and their co-conspirators allegedly conspired to defraud FirstCity Bank’s loan committee and board of directors into approving multiple multi-million-dollar commercial loans to borrowers who, unbeknownst to FirstCity Bank, were actually purchasing property owned by CONNER or COE personally.

The indictment charges that CONNER, COE, and their co-conspirators misrepresented the essential nature, terms, and underlying purpose of the loans and falsified documents and information presented to the loan committee and the Board of Directors. CONNER, COE, and their co-conspirators then allegedly caused at least 10 other federally insured banks to invest in, or “participate in” the fraudulent loans based on these and other fraudulent misrepresentations, shifting all or part of the risk of default to the other banks. COE’s bonus compensation was tied to the origination of FirstCity Bank loans, including the fraudulent loans with which he and CONNER allegedly assisted each other.

In the process of defrauding FirstCity Bank and the “participating” banks, CONNER, COE, and their co-conspirators allegedly routinely misled federal and state bank regulators and examiners to conceal their unlawful scheme. They also unsuccessfully sought federal government assistance through the U.S. Treasury Department’s Troubled Asset Relief Program (“TARP”) and engaged in other misconduct in an attempt to avoid seizure by regulators and prevent the discovery of their fraud.

The charge against CONNER for conducting a continuing financial crimes enterprise carries a mandatory minimum sentence of 10 years in federal prison, a maximum sentence of life in prison, and a potential fine of up to $10 million. The conspiracy and bank fraud charges against CONNER and COE, and a remaining charge against COE for fraudulently influencing the actions of a federally insured bank, carry a maximum sentence of 30 years in prison and a potential fine of up to $1 million on each count. In determining the actual sentences for each defendant, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.

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

This case is being investigated by special agents of the FDIC, Office of Inspector General; the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), the Federal Bureau of Investigation, and Internal Revenue Service-Criminal Investigation.

Assistant United States Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.

For further information please contact Sally Q. Yates, United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

Melody C. Redondo, 32, and Paul G. Redondo, 33, both of Meridian, Idaho, entered guilty pleas today in U.S. District Court in Boise, U.S. Attorney Wendy J. Olson announced. Melody Redondo pleaded guilty to making a false statement to a financial institution, a felony. Paul Redondo pleaded guilty to misdemeanor theft from a financial institution.

Melody Redondo admitted that in July 2007, she submitted a false application to obtain financing from Washington Mutual Bank on a $200,000 loan. Redondo represented on the loan application that she had monthly gross income of $13,000; however, her total income in 2007 was substantially less. Redondo submitted the loan application to Washington Mutual Bank to obtain a home equity line of credit. The bank relied upon the loan application, which contained the defendant’s materially false statement, and authorized funding of the loan. The charge of making a false statement to a financial institution is punishable by a term of imprisonment of 30 years, a term of supervised release of up to five years, and a maximum fine of $1 million.

Paul Redondo admitted that in August 2007, he submitted a consumer loan application to obtain financing on a $100,000 home equity line of credit on a home in Eagle, Idaho. He also admitted to falsely represented his monthly gross income on the loan application that was submitted to Washington Trust Bank. Misdemeanor theft from a financial institution carries a maximum punishment of one year in prison, a $100,000 fine, and a term of supervised release of not more than one year.

Sentencing for Melody Redondo is scheduled for May 3, 2011, before Chief U.S. District Judge B. Lynn Winmill in Boise. Sentencing for Paul Redondo is scheduled for May 4, 2011, before U.S. Magistrate Judge Ronald E. Bush.

The case is part of the ongoing Crestwood mortgage fraud case, which involved multiple defendants who bought and sold real estate in order to “flip” it, or gain profits from the sales. The financial institutions and mortgage lenders incurred losses of approximately $1.6 million dollars.

To date, eight other people have been sentenced or pleaded guilty in the case: Michael J. Hymas, formerly of Boise, was sentenced to 21 months in federal prison for wire fraud and ordered to pay $544,647 in restitution; Shauntee K. Ferguson, of Boise, was sentenced to probation for five years, 80 hours of community service, and ordered to pay $365,829.69 in restitution for making a false statement to a financial institution; Christopher R. Georgeson, formerly of Boise, currently of Phoenix, Arizona, was sentenced to one month in federal prison for wire fraud and ordered to pay $103,356.64 in restitution; Stanley J. Ferguson, of Boise, was sentenced to 12 months plus one day in federal prison and ordered to pay $676,826 in restitution; and Brent Bethers, of Eagle, Idaho, was sentenced to one month in federal prison for wire fraud, ordered to pay $23,913 in restitution, and fined $6,000.

Travis Hymas, formerly of the Boise area, currently of Cedar Hills, Utah, pleaded guilty to false statement to a bank in March 2010. Shane Hymas and Laurie Krechelle Hymas, both formerly of the Boise area, currently of American Fork, Utah, pleaded guilty to bank fraud in April 2010. Sentencings for all three have been rescheduled to April 11, 2011, in Boise before U.S. District Judge Edward J. Lodge. Each faces a maximum sentence of 30 years in federal prison, a fine of up to $1 million, and supervised release of up to five years.

“Homeowners, the economy and financial institutions all suffer from fraudulent housing transactions,” said Olson. “The Crestwood mortgage fraud cases demonstrate federal and state law enforcement agencies’ commitment to aggressively investigate and prosecute fraud in the housing finance industry.”

The case was investigated by the Federal Bureau of Investigation and was prosecuted by the United States Attorney’s Office and the State of Idaho Office of the Attorney General.

James Carl Gustafson, a 49-year-old former employee of auto mogul Denny Hecker, was sentenced earlier today in federal court in Minneapolis for his role in Hecker’s scheme to defraud financial lenders and others out of millions of dollars. United States District Court Judge Joan N. Ericksen sentenced Gustafson to two years of probation, 120 hours of community service, and a $1,000 fine on one count of making a false statement and one count of mail fraud. Gustafson was charged on September 17, 2010, and pleaded guilty on September 27, 2010.

In his plea agreement, Gustafson admitted that on April 21, 2010, he made a false statement to agents of the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation. He told them that in October of 2008, he learned for the first time that a falsified Hyundai Motor America document had been submitted to Chrysler Financial, one of the lenders from which Hecker borrowed money for financing the purchase of fleet vehicles. Gustafson told investigators that there was no intentional fraud committed against Chrysler Financial. In reality, however, Gustafson knew of the scheme to defraud Chrysler Financial as early as November 2007 and knew of the falsified document by early 2008. In addition, Gustafson admitted that on April 20, 2009, he mailed an application to the State of Minnesota to retitle a 2004 Cadillac Escalade in the name of Northstate Financial, knowing the company was nothing more than a shell company. The title transfer was merely a ploy to mask the car’s true owner, Denny Hecker, from creditors, including Chrysler Financial.

At the sentencing hearing, the government concurred in Gustafson’s request for a sentence of probation because of Gustafson’s ultimate cooperation with the government’s investigation after his admissions of guilt.

Hecker is scheduled to be sentenced at 10 a.m. Friday, February 11, 2011, in Minneapolis. He pleaded guilty to one count of conspiracy to commit wire fraud and one count of bankruptcy fraud in connection with the scheme to defraud Chrysler Financial Services and other commercial lenders.

Co-conspirator Steve Leach is scheduled to be sentenced at 9:30 a.m. Tuesday, February 8, 2011, also in Minneapolis.

This case was the result of an investigation by the Minnesota State Patrol, the IRS-Criminal Investigation Division, and the FBI. It was prosecuted by Assistant U.S. Attorneys Nicole A. Engisch, Nancy E. Brasel, and David M. Genrich.

HOUSTON—Today, a jury sitting in United States District Judge Sim Lake’s Courtroom found Vincent Wallace Aldridge, former fee attorney for First Southwestern Title Company and attorney for Aldridge and Associates, along with Tori Elyse Aldridge, a former employee of First Southwestern Title Company and Gilbert Barry Isgar, a co-owner of Waterford Homes, guilty of charges of wire fraud and money laundering in a scheme to defraud residential mortgage lenders of more than $3.7 million in loans in connection with home purchases in the Houston area, United States Attorney José Angel Moreno announced today along with FBI Special Agent in Charge Richard C. Powers and Internal Revenue Service-Criminal Investigations (IRS-CI) Special Agent in Charge Rodney E. Clarke.

Vincent Aldridge, 45, and Tori Aldridge, 32, both of Fresno, Texas (right outside of Houston), were found guilty of 19 counts which included conspiracy to commit wire and mail fraud, wire fraud, conspiracy to commit money laundering and money laundering charges. Isgar, 50, of Katy, Texas, was found guilty of 13 counts which included conspiracy to commit wire and mail fraud, wire fraud and conspiracy to commit money laundering.

Both of the Aldridges and Isgar conspired to devise and execute a scheme during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least four lending institutions as the basis for an agreement between the lending institutions and borrowers. Vincent Aldridge lured borrowers by representing the scheme as an investment opportunity. For the use of their credit to obtain mortgage loans, the borrowers were promised $10,000 after the closing of their respective property and that the property would be sold after a year for a profit. Once a borrower agreed to the deal, then Vincent Aldridge and Tori Aldridge, acting as an escrow officer and as a loan processor, met with the borrower to obtain the necessary personal identifying information to complete the borrower’s lending package. Prior to the Aldridges submitting the lending packages to the lending institutions, the Aldridges modified the lending package to enhance the borrower’s ability to qualify for the requested loan. These enhancements included fraudulently overstating the borrower’s income, misrepresenting the borrower’s principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. Each property sold in amounts between $344,000 and $360,000 and were funded to First Southwestern Title Company by wire.

As a part of the scheme, Isgar, co-owner of Waterford Custom Homes, inflated the sales price of the properties to be purchased by the aforementioned recruited borrowers. As a part of the agreement between the Aldridges and Isgar, disbursement authorizations for attorney’s fees and additional contractor fees on brand new homes for amounts of $60,000 to more than $80,000 were signed by Isgar. These documents were provided to First Southwestern Title, which was controlled by the Aldridges. These disbursement authorizations were not provided to the lender and were not listed on the HUD Settlement Statement. The disbursements for additional attorney’s fees were in addition to the attorney’s fees stated on the attorney fee line in HUD Settlement Statement.

Once the loans were funded to the title company, the Aldridges caused several checks to be drawn on the account of the title company, each totaling amounts of $60,000 to more than $80,000, to Aldridge & Associates IOLTA bank account. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme. On one occasion, Isgar wired approximately $81,000 back to Vincent Aldridge’s account after he received the funds from the closing. The total amount of the money laundering was more than $500,000.

United States District Judge Sim Lake pronounced the defendants guilty and reset the case for sentencing on May 25, 2011, at 2:00 p.m. All of the defendants were permitted to remain on bond pending their sentencing hearings.

The maximum penalty for each wire fraud count is 20 years in prison as well as substantial fines. The maximum penalty for each money laundering count is 10 years in prison. A conviction for money laundering carries the most significant fine of $250,000 or twice the amount of the criminally derived property, whichever is greater.

The investigation leading to the charges was conducted by the FBI and IRS-CI. Assistant United States Attorneys Jennifer Lowery and Andrew Leuchtmann are prosecuting the case.

Three of 10 defendants charged in a mortgage fraud case were sentenced yesterday in Boise by U.S. District Judge Edward J. Lodge, the U.S. Attorney’s Office announced. Michael J. Hymas, 59, formerly of Boise, Idaho, was sentenced to 21 months in prison, three years of supervised release, 80 hours of community service, and $544,647 in restitution for wire fraud. Hymas pled guilty to the charge in March 2010. Shauntee K. Ferguson, 33, of Boise, Idaho, was sentenced to five years of supervised release, 80 hours of community service, and $365,829.69 in restitution for making a false statement to a financial institution. Ferguson pled guilty to the charge in June 2010. Christopher R. Georgeson, 30, formerly of Boise, Idaho, currently of Phoenix, Arizona, was sentenced to one month in prison, three years’ supervised release,11 months of home detention, and $103,356.64 in restitution for wire fraud. Georgeson pled guilty to the charge in March 2010. Four other defendants have pled guilty to a variety of charges and are awaiting sentencing, one defendant has been sentenced, and two other defendants are awaiting trial.

According to an indictment filed in December 2009, Michael Hymas was an insurance agent in Meridian, Idaho, and a silent partner with Stanley Ferguson, Michael Hymas’s son-inlaw, and Shauntee Ferguson, Michael Hymas’s daughter, in the buying and selling of real estate, or “flipping” of real estate, in order to gain profits from the sales. In 2002, Hymas filed a bankruptcy petition and as a result, had difficulty obtaining credit from financial institutions and mortgage lenders. As part of their scheme to defraud and obtain money by false pretenses, Michael Hymas, Shauntee Ferguson and Stanley Ferguson falsely inflated their monthly personal income and falsely claimed rental income, falsely stated that residences would be used as primary residences when in fact they were intended as investment properties only, falsely represented the employment status of Shauntee Ferguson, and falsely provided bank accounts as a source of funding. They submitted the fraudulent documents to loan brokers. As a result, between 2004 and 2006, they caused the financial institutions and mortgage lenders to fund approximately 21 fraudulent loans for an approximate total value of $7.59 million dollars. The financial institutions and mortgage lenders incurred losses of approximately $1.6 million dollars.

According to the Michael Hymas’ plea agreement, on November 19, 2004, Shauntee Ferguson applied for a residential construction loan in the approximate amount of $337,250. The residence was intended for investment purposes only by Michael Hymas, Shauntee Ferguson and Stanley Ferguson. It was not intended for personal occupancy, as misrepresented on the loan application. After the residence was completed and sold, Hymas and the Fergusons shared in the profits from the sale. In order to obtain the loan, Michael Hymas and Shauntee Ferguson provided false information to the mortgage company. Hymas caused a false rental agreement to be prepared, falsely representing he was paying the borrower, Shauntee Ferguson, rental income of $2,500 per month. He also misrepresented that Ferguson was the marketing manager at his insurance company, that she’d been employed there for three years, and that she earned $9,000 per month. Hymas caused an employee at his insurance agency to confirm these misrepresentations when Ferguson’s employment was verified. Hymas also caused Ferguson’s name to be placed on his checking account so that the checking account was represented on her loan application as a personal asset with a value of approximately $31, 000. Based on the misrepresentations, the funding on the residential loan was authorized.

According to the Shauntee Ferguson plea agreement, on November 16, 2005, Shauntee Ferguson applied for a residential construction loan in the approximate amount of $520,000. On her loan application, Ferguson falsely stated that she had a monthly income of $10,000 and was employed as the marketing manager at an insurance agency. In fact, she was not employed and had no monthly income. Ferguson also claimed she had an account balance of approximately $102, 000 when in fact her name was placed on the account to give the appearance that she had access to the funds. Ferguson also falsely represented on the loan application that she planned to occupy the residence as her primary residence when in fact the property was intended solely for investment purposes. Based on the misrepresentations, the funding on the residential loan was authorized.

According to the Christopher Georgeson plea agreement, on November 21, 2006, Georgeson applied for a residential construction loan in the approximate amount of $292,000. On his loan application, Georgeson falsely stated he had a monthly income of $41,666.67 when in fact he had monthly income of approximately $8,000. Georgeson also falsely stated he had gross rental income of $2,300 per month when in fact he had no rental income. Based on these misrepresentations, the funding on the residential loan was authorized. At the loan closing, $93,000 was paid to Crestwood, Inc. The property was subsequently the subject of a foreclosure proceeding due to non-payment of the monthly mortgage by Georgeson.

Stanley J. Ferguson, 33, of Boise, Idaho, pled guilty to Wire Fraud in May 2010. According to the plea agreement, on June 29, 2006, Ferguson applied for a residential construction loan in the approximate amount of $1,499,999, for a residence in Eagle, Idaho. On his loan application, Ferguson falsely stated he had a monthly base employment income of $23,500 when in fact he had no monthly base employment income. Ferguson also falsely stated he had gross rental income of $2,138.50 per month when in fact he had no rental income. He falsely stated that the property would be his primary residence. Based on these misrepresentations, the funding on the residential loan was authorized. At the loan closing, a sum of money was paid to Crestwood, Inc. The property was subsequently the subject of a foreclosure proceeding due to non-payment of the monthly mortgage by Ferguson. Ferguson faces a maximum sentence of twenty years in federal prison, a fine of up to $250,000, and supervised release of up to three years. Sentencing is set for November 29, 2010, before U.S. District Judge Edward J. Lodge in Boise.

Brent Bethers, 37, of Eagle, Idaho, was sentenced on September 20, 2010, to one month in prison, eleven months of home detention, three years of supervised release, $23,913 in restitution, and a fine of $6000 for Wire Fraud. Bethers pled guilty to the charge in March 2010. According to the plea agreement, Bethers was a loan officer in Meridian, Idaho. In June 2006, Stanley Ferguson approached Bethers regarding financing for a residence in Eagle, Idaho. Bethers prepared a loan application on which he falsely represented that Ferguson had monthly income of $25,638 per month when in fact Ferguson’s monthly income was substantially less than this amount. Bethers also represented on the loan application that Ferguson intended to occupy the residence as his “primary residence” when in fact the property was for investment purposes. The mortgage company relied upon these false representations and authorized a loan of approximately $1.5 million to Ferguson.

Travis Hymas, 27, formerly of the Boise area, currently of Cedar Hills, Utah, pled guilty to False Statement to a Bank in March 2010. According to the plea agreement, on March 28, 2007, Hymas applied for a residential construction loan in the amount of $154,800 for a residence in Nampa, Idaho. On his loan application, Hymas falsely stated he had a monthly gross income of $15,000 when in fact he had a monthly gross income of approximately $3,000. He also falsely represented that he had personal property with a value of approximately $100,000. Based on these misrepresentations, the funding on the residential loan was authorized. Hymas faces a maximum sentence of thirty years in federal prison, a fine of up to $1,000,000, and supervised release of up to five years. Sentencing is set for December 15, 2010, before U.S. District Judge Edward J. Lodge in Boise.

Shane Hymas, 32, formerly of the Boise area, currently of American Fork, Utah, and Laurie Krechelle Hymas, 31, formerly of the Boise area, currently of American Fork, Utah, both pled guilty to Bank Fraud in April 2010. According to the plea agreements, on August 23, 2006, Shane and Laurie Hymas applied for refinancing on a loan in the amount of $104,500 for a residence in Star, Idaho. On their loan application, the Hymas’s falsely stated they had a combined monthly gross income in the amount of $33,000 when in fact they had a monthly gross income of between $10,000 and $15,000. They also falsely represented that they had gross monthly rental income of $2,550 when in fact they had no rental income. Based on these misrepresentations, the funding on the residential loan was authorized. They each face a maximum sentence of thirty years in federal prison, a fine of up to $1,000,000, and supervised release of up to five years. Sentencings for both defendants are set for January 18, 2011, before U.S. District Judge Edward J. Lodge in Boise.

“Mortgage fraud and other irregularities in the housing industry contributed significantly to Idaho’s and this nation’s economic struggles,” said Wendy J. Olson, United States Attorney. “These cases demonstrate again that federal and state law enforcement agencies and prosecutors will work together to bring to justice those whose lies undermine the integrity of the housing financing system.”

Paul Redondo, 33, of Meridian, Idaho, and Melody C. Redondo, 32, of Meridian, Idaho, were indicted in October 2010 for multiple counts of Bank Fraud, Wire Fraud, and False Statement to a Financial Institution. According to the indictment, in March through August 2009, Melody Redondo, a licensed real estate agent, failed to disclose multiple offers to a mortgage company on a short-sale residential property, failed to disclose a duo-contract with simultaneous closings on the same real estate transaction, and forged a quitclaim deed and personally notarized the forged deed. The indictment also alleges that the Redondo’s fraudulently overstated their monthly income and falsely represented rental income on multiple loan applications. In May 2009, the Redondo’s filed a joint bankruptcy petition and discharged approximately $1,429,000 in debts. A trial is scheduled for January 10, 2011, before Chief U.S. District Judge B. Lynn Winmill in Boise. An indictment is a means of charging a person with criminal activity. It is not evidence. The person is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The case was investigated by the Federal Bureau of Investigation and was prosecuted by the United States Attorney’s Office and the State of Idaho, Office of the Attorney General.

The Federal Bank Fraud Statute, 18 U.S.C. 1344, generally provides that whoever knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution or to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

Dwayne A. McKay, 45, has been employed by the police department for eight years, spokeswoman Anne E. Schwartz said. He is assigned to the Prisoner Processing Section and is currently suspended, she said.

According to the 26-page complaint: Dwayne McKay operates a real estate financing business called Yenom Services, LLC. His wife, Lisa McKay, is a property sale closing agent at Summit Guaranty Title and Closing Services in West Allis.

Here is how their scam worked: When a homebuyer could only obtain partial financing, usually 90%, Dwayne McKay would provide the additional 10%. The 10% payment was a sham, however, according to the complaint. It overstated the sale price by 10%, and that tricked the lender into actually providing the buyer with 100% of the financing, instead of only 90%.

At the closing, Lisa McKay would return the 10% to Dwayne McKay, plus a “funding fee.” Lisa falsified property sale settlement statements to cover up the payments, the complaint said.

Dwayne and Lisa are charged with one count of conspiracy to commit fraud against a financial institution and two counts of being party to the crime of fraud against a financial institution.

Lisa, 45, also is charged with seven counts of fraudulent writings, one count of misconduct in public office and one count of attempted fraud against a financial institution.

Dwayne McKay was in custody Tuesday at the Waukesha County Jail, and Lisa McKay was at the Milwaukee County Jail.

Deputy Attorney General Mark Filip and FBI Director Robert Mueller announced the results of “Operation Malicious Mortgage,” a massive multiagency takedown of mortgage fraud schemes involving more than 400 defendants nationwide who have been charged over the past three and a half months.
The operation focused primarily on three types of mortgage fraud—lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes. “To persons who are involved in such schemes, we will find you, you will be investigated, and you will be prosecuted,” said Mueller. “To those who would contemplate misleading, engaging in such schemes, you will spend time in jail.”
Among the 400-plus subjects of Operation Malicious Mortgage, there have been 173 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 secured more than $60 million in assets.
During its investigative phase, we worked closely with our partner agencies—including the Postal Inspection Service, Internal Revenue Service, Immigration and Customs Enforcement, Secret Service, U.S. Trustee Program, and the Inspector General Offices of the Department of Housing and Urban Development, Department of Veterans Affairs, and Federal Deposit Insurance Corporation.
The FBI’s mortgage fraud caseload has doubled in the past three years to more than 1,400 pending cases. To address this steady growth, Mueller noted that every FBI field office focuses on this criminal priority. The Bureau also takes part in 42 mortgage fraud task forces and working groups. And we continue our joint efforts with federal, state, and local agencies.
“Our objective, as always,” said Mueller, ”is to protect the consumer and stabilize our economic markets.”
Among the Bureau’s mortgage fraud cases are 19 sub-prime-related corporate fraud investigations. Most of these corporate fraud investigations, said Mueller, deal with accounting fraud, with insider trading, and with criminal intent, the failure to disclose the proper valuations of the securitized loans and derivatives.
Deputy Attorney General Filip also said that the Justice Departments remains committed to investigating and prosecuting cases of mortgage-related securities fraud, noting today’s announcement of an indictment against two senior managers of failed Bear Stearns hedge funds.

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that GEORGE HAJATI, also known as Gjergji Hajati, 31, of Westerly Terrace, Rocky Hill, pleaded guilty today before United States District Judge Mark R. Kravitz in New Haven to one count of conspiracy to commit wire fraud and eight counts of wire fraud stemming from a Hartford-area mortgage fraud scheme.

According to court documents and statements made in court, between September 2003 and November 2007, HAJATI, using his company Connecticut Partners Mortgage (“CPM”), conspired with Justin Williams, a CPM employee; Douglas Sheehan, an attorney; and others to deceive mortgage lending financial institutions into providing falsely inflated mortgage loans to real estate buyers for the purchase of property that was worth less than the amount of the loans. CPM provided fraudulent financial statements to the lending institutions that inflated the sales prices of the properties, the down payments made by purchasers and the amount due to sellers, as well as other fraudulent information, in order to induce the institutions to provide the funds.

The various lenders have suffered a loss of more than $1 million due to this mortgage scheme.

On November 14, 2007, Federal Bureau of Investigation agents conducted a court-authorized search of Connecticut Partners Mortgage on Weston Street in Hartford. On November 21, 2007, HAJATI fled the United States. In January 2008, HAJATI met Williams in Australia and, in May 2008, the co-defendants traveled to Albania, where HAJATI had lived until he was 17 years old, has relatives, and is fluent in the language.

On March 17, 2009, approximately one month after HAJATI and Williams were indicted by a grand jury in Hartford, HAJATI was arrested by Albanian authorities after he attempted to cross the border of Albania and Montenegro. He was extradited to the United States on July 24.2009.

Judge Kravitz has scheduled sentencing for June 24, 2010, at which time HAJATI faces a maximum term of imprisonment of 30 years and a fine of up to $1 million, on each count.

Williams, of Newington, voluntarily returned from Albania. On October 21, 2009, he pleaded guilty to one count of conspiracy to commit wire fraud and three counts of wire fraud. He awaits sentencing.

On November 20, 2008, Sheehan waived his right to indictment and pleaded guilty to one count of conspiracy to commit wire fraud and four counts of wire fraud. He also awaits sentencing.

This case is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Paul H. McConnell.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

Richard S. Hartunian, United States Attorney for the Northern District of New York, Rene Febles, Special Agent in Charge of the Office of Inspector General, U.S. Department of Housing and Urban Development in New York, John F. Pikus, Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation, and Lt. John D. Durling of the New York State Police Special Investigations Unit announced that Michael Cassadei was sentenced today by Senior United States District Judge Thomas J. McAvoy in Albany to twenty-seven (27) months in prison, to be followed by three years’ supervised release, for his role as organizer of a local mortgage fraud scheme. Cassadei also was ordered to make full restitution, due immediately, in the total amount of $135,148.45.

Cassadei, age 54, of Schenectady, owned, operated and/or did business in the name of, or using a number of entities, including AAA Allstate Appraisal Services. He pled guilty on February 17, 2010, at which time he admitted that, through the use of fraudulent loan applications, settlement statements, appraisals and other false statements and documents, he and the other participants in the scheme were able to fraudulently cause First Union National Bank of Delaware to finance the sale of Capital Region residential properties in amounts well in excess of their actual value, and that he and other participants then used the proceeds of the loans to purchase the properties in much lower amounts and retained the bulk of the funds. In furtherance of this scheme, Cassadei and the other participants coordinated two closings on the properties – in the first, the financial institution wired proceeds for the purchase of the properties for an amount substantially in excess of their true values. The mortgage amounts were inflated by, among other things, false seller-second mortgages and cash down payments or other payments or credits for the end buyers that did not, in truth and fact, exist. After paying the costs and fees associated with the initial closing, Cassadei then caused the remaining proceeds to be transferred to him or others acting under his direction. Thereafter, the deeds were recorded in reverse chronological order from that in which the sales actually occurred in order to create the appearance that the prior owners of the properties had conveyed them to the defendant and/or his nominees before sale to the end buyers, whereas the opposite was, in fact, what happened. As a result, the defendant was able to cause the bank, without its knowledge, to fund the purchase of the properties with the proceeds from their prior sale, with the bulk of the remaining funds going to the defendant or others at his direction.

United States Attorney Hartunian observed that “it is important that those who engage in mortgage fraud understand that they face significant penalties, and that such fraudulent schemes will be pursued aggressively in this District.”

The investigation in this matter was conducted by the Office of the Inspector General of the United States Department of Housing and Urban Development, the Albany Division of the Federal Bureau of Investigation, the New York State Police Special Investigations Unit, with the assistance of the Internal Revenue Service, Criminal Investigation Division, the United States Postal Inspection Service, and the New York State Banking Commission. It is being prosecuted by the United States Attorney’s Office for the Northern District of New York.

The United States Attorney for the District of Connecticut today announced that a federal grand jury sitting in Bridgeport has returned a nine-count indictment charging WILLIAM A. TRUDEAU, JR., 47, of Westport, with bank fraud, wire fraud, and mail fraud offenses stemming from his alleged participation in a Fairfield County mortgage fraud scheme. The indictment was returned yesterday, November 18.
The indictment alleges that TRUDEAU, a property developer, was an unnamed principal in both Aspetuck Building & Development and Huntington South Associates, LLC, the latter of which was a shell company that TRUDEAU used to pay for personal expenses and to secure loans fraudulently. From approximately February 2004 to April 2010, it is alleged that TRUDEAU conspired with Joseph Kriz, Heather Bliss, Fred Stevens, Thomas Preston, and others to defraud federally insured financial institutions and mortgage lenders. Through this scheme, it is alleged that TRUDEAU and his co-conspirators submitted false mortgage loan applications to financial institutions to obtain mortgages on various properties in Fairfield County in order to develop and sell the properties for profit, and to pay off debts owed to “hard money” lenders from whom they had previously obtained high interest loans. The mortgage applications, which included false income information and omitted the mortgage applicants’ true indebtedness, caused the financial institutions to issue mortgage loans on properties that TRUDEAU and his co-conspirators would not have otherwise been qualified to purchase, allowing the applicants to qualify for mortgages that far exceeded their ability to repay the loans.
The indictment further alleges that TRUDEAU’s name did not appear on any documentation related to the loans or the properties for which the loans were obtained, and that money was hidden in bank accounts that were not in TRUDEAU’s name, in part to prevent the collection of more than $450,000 in restitution that a court ordered TRUDEAU to pay in July 2003.
Through this scheme, it is alleged that TRUDEAU and his co-conspirators fraudulently obtained more than $3.5 million in mortgage loans.
The indictment charges TRUDEAU with one count of conspiracy commit bank fraud, mail fraud, and wire fraud; two counts of bank fraud; three counts of mail fraud; and three counts of wire fraud. If convicted, TRUDEAU faces a maximum term of imprisonment of 240 years.
An indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.
Kriz, Bliss, Stevens, and Preston have pled guilty to charges related to their involvement in this scheme. Each awaits sentencing.
This matter is being investigated by the Federal Bureau of Investigation. Citizens with information about this case are encouraged to contact FBI Special Agents McNamara or Bowery at 203-333-3512.
The case is being prosecuted by Assistant United States Attorney Rahul Kale.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including “foreclosure rescue” schemes, and “short sale” schemes.
Citizens can report mortgage fraud activity by contacting the Connecticut Mortgage Fraud Task Force at 203-333-3512, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.