Jeffrey H. Sloman, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announce that defendants Daniel Stephen and Patricia De Pons pled guilty to conspiracy to commit mail fraud in connection with a vacant land sale scheme that defrauded more than 1,000 victims out of $10.6 million.

According to the indictment, this case arose out of the sale of land in various counties in North Florida and in Georgia by First Loan Solution (“FLS”), a company owned and operated by Daniel Stephen. Stephen advertised the sale of the land to the Haitian community in Miami Dade County, using First Loan Solution’s website, Stephen’s radio program on Haitian radio, and the distribution of flyers. Stephen organized bus trips for prospective buyers to view the land in North Florida. During these trips, Stephen falsely represented that First Loan Solution owned the land. Stephen made similar false representations in individual meetings with the buyers.

Based upon these false representations, the prospective buyers agreed to enter into land sale contracts with First Loan Solution to purchase the land in one-acre increments. Upon signing the land sale contracts, Daniel Stephen required buyers to make down-payment deposits. Stephen falsely assured the prospective buyers that First Loan Solution would maintain the deposits in escrow accounts to be released only when authorized by the parties to the contract. Contrary to his representations, Stephen fraudulently diverted a significant portion of these buyers’ deposits to pay business expenses of First Loan Solution and for his personal enrichment.

Daniel Stephen failed to purchase the land that he had agreed to sell, causing significant delays in closing the land sales to the buyers. Stephen sent letters to the buyers purporting to explain the reason for the delays, fraudulently representing that the delay resulted from the lengthy time required to survey the land without disclosing that First Loan Solution did not own the land. Stephen also falsely assured the buyers that their deposits were being held in escrow accounts. Stephen used these letters to conceal the fraud and lull the buyers into a false sense of security about the status of the land transactions and the safety of their deposits.

Daniel Stephen hired a law firm with initials of E.-T. to serve as the closing and escrow agent in the land sale transactions between the prospective buyers and First Loan Solution. Patricia De Pons was the public face of E.-T. in connection with these First Loan Solution transactions. Many buyers attempted to terminate the land sale contracts and obtain refunds of their deposits. Patricia De Pons, on behalf of E-.T, and Daniel Stephen, on behalf of First Loan Solution, refused requests to obtain refunds, offering repeated excuses for failing to refund the deposits and referring the increasingly frustrated buyers back and forth between First Loan Solution and E.-T. In some instances, De Pons and Stephen did provide refund checks, although several of the refund checks issued by Stephen were returned for lack of sufficient funds.

Without explanation, Patricia De Pons presented the buyers with limited liability company (“LLC”) agreements for signature. De Pons failed to disclose to the buyers that, through these LLC agreements, the buyers were agreeing to purchase an interest in a limited liability company—with the company as the title owner of the property—and that the buyers were not purchasing land in their own names as Stephen had represented to them at the time the buyers signed their land sale contracts.

Patricia De Pons conducted false and fraudulent closings purporting to transfer title of the land tracts from First Loan Solution to the buyers. As part of the closing, De Pons demanded payment from the buyers of the balance purportedly owed on the land purchases. De Pons then sought to establish the legitimacy of these transactions by sending fabricated, unrecorded warranty deeds to the buyers. De Pons sent letters to the buyers representing that closings on their land had taken place and that a recorded copy of the warranty deed would be returned to the buyers upon receipt from the county where the land was located.

Despite conducting hundreds of closings purportedly transferring the land to the victim buyers, the buyers were left without any land and without a refund of the monies they provided to First Loan Solution and E.T. In excess of 1,000 victim buyers fell prey to this scheme with losses to the victims of $10,600,000.

This case was investigated by agencies participating in the Federal-State Mortgage Fraud Strike Force. Mr. Sloman commended the investigative efforts of the Mortgage Fraud Strike Force with particular commendation to the Federal Bureau of Investigation and the State of Florida Office of Financial Regulation. The case was prosecuted by Assistant U.S. Attorneys Peter A. Forand and Michael Sherwin.

United States Attorney A. Brian Albritton announces that U.S. District Judge Henry Lee Adams, Jr. yesterday sentenced Barry C. Westergom (age 60, of Jacksonville) to four years in federal prison for conspiracy to commit wire and bank fraud. The court also ordered restitution in the amount of $866,141.62 and entered a money judgment for $100,000, the amount that Westergom had obtained from the fraud. Westergom had pleaded guilty on October 8, 2009.

According to court documents, during 2004 and 2005, Westergom’s co-conspirator, Juan Carlos Gonzalez, contracted to purchase about 55 houses. Gonzalez retained Westergom, who was a licensed real estate appraiser, to appraise most of the properties. Westergom then fraudulently inflated the appraisals, valuing each property at a significantly higher price than the negotiated purchase price. Westergom knew that Gonzalez intended to submit the appraisals to lenders in support of mortgage loan applications in which the inflated appraisal value was listed as the purchase price. The lender was not informed that the price listed in the transaction documents was higher than the actual price negotiated with the seller. Gonzalez also submitted fraudulent financial documents and information, including altered bank statements and payroll records, to the lenders in support of the loan applications.

At each closing, Gonzalez received the difference between the loan amount, which was based on the inflated appraisal, and the actual purchase price, and Westergom received commissions and fees.

Westergom’s plea agreement details one transaction in which Westergom, acting as a buyer’s agent for Gonzalez, negotiated with a seller to purchase a house for $490,000. Westergom then fraudulently appraised the house for $625,000. Gonzalez submitted first and second mortgage loan applications for the house reflecting a sales price of $625,000. Gonzalez also submitted altered bank account statements showing significantly larger cash balances in the account than actually existed. The lender approved the loans and, at the closing, Gonzalez received $134,000, which was listed on closing documents as an “Assignment of Contract Fee.” Westergom received $12,250 as a broker’s fee and $550 as an appraisal fee.

The conspirators’ fraudulent acts resulted in lenders extending more than $29,272,000 in first and second mortgage loans. Westergom received a total of about $100,000 in commissions and fees. Gonzalez received $6,296,303.65 from the scheme.

Gonzalez pleaded guilty to a conspiracy charge and was sentenced to seven years in federal prison on November 5, 2009.

The case was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Arnold B. Corsmeier. It 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 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.

A title company owner, who operated Homemaxx Title & Escrow, was arrested in Palm Beach, Florida. He had been a fugitive since March 26, 2009, when a federal grand jury in Maryland, returned an indictment charging him with wire fraud and money laundering in connection with a scheme to defraud lenders and homeowners.

The indictment states that from February 2003 to July 2004, the fugitive owner had caused Homemaxx to divert funds meant to pay outstanding first mortgages on real estate transactions or to officially record deeds. He had transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with any transactions.

He then used the money intended to be disbursed per the HUD-1 settlement for personal use that had nothing to do with the real estate transaction. With one particular real estate refinancing by one of his customers, he diverted funds from the escrow account and then used the proceeds to purchase a new 2004 CLK Mercedes.

The indictment seeks the forfeiture of $593,228, and is alleged to have defrauded lenders and homeowners and to have used $93,228 of the criminal proceeds for money laundering. Although, an indictment is not a finding of guilt, an individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

One of the most difficult aspects of dealing with real estate fraud is that it is hard to know the scope of the problem. The human element that is involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify.

Because these people are white-collar criminals, they look, dress, act, and talk just like the rest of us. They won’t look like criminals; they’ll look like loan officers, title closing agents, real estate agents, members of management and loan processors or closers and, of course, the people next door.
Once a white-collar criminal gets away with it, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage transactions clearly begin feeling that not only are they above the law but in fact, they are not doing anything wrong in the first place.

We should all congratulate the United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.
It starts with me.
It starts with you.
It starts with us…

Michael S. Richardson
Author of “An American Epidemic, Mortgage Fraud a Serious Business”
www.mortgagefraudsolutions.com

Stephen Thomas Bybel had a business idea that would make him a landlord and line his pockets while sprucing up neighborhoods where homes in foreclosure were left to deteriorate and become targets of vandals.

Pasco County sheriff’s officials see it another way: He broke into vacant homes, changed the locks and rented out other people’s houses. Bybel was arrested at his house Wednesday and was charged with one count of scheming to defraud.

Reached by telephone after his release from jail, the 48-year-old Bybel maintained he didn’t defraud anyone.

“I think I’m doing a service to the community.”

In all, Sheriff Bob White said, Bybel took possession of 72 homes – in the Land O’ Lakes and Wesley Chapel areas — beginning in December and rented out 31 of them. White said Bybel collected nearly $17,000 for rent in January on the homes; Bybel said that’s not correct because some people didn’t pay their rent. He didn’t say how much he collected.

Ken Londo said he gave Bybel $650 for a three-bedroom house in Land O’ Lakes two weeks ago.

“I had no idea, actually,” he said when told of the allegations against Bybel.

“I’m freaking out. What are you going to do?” said his wife, Lisa Londo. “I don’t know.”

The Londos said they moved to the home on Aldus Drive with their four children because their previous apartment was filled with black mold.

“We really thought that we had found the right place,” Lisa Londo said.

The investigation into Bybel began when a real estate agent, also a part-time Pasco deputy, was recently trying to show a house that was for sale but discovered the locks had been changed. He saw a notice from Bybel’s company on the door and called him. Bybel told him he had “gotten the wrong house” and then provided a key to the Realtor, a sheriff’s office report states.

In September, Bybel started a company – Real T Solutions Investments, LLC — and hit the streets of central Pasco searching for vacant homes. He would select some and then by filing a one-paragraph “memorandum of adverse possession” legal notice with the Pasco Clerk of Courts office, he would take possession of such properties. Bybel would then change the homes’ locks, sometimes give them a fresh coat of interior paint and then rent them out.

Bybel, who lives at 22430 Stillwood Drive, said Wednesday that he went through hoops trying to locate owners of the homes. He sent them letters via the mail, tried to find them on Facebook and left notices on their properties’ front doors. Detectives say they don’t believe any of the homeowners were properly contacted.

One of the homes which Bybel has taken over, White said, is owned by another deputy who just started work this week.

Apparently, it’s a scheme that’s being done in Miami and Las Vegas, the sheriff said. In fact, White said, they are investigating another unrelated similar scheme in Pasco.

This comes at a time when tens of thousands of Florida homes are sitting empty, their owners too financially strapped to stay. Keeping track of so many homes is taxing on lenders, and many of the homes have been abandoned by owners waiting for foreclosure to be finalized.

It’s easy to see how foreclosed homes could slip through the cracks, said Anthony DiMarco, spokesman for the Florida Bankers Association. He said he hasn’t heard of such a scheme but isn’t surprised.

“There has been so much mortgage fraud, and there are lots of foreclosed homes,” he said. “It’s a matter of numbers.”

Bybel has maintained to authorities he was within his legal rights of adverse possession, said Detective Jeff Peake of the economic crimes unit.

The adverse possession statute’s intent, said White, is indeed to claim property but not in the way in which Bybel interpreted it. For example, he said, if someone mistakenly builds a structure that stretches over the property line of his neighbor’s and it goes uncontested for a certain amount of time, the land can be claimed as the person who built the building.

“That’s nowhere near this,” White said of what Bybel was doing. “This is closer to burglary and grand theft than adverse possession.”

Bybel said when he was setting up his business he ran the idea by a few lawyers.

“They all said this was a gray area,” he said. “They didn’t say not to do it.”

The way Bybel sees it, he cleaning up his community while helping others, kind of a modern day Robin Hood in times of an economy mired in recession. In fact, his company mission statement says as much.

“Help stabilize communities blighted by vacant homes. Clean up the properties and provide affordable housing to citizens in transition,” it states in part.

“I read the papers,” Bybel said. “I watch the news and the world is falling apart and nobody is doing nothing about it.”

Illegal or not, he said, he’s helping “save” Pasco.

“It’s a victimless crime,” he said.

Bybel said he wanted to make renting homes in this economy easier for people who have lost their homes, such as himself. His New Jersey home, he said, was foreclosed on about a year ago.

He advertised on Craigslist, didn’t collect deposits and didn’t charge outrageous monthly rents, Bybel said. All the while, he was making sure the homes were maintained and even did some repairs inside like patching walls, steam cleaning carpets and painting to make the homes nice for his renters – and the neighborhood.

Now those renters he says he helped – such as Londo — have to find new homes.

“They need to find a place to live and like they say, quick like a bunny,” White said.

The foreclosure crisis has resulted in a lot of work for lawyers hired to try to help struggling owners hang onto their homes.

But it has also resulted in a record number of complaints concerning claimed unscrupulous practices, some of which have already led to disciplinary action, according to a Daily Business Review article reprinted in New York Lawyer (reg. req.).

“There has definitely been a trend in the last six months or year where attorneys are having some involvement in loan modification scams,” says Arne Vanstrum of the Florida Bar.

He says the Florida Bar received 100 complaints in the last six months concerning lawyers involved in loan modifications, many of them in South Florida. Meanwhile, the state attorney general’s office got 756 complaints through August, a record. In all of 2008, the AG’s office got only 61 such complaints, the business publication recounts in a lengthy article.

Meanwhile, the California State Bar has taken the unusual step of making public the names of 16 attorneys accused of misconduct concerning loan modification matters.

Attorneys often get into trouble because of fee issues. Clients should be charged based on the amount of time it takes to handle their matter, not the size of the mortgage, says George Castrataro. He formerly worked for the Legal Aid Service of Broward County and is now in private practice. Clients also need to be clearly informed if representation will not begin until they have made a number of monthly payments to cover a required minimum retainer, he tells the Daily Business Review.

Another potential ethical pitfall is presented if a lawyer is too closely involved with a non-law-firm loan modification company, says Ryan Wiggins, who serves as deputy director of the state AG’s office.

Under a 2008 federal law that doesn’t apply to attorneys, loan modification companies can’t charge upfront fees, he explains to the business publication. This has led a number of firms to affiliate with attorneys, but unless the attorney is acting as a lawyer and actually representing company clients he or she is then in violation of the federal law, too, according to Wiggins.

Many complainants also contend that lawyers take their money and then do little or no work.

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Filed in Oklahoma City by two banks and a title insurance company, the suits claim that Kevin and Deborah Flessner bought three apartment complexes in Oklahoma and one in South Carolina at the height of the real estate boom for $9.1 million and sold the complexes — within five days or less — to companies they controlled for $13.5 million.

The couple then used the higher valuations to get $10.3 million in loans, or $1.2 million more than they first paid for the properties.

The Flessners’ intent was to “deceive federally insured mortgage lenders into overvaluing apartment properties to the tune of $900,000 or more per transaction,” says the suit filed by Imperial Capital Bank, a Glendale, Calif.-based lender that was shuttered in January by regulators. “The excess loan proceeds would then be pocketed by the defendants or invested as equity in further transactions under the scheme.”

The Flessners have denied the charges, saying in court documents that they did not conspire to defraud any bank.

The kind of flipping described in the lawsuits — in which buyers sell properties to themselves at inflated values to get more loan money than they would have otherwise have entitled to receive — is the same kind the Herald-Tribune wrote about in a series of stories published in July.

Filed in Oklahoma City by two banks and a title insurance company, the suits claim that Kevin and Deborah Flessner bought three apartment complexes in Oklahoma and one in South Carolina at the height of the real estate boom for $9.1 million and sold the complexes — within five days or less — to companies they controlled for $13.5 million.

The couple then used the higher valuations to get $10.3 million in loans, or $1.2 million more than they first paid for the properties.

The Flessners’ intent was to “deceive federally insured mortgage lenders into overvaluing apartment properties to the tune of $900,000 or more per transaction,” says the suit filed by Imperial Capital Bank, a Glendale, Calif.-based lender that was shuttered in January by regulators. “The excess loan proceeds would then be pocketed by the defendants or invested as equity in further transactions under the scheme.”

The Flessners have denied the charges, saying in court documents that they did not conspire to defraud any bank.

The kind of flipping described in the lawsuits — in which buyers sell properties to themselves at inflated values to get more loan money than they would have otherwise have entitled to receive — is the same kind the Herald-Tribune wrote about in a series of stories published in July.

In that series, the Herald-Tribune showed that groups of flippers in Southwest Florida and across the state contributed to defaults on more than $500 million in loans in Sarasota and Manatee counties and $10 billion or more statewide.

What makes the lawsuits involving the Flessners significant is that they go into detail about the couple’s alleged orchestration of the flips and the real estate professionals who are said to have helped them. Outside of criminal cases, detailed information is hard to find.

Only one of the lawsuits — the Imperial Capital Bank lawsuit — was filed directly against the Flessners.

The other two — one filed by Wells Fargo and another by First American Title — take the alleged fraud on the part of the Flessners as a given and blame bankers and real estate professionals for allowing the fraud to occur.

Though the Flessners have denied the charges, the documents they filed do not explain why they needed to sell the properties to themselves at higher values.

The Flessners did not return three calls from the Herald-Tribune for comment, and Kenneth Jones, a lawyer representing the couple in Oklahoma City, did not return four phone calls.

But Harry Haskins, an attorney who represents the Flessners in Sarasota, said his clients have been hit with allegations that are not true.

Haskins said he was told that Imperial Bank knew that there were two purchase contracts at two different prices when it made its loan on the Archway Apartments in Oklahoma City.

“Banks do their own appraisals and there was nothing wrong with that appraisal,” Haskins said. “They okayed that loan. This is not a situation in which the property was over-mortgaged or over-collateralized.”

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.

Hundreds of gold bars. Luxury cars. And cold, hard cash.

These were the spoils, federal officials say, of what appeared to be successful ventures involving Pedro Benevides and Daniel Fernandez Rojo Filho.

Between them, the Central Florida associates ran or were part of a series of area businesses — investment, real estate, aviation, car rental. What they really did, federal officials say, was participate in a Ponzi scheme that victimized thousands of people across the globe.

And, federal investigators say, the seized assets are part and parcel of a case that is just one example of an increased number of probes into suspected investment scams, taxing investigators and loading up cases for prosecutors of white-collar crimes.

“We are continuing to see a rise in Ponzi schemes, no doubt about it,” said Dave Nanz, chief of the Economic Crimes Unit for the FBI in Washington.

In Florida, the Attorney General’s Office has seen a nearly 175 percent increase in the number of investment-fraud-related complaints in the past five years.

And Friday, another case escalated. Grand-Am race-car driver Henri Zogaib of Longwood was arrested on one count of organized fraud.

Investigators said Zogaib, 36, stole about $5.1 million from 19 people who invested in his company, Executive Investment Group, by promising large returns on their money. They said he never invested the money but took it for his own use.

He was booked into the Lake County Jail on Friday with bail set at $100,000.

Ponzi schemes — or similar scams — have existed for decades. The name of the fraud itself is derived from Charles Ponzi, who in the 1920s tricked thousands of New England residents into investing in a postage-stamp-speculation scheme. He promised investors a 50 percent return in 90 days at a time when banks were giving 5 percent to account holders.

Ponzi used money from new investors to pay early investors their “profits.”

Today’s Ponzis are similar.

“The promoter is generally very charismatic and has some real-life experience with some type of legitimate investment product,” said Internal Revenue Service Special Agent Norm Meadows.

When investors want to pull their money out, Ponzi schemes collapse. And a lingering downturn in the U.S. economy explains why federal investigators see their case files stacking up.

“Bad economic conditions basically make the Ponzi scheme impossible to maintain,” said David P. Leibowitz, an attorney and board member of the National Association of Bankruptcy Trustees. “These Ponzi schemes have happened already. The Ponzi schemers have schemed. What we’re seeing now is the backwash of what was happening in 2007 and 2008.”

Benevides, 40, of Lake County and Filho, 42, of Orange County lived in style. And they appear to have been generous with their money: Filho bought his maid a Chevrolet Equinox, court documents say, which was also seized by the feds.

Court documents said Benevides and Filho participated in the operation of a company called Evolution Market Group.

From December 2007 to March 2009, Evolution Market Group — doing business as Finanzas Forex — operated several Web sites that boasted of short-term investments that yielded 77 percent to 300 percent returns, court documents show.

Evolution Market Group falsely represented on the Web that all funds would be invested in a European brokerage firm that specialized in buying and selling foreign currency, documents show.

Instead, prosecutors say, the company used most of the money to partially pay back early investors and to “reward” promoters of the company with money, luxury cars and housing allowances.

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.

Jeffrey H. Sloman, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; and C. Ed Slagle, Special Agent in Charge, Federal Deposit Insurance Corporation, Office of Inspector General, Southeast Region, announced the January 26, 2010 unsealing of an Indictment charging Yamil L. Herrera, 38, of Miami; Alain C. Hernandez, 41, of Miami; Ricelda M. Hernandez, 44, of Miami; Maria G. Herrera, 40, of Miami; Ana G. Blanco, 35, of Hialeah; Samantha Portales, 43, of Miami; Edel Martinez, 37, of Miami; Osiris Garcia, 41, of Miami; Luis R. Martinez, 42, of Hialeah; and Silvio De Paz, 46, of Miami, with one count of conspiracy to commit wire and bank fraud, in violation of Title 18, United States Code, Section 1349, 11 counts of substantive wire fraud, in violation of Title 18, United States Code, Section 1343, and five counts of substantive bank fraud, in violation of Title 18, United States Code, Section 1344.

Through this scheme, the defendants are alleged to have defrauded three financial institutions of more than $24 million in loan proceeds. If convicted, the defendants face a maximum statutory sentence of 30 years’ imprisonment for the conspiracy and bank fraud counts, and 20 years’ imprisonment for the wire fraud counts.

More specifically, the Indictment alleges that the defendants were involved in the financing of six residential properties in Miami-Dade County. According to the Indictment, Yamil L. Herrera, Alain C. Hernandez, and Ricelda Hernandez would identify properties that could be used to defraud lenders and then recruited friends and family to pose as purchasers of the properties. In addition, through a mortgage brokerage company called “Miami Dade Mortgage Professionals,” Alain C. Hernandez, a licensed mortgage broker, and Ricelda M. Hernandez would prepare loan applications that contained fraudulent statements about the purchasers’ employment, assets and intention to live in the properties. Ricelda M. Hernandez was also acting as a real estate agent.

Among the defendants who acted as straw purchasers for the properties were Maria G. Herrera, Samantha Portales, Edel Martinez, Osiris Garcia, Luis R. Martinez, and Silvio De Paz. The defendants conducted all of the real estate closings at Ana G. Blanco’s Trinity Closing Group. Since the defendants were often re-selling or “flipping” the properties among themselves, Blanco would disburse the money owed to the seller before the closing, and the seller would transfer the money to the defendant who was purchasing a property, so that money could be used as a ‘down payment.’ Once the property was purchased, the defendants allegedly arranged to make the mortgage payments until they could flip the property at an inflated purchase price. With the profits made from “flipping” the properties to each other, the defendants continued to buy additional properties and pay outstanding mortgage payments during the scheme. Eventually, the defendants ran out of money, stopped making the loan payments and the properties went into foreclosure. The foreclosures resulted in more than $7 million in losses to Washington Mutual, Impac Lending Group, Loan City and other lenders.

Brandon Foley, an owner of Smart Choice Realty, has agreed to plead guilty in a mortgage fraud conspiracy, operating what prosecutors call a “builder kickback” scheme in Mecklenburg County.

The Charlotte real estate agent, served as an agent for deals in which a builder “agreed to pay hidden kickbacks to buyers and promoters who recruited buyers,” according to court documents filed Monday. He was involved in the fraud ring for more than two years, starting about September 2005, documents say.

Foley is charged with one count of mortgage fraud conspiracy. He faces up to five years in prison and a maximum fine of $250,000. He declined to comment saying his attorney advised him not to discuss his case. A date in January 2010 is yet to determined for his plea to be heard.

The conspiracy generally involved an unidentified builder that had “numerous houses that were not selling at the desired price,” according to court papers. To stimulate sales, “Builder A” agreed to pay kickbacks, which were not listed on closing documents.

As the real estate agent, Foley “facilitated the hidden kickbacks,” the documents say.

Prosecutors say Foley’s case is not related to the “Waxhouse Investigation,” a mortgage fraud case in which 12 people have agreed to plead guilty since last year.

However, there are similarities, based on filings in the cases. For example, in both, participants lied to get mortgages, including misrepresenting buyers’ income, place of employment and intent to occupy the house as a primary residence.

In the Foley case, conspirators also used false identification, such as fake Social Security numbers, the filing says.

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Former Real Estate Investor Comes Up with the Short Straw in Mortgage Fraud Scheme

Kevin M. Lafavers of LaGrange, Ky. faces sentencing Feb. 2 in the case. He pleaded guilty to wire fraud.

A former real estate investor, Lafavers pleaded guilty to federal charges that he set up straw deals to obtain inflated mortgages on more than 100 Indianapolis houses has been sentenced to prison.

Forty-four-year-old Robert A. Penn of Naples, Fla. also was ordered Monday to pay more than $11 million in restitution. He earlier pleaded guilty to charges of wire fraud and admitted to money laundering conspiracy.

The former Indianapolis residents were indicted in July on charges that from 2003 to 2005 they bought many of the homes for $120,000. Those were later seized by lenders and resold at sheriff’s sales for $3,500 to $26,000.

According to a January 4, 2010 Bloomberg Report, Bradley Birkenfeld, was a key informant in a U.S. investigation of offshore tax evasion aided by US Bancorp (UBS). On Jan. 8, Birkenfeld reported to prison for a 40-month prison term as ordered by U.S. District Judge William Zloch in federal court in Fort Lauderdale, Florida.

“I gave them the biggest tax fraud case in the world,” said the 44-year old Birkenfeld. “I exposed 19,000 international criminals. And I’m going to jail for that?”

Birkenfeld, a former banker with USB AG, pleaded guilty in 2008 to helping California billionaire Igor Olenicoff and hundreds of others evade taxes. Before his sentencing, Birkenfeld cooperated with the Justice Department, a U.S. Senate investigation and the Internal Revenue Service probe of the Zurich-based financial giant, detailing how UBS helped Olenicoff and other rich Americans evade taxes.

Birkenfeld, a former UBS banker, sought a postponement of the term imposed Aug. 21 by, and a new hearing to seek a shorter sentence. He promised to continue cooperating with prosecutors. Zloch denied the request in a one-page order.

“It’s a setback for whistleblowers everywhere,” said Birkenfeld attorney Stephen Kohn, executive director of the National Whistleblowers Center in Washington. “It just undermines the public interest that thousands of major tax cheats all escape any prosecution, and the one person who turned it in gets the longest sentence.”

In February 2009 the court ordered USB to pay $780 million in fines and to hand over data on 250 accounts to avoid prosecution. It agreed in August to turn over data on another 4,450 clients sought by the IRS.

At Birkenfeld’s sentencing on Aug. 21, 2009 the DOJ prosecutor, Kevin Downing stated that the U.S. couldn’t have unraveled the bank’s “massive tax fraud scheme” without his help. Prosecutor Downing recommended a minimum sentence of 30-months for Birkenfeld, since he wasn’t initially truthful about his dealings with Olenicoff.

In an interview on CBS’s “60 Minutes,” Birkenfeld said he didn’t deserve to go to jail when other bankers and clients haven’t. Birkenfeld also seeks a reward from the IRS of up to 30 percent of the taxes collected based on his information.

Olenicoff, who pleaded guilty in 2007 to filing a false tax return, got two years probation and paid $52 million in back taxes, fines and penalties. Last year, six former UBS clients pleaded guilty. While one got 12 months house arrest, none was sentenced to more than three months in prison.

Birkenfeld, who is under house arrest with electronic monitoring in Massachusetts, filed a motion Dec. 26 seeking a delay in his prison term and a hearing on a reduced sentence.

In that motion, Birkenfeld’s lawyers said he has been “ready, willing and able” to provide continued assistance to the government, and prosecutors had not taken him up on the offer.

In the four months after his sentencing, “the government has neither met with Mr. Birkenfeld nor asked him a single question about UBS, Swiss private banking, or any of Mr. Birkenfeld’s former U.S. clients.” His lawyer also spoke once to U.S. authorities on Dec. 14 about Birkenfeld’s former UBS clients, according to the filing.

In a Dec. 7 letter to U.S. Attorney General Eric Holder, Kohn also said that his client told the Senate, the IRS and the Securities and Exchange Commission in 2007 about Olenicoff. “There clearly was a breakdown in communication between DOJ and Mr. Birkenfeld,” Kohn wrote. “There also appears to have been a breakdown in the cooperation and information sharing between various government entities.”

Birkenfeld was indicted with a Liechtenstein investment adviser, Mario Staggl, who was declared a fugitive. Two former UBS bankers, Raoul Weil and Hansreudi Schumacher, and a Swiss lawyer, Matthias Rickenbach, also were indicted in the U.S. and declared fugitives.

Just When You Thought it was Safe to go into the Water

This is not a follow-up story about hurricane Katrina.

One out every three home owners today in America is drowning.  According to Mark Fleming, chief economist for First American CoreLogic, more than 15.2 million U.S. mortgages, or 32.2% of all mortgaged properties, were in a negative-equity position on June 30, edging down from 32.5% at the end of March, according to the real-estate information company, which tracks data on about 90% of mortgage loans nationwide.

The combined total property value for loans in 2008 in a negative-equity position was $3.4 trillion, according to the report.  Negative equity can occur because of a decline in property value, an increase in mortgage debt or a combination of both. Equity levels are important to people who can’t make their mortgage payment since it affects their ability to sell or refinance.

“The slight drop from 2008 to the figures of 2009’s first 2 quarters in the portion of under-water loans reflects the recent flattening of home price changes, which is “great news” for the housing market as negative equity has been increasing for a number of periods,” Fleming said.

Still, he stressed that this decrease is a quarterly comparison and not the yearly comparison typically used in house prices.

Negative equity is a strong driver of foreclosures, Fleming said, and the stunted growth rate in the second quarter is a positive sign that foreclosures may moderate in the future. First American CoreLogic made “very crude” estimates that the foreclosure rate will peak a bit higher than 4% in early 2010, he said.

Is there Regional competition to be in Second Place?

According to business columnists in Arizona and Florida, they both report that their state has the number two spot sewn up for the most homes under water with negative-equity mortgages.

According to Jan Bucholz of the Phoenix Business Journal, her headline read:

“Arizona second in underwater loans”

On the other coast of the United States, the South Florida Business Journal with a statistical quote from CoreLogic posts the following headline:

“Florida No. 2 in mortgages under water”

For the sake of preventing another Civil War, let’s call it a tie.  We’ll look at the raw figures in a moment.  For right now, here is a look at what everyone agrees on:

The number one state leading the country in under water (negative-equity) mortgages is Nevada where 65 percent of homeowners have negative equity in their homes. (I still am quoting data from First American CoreLogic, based in Santa Ana, Calif.)

The percentage difference between the two states “coveting” the number two position, Arizona and Florida, is a fraction between 49% and 48% respectively.

Fourth on the list of under water mortgages is Michigan with California rounding out the top five.

Can anyone say:  Tsunami?

Nationwide, we have one-third of all mortgages in an “under water” position with a total property value for loans at $3.4 trillion. California led states with $969 billion, followed by Florida with $432 billion, New Jersey and Illinois each with $146 billion and Arizona with $140 billion.

Looked at by city, Los Angeles topped the list with more than $310 billion of total property value under water, followed by New York with $183 billion, Miami with $152 billion, Washington with $149 billion and Chicago with $134 billion, according to CoreLogic.

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R. Alexander Acosta, United States Attorney for the Southern District of Florida, Michael Fithen, Special Agent in Charge, U.S. Secret Service, Miami Field Office, Daniel W. Auer, Special Agent in Charge, Internal Revenue Service, Criminal Investigation, Duncan Foster, Chief of Police, Coral Springs Police Department, and Sheriff Al Lamberti, Broward Sheriff’s Office, announced that Peter Affatati, 39, of Coral Springs, FL, was sentenced to 13 years in prison in federal court in West Palm Beach for his role in a multi-million dollar mortgage fraud scheme. Affatati was also ordered to pay restitution in the amount of $8.8 million.

Specifically, Peter Affatati was charged with and pled guilty to orchestrating a $40 million mortgage fraud scheme that involved more than 50 residential mortgages, most of them in South Florida. Affatati used nominee purchasers/straw buyers to purchase the homes, then used his company, Assurance Title, to falsify the straw buyers’ employment, income, and asset information to qualify them for large mortgages from institutional lenders.

Upon the funding of the mortgage, Affatati diverted a large portion of the proceeds for his personal benefit.

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The State of Florida unveiled a new website today designed to help homeowners avoid real estate and mortgage fraud-related scams. The website, Florida Mortgage Fraud, provides homeowners and their loved ones with access to current investigations, complaint forms, and tips to identify and avoid a number of different types of real estate and mortgage fraud, including foreclosure rescue fraud.

“Companies and individuals are taking advantage of our homeowners in these tough economic times by preying on their financial situations,” said Florida’s Attorney General, Bill McCollum, in announcing the launch of the website. “If we can increase consumer education and empower people to spot scams and avoid them in advance, we can help decrease the number of victims targeted by this fraud.”

Homeowners can use the site to obtain information about active litigation involving companies the State of Florida has taken action against and can download affidavit forms to fill out if they feel they have been victimized by one of the companies on the list. You can also use the site to access a list of investigations being conducted by the Attorney General’s Mortgage Fraud Task Force to see if a particular company is currently being scrutinized.

The website also features answers to frequently asked questions about real estate and mortgage fraud, consumer tips, and a list of warning signs that a company or an individual might be engaging in foreclosure rescue fraud. Additional resources are also available, including a link to a new Florida Bar website containing information for attorneys and consumers on legal training, housing help workshops and clinics being held in Florida, and information concerning the Florida Bar Lawyer Referral Service and qualified legal aid agencies throughout Florida.

In 2007, Florida’s Attorney General initiated an agency-wide Mortgage Fraud Task Force to address the issues of mortgage and foreclosure rescue fraud. Since then, the Task Force has filed six lawsuits, has settled with seven companies, and is actively investigating more than 50 additional companies under the Foreclosure Rescue Fraud Prevention Act, which took effect October 1, 2008. The Task Force has also reviewed information pertaining to the business practices of more than 200 foreclosure rescue businesses.

Image by Getty Images via DaylifeThe U.S. Attorney for the Southern District of Florida (R. Alexander Acosta), and the FBI announced late last week that Steven Gordon, 49, of Miami, Florida, pled guilty to wire fraud charges related to a five-year scheme to inflate the value of mortgage loans to increase his commission compensation. Steven Gordon’s sentencing has been scheduled for April 23, 2009.

Prior to his dismissal in 2006, Gordon was a principal at Bayview Financial, LP, a Coral Gables, Florida-based finance company that buys portfolios of loans from lending institutions. Bayview Financial pooled these loans into newly formed business entities, called “special purpose entities,” and then issued securities backed by those loans to the investing public. During 2006, 2005 and 2004, respectively, Bayview Financial and its affiliates securitized approximately $2.056 billion, $0.954 billion and $1.428 billion, in offerings of residential and commercial mortgage loans, including $1.989 billion, $0.884 billion and $1.243 billion of residential mortgage loans.

While employed at Bayview Financial, Gordon held the title of Director of Residential Acquisitions. One of Steven Gordon’s primary duties was to negotiate the purchase of thousands of loans for Bayview Financial’s residential mortgage securitization program. Gordon’s incentive compensation was based, in part, on his ability to buy those loans at a low cost.

Late last week, Gordon admitted that between 2001 and 2006, he engaged in a scheme to defraud Bayview Financial, in which he regularly altered credit information affecting the value of more than 2,800 loans acquired for Bayview Financial’s residential mortgage securitization program. Gordon’s fraudulent scheme caused Bayview Financial to pay him more than $2.8 million in excessive and undeserved bonuses.

Reported incidents of real estate and mortgage fraud in the U.S. increased by 45% on fewer loan applications in the second quarter of 2008 from a year ago, according to a report released today by the Mortgage Asset Research Institute (MARI). The MARI Quarterly Fraud Report is based on data submitted by MARI subscribers on loans originated in the second quarter of this year that have since been classified as fraudulent.

Key findings from the report include:

• Fraud most often occurs at the beginning of the loan process. More than 65% of fraud incidents are attributed to “General Application Misrepresentation,” a trend that has continued over the past two quarters. General Application Misrepresentation occurs when information such as a name, occupancy or assets is incorrectly stated during the application process.
• Income misrepresentation on loan applications rose 5% during the second quarter of 2008 versus the first quarter of 2008.
• Asset and debt misrepresentation on the loan application rose 7% during the second quarter of 2008 versus the first quarter of 2008.
• Tax return and financial statement misrepresentation rose 4% during the second quarter of 2008 versus the first quarter of 2008.
• Verification of deposit and bank statement misrepresentation rose 3% during the second quarter of 2008 versus the first quarter of 2008.
• Appraisal misrepresentation climbed to 21% for an overall increase of 6% during the second quarter of 2008 versus the first quarter of 2008.
• Florida, California, and Illinois compose the top three states for reported incidents of fraud. Florida saw a 5% increase in General Application Misrepresentation in the second quarter, while California saw a 20% decrease. Illinois recorded the highest percentages of income and employment misrepresentation on loan applications.

As was the case for the first quarter of 2008, Florida tops the list with the most reported loans with misrepresentation in the second quarter. Twenty-one percent (21%) of reports for loans originated during this time period were for properties in Florida. California ranks second, with 15% of loans reported; and Illinois rounds out the top three with 12% of all loans reported.

California REALTOR® Jose Oliva Sentenced for Real Estate Fraud: A real estate agent from Fontana, Calif., who was arrested in July of this year on felony charges connected to real estate fraud, has finally been sentenced… to six (6) months in jail followed by three (3) years probation.

John Matouk pleads guilty in Michigan of quitclaim deed fraud: According to the Wayne County Prosecutor’s Office, in February 2004, Matouk, who owned half a property in the 1100 block of Telegraph in Dearborn, forged a quitclaim deed from an elderly couple that transferred the entire property to his company, LM Investments of Dearborn LLC. Before his sentencing last week, Matouk was ordered to pay $26,000 in real estate taxes, the outstanding balance on a $650,000 loan, and court and probation costs. Because of his plea, Matouk received a sentence of two (2) years’ probation.

Rockland County, New York, task force targets mortgage fraud: Rockland County, NY, officials are trying to fight the worsening mortgage fraud problem by forming a Real Estate Fraud Investigation Task Force. The task force, a joint effort of Rockland District Attorney, County Clerk and County Sheriff, will investigate and prosecute cases involving recorded real estate documents, with an emphasis on instances in which the victim’s home is at risk of foreclosure.

U.S. Attorney charges Missouri mortgage brokers with cash-back-at-closing fraud: John F. Wood, United States Attorney for the Western District of Missouri, announced that several mortgage brokers are among six Missouri residents indicted by a federal grand jury last week for participating in several related mortgage fraud schemes. Charles M. Davis, 34, of Rogersville, Mo., Cheryl Joan Kassebaum, 42, and her husband, Scott Allen Kassebaum, 42, both of Ozark, Mo., Randall Lee Hall, 59, and Shanda Lynn Moore, 44, both of Springfield, Mo., and Steven Ray Spencer, 47, of Carl Junction, Mo., were charged in a 55-count indictment returned by a federal grand jury in Springfield. Davis, a former mortgage broker, was the owner of Master Marketing Consultants. The Kassebaums, former mortgage brokers, were owners of Metro Consulting Group. Hall is a former mortgage broker.

Westport, Connecticut, mortgage broker Fred Stevens pleads guilty to mortgage fraud: Stevens, 53, of Easton, Conn., is charged with submitting fraudulent mortgage applications with IndyMac Bank and other financial institutions resulting in losses of over $1,000,000.

Florida real estate appraiser Juan Gonzalez guilty of mortgage fraud: Gonzalez fraudulently obtained loans on more than 40 properties, victimizing numerous lenders and grossing over $5,000,000 in the process. As a result, the 51-year-old will spend the next 30 years in federal prison and pay a $1 million fine.

While members of Congress, President Bush, and the Treasury Department attempt to work out (pun intended) the $700 billion Troubled Asset Relief Program, real estate and mortgage fraud continues to be the fastest-growing white collar crime in American:

WaMu loaned millions to California home flippers convicted in fraud scheme: Records show WaMu, America’s largest savings and loan, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since 2007. Of the 22 homes sold in that period, at least six have become problems for WaMu: Four were foreclosed, one received a notice of default and another was listed for sale at a $260,000 loss. Total value of WaMu’s mortgages on the troubled properties: $2.7 million.

Weld County’s ‘Most Wanted’ fugitive — a developer — busted in Mexico: Weld County’s “Most Wanted” fugitive sits in a California jail today after a dogged investigation led to his arrest in Mexico. Mark Strodtman, a Greeley developer, was indicted March 25 by Weld County grand jury on 23 felonies, including racketeering. Strodtman, 51, and two others are accused in a mortgage fraud scheme that left many Greeley area families in foreclosure, reduced property values of neighboring homes and defrauded lenders, according to the Weld County District Attorney’s Office.

Brothers admit to million-dollar mortgage fraud: Federal prosecutors say two Virginia brothers have pleaded guilty in a million-dollar mortgage fraud scheme. Twenty-nine-year-old Mohammed Rababeh of Vienna and 31-year-old Ahmed Rababeh of Haymarket pleaded guilty Wednesday to conspiring to commit bank fraud.

Former mortgage loan officer pleads guilty to fraud scheme: A 25-year-old woman pleaded guilty in federal court yesterday to participating in a mortgage fraud scheme and faces up to five years in prison and $250,000 in fines. Paula Galacgac admitted that, while working as a loan officer for Mortgage Ability, LLC she recruited two “straw buyers” for properties on O’ahu and assisted them in fraudulently applying for mortgage loans worth more than $400,000. Other members alleged to be part of the fraud conspiracy were named in a separate criminal indictment returned by a federal grand jury May 30.

Officials say Florida man is part of mortgage scheme: A Seffner man was arrested Wednesday in connection with a multimillion-dollar mortgage fraud scheme that victimized dozens of people since 2004, the Florida Department of Law Enforcement said. Michael Fetterhoff, 37, of 205 Kingsway Road, was charged with grand theft of more than $100,000. Fetterhoff worked in sales for Advanced Mortgage Solutions, a mortgage broker company associated with other home improvement businesses that persuaded mostly minority customers in poor areas of Florida to take out home loans, FDLE spokeswoman Trena Reddick said.

Kansas City mortgage fraud ringleader sentenced to 13 years: A Kansas City businessman was sentenced to 13 years in prison for a $17 million mortgage fraud scheme that included buying a home owned by former Jackson County Executive Katheryn Shields and her husband. Raymond Zwego Jr. will also pay nearly $5.6 million in restitution and serve three of those years in prison for a probation violation.

AARP Calls For Help For Victims of Mortgage Fraud: Florida is one of only three states that doesn’t offer financial protection to victims of fraudulent loans. We’re also first in the nation for mortgage fraud. The Florida Association of Mortgage Brokers and AARP are calling on lawmakers to revive the Mortgage Brokerage Guaranty Fund. The fund was quietly cut in the 90’s. It would pay some victims or mortgage fraud 20,000 dollars for their losses. AARP Spokesman Dave Bruns said if the program hadn’t been canceled, today the state would have 24 (m) million dollars to help victims.

Delray Beach mortgage agent guilty of fraud: A Delray Beach mortgage broker pleaded guilty Friday to participating in a wire fraud scheme to misappropriate more than $1.2 million in client funds supposedly held in escrow for real estate transactions and related expenses. John Mohan, 38, faces up to 20 years in prison when he is sentenced Dec. 19 in federal court. According to the U.S. Attorney’s Office, Mohan worked as a mortgage broker and closing agent. He collected money from buyers and lenders and represented to the parties that the funds were being held in escrow to be disbursed for various specified purposes, including the satisfaction of pre-existing mortgages. Prosecutors said Mohan used the money for personal use and investments and tried to conceal the fraud and prevent immediate foreclosure of the property by sometimes making payments on the homeowner’s original mortgage.

Virginia mortgage broker sentenced in real estate fraud scheme: A mortgage broker from Norfolk has been sentenced to four years in federal prison in a mortgage fraud case involving a home in northern Virginia. Fifty-year-old David A. Freelander was sentenced last Friday in Alexandria federal court. He has to pay more than $5.4 million in restitution.

Florida AG suing 10 companies, 15 individuals for mortgage fraud: Florida Attorney General Bill McCollum announced last Friday that his state’s Mortgage Fraud Task Force is suing 10 companies and 15 individuals for their alleged roles in a Central Florida mortgage fraud scheme. The suit alleges that the group obtained more than $37 million in mortgage loans for at least 60 homes and siphoned off more than $6 million of the loan proceeds for their personal use.

12 indicted in Atlanta mortgage fraud scheme: Local authorities said last Monday they charged 12 men with an elaborate mortgage fraud scheme in Atlanta’s West End neighborhood and seized more than $200,000 of assets. In indictments filed last week, Fulton County District Attorney Paul Howard Jr. accused the men of buying and selling nine homes using false appraisals that were more than double the homes’ actual value. Seven of the houses were in the 30310 zip code in the West End, where 26 homes were put up for foreclosure auction in late June.