California Woman, Florida Man Indicted

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a California woman and a Florida man were indicted by a federal grand jury today for their roles in a credit history fraud that allegedly contributed to a nearly $3 million mortgage fraud scheme in Lee’s Summit, Missouri.

“Credit history fraud is a new and troubling criminal scheme,” Phillips said. “By supplying false credit information, they artificially boost credit scores and create a fraudulent credit history that enables their customers to commit financial fraud. Today’s indictment marks the first time this district has charged a credit history fraud case, and signals our determination to prevent such schemes from proliferating.”

Karen Washam-Hawkins, 48, of Carson, California, and Gerald William Bartlett, 38, of Tampa, Florida, were charged in a six-count indictment returned by a federal grand jury in Kansas City, Missouri.

Washam-Hawkins, a real estate agent, allegedly obtained and sold false Social Security numbers to enable individuals to create false credit histories in order to deceive lenders and obtain loans. Bartlett, through his Tampa businesses, provided fraudulent account and payment information to a credit bureau to falsely enhance the creditworthiness of individuals in order for those individuals to deceive lenders and obtain loans.

According to today’s indictment, beginning in late 2004 to early 2005 and continuing through Aug. 15, 2006, several customers of Washam-Hawkins and Bartlett benefitted from the credit history fraud scheme in order to fraudulently purchase six properties in Lee’s Summit in a mortgage fraud scheme totaling $2,959,200.

Washam-Hawkins allegedly supplied Shade Jerome Howard of Anaheim,Calif., with false Social Security numbers. Howard then gave Bartlett those false Social Security numbers, along with other identity information, and requested positive credit information for those individuals in order to enhance their creditworthiness. Bartlett, using the names South Florida Management Group and Consumer Financial Group, allegedly reported false account and payment information to a credit bureau.

According to today’s indictment, this scheme allowed Howard, along with Ronald E. Brown, Jr., of Gladstone, Missouri, and Daryle A. Edwards of Overland Park, Kansas, to enhance their creditworthiness in order to deceive lenders and obtain mortgage loans for residential properties in Lee’s Summit. Brown purchased three residential properties totaling $1,339,700. Howard purchased two residential properties totaling $1,201,000. Edwards purchased a residential property for $418,500.

In addition to the conspiracy, today’s indictment charges Washam-Hawkins and Bartlett with three counts of transferring funds obtained by fraud across state lines. Washam-Hawkins is also charged with two counts of wire fraud.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Linda Parker Marshall. It was investigated by the Federal Bureau of Investigation.

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Stefan M. Guerra, 30, of Lee’s Summit, Missouri, and Daryle A. Edwards, 37, and Leon T. Jones, 42, both of Olathe, Kansas., have pleaded guilty in separate appearances before a U.S. Chief District Judge for their roles in a $12.6 million mortgage fraud scheme that involved 25 residential properties in Lee’s Summit and Raymore, Mo.

Guerra, Edwards, and Jones each admitted to participating in a conspiracy to defraud mortgage lenders from June 2005 to May 2007. They are among more than a dozen scammers who were involved in buying and selling new homes in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore.

According to court documents, buyers purchased the homes at inflated prices, obtaining mortgage loans by providing false information to mortgage lenders, then kept the extra proceeds. The buyers created shell companies for the purpose of receiving those kickbacks from the builder, with kickbacks reaching up to $125,000 on each house.

In total during the course of the conspiracy, mortgage lenders approved 25 loans totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge.

Stefan Guerra, a former mortgage loan officer at Midwest Equity Mortgage, admitted that he was involved in the purchase of one property and acted as a broker on 11 other properties involved in the conspiracy. The loans on the 12 properties totaled more than $5 million.

Leon Jones admitted he purchased a property in Lee’s Summit as part of the conspiracy, a purchase that involved Stefan Guerra. Jones also admitted that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $509,000. From the purchase of this property, unbeknownst to the lender, Leon Jones received approximately $50,000.

For his part, Daryle Edwards admitted that he purchased a property in Lee’s Summit as part of the conspiracy, and that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $410,000. Edwards used a false Social Security number, a false address and false employment, and falsely claimed that he would occupy the property. Darlye Edwards also admitted that he made false representations regarding the use of loan proceeds; Edwards received a $76,600 check payable to DAECO Construction, Inc., a company owned by Edwards, which was not disclosed to the mortgage lender or to the title company.

Co-defendant Ronald E. Brown, Jr., 39, of Gladstone, MO, pleaded guilty in early January of this year, to his role in the conspiracy. Brown, a self-employed insurance agent doing business as The Brown Insurance Agency in Kansas City, Kansas, obtained insurance for the properties that were purchased. After purchasing two false Social Security numbers for $10,000, Brown used the false Social Security number to purchase three properties in Lee’s Summit. In each case, Brown made material misrepresentations upon which the lenders relied in making the mortgage loans, which totaled $1,339,700. From the purchase of these properties, unbeknownst to the lenders, Brown received a total of $279,426.

Under federal statutes, Stefan Guerra, Leon Jones and Daryle Edwards are each subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

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.