PHILADELPHIA—Frank J. Dattilo, 64, of Holland, Pennsylvania, was sentenced today to 15 months in prison for a scheme to defraud mortgage lenders in an effort to obtain money and property, announced United States Attorney Zane David Memeger. DAttilo was the owner and operator of the mortgage brokerage firm Provident Financial Group (“PFG”), located in Bensalem, PA. He employed Michael Giello as a mortgage broker and loan officer, and Jason Megow as a loan processor. Dattilo marketed to people with poor credit or low incomes. Between January 2004 and February 2007, Dattilo, Giello, and Megos created false documents for use in mortgage applications. The falsified forms, among other things, overstated borrowers’ income, falsely showed that borrowers had rental histories, and showed that a property was an income-producing rental property when, in fact, it was not. These fraudulent documents made borrowers appear more creditworthy than they were, thereby misleading the banks into funding the mortgage loans.
All three defendants pleaded guilty to two counts, each, of mail fraud. Giello was sentenced to one year and one day; Megow was sentenced to one day in prison and five years of supervised release. In addition to the prison term, U.S. District Court Judge Norma Shapiro ordered the three defendants to pay total restitution in the amount of $117,673.66.
This case was investigated by the Federal Bureau of Investigation and Pennsylvania Department of Banking. It was prosecuted by Assistant United States Attorney Maria M. Carrillo.

Four Detroit area residents were indicted on charges of wire fraud and interstate transportation of money taken by fraud, announced United States Attorney Barbara L. McQuade. McQuade was joined in the announcement by Special Agent in Charge Andrew G. Arena, Federal Bureau of Investigation.
Charged in the 14-count indictment, which was unsealed this week, were MELVIN A. JOHNSON, 49, of Lathrup Village; CURTISS JOHNSON, 46, of Novi; BRADY MUSE, JR, 48, of Novi; and LANITA J. GATEWOOD, 53, of Detroit.
The indictment charges that from November 2004 through February 2006, these individuals knowingly participated in a scheme to defraud mortgage lenders. The loan applications were completed or supervised by Melvin Johnson or Curtiss Johnson at CHALLENGE MORTGAGE’s branch office in Southfield, Michigan, where Melvin was the branch manager and Curtiss a loan officer. Challenge Mortgage was a mortgage broker based in Florida.
The indictment alleges that the loan applications were materially false or fraudulent and that when the mortgage loans closed, Melvin Johnson and Curtiss Johnson benefitted financially through checks made payable to Challenge Mortgage and other businesses with which Melvin Johnson was associated, such as JEM Marketing Realty, JEM Processing, and First United Realty.
The indictment also alleges that the fraudulent information provided in the loans documents included false employers, overstated income, fictitious bank accounts, stolen identities, and information obtained from forged deeds, and that as a part of the scheme, Brady Muse created counterfeit documents to support the fraudulent loan packages assembled by Melvin Johnson and Curtiss Johnson. It also alleges that Lanita Gatewood allowed property she did not own to be titled in her name, and that she distributed the proceeds of the fraud to other participants in the scheme.
The defendants are charged with multiple counts of wire fraud and interstate transportation of money taken by fraud. Each count of wire fraud carries a maximum penalty of 20 years’ imprisonment and a $250,000 fine. Each count of interstate transportation of money taken by fraud carries a maximum penalty of 10 years’ imprisonment and a $250,000 fine. The defendants could also be ordered to pay restitution to the mortgage lenders.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
The case was investigated by the Federal Bureau of Investigation.

DENVER—Cedric Lipsey, age 35, and Philip A. Martinez, age 34, both from Denver, Colorado, were indicted by a federal grand jury last week on charges of wire fraud as part of a mortgage fraud scheme, U.S. Attorney David Gaouette, FBI Special Agent in Charge James Davis, and IRS Criminal Investigation Special Agent in Charge Christopher M. Sigerson announced. Lipsey was arrested by federal agents without incident. He appeared in U.S. District Court in Denver on August 31st, 2009 for an initial appearance, where he was advised of the charges pending against him. He appeared in court again today, where U.S. District Court Magistrate Judge Kristen L. Mix authorized his release on a $50,000 property bond.

According to the indictment, beginning in April 2004, and continuing thereafter until about March 2006, in the District of Colorado and elsewhere, Cedric Lipsey, aided and abetted by defendant Philip A. Martinez, did knowingly devise and intend to devise a scheme to defraud lending companies that funded residential mortgage loans and to obtain money from them by means of materially false and fraudulent pretenses, representations, and promises.

Cedric Lipsey, a licensed real estate agent, held himself out as a successful real estate agent and investor. Philip A. Martinez was a loan officer and mortgage broker.

Lipsey orchestrated the purchase and resale or refinancing of numerous residential properties, including the sale of one of his own homes, by paying individuals to participate as “investors” in what he referred to as an investment “opportunity.” Lipsey and Martinez arranged for these so-called “investors” to use their good credit to obtain mortgage loans to purchase the properties. Shortly after the first set of loans that helped these individuals purchase properties, Lipsey caused them to sell the properties to a second set of buyers at substantially higher prices, with Lipsey and Martinez taking a combination of commissions, fees, and proceeds from the first and second transactions.

Lipsey falsely represented that the first buyers would be purchasing and had purchased the properties for less than their actual market value. The first sales were not “distressed”, as the defendants sometimes represented to facilitate their fraud. In fact, the first buyers purchased the properties at or near their market value, and there was no legitimate reason for the substantial increase in price when the same properties were resold shortly thereafter.

Lipsey and Martinez arranged to have a variety of fraudulent documents submitted to the lenders in support of the loan applications. These consisted primarily of documents purporting to show proof of the borrowers’ employment, proof of the borrowers’ assets, and sources of the borrowers’ asset, and incomes. The defendants also used forged signatures where necessary to facilitate the scheme. Furthermore, Lipsey enabled certain appraisers to create false reports which reflected that the subject properties were “comparable” to the higher quality or otherwise more valuable properties, when they were not.

“Mortgage fraud weakens our economy, threatens the recovery of the housing market, and makes it more difficult for law-abiding folks to purchase a home,” said United States Attorney David Gaouette.
“Mortgage fraud hurts borrowers, financial institutions, and legitimate homeowners,” said FBI Denver Division Special Agent in Charge James Davis. “The FBI, in conjunction with our law enforcement, regulatory, and industry partners, will continue to diligently pursue perpetrators of mortgage fraud schemes.

“Mortgage fraud creates a significant loss of tax revenue, drives buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties,” said Christopher M. Sigerson, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

If convicted of wire fraud, which are counts one through 27, the penalty is not more than 20 years in federal prison, and up to a $250,000 fine, per count. If convicted of count 28, monetary transaction in property derived from unlawful activity, the defendant faces not more than 10 years in federal prison, and up to a $250,000 fine.

The case was investigated by the Federal Bureau of Investigation (FBI), and the Internal Revenue Service – Criminal Investigation (IRS CI).

The case is being prosecuted by Assistant U.S. Attorney Linda Kaufman.

MINNEAPOLIS—Earlier today in federal court in the District of Minnesota, two people pleaded guilty to their roles in a scheme that defrauded mortgage lenders out of approximately $4.2 million. My Dinh Lam, age 30, of Minneapolis, and Ashley Elizabeth Prasil, age 27, of Eden Prairie, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the scheme. The defendants, who were charged on April 21, 2011, entered their pleas before United States District Court Judge Susan Richard Nelson in St. Paul.

In their plea agreements, the defendants admitted that from December 18, 2006, through December of 2007, they conspired to defraud mortgage lenders in connection with the marketing of the Cloud 9 Sky Flats (“Cloud 9″), a Minnetonka development. The defendants admitted that the scheme involved finding buyers to apply for mortgage loans to purchase units in the development, knowing that each buyer would receive a kickback of approximately 30 percent of the reported purchase price of any unit. The application forms submitted to the lenders did not disclose these kickbacks. The kickback payments were returned to the buyers through an account controlled by a co-conspirator, with a portion skimmed off and shared among the defendants. More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted. In excess of $4.2 million was transferred to accounts controlled by Sheri Lynn Delich, a person who has been charged by Information in this case.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Nelson will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Robert M. Lewis.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It 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, 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.

PHOENIX—Phoenix resident Paige Kinney, aka Jaime Lee Lawler, 42, pleaded guilty in two separate cases in federal district court on Friday. In one case, Kinney admitted to her leadership role in a $40 million mortgage fraud involving Countrywide Home Loans, and in the second case, she admitted to committing bankruptcy fraud, bank fraud, and mail fraud.

“This defendant’s fraudulent activities were pervasive—she targeted financial institutions, she undermined the integrity of the bankruptcy court, and she stole from an insurance company,” said U.S. Attorney Dennis K. Burke. “For those in the real estate and mortgage industry: If you engage in fraud to line your pockets at the expense of others, we will come after you with everything we have. I congratulate the IRS and FBI on a thorough investigation.”

“Today’s guilty plea signifies the continued commitment by the FBI, the Arizona Mortgage Fraud Task Force, and the United States Attorney’s Office in targeting mortgage and bankruptcy fraud,” said John Strong, Federal Bureau of Investigation Acting Special Agent in Charge, Phoenix Division. “The FBI and its law enforcement partners will continue to aggressively pursue those who are involved in these types of fraudulent schemes. Mortgage fraud has greatly impacted the citizens of Arizona over the past few years and will continue to remain a top criminal priority of the FBI.”

Kinney admitted that from January of 2005 through December of 2007, she and others recruited straw buyers to purchase homes the buyers never intended to live in by obtaining mortgage loans the buyers never should have received. Kinney arranged for the loan applications to be submitted with false information about the employment, income, and assets of the buyers so they would qualify for the loans. The loans, totaling almost $40 million, were obtained based on inflated property appraisals. The excess cash totaling $9 million was then diverted to Kinney and her co-conspirators.

Kinney further admitted that she continued her illicit activities while she was pending trial on the mortgage fraud charges. She declared bankruptcy and then attempted to hide assets and liabilities by changing her name. She committed additional financial fraud by arranging for friends to fraudulently obtain a loan to purchase a Mercedes. And she committed insurance fraud by staging a phony burglary of her residence and then collecting $130,000 from Allstate Insurance Company.

Kinney pleaded guilty to a total of 13 felony offenses, many of which each carry a maximum prison sentence of 30 years and a maximum fine of $1 million. In determining an actual sentence, the federal district court judge will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

Sentencing is set before Judge Neil V. Wake on September 12, 2011. The investigation in this case was conducted by the IRS and FBI. The prosecution is being handled by Kevin M. Rapp and Monica B. Klapper, Assistant U.S. Attorneys, District of Arizona, Phoenix.

PROVIDENCE, RI—A federal grand jury in Providence on Tuesday returned indictments against a loan officer and a loan processor employed at the same mortgage company, and a former Rhode Island attorney currently involved in the real estate industry in an alleged “straw borrowing” scheme that netted more than $3.5 million dollars in fraudulently obtained mortgages on 13 properties in five Rhode Island communities, it was announced by United States Attorney Peter F. Neronha.

The grand jury returned a 13-count indictment charging Juan Carlos Hernandez, 41, of West Warwick, R.I., a loan officer with National City Mortgage Company; Miguel Valerio, 51, of Providence, R.I., a loan processor with National City Mortgage Company; and James D. Levitt, 65, of Pawtucket, R.I., a former attorney who controlled two companies formed for the purpose of engaging in real estate transactions. The properties are located in Cranston, Central Falls, Coventry, Pawtucket, and Providence.

In addition, Levitt is named in a separate eight-count indictment alleging three counts of bank fraud, three counts of wire fraud, and two counts of tax fraud in connection with mortgage transactions in Providence separate from the conspiracies outlined in the indictment naming Levitt, Juan Carlos Hernandez, and Miguel Valerio.

The indictments allege that Juan Carlos Hernandez and Miguel Valerio conspired to recruit and pay “straw purchasers” to purchase properties they would not normally qualify to purchase, with the intent of taking control of the properties to collect rent on and to sell within a short period of time, and divide the profits among them. The “straw-borrowers” were paid various fees and were regularly advised by the defendants that they would not be responsible for the mortgages for which they were applying.

In addition, the indictment alleges that Hernandez, Valerio, and Levitt conspired to obtain “straw purchasers” to apply for and obtain mortgages on four properties in which the three had a financial interest.

A separate indictment alleges that James Levitt schemed to commit mail and wire fraud by obtaining mortgages on three properties which he expected to control, two of which were obtained in the name of an associate based on false and fraudulent information.

The cases are being prosecuted by Assistant U.S. Attorney Luis M. Matos.

The matters were investigated by the Federal Bureau of Investigation, U.S. Department of Housing and Urban Development Office of Inspector General, and Internal Revenue Service, Criminal Investigations.

An indictment is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

MINNEAPOLIS—Earlier today in federal court in St. Paul, a jury convicted a 44-year-old Burnsville man of conspiring with others to bilk mortgage lenders out of more than $43 million. Following a six-day trial, the jury found Troy David Chaika guilty on seven counts of wire fraud, three counts of mail fraud, and one count of conspiracy to commit wire fraud and mail fraud. Chaika was indicted on April 12, 2010.

The indictment filed in this case and the evidence presented at trial indicated that between 2005 and 2008, Chaika conspired with others, including Dustin Lee LaFavre, prosecuted in a separate action, to obtain money fraudulently through over 100 residential property transactions. To further this scheme, Chaika and LaFavre negotiated with builders of new properties as well as owners of existing properties to buy both single pieces of property and property groupings, known as “bulk purchases,” at greatly reduced prices. Chaika and LaFavre then solicited real estate purchasers by promising they would receive large cash pay-outs, or “kickbacks,” from lenders’ funds.

Chaika and LaFavre failed to tell potential buyers about the reduced prices they had negotiated for the properties, choosing instead to quote them the grossly inflated prices. By charging buyers the higher prices, Chaika and LaFavre acquired enough cash from loan proceeds to pay buyers their kickbacks and still have money left for themselves and their co-conspirators. Once a potential buyer was recruited through this scheme, Chaika and LaFavre, or someone working on their behalf, drafted a purchase agreement that reflected the inflated sale price only and failed to disclose to lenders the kickback amount to the buyer. Occasionally, Chaika, LaFavre, or someone working for them drafted a so-called addendum to the purchase agreement, setting forth the planned kickback, or “pay-out,” to the buyer, but that document was never provided to the lender.

In several instances, Chaika and LaFavre, or others on their behalf, worked with buyers and mortgage loan officers to prepare false documents for use in the application process. In addition, Chaika and LaFavre sometimes loaned buyers money for down payments or to pad their bank balances while the application process was pending. Because of those material misrepresentations, numerous lenders agreed to fund mortgage loans for the purchase of the residential properties. Furthermore, after the mortgage loans were secured, property title companies prepared documents and handled closings based on the fraudulent information provided by Chaika and LaFavre or others on their behalf. Again, those misrepresentations were material.

In furtherance of this scheme, Chaika prompted no fewer than seven wire transfers of loan proceeds from which he and others obtained cash kickbacks. He also caused false documents to be sent through the U.S. mail and by commercial carriers on at least three occasions.

For his crimes, Chaika faces a potential maximum penalty of 20 years in federal prison on each count. United States District Court Judge Richard H. Kyle will determine his sentence at a future hearing, yet to be scheduled. On December 7, 2009, Dustin Lee LaFavre pleaded guilty to one count of conspiracy and awaits sentencing.

This case is the result of an investigation by the Federal Bureau of Investigation and the U.S. Postal Inspection Service. It is being prosecuted by Assistant U.S. Attorneys Nancy E. Brasel and David M. Genrich.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It 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, 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.

Myron L. Hooker, Jr., 43, of Detroit, Peter Garland, 40, formerly of Southfield, Nicole Jackson, 38, formerly of Detroit and Antwan Mcrea, 35 of Detroit, were sentenced yesterday for obtaining fraudulent mortgage loans on numerous properties and splitting illegal proceeds in varying proportions among themselves announced United States Attorney Terrence Berg.

Berg was joined in the announcement by Andrew G. Arena, Special Agent in Charge of the Detroit Field Office of the Federal Bureau of Investigation. United States Attorney Terrence Berg said, “We’re catching up with a lot of these mortgage fraudsters, and now they are starting to see the price to be paid for turning mortgage lending into a criminal enterprise. Mortgage fraud poses a significant threat to our economy. In prosecuting mortgage fraud we demonstrate the United States Attorney’s office and the FBI’s commitment and determination in holding perpetrators accountable for these crimes.”

Myron Hooker, the lead defendant in the case, was sentenced by the Honorable Julian Abele Cook, United States District Judge, to serve 63 months in federal prison on wire fraud charges, and 40 months for conspiracy to commit wire and mail fraud, the terms to be served concurrently.

The remaining defendants were convicted of conspiracy to commit wire and mail fraud and received the following sentences:

Peter Garland, was sentenced to serve 27 months in federal prison;
Antwan Mcrea, was sentenced to serve 24 months in federal prison;
Nicole Jackson, was sentenced to serve one day in federal prison, to be followed by three years supervised release and five months home confinement

In addition to their custodial sentences, Hooker, Garland, Jackson and Mcrea were ordered to pay, in various amounts, more than $1.2 million in restitution, $100 in special assessments per count of conviction and must serve two or three years of supervised release upon the completion of their custodial terms.

Information presented to the Court at the time of their pleas showed that Hooker conspired and agreed with the other defendants, to defraud and obtain money and funds from lending institutions, banks and individuals by obtaining fraudulent mortgage loans. Hooker orchestrated the fraud by coordinating and directing the activities of loan officers, straw buyers, collusive sellers, real estate appraisers, and closing agents, some of whom are also charged in the indictment. For instance, Hooker obtained falsely inflated appraisals on real estate and paid straw buyers to act as purchasers of the property. To bolster the straw buyer’s credit-worthiness, false income and asset documentation was provided by Hooker. Relying on the falsely inflated appraisals and fraudulent documentation, lending institutions approved and disbursed loans. These loans often subsequently went into default leaving the lending institutions with insufficient collateral and substantial losses, well in excess of $1,000,000.

U.S. Attorney Berg thanked the FBI for the successful investigation of the case.

Nora R. Dannehy, United States Attorney for the District of Connecticut, today announced a federal jury in Hartford has found GARY T. JOHNSON, 60, of Groton, guilty of four counts of wire fraud and two counts of engaging in illegal monetary transactions while operating his former mortgage lending business. A trial in this matter began on Thursday, March 18, and the jury returned the verdicts this afternoon.

According to the evidence presented during the trial, JOHNSON owned and operated a business known as Matrix Investment Corp. (“Matrix”), which was based in Groton, Connecticut. Matrix provided mortgage loans to interested borrowers either as a broker for other lenders or as a loan originator itself. JOHNSON was the Chairman of Matrix and oversaw lending activity at the Company.

During 2004 and 2005, Matrix and JOHNSON began to use monies disbursed for the benefit of borrowers for purposes other than the payoffs set forth in the relevant HUD settlement statements, including to pay Matrix’s ongoing payroll and other expenses, or to make payoffs to other lenders on unrelated refinancings. In the summer of 2004, JOHNSON informed some of his employees that he was seeking to refinance certain of his personal properties to put money into the business to fund Matrix. As part of that process, a Matrix employee began to explore refinancing options for JOHNSON from various lenders, including Greenpoint Mortgage Funding Inc., for approximately $640,000 and a line of credit for $80,000, both to be secured by JOHNSON’s personal residence in Groton. Several months later, JOHNSON sought refinancing for $575,000 with Flagstar Bank, to be secured by another house he owned in New London.

During the refinancing process, JOHNSON caused fraudulent personal mortgage loan applications to be submitted to Greenpoint, Flagstar Bank, and other lenders. On the applications, JOHNSON misrepresented to Greenpoint that he owned his primary residence in Groton, when the residence was actually held in his wife’s name. JOHNSON also overstated his monthly employment income, listing it as much as $29,000, when his tax returns listed no employment income. Although JOHNSON also told Greenpoint and Flagstar that he would use the proceeds of the refinancings to pay off preexisting liens on the properties, he instead used the monies for other purposes.

The $640,000 and the $80,000 loans with Greenpoint closed on August 9, 2004. The Flagstar loan for $575,000 closed on October 8, 2004. In the fall of 2005, JOHNSON ceased making payments on both the Greenpoint and Flagstar loans. The loans went into default, and the lenders have suffered losses in excess of $1.3 million.

JOHNSON is scheduled to be sentenced by United States District Judge Christopher F. Droney on June 11, 2010, at which time JOHNSON faces a maximum term of imprisonment of 120 years.

This matter was investigated by Internal Revenue Service – Criminal Investigation. The Federal Bureau of Investigation assisted in the investigation. The case is being prosecuted by Senior Litigation Counsel Christopher W. Schmeisser and Assistant U.S. Attorney David J. Sheldon.