Mortgage Fraud Scheme in Phoenix Resulted in $9.5 Million Loss

PHOENIX—Mario G. Bernadel, 51, a citizen of Haiti, was sentenced today to nearly 17 years in prison for his conviction on multiple counts for leading a mortgage fraud scheme in Phoenix that cost banks over $9 million.

Bernadel was found guilty by a jury in September 2009 on 19 counts related to mortgage fraud, including mail, wire, and bank fraud, and transactional money laundering. Bernadel led a two-year conspiracy involving the purchase of 37 properties using fraudulent loan documents and receiving cash back at closing. Seven co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy and many will be sentenced in the next few months.

Dennis K. Burke, U.S. Attorney for the District of Arizona, highlighted the significance of this sentence. “Mortgage fraud is a top priority for the U.S. Justice Department in the District of Arizona, where it has destroyed property values, lending institutions, and entire neighborhoods in our community. No question, complex fraud schemes—a prime example, here—played a role in crashing our real estate market. Culprits like these defendants will be tracked down, prosecuted and convicted. I congratulate the FBI for their thorough investigation that led to this significant sentence.”

The case against Bernadel and seven others was based on an investigation by the Federal Bureau of Investigation, which revealed that from December 2005 through March 2007 they conspired to commit mortgage fraud in Phoenix. Bernadel and others fraudulently submitted mortgage loan applications, on behalf of straw buyers, under false pretenses, obtaining and disbursing the proceeds of fraudulently obtained loans, including directing portions of the proceeds to bank accounts in Bernadel’s and other defendants’ control. Bernadel prepared or directed others to prepare fraudulent loan applications misrepresenting salary, assets and liabilities. Bernadel used the proceeds from the fraud to live a lavish lifestyle including purchasing several expensive homes and luxury vehicles. Evidence presented at his sentencing demonstrated that he continued to engage in mortgage fraud while in custody after his conviction. The conspiracy resulted in a loss to lending institutions of approximately $9,500,000.

Nathan T. Gray, FBI Special Agent in Charge of the Phoenix Division, said: “Today’s sentence signifies the continued efforts of the U.S. Attorney’s Office and the FBI’s Mortgage Fraud Task Force to investigate and prosecute those who commit mortgage fraud. We want to send a message that when individuals knowingly defraud the public during the course of mortgage transactions, the FBI and our law enforcement partners are committed to holding them accountable in accordance with the law.”

Following the completion of his sentence, Bernadel, who has legal residence in the U.S., will be deported by the Department of Homeland Security to his home country of Haiti. Bernadel’s prosecution is one result of “Operation Cash Back”, an initiative in which over 50 defendants were indicted and arrested, including many real estate professionals in 2007 and 2008. Bernadel is the 48th defendant to date who has been convicted through “Operation Cash Back.”

The investigation in this case was conducted by the FBI. The prosecution is being handled by Kevin M. Rapp, and Charles W. Galbraith Assistant U.S. Attorneys, District of Arizona, Phoenix.

Mortgage fraud is a key focus of the Financial Fraud Enforcement Task Force’s efforts. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

A lot of blame for the housing crisis that helped drive our nation into a financial crisis has been heaped on “greedy” bankers and home buyers trying to live beyond their means.

But there was another element that should not be forgotten – and that was outright criminal activity.

A recent Arizona case demonstrates the lengths that were taken by some to cheat bankers and others in order to fill the pockets of criminals with money.

The case involves five Arizona men who were convicted and sentenced for mortgage fraud involving millions of dollars. One of the ringleaders was sentenced to 62 months in prison. Others received lesser sentences based on their degree of involvement and cooperation in the case.

The scheme was rather involved. First, the rights to land was obtained which was then sold to accomplices at highly inflated prices. Fraudulent bank loan applications were then prepared and then cash kickbacks would be given to the buyers after the loans were approved. At each critical stage leading up to the loan, a “player” in the fraud was involved to disguise what was happening.

Eventually, the properties went into foreclosure and the banks lost over $1 million.

This is but one incident among the many shady dealings that went on during the “go-go” years of the housing boom. Only now is some accountability starting to be seen as part of a federal initiative called “Operation Cash Back.”

So far 49 people have been convicted after guilty pleas or trials in federal courts. Unfortunately, that only represents a small part of the fraudulent dealings that went on in the mortgage industry in past years. Unfortunately, these are complicated cases which are difficult to investigate and try.

But whatever the number convicted, there is some satisfaction that justice is finally being done.

Perhaps a more appropriate name for the fraud program might be “Operation Pay Back,” reflecting the prison sentences that are being handed out in repayment for what these individuals did to contribute to the economic collapse that has hurt so many people.