Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, Kimberly A. Lappin, Acting Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), Miami Field Office, Jeff Atwater, bannounced the return of two indictments and one superseding indictment involving mortgage fraud schemes relating to properties in the Versailles development in Wellington, Florida. Charged in at least one of the indictments are defendant Carl Alexander, 45, of Parkland, Florida; Carol Asbury, 59, an attorney, of Lake Worth, Florida; Patrick Brinson, 34, of Miami, Florida; David Lam, 42, a real estate broker, of Parkland, Florida; David Miller, 43, Miramar, Florida; Godfrey Myles, 42, former professional football player, of Miami, Florida; Michael Samuda, 38, an attorney, of Weston, Florida; Thomas Thelusma, 40, a firefighter, of Miami, Florida; and Victoria Wilson, 30, a mortgage broker, of Hollywood, Florida.

As alleged in all three indictments, the defendants used “straw buyers” to submit false documentation substantially inflating the purchase price of the properties to various mortgage lenders. As part of the conspiracy, double HUD-1 Settlement Statements were prepared. One set with the real price was provided to the seller and another set with the inflated price was provided to the lender. The difference between the real price and the inflated price was either made to appear as if it were a debt owed to business entities controlled by the defendants and their co-conspirators, or was made to appear as profits to the seller. The fraudulent loan proceeds were instead laundered through multiple accounts to conceal the source and distribution of the money and were ultimately used for the benefit of the defendants and their co-conspirators.

More specifically, in one of the indictments (11-CR-80033-KAM), defendants Asbury, Brinson, Lam and Myles were involved in a mortgage fraud scheme that generated more than $2.55 million in mortgage loans and approximately $488,000 in fraudulent loan proceeds involving two properties in the Versailles development in Wellington: 10638 Versailles Boulevard and 10515 Vignon Court. Asbury and Lam are also charged with a mortgage fraud scheme which generated an additional $2 million in mortgage loans and $785,000 in fraudulent loan proceeds involving Versailles properties 10284 Medicis Place and 10420 St. Germain Court. Defendants Asbury and Lam are charged with two counts of conspiracy to commit mail and wire fraud, in violation of Title 18, United States Code, Section 1349, and defendants Brinson and Myles are charged with one count. Defendants Asbury, Brinson and Myles are each charged with two counts of wire fraud, in violation of Title 18, United States Code, Section 1343, and defendant Lam is charged with four counts. Defendants Asbury and Lam are also each charged with one count of mail fraud, in violation of Title 18 United States Code, Section 1341. Defendants Asbury, Brinson, and Myles are each charged with one count of making false statements on loan applications, in violation of Title 18, United States Code, Section 1001, and defendant Lam is charged in two counts. Each of the defendants are also charged with one count of conspiracy to commit money laundering, in violation of Title 18, United States Code, Section 1956(h). Defendants Asbury and Lam are charged in three counts of money laundering, in violation of Title 18, United States Code, Section 1957, and defendants Brinson and Myles are charged in six counts.

In a second indictment (11-CR-80061-KAM), defendants Asbury, Alexander and Lam were charged for their involvement in a mortgage fraud scheme that generated more than $4.9 million in mortgage loans and approximately $1.8 million in fraudulent loan proceeds involving four Versailles properties: 10714 Versailles Boulevard, 3617 Royalle Terrace, 10293 Medicis Place, and 3554 Collonade Drive. Defendants Alexander, Asbury and Lam are charged with one count of conspiracy to commit mail and wire fraud, in violation of Title 18, United States Code, Section 1349; nine counts of wire fraud, in violation of Title 18, United States Code, Section 1343; four counts of mail fraud, in violation of Title 18 United States Code, Section 1341; four counts of making false statements on loan applications, in violation of Title 18, United States Code, Section 1001; and one count of conspiracy to commit money laundering, in violation of Title 18, United States Code, Section 1956(h). In addition, defendants Alexander and Asbury are charged in thirteen counts of money laundering, in violation of Title 18, United States Code, Section 1957, and defendant Lam is charged in six counts.

The third indictment (11-CR-80057-KAM) charges defendants Lam, Miller, Samuda, Thelusma, and Wilson in a mortgage fraud scheme that generated more than $3.79 million in mortgage loans and approximately $1 million in fraudulent loan proceeds involving three Versailles properties: 10475 Trianon Place, 10460 Trianon Place, and 3483 Collonade Drive. All of the defendants are charged with one count of conspiracy to commit mail and wire fraud, in violation of Title 18, United States Code, Section 1349; six counts of wire fraud, in violation of Title 18, United States Code, Section 1343; and one count of criminal forfeiture in violation of Title 18, United States Code, Section 981.

If convicted, the defendants face a maximum statutory sentence of 20 years in prison for the mail and wire fraud conspiracy, 20 years in prison for each of the mail and wire fraud counts, 20 years in prison for the money laundering conspiracies, 10 years in prison for each of the money laundering counts, and 5 years in prison for each of the false statement charges.

Mr. Ferrer commended the investigative efforts of the IRS Criminal Investigation Division, Department of Financial Services, FBI, FDLE, U.S. Secret Service, and the Palm Beach County Mortgage Fraud Task Force. The cases are being prosecuted by Assistant U.S. Attorneys Stephanie Evans, Ellen Cohen and Carolyn Bell.

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

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

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

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

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

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

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

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

HOUSTON—An 11-count sealed indictment charging conspiracy and wire fraud has been unsealed following the arrests of Claymon “Butch” Trammell, Michelle Trammell, and Jeannettea Williams, United States Attorney Tim Johnson announced today. Claymon Trammell operated real estate and home repair companies in the Houston area. Michelle Trammell, Claymon Trammell’s daughter, operated as a mortgage broker while Jeannettea Williams, Claymon Trammell’s wife, operated as a real estate agent.

Claymon Trammell, 59, of Manvel, Texas; Michelle Trammell, 37, of Katy, Texas; and Jeannettea Williams, 54, of Manvel, Texas, are charged for their alleged involvement in a scheme to defraud residential mortgage lenders out of loans totaling more than $2.5 million in connection with purchase money home loans. The three were arrested this morning without incident by FBI agents at their residences.

According to allegations in the indictment, the defendants paid individuals to use their names and credit on loan applications to buy residential properties and submitted fraudulent home repair and other invoices to pay themselves from the loan proceeds. Michelle Trammell allegedly filled out loan applications for the straw buyers and provided lenders with false information about borrowers’ employment, income, assets and intent to occupy the properties. Jeannettea Williams notarized borrower occupancy affidavits that borrowers intended to occupy the properties as primary residences, even though she and Claymon Trammell occupied two of the properties, according to the indictment.

The Indictment also provides notice to each defendant of the intent of the United States to forfeit their interest in the $2.5 million they allegedly obtained as a result of the mortgage fraud scheme.

The maximum penalty, upon conviction, for conspiracy and wire fraud affecting a financial institution is 30 years in prison and a $1 million fine.

The three defendants are expected to make their initial appearance today at 2:00 p.m. before United States Magistrate Judge Calvin Botley.

This case was investigated by the FBI and is being prosecuted by Assistant United States Attorney Belinda Beek.

TRENTON, NJ—Barry Kantrowitz, 62, of Wayside, N.J., admitted today that he fraudulently concealed $82,100 in cash from a trustee appointed by the United States Bankruptcy Court, U.S. Attorney Paul J. Fishman announced.
Kantrowitz entered his guilty plea, to an Information charging him with one count of fraudulent concealment of assets from a United States Bankruptcy Trustee, before United States District Judge Joel A. Pisano in Trenton federal court.
According to the documents filed in this case and statements made in court:
Kantrowitz admitted that from February 2007 to March 2008, he held and concealed quantities of cash belonging to Solomon Dwek that were part of Dwek’s bankruptcy estate. Kantrowitz met Dwek on three separate occasions to give him cash, intending to conceal the monies from the trustee appointed to preside over Dwek’s bankruptcy proceeding. On March 13, 2007, Kantrowitz hid a plastic bag containing $75,100 in cash behind air conditioning units of Kantrowitz’s business office in Oakhurst, N.J. During two other meetings— held on September 12, 2007, and March 21, 2008, at prearranged locations in Monmouth County, N.J.—Kantrowitz delivered envelopes containing $5,000 and $2,000 in cash, respectively, to Dwek. Dwek, who was cooperating with the federal government at the time, secretly made consensual recordings of his meetings with Kantrowitz.
The charge to which Kantrowitz pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for February 23, 2011.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, with the investigation leading to today’s guilty plea. He also thanked the Monmouth County Prosecutor’s Office, under the direction of Luis A. Valentin, for its assistance in the investigation.
The government is represented by Assistant U.S. Attorney Christopher J. Gramiccioni of the U.S. Attorney’s Office Special Prosecutions Division in Newark.
Defense counsel: Joseph A. Hayden, Esq., Roseland, N.J.

URBANA, IL—A federal jury deliberated approximately five and one-half hours before returning guilty verdicts on all nine counts of fraud charged against Decatur real estate broker Terry Hart for his participation in a real estate “flipping” scheme Hart’s sentencing is scheduled on Jan. 20, 2011. Trial began in Urbana federal court on Sept. 21.

Hart, 58, of the 1400 block of Post Court, Decatur, was a licensed real estate broker who operated Hart Realty in Decatur when he was indicted in March 2008 with two co-defendants, Diane Shelton, 62, of the 1700 block of East Barrington, Decatur, formerly a loan officer at Staley Credit Union in Decatur, and Mark Brown, 45, of Moweaqua, Illinois, a former licensed real estate appraiser who operated a real estate appraisal business in Decatur, Illinois. The three were each charged with nine counts of mail fraud related to their participation in a scheme to defraud Staley Credit Union and various buyers of real estate in Decatur from 2002 to July 2005.

On June 22, 2009, Brown entered pleas of guilty to the nine counts of fraud. Shelton pled guilty to the nine counts on Oct. 1, 2009. Sentencing for both Brown and Shelton is scheduled on Nov. 12, 2010.

Evidence presented at trial showed the three participated in as many as 40 fraudulent real estate sale and financing transactions totaling more than $3 million in gross proceeds which generated profits to Hart of more than $600,000 and a potential loss to Staley Credit Union of more than $1 million. The defendants made false representations, including fraudulent appraisals prepared by Brown and used by Hart and Shelton, to cause buyers to purchase and Staley Credit

Union to finance residential real estate properties, some of which were owned by Hart and were financed at amounts substantially higher than their reasonable value. Hart and Shelton received payment of loan proceeds and paid appraisal fees and kickbacks to Brown. The charges are the result of an investigation by the U.S. Postal Inspection Service, the Federal Bureau of Investigation, and the Illinois State Police. Staley Credit Union cooperated and provided assistance in the investigation. The case is being prosecuted by Assistant U.S. Attorney Timothy A. Bass.

Each offense of mail fraud carries a maximum statutory penalty of up to 30 years’ imprisonment and a fine of $1,000,000. Final sentences are determined by the court. In imposing sentence, the court may consider federal sentencing guidelines, which include a defendant’s criminal history, the amount of loss, and other applicable factors.

Earlier today at the federal courthouse in Brooklyn, New York, an indictment was unsealed charging 10 defendants, including three attorneys and two licensed real estate brokers, with conspiracy, bank fraud, and wire fraud arising out of their mortgage fraud scheme. The indictment alleges that the defendants fraudulently obtained over $10 million in loans from American Home Mortgage, Fremont Bank, BNC Mortgage (a subsidiary of Lehman Brothers), and WMC Mortgage (a subsidiary of GE Money Bank).

The indictment was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, Joseph M. Demarest, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, and Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation. The defendants’ initial appearances and arraignments are scheduled later today before United States Magistrate Judge Roanne L. Mann, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. The case has been assigned to United States District Judge I. Leo Glasser.

The indictment charges Akin Ayorinde, Hervin Henry, Anthony Onua, Umana Oton, Max Shimba, John Star, Anthony Suazo, Marisol Vasquez, and two others with conspiracy to commit bank and wire fraud. In addition, Ayorinde, Henry, Onua, Oton, Shimba, Star, Suazo, and two others are charged with bank fraud, and Ayorinde, Henry, Onua, Shimba, and two others are charged with wire fraud.1

As detailed in the indictment, from January 2005 to May 2007, Ayorinde, Onua, and Star purchased properties located in Brooklyn and Queens. Ayorinde and Onua are attorneys licensed to practice in the State of New York, and Star is a real estate broker licensed in the State of New York. As part of the scheme, the defendants allegedly submitted false loan applications to create the appearance that the properties were being purchased by creditworthy individuals, when, in fact, the properties were purchased at inflated prices by straw buyers who were controlled by Ayorinde, Onua, and Star. Many of these straw buyers were recruited by Henry, a real estate broker licensed in the State of New York. The indictment charges that Suazo furnished fraudulent appraisals to support the inflated purchase prices of the properties, and Onua, Shimba, and Marisol Vasquez provided fraudulent title abstract reports and other documentation that falsely enhanced the purported value of the properties. These false documents induced lenders to issue loans which were far in excess of the true value of the properties.

The defendants were assisted in the fraud by a third attorney, Oton, who is also licensed to practice in the State of New York. Ayorinde, Onua, and Oton served as attorneys at the closings and allegedly were aware that there were fraudulent misrepresentations made to lenders in connection with the closings.

“This prosecution is another example of the results of the department’s ongoing efforts to investigate and prosecute allegations that licensed professionals abused their positions to perpetrate mortgage fraud,” stated United States Attorney Campbell. “We believe that professionals who serve as gatekeepers against fraud owe a duty to their clients and their oaths and should not compromise that duty by promoting their own selfish interests.”

FBI Assistant Director-in-Charge Demarest stated, “As attorneys and real estate brokers, these men know the ins and outs of dealing in real estate. We should expect them to be honest and serve their clients, but in this case they allegedly did just the opposite. Their activity hurts the trust that everyone should be entitled to when dealing with their attorneys and brokers. The FBI is dedicated to tracking down those that work to abuse the system and steal money while causing further damage to the real estate market.”

FDIC Inspector General Rymer stated, “The Federal Deposit Insurance Corporation Office of Inspector General is committed to its partnerships with others in the law enforcement community as we address mortgage fraud cases throughout the country. The American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that if the individuals indicted today have undermined that integrity, they will be held accountable.”

The maximum term of imprisonment for any defendant convicted of conspiracy to commit bank and wire fraud is 30 years. The indictment also seeks forfeiture of the proceeds of the defendants’ bank and wire fraud activities, including a criminal forfeiture money judgment and money traceable to the offenses.

The government’s case is being prosecuted by Assistant United States Attorneys Jonathan E. Green and Daniel A. Spector.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Marina Dubin, a real estate paralegal, was sentenced yesterday to two concurrent three-year prison sentences in connection with her involvement in a multimillion-dollar, sub-prime mortgage fraud scheme and another foreclosure rescue scheme. Dubin, 33, of Brooklyn, New York, pleaded guilty to two counts of conspiracy to commit mail, wire, and bank fraud on June 12, 2008, before United States District Judge Richard J. Holwell, who also imposed the sentence yesterday in Manhattan federal court.

The Mortgage Fraud Scheme

According to the Indictment, other documents filed in these cases and related cases and statements made in court:

From 2004 through January 2007, DUBIN was a paralegal who acted as the bank attorney and settlement agent for numerous loans obtained by the participants in a wide-ranging mortgage fraud scheme. The scheme was led by Aleksander Lipkin 31, of Brooklyn, New York, and other participants included mortgage brokers and loan processors who worked at the Brooklyn mortgage brokerage firm AGA Capital NY, Inc. (“AGA Capital”) and its successors, as well as real estate appraisers, loan account executives, a lawyer, straw buyers, and others. DUBIN and her co-defendants submitted loan applications containing false information and material omissions, as well as other false documentation such as bank statements, to obtain loans that otherwise would not have been funded.

During the course of the mortgage fraud scheme, AGA Capital and its successors brokered over 1,000 home mortgages and home equity loans with a total face value of at least $200 million dollars and earned at least $4 million in commission fees on those loans. The various lenders defrauded by the scheme have claimed actual losses of approximately $11.6 million on loans that have completed foreclosure.

Of the 27 defendants charged in this case (United States v. Aleksander Lipkin, et al.), 25 pleaded guilty; one of the defendants, attorney Alexander Kaplan, 35, of Brooklyn, New York, was found guilty following a jury trial and is scheduled to be sentenced on April 6, 2010.

Garri Zhigun, 33, of Brooklyn, New York, who supervised the operations of AGA Capital and was Likin’s business partner, was sentenced on May 28, 2009, by Judge Holwell to 100 months in prison, three years of supervised release, and was ordered to forfeit $2.5 million and pay approximately $11.6 million in restitution.

The Foreclosure Rescue Scheme

From November 2003 through April 2005, Maurice McDowall, 55, of Brooklyn, New York, Lipkin and Dubin engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, New York, were in foreclosure or facing foreclosure, by offering them a plan to “save” their homes. The proposed plan included the refinancing of the homeowners’ debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to “sell” their homes to straw buyers, who would apply for loans to be used to “save” the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to pay off the homeowners’ old debt and make one year’s worth of payments on the new loans. The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit. Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

McDowall, who directed the daily operations of the scheme, and Lipkin, a mortgage broker who coordinated the submission of fraudulent information to lenders on behalf of straw buyers, obtained more than 80 home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.

Dubin served as the settlement agent for the vast majority of the fraudulent loans obtained in the course of the scheme. In that capacity, she organized closings, prepared documents, and disbursed the fraudulently obtained proceeds to various defendants.

McDowall was previously sentenced by United States District Judge Robert P. Patterson to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release. In addition, Judge Patterson ordered McDowall to forfeit $2.5 million.

Of the three other defendants charged in this case, one pleaded guilty and the other two were found guilty on charges of conspiracy, wire fraud, and bank fraud, following a 12-day jury trial in Manhattan federal court.

Lipkin was sentenced by Judge Holwell for his role in both the mortgage fraud scheme and the foreclosure rescue scheme (United States v. Maurice McDowall, et al.) on June 4, 2009, to 110 months in prison, five years of supervised release, and was ordered to forfeit $7 million and pay approximately $11.6 million in restitution.

In addition to the 36-month prison term, Dubin was sentenced to three years of supervised release. Judge Holwell also ordered Dubin to forfeit $7 million and pay approximately $11.6 million in restitution.

Mr. Bharara praised the work of the Federal Bureau of Investigation, the New York City Police Department, and the Department of Homeland Security’s U.S. Immigration and Customs Enforcement. He also thanked the New York State Attorney General’s Office for its role in the investigation.

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

ST. LOUIS, MO—The United States Attorney’s Office announced today that Randall Penberthy, Jr., has pleaded guilty to bank fraud in connection with brokering real estate transactions between 2006 and 2007.

From 2003 through 2008, Randall Penberthy, Jr. was engaged in the business of brokering real estate transactions in the St. Louis metropolitan area and elsewhere. Penberthy marketed real estate deals to associates and investors as potential rental properties. Penberthy operated and controlled several business entities, including Covenant Financial LLC, First Choice Investment and Loan LLC, and Midwest Management LLC. Penberthy operated his business initially out of an office in Chesterfield and later moved to 93 Centre Pointe, St. Charles.

According to court documents, between late 2006 and October 2007, Penberthy devised and executed a scheme to defraud financial institutions by means of material false representations. As part of the scheme, Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure.

With Penberthy’s assistance, investors would finance the purchases through bank loans. Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled, in order to make it appear that a legitimate second or third mortgage had been placed against the property, when in fact he knew that no such legitimate second or third mortgage existed.

Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage. Funds used to pay off the fraudulent second or third mortgage were paid to entities controlled by Penberthy, including First Choice and Midwest. He then used a portion of those funds to make the down payment on the property being purchased. Penberthy fraudulently misrepresented the source of down payment funds on loan documents. Penberthy’s scheme has caused financial institutions to incur financial losses in excess of $500,000.

Penberthy, 40, St. Charles, pleaded guilty to one felony count of bank fraud before United States District Judge E. Richard Webber.

He now faces a maximum penalty of 30 years in prison and/or fines up to $250,000, when he is sentenced on May 13, 2010.

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.