Suspects may find themselves behind bars living rent free thanks to nationwide mortgage fraud arrests.

Members of the Financial Fraud Enforcement Task Force released the results of a nationwide dragnet, “Operation Stolen Dreams,” which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The White Collar Crime Committee of the National Association of Chiefs of Police obtained relevant documents describing this enormous operation.

The sweep was organized by President Barack Obama’s interagency Financial Fraud Enforcement Task Force, which was established “to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.”

Starting on March 1 through June 17, Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions, which have resulted in the recovery of more than $147 million, according to the Federal Bureau of Investigation.

“From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” said FBI Director Robert S. Mueller, III. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners.

The operation was conducted in conjunction with the Department of Justice — including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program, and other components — as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General, and the National District Attorneys Association.

The President’s Financial Fraud Enforcement 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, according to officials.

MORTGAGE FRAUD REPORT

According to the Federal Bureau of Investigation’s 2009 Mortgage Fraud Report, released today, mortgage fraud suspicious activity reports referred to law enforcement increased 5 percent to 67,190 during fiscal year 2009.

It’s estimated that $14 billion in fraudulent loans originated in 2009. The total dollar loss attributed to mortgage fraud is unknown.

Other key findings presented in the report include:

There are more than 2.8 million properties with foreclosure filings, a 120 percent increase from 2007 to 2009. The Las Vegas area reported the most significant rate of foreclosures, with more than 12 percent of housing units there receiving a foreclosure notice.

The top 10 states ranked by the number of foreclosure filings per housing unit were California, Florida, Arizona, Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey. In April 2010, one in every 386 housing units received a foreclosure filing.

Prevalent mortgage fraud schemes in fiscal year 2009 include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications. Emerging trends include fraud involving economic stimulus plans/programs, property theft/fraudulent leasing of foreclosed properties and tax-related fraud.

PREET BHARARA, the United States Attorney for the Southern District of New York, and GEORGE VENIZELOS, the Acting Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (”FBI”), announced today the arrest this morning of ANTOINETTE HODGSON on charges that she orchestrated a $45 million real estate Ponzi scheme that fraudulently solicited investments from over 20 New York and New Jersey investors. HODGSON is charged in a Complaint with one count of wire fraud conspiracy and one count of wire fraud, and surrendered to the FBI this morning. She is expected to appear in Manhattan federal court later today.

According to the Complaint unsealed today in Manhattan federal court:

HODGSON solicited tens of millions of dollars from investors in New York and New Jersey on the false pretense that she would use the investors’ money to purchase and/or renovate residential real estate properties, and then re-sell the properties to third party buyers or rent them for a period of time before re-selling them. HODGSON promised investors high rates of return on their investments, which she represented was based on the profits generated by her successful real estate business.

In truth and in fact, however, HODGSON, misappropriated tens of millions of dollars of investors’ funds, and used those funds to repay other investors or for her own purposes. Between 2006 and 2009, HODGSON solicited approximately $45 million from investors who understood, based on HODGSON’s representations, that they were investing in her real estate business. During the same period, HODGSON only spent approximately $6 million on residential real estate. Most of the $45 million she received from investors was immediately used to repay other investors, in the pattern of a classic Ponzi scheme.

Some of the investor money was used to enrich HODGSON and her family members. HODGSON spent hundreds of thousands of dollars at casinos in Atlantic City and Las Vegas, invested over $700,000 in a Dunkin Donuts franchise in Arizona, and gave tens of thousands of dollars to friends and family members.

HODGSON is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. If convicted on the conspiracy count, HODGSON faces a maximum sentence of 20 years in a prison and a fine of $250,000, or twice the gross gain or loss derived from the offense, and a maximum sentence of 20 years in prison and a fine of $250,000, or twice the gross gain or loss derived from the offense, for the wire fraud count.

HODGSON, 58, of Montclair, New Jersey, surrendered this morning and will be presented before a United States Magistrate Judge in Manhattan federal court later today.

U.S. Attorney PREET BHARARA said: “What Antoinette Hodgson allegedly promised to investors seemed too good to be true and that’s because it was. This case is a further reminder that whether the real estate market is up or down, innocent investors can be and will be targeted by unscrupulous fraudsters. This Office will continue to work with our partners at the FBI to pursue and prosecute fraud in every sector of our nation’s economy.”

FBI Acting Assistant Director-in-Charge GEORGE VENIZELOS said: “What we have here is a classic example of someone engaging in a get rich quick and get rich easy scheme, but the outcome is far from simple. Antoinette Hodgson allegedly has already proved she’s a lousy gambler by losing the investor’s money in the casinos. She has now gambled with her future and faces serious charges for a plot of her own making. The FBI will continue to seek out those who engage in all types of fraudulent real estate deals, bringing about certain justice for them and clearing a path for those who work hard to uphold the standards of our justice system.”

Mr. BHARARA praised the investigative work of the FBI and added that the investigation is very much ongoing.

If you believe you were a victim of these crimes, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900, ornWendy.Olsen@usdoj.gov. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html

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.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant United States Attorneys ANTONIA M. APPS and AMANDA KRAMER are in charge of the prosecution.

The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Kenneth Cowden relied on digital photographs and a flair for creative fiction to write up $137 million worth of false property appraisals over five years.

For a while, Cowden, 58, formerly of Coraopolis, used the identification of a dead man to continue the scam, according to federal court papers. Then he doctored photos on a computer to make dog-eared houses appear stellar to lenders.

In the process, Cowden, a midlevel player, contributed to a huge mortgage fraud problem across the United States. The fraud, which the FBI estimates has cost $7 billion since 2005, helped lead to the greatest economic downturn since the Great Depression, experts said.

“(Cowden) and guys like him all over the country, in conjunction with Wall Street, really caused the biggest recession most of us will see in our lifetimes,” said Mark Maddox, an Indianapolis lawyer representing investors who lost money on bad loans.

Nationwide, the FBI opened 1,571 mortgage fraud causes last year, compared to 136 in 2004. Convictions of 338 criminals in 2008 brought $1.1 billion in restitution and seizures worth $477 million.

Federal prosecutors in Western Pennsylvania have been among the busiest, ringing up more cases than in any district except South Florida, where once-hot real estate has been devastated by mortgage fraud.

Prosecutors here won 58 convictions in the past two years, said Acting U.S. Attorney Robert Cessar. Seven cases are pending, two defendants are on the run, and another died while awaiting trial.

“I don’t think there’s any doubt that we had a significant problem here,” said Assistant U.S. Attorney Brendan Conway, who oversees mortgage fraud prosecutions in Western Pennsylvania.

Cowden’s claims

When federal agents knocked on Cowden’s door in May 2005, it was as if he had been waiting for them. He handed over 29 boxes of appraisals, e-mails and correspondence. He gave agents access to his computer and tape-recorded conversations with brokers.

He worked with 15 to 20 brokers and used the names of seven appraisers, according to federal court documents and interviews with prosecutors. For a while, Cowden used the name and state identification of Raymond Faber, who had died.

Another time, the Pennsylvania Department of State caught Cowden paying a licensed appraiser $2,000 a month to use his name and identification. The agency fined Cowden $15,000 and revoked the appraiser’s license.

Collecting a regular fee of $400 per appraisal, Cowden most often “stretched,” or falsely inflated, values by at least $20,000 and sometimes much more, according to an FBI affidavit. After going through Cowden’s garbage, an agent found an appraisal that noted a prior sale of $35,000 in June 2004 and a value for the same property at $110,000 the next year.

To back up the claims, Cowden altered digital photographs, prosecutors said. He made a mobile home look like a ranch-style house by adding grass to cover up concrete blocks holding it up. At other times, he removed fire damage and deleted awnings to make businesses look like homes.

In one year, he made more than $255,000 but did not file income taxes, a court filing states.

After pleading guilty to conspiracy and tax evasion, Cowden could have faced up to five years in prison. Instead, prosecutors sought leniency from U.S. Judge Joy Flowers Conti because of his cooperation. Cowden provided “extraordinary cooperation,” Conway said.

Cowden is serving nine months in a halfway house in Tampa and will spend 45 months on probation. Under the conditions of his punishment, he can leave for work at the Postal Service and religious services.

He was ordered to pay 10 percent of his income toward restitution of nearly $1 million — $947,196 to National City Mortgage Company and $12,166 to Bank of America Home Loans. Spokesmen for PNC Bank, which purchased National City in December 2008, and Bank of America declined to comment.

Neither Cowden nor federal Public Defender Michael Novara would comment for this story.

Culture existed

“It’s the same old story: Everybody wants to make as much money as they can,” said Downtown attorney Stanton Levenson, who represents a defendant in another case.

With the Federal Reserve keeping interest rates low, banks had easy access to cash for lending, said a Pennsylvania Department of Banking spokesman. By packaging loans for resale, banks limited their risks, Cessar said.

In that environment, unscrupulous mortgage brokers found it easy to submit false statements for loans, said Julie Halferty, associate division counsel in the FBI’s Pittsburgh office and former head of the agency’s mortgage fraud task force in Phoenix.

“My perception is that it was almost like a herd mentality,” she said. “It spread by word of mouth. Everybody knew you could do it, and housing prices kept going up, so there was seemingly no risk.”

That carefree lending culture no longer exists, said David Bleicken, Pennsylvania deputy banking secretary. Lenders require more detailed information before making loans, and mortgage brokers must be licensed by the state.

By Andrew Conte

Federal authorities have charged Rab Nawaz of Waterford in connection with a real estate fraud scheme that involved purchasing homes in New London and selling them to straw buyers at artificially inflated prices.

Nawaz, 47, of Harbor View Avenue, was arrested Wednesday morning at his home. He appeared before U.S. District Judge Ellen Bree Burns on charges of conspiracy to commit wire fraud and obstruction of justice and was released on a $100,000 bond secured by property.

Nawaz allegedly conspired with Syed A. Babar and others in a scheme involving real estate throughout Connecticut, costing lenders an estimated $2.5 million. The scheme involved more than 25 properties in New London, New Haven and other locations.

According to the U.S. Attorney’s office, Nawaz purchased homes in New London and sold them to straw buyers at artificially inflated prices that, typically, were supported by fraudulent appraisals. Although the straw buyers would represent that they intended to occupy the homes as their primary residence, they had no intention of doing so. They defaulted on the loans and allowed the homes to go into foreclosure.

Following Babar’s arrest on May 14, Nawaz allegedly met with a co-conspirator in the case, advised him of evidence that the government had presented against Babar and instructed him as to “what he should and should not admit knowing to government investigators,” according to the U.S. Attorney’s office.

The charge of conspiracy to commit wire fraud carries a maximum term of imprisonment of 20 years and the charge of obstruction of justice carries a maximum term of imprisonment of 10 years.

U.S. Attorney David Fein said the investigation is ongoing. The case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.

-Karen Florin

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner and Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division announced today that Anthony B. Ghio, 43, of Stockton, pleaded guilty today before United States District Judge Edward J. Garcia to conspiring to rig bids at public real estate foreclosure auctions held in San Joaquin County.

These charges arose from an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the U.S. Attorney’s Office for the Eastern District of California, the Antitrust Division’s San Francisco Office, the Federal Bureau of Investigation, and the San Joaquin County District Attorney’s Office.

According to Assistant United States Attorneys Robin R. Taylor and Russell L. Carlberg, who are prosecuting the case with assistance from Barbara Nelson and Richard Cohen of the Antitrust Division, Ghio admitted in his guilty plea that he conspired with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices.

Court documents show that after the conspirators’ designated bidder bought a property at a public auction, they would hold a second private auction. Each participating conspirator would submit bids in the private auction above the public auction price. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the noncompetitive price at the public auction and the winning bid at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs. Ghio participated in the bid-rigging scheme from April 2009 until October 2009.

Ghio is charged with bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The investigation is continuing. Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm, or the FBI’s Sacramento Division at 916-481-9110, or the U.S. Attorneys Office for the Eastern District of California at 916-554-2900.

Media inquiries to the U.S. Attorney’s Office should be directed to Lauren Horwood at 916-554-2706. Media inquiries regarding the department’s Antitrust Division should be directed to Gina Talamona at 202-514-2007.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.

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.

One component of the FFETF is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner.

A $120,000 settlement has been reached with multiple Tucson defendants for their roles in what state Attorney General Terry Goddard called a fraudulent real estate scheme.

Those agreeing to the settlement included Andrew T. Silverstein, VinLan Ventures doing business as Re/Max All Executives, and Vincent Volpe. They must pay $84,000 toward restitution and $36,000 to the attorney general’s Consumer Fraud Revolving Fund.

The agreement follows a $60,000 settlement earlier this year in the same case against four other defendants: Tucson Mortgage Co., WGA Enterprises LLC and William and Jane Doe Anastopoulos.

According to the attorney general’s report, the scheme involved putting unqualified rent-to-own buyers into investment homes. Eventually many of these homes were foreclosed, causing harm to the investors, lenders and rent-to-own home buyers, according to the attorney general.

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.

Merced County’s stock of empty, foreclosed homes can be a magnet for criminal activity: metal theft, tagging, vandalism, illegal squatting. On Thursday, Merced County law enforcement officials gathered in North Merced to call attention to another crime gaining traction in our community: real estate fraud.

Last year, a joint federal, state and county real estate fraud task force, headed by the FBI, was created to confront the Central Valley’s dramatic increase in fraud reports. Merced County District Attorney Larry Morse’s fraud team has been up and running since 2009, but used this event to call attention to the crackdown.

“While our local economy wrestles with the financial fallout from a real estate depression, and thousands of homeowners are wracked with worry about losing everything, others have seized on an opportunity,” Morse said. “Those of us in law enforcement know all too well that in every tragedy there are criminal profiteers that will seek to exploit the misery of others.”

The Merced County fraud investigators have submitted eight cases for prosecution, half of them involved manipulation of elderly homeowners, Morse said. Two of the cases were settled when the defrauders pleaded to the crimes, he added.

If a fraud case spans several counties, the U.S. Attorney’s office will lead the prosecution. If a fraud scheme is confined to Merced County, Morse’s office will take the case.

The real estate fraud investigators here have 20 active investigations right now. The U.S. Attorney’s office in Fresno has several current fraud investigations, said Benjamin Wagner, U.S. Attorney for the Eastern District of California. Two years ago, the Eastern District led the country in mortgage fraud indictments, with nearly 50 cases, he added.

The Merced task force has two district attorney’s investigators dedicated full time to real estate fraud issues. Anna Hazel, one of the investigators, said most of the fraud crimes in Merced involve foreclosure rescue promises. More sophisticated schemes that originate outside of the county also hit people here, she said.

“By the number of foreclosures and the fact that we have so many people underwater, I can say the victim potential is great here,” Hazel said. “We get lots of complaints. We also have individuals in this county that are victims of much larger statewide plots.”

Authorities warned residents about the two most common schemes:

Foreclosure prevention fraud is an offer to help homeowners in foreclosure, but the criminal is actually looking to eventually get a large sum of money or the property itself.

In a loan modification fraud scheme, a businessman might promise to change a borrower’s loan terms for a fee.

Charging advance fees for loan modification workouts became illegal in California in October 2009.

Homeowners who need help should call a foreclosure avoidance counselor approved by the U.S. Department of Housing and Urban Development, or their bank. One local avoidance counselor, No Homeowner Left Behind, is at (559) 234-1492.

The task force agencies also stressed that they would look into frauds perpetrated by borrowers. Homeowners should never let someone talk them into making false statements — like overstating their income — on loan documents, the agencies warned.

To report suspected real estate fraud, or to get more information, contact the Merced County District Attorney’s real estate fraud unit at 1944 M Street, Merced, or by phone at (209) 385-7383. Spanish speakers can call (209) 385-7383, ext. 4229.

A Placer County man who hosted hotel seminars promising his audience certain wealth has been charged with fraud by the Securities and Exchange Commission.

The civil complaint, filed Tuesday in Sacramento federal court, charges Lawrence “Lee” Loomis and his father-in-law, John Hagener, with taking at least $10 million from more than 100 investors by promising them a 12 percent return with no risk.  SEC investigators said the money was instead used to prop up Loomis’ failing businesses.

News10 obtained videotape of one of the “Loomis Wealth Solutions” seminars hosted at a Sacramento hotel in December 2007.  On the tape, Loomis promised investors they would become rich.  “At a minimum, this is my vision for you. To have a net worth of at least ten million dollars. At least ten million. And many of you will have more, but at a minimum have a net worth of ten million,” Loomis told his audience.

In addition to the civil complaint, sources told News10 Loomis still faces a criminal probe in a $100 million multi-state real estate Ponzi scheme.  Three former associates have already been charged and two are in custody.

In 2008, FBI agents raided Loomis’ Roseville offices and his Granite Bay home, and later seized his bank accounts.  Placer County tax records show that Loomis’ home, valued at $1.6 million, was taken by the bank last summer.

by George Warren,

In the earlier days, it was easy to buy, refinance or sell properties. The buying and selling process are straightforward and people were more trustworthy than today. Communities were small and people know about properties that are for sale by word of mouth. Responses are immediate and deals are closed without too much hassle of evaluation, paper work and the like. But the reality is that these days are gone. The process has become complex and the people who make things happen have increased. If before, you can sell or buy a property by yourself and be confident to handle things, these days, it is best to get the right people to represent you and protect you from possible unusual circumstances. Now, you will have to deal with Real Estate brokers, appraisers, mortgage lenders, real estate agents, lawyers and other personalities that will be needed in the process.

Availing of the services of professionals is the first step in protecting yourself from Fraud. These professionals know indicators of bad deals and they can easily advise you on your possible next moves to avoid negative experience. With real estate as a critical and a major area of interest, the government has adopted laws to require professionals to secure their licenses in the practice of their profession. Knowing this, the risk becomes low as you have somebody who would not want to jeopardize his license just to enter into a false deal.

The best person to protect you from frauds is a Real Estate lawyer. You have to find one who will only be loyal to you and nobody else. He is the person to trust and he is responsible for protecting your interest. You have to make sure that you will be hiring somebody who is trustworthy, experienced and credible. Sometimes there is a higher price tag for this type of lawyer but it is surely worth the difference in price when you get somebody you really do not know.

In your hiring process, never trust recommendations without doing your background check. There are established Network of professionals that may look credible but sometimes these organizations can pose some problems because of their expertise. This expertise can be used to impose some Fees and other costs and instead of helping you, they can make you feel robbed at the end of the process.

When you already have a trusted real estate lawyer, you can avoid fraud by not signing any document that your lawyer did not approve. There are many cases when people sign documents just to satisfy notary requirements and end up discovering that there are stipulations in the document that were not agreed on.

Always use the services of your lawyer whatever is your concern. You have to be honest and tell him about your observations and listen to him as he will always have recommendations that can make you benefit even more.

The most important way to avoid fraud is to know what the law says. You also have to do due diligence in updating yourself about the state of the real estate industry and improve on your level of understanding in the field. The knowledge that you gain can make you do away with suspicious and fake dealings.

By John Carlstrom

Real Estate Articles

Midland Police say the second man wanted in this case has turned himself in.

Marcus Rosenberger turned himself in around noon on Wednesday.

Orange County Man Gets 15 Years for Fraud, Refusal to Account for Off-Shore Money

A Downey woman who orchestrated a real estate fraud scheme that caused nearly $13 million in losses after falsely promising to help homeowners in default on their mortgages has been sentenced to 10 years in federal prison. A second person involved in the scheme was sentenced yesterday to 15 years in prison after a federal judge determined that he had refused to account for proceeds of the scheme in an off-shore bank account that he had agreed in his plea agreement to repatriate.

Martha Rodriguez, 38, who pleaded guilty to mail fraud and money laundering charges in relation to the scheme that ran from May 2003 until November 2005, was sentenced yesterday morning to 120 months in prison by United States District Judge George H. King. In issuing the decade-long sentence, Judge King noted that Rodriguez perpetrated the mortgage fraud scheme while she was free on bond after being charged in another real estate fraud scheme. Edward Seung Ok, 44, of Huntington Beach, who pleaded guilty to mail fraud, was sentenced yesterday afternoon to 15 years in prison. Before issuing the sentence, Judge King ruled that Ok violated his plea agreement by failing to provide investigators with access to an account in the Bank of Nevis on the Caribbean island of St. Kitts into which Ok had transferred more than $1.6 million during the course of the fraudulent scheme. In his plea agreement, Ok had agreed to repatriate and transfer to the government all of the funds in that account. In addition to continuing to conceal the money, Ok transferred more than $1 million of the off-shore money into a secret account in the United States, where he could access the funds for his personal expenses, which included golf club memberships, illegal drugs and a $235,000 Lamborghini Gallardo, prosecutors told Judge King during yesterday’s hearing. Addressing the court during yesterday’s hearing, Ok admitted that he spent more than $1 million of the money he had hidden in the off-shore account during a two-year period when he was free on bond in this case.

The prison sentences stem from a fraud case in which Rodriguez, Ok and three others used computerized databases that list homes going into foreclosure to locate victims, who were promised refinancing services. The scheme was operated through Rodriguez’s real estate and escrow agencies, Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Instead of obtaining refinancing, Rodriguez and her co-schemers submitted loan applications in the names of “straw buyers” who were purportedly buying the properties. In some cases, the defendants paid the straw buyers for the use of their personal information. In other cases, the defendants used personal information of people without their knowledge. The loan applications for the straw buyers – which always contained false information – caused a series of lenders to fund more than 100 mortgages worth more than $40 million. The loan proceeds were used to pay off the loans in default, sometimes to make a few mortgage payments on the new loans, and to provide some instant cash to homeowners. However, the remaining proceeds, typically representing the bulk of the homeowner’s equity, were skimmed off by Rodriguez and her co-schemers.

Even though they were promised that they would be able to keep their homes, the victim homeowners usually lost title to their homes. The lenders suffered losses when the straw buyers then failed to make loan payments and the new loans went into default. Lenders were often unable to foreclose because the straw buyers did not know the properties were in their names. The scheme targeted commercial lenders and more than 100 homeowners across the Southland.

Three other defendants in this case were sentenced late yesterday by Judge King. They are:

Cynthia Valenzuela, a 27-year-old Orange resident who pleaded guilty to mail fraud, was sentenced to one year and one day in prison;

Vladimir Stefanovic, 38, of Huntington Beach, was sentenced to 18 months in prison; and Maria G. Juarez, 39, of Canoga Park, was sentenced to three years in prison, in part because, after she was arrested on the case, she continued to perpetrate loan fraud while she was free on bond.

This case is the result of an investigation by the Federal Bureau of Investigation and IRS - Criminal Investigation. The Los Angeles County Department of Consumer Affairs, Real Estate Fraud Section, provided substantial assistance during the investigation.

A 33-year-old Long Beach man who operated a number of ventures that he used to solicit money with false claims of profitable investments in real estate has pleaded guilty to a federal wire fraud charge.

Jon Weldon James pleaded guilty yesterday afternoon to the federal offense related to his Ponzi scheme that collected more than $33 million from his El Segundo-based venture that operated under a series of names, including J.W. James and Associates, Inc., and The Cloaking Device, Inc.

Appearing before United States District Judge R. Gary Klausner, James pleaded guilty and admitted that he defrauded more than 50 individuals who invested in his real estate-related investments from late 2003 through August 2006. James offered his investments through face-to-face meetings that included hosting presentations at restaurants, where he encouraged victims to invest their savings or money from their Individual Retirement Accounts.

While James told victims that he was using their money to invest in real estate and sent account statements that purported to show profits to some investors, James invested in only a few properties and made absolutely no profit from any real estate-related investments. However, in the hallmark of a Ponzi scheme, James used investors’ money to repay other investors who requested withdrawals of their funds. James also used investor money to pay for personal expenses, which included his wedding and an investment in a recording studio and production company called “On the Ball Entertainment.”

After taking in approximately $33 million from investors, repaying some investors and spending millions on personal and business expenses, James’s illegal conduct caused losses of approximately $11 million.

James is scheduled to be sentenced by Judge Klausner on May 24, at which time he faces a statutory maximum sentence of 20 years in federal prison.

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.

Kings County District Attorney Charles Hynes announces indictments against a dozen individuals arrested by his Mortgage and Real Estate Fraud Unit.

A major milestone in every homeowner’s life is the day when they pay off their mortgage and their humble abode is truly theirs.

That being said, you can truly understand how Marine Park resident Jean Kemp felt when she got a phone call from a bank demanding she make an installment on her mortgage — 22 years after she made her last payment.

“It was so scary. I was just furious,” Kemp told reporters Thursday when it was announced that an unscrupulous attorney and his sidekick were responsible for “stealing” her home and using it to secure a $225,000 mortgage — two of a dozen scam artists in Kings County District Attorney Charles Hynes’ ever growing real estate rogues gallery.

Standing with Kemp, Hynes explained that Victor Koltun and Jarrett Haber, the attorney, doctored paperwork to make it look like they owned Kemp’s home, even though her family has been living there since 1975 (they hadn’t had a mortgage on the property since 1987).

The duo then used the property, as well as several others, to get a $225,000 loan, Hynes said. They reportedly used the money to pay down a large debt related to another real estate scam they were conducting in Long Island.

“Ordinarily, in real estate deals, you would say, ‘Get a lawyer.’ Now you say, ‘Get an honest lawyer,’” Hynes said, adding that his Mortgage Fraud and Real Estate Crimes Unit arrested Koltun and Haber after learning of Kemp’s plight through State Senator Carl Kruger’s (D-Mill Basin, Brighton Beach) office.

Upon learning that a second mortgage miraculously appeared on her house, Kemp, whose husband is in a nursing home, contacted Kruger’s office, looking for help. Finding something shady, Kruger’s people contacted the D.A.’s office, who arrested Haber and Koltun after a brief investigation.

Kruger was with Hynes and Kemp to announce the arrest Thursday.

“With mortgage fraud gaining status as the ‘crime of choice’ among thosewho prey on the elderly and other vulnerable residents, I applaud the efforts of District Attorney Hynes in aggressively pursuing those whoperpetrate this crime and prosecuting them to the fullest extent of the law,” he said in a statement.

But Kemp’s plight was one of several mortgage swindling stories outlined Thursday. Ten other flim flam artists have also been recently been indicted in various investigations conducted by the Mortgage Fraud and Real Estate Crimes Unit. Some of them were down right devilish.

Case in point: Attorney Alan Rocoff found himself being investigated by the Real Estate Crimes Unit when allegations were made that he had pocketed more than $200,000 he gained from an auction on a foreclosed church at 2525 Snyder Avenue in East Flatbush back in 2005.

Rocoff, who has now been suspended from practicing law in New York, reportedly got more than $300,000 for the property at auction.

After paying off all of the debts attached to the house of worship, Rocoff, the court appointed referee, allegedly held onto the money, despite repeat attempts of Pastor Robert Booker Sr., the owner of the property, to reclaim the leftover cash.

When Pastor Booker died in 2008, he was still trying to get the money owed to him returned, family members told reporters, who said that they were “jubilant” that justice had finally been served.

“This was his life,” his daughter Dorcel Egerton told reporters. “He would go outside and administer to the community, help people, giving people money.”

Rocoff is currently charged with grand larceny in the second degree.

Other con artists busted by the DA’s Mortgage Fraud and Real Estate Crimes Unit included Joseph Nykian and Nitza Jones who were charged with forging power of attorney in order to take out a $300,000 mortgage on a St. Marks Avenue home without the owner’s consent, New York City Corrections Officer Margareth Blanc, who was charged with collecting more than $30,000 in Section 8 rental subsidies while living in a home owned by his sister, and Todd Graham, who was accused of placing an ad on Craigslist for an apartment in a building he neither owned nor managed. Graham reportedly collected the first month’s rents and a security deposits from two prospective tenants before his scam was uncovered, officials said.

Hynes estimated that the 12 suspects were responsible for bilking banks, homeowners and tenants of more than $2 million dollars with these scams.

“The diversity of crimes committed by all of these defendants shows the lengths to which some unscrupulous people will go to enrich themselves illegally,” Hynes said. “The arrests and indictments should serve as a strong warning to all who still think that they will devise some new scheme and get away with Real Estate and Mortgage Fraud related crimes.”

“No matter how creative they think they are, no matter what lengths they go to avoid detection, they will be caught and prosecuted,” he said.

Solomon Dwek’s credibility is key in Beldini corruption trial Defense lawyer puts focus on deal failed mogul made

NEWARK - A federal jury’s answer to that question is likely to decide the fate of the government’s extortion and bribery case against suspended Jersey City deputy mayor Leona Beldini. Beldini, 74, is the first of the 44 people arrested in a July 2009 FBI public corruption and money-laundering sting to go to trial.

Dwek, 37, admitted career criminal, is the government’s witness. He spent almost five full days on the witness stand. At times stoic and subdued, at others angry and annoyed, and once moved nearly to tears, the disgraced land mogul who had ruled over a $400 million empire, testified before spectators that often included defense attorneys for others arrested in the FBI operation.

They heard him admit to bilking his uncle of $100 million in a real estate scheme and stealing millions more from a close family friend. They watched him choke up as he admitted under questioning that his mother and father are no longer his friends. They heard him admit to breaking several of the Ten Commandments.

But they also listened as he repeatedly contended that Beldini had only continued to meet with him because her motives were corrupt: she wanted the cash he was offering for Mayor Jerramiah T. Healy’s election campaign, and she wanted to be the exclusive real estate agent for the fictitious condominium complex Dwek claimed he was going to build.

“If she didn’t want to talk about it, she could have got up and left . . .,” Dwek responded testily to one series of questions from Beldini’s attorney, Brian J. Neary.

Neary implied that Beldini was simply too courteous to walk away from the meeting.

“She is courteous enough to simply talk to you. . .,” Neary said.

“And accept the money, yes,” Dwek shot back. “She was courteous for her own good, not for my own good.”

The government called only three other witnesses in the Beldini trial, while the defense presented no testimony at all. Should Beldini be acquitted, it is likely to encourage other defendants to take their chances at trial instead of agreeing to a plea deal.

The jury is expected to begin deliberations as early as Monday.

Posing as corrupt developer David Esenbach, Dwek wore a wire and secretly videotaped several meetings with Beldini, Healy, former Housing Commissioner Edward Cheatam and political consultant Jack Shaw. The black-and-white videotapes, along with wiretapped conversations from Shaw’s telephone, were the government’s key evidence at the trial.

Beldini is charged with funneling $20,000 in cash that Dwek gave to Cheatam and Shaw, into Healy’s 2009 mayoral campaign. Beldini served as campaign treasurer for Healy, who has not been charged with any wrongdoing.

Under cross examination by Neary, Dwek admitted that he never gave Beldini any cash directly. But on one videotape, Dwek can be heard asking the deputy mayor if Mayor Healy knows that Dwek had given Cheatam and Shaw $10,000 in cash to secretly purchase tickets for a Healy fundraiser.

“The mayor knows, you know, where the tickets came from?” Dwek asks, adding “. . .He appreciates the way I do business, right?’ ” Dwek asks.

“Absolutely,” Beldini answers.

Shaw died of an overdose of Valium on July 28, five days after his July 23 arrest. Two more people have since been arrested in the case, 12 have so far pleaded guilty, including Cheatam, who admitted to taking about $70,000 from Dwek.

Dwek admitted under questioning by Neary that he did not initially know that Beldini’s $66,000-a-year job as deputy mayor was an appointed position, and that she had no vote and did not sit on the city’s planning or zoning boards.

He had been told by Cheatam and Shaw, he said, that Beldini was the mayor’s “right-hand man,” and Jersey City’s second-most powerful public official.

Dwek began cooperating with the FBI only months after he was arrested on $50 million in bank fraud charges in May 2006. During more than two years working undercover as a government informant, Dwek drove all over New Jersey and into New York City in a Lexus, meeting with public officials and Sephardic rabbis.

The $1,753 monthly rental and insurance fee for his car was paid for by the federal government, which also reimbursed him for tens of thousands of dollars he spent on mileage, meals, tolls and parking

The jury is expected to begin deliberations as early as Monday.

Posing as corrupt developer David Esenbach, Dwek wore a wire and secretly videotaped several meetings with Beldini, Healy, former Housing Commissioner Edward Cheatam and political consultant Jack Shaw. The black-and-white videotapes, along with wiretapped conversations from Shaw’s telephone, were the government’s key evidence at the trial.

Beldini is charged with funneling $20,000 in cash that Dwek gave to Cheatam and Shaw, into Healy’s 2009 mayoral campaign. Beldini served as campaign treasurer for Healy, who has not been charged with any wrongdoing.

Under cross examination by Neary, Dwek admitted that he never gave Beldini any cash directly. But on one videotape, Dwek can be heard asking the deputy mayor if Mayor Healy knows that Dwek had given Cheatam and Shaw $10,000 in cash to secretly purchase tickets for a Healy fundraiser.

“The mayor knows, you know, where the tickets came from?” Dwek asks, adding “. . .He appreciates the way I do business, right?’ ” Dwek asks.

“Absolutely,” Beldini answers.

Shaw died of an overdose of Valium on July 28, five days after his July 23 arrest. Two more people have since been arrested in the case, 12 have so far pleaded guilty, including Cheatam, who admitted to taking about $70,000 from Dwek.

Dwek admitted under questioning by Neary that he did not initially know that Beldini’s $66,000-a-year job as deputy mayor was an appointed position, and that she had no vote and did not sit on the city’s planning or zoning boards.

He had been told by Cheatam and Shaw, he said, that Beldini was the mayor’s “right-hand man,” and Jersey City’s second-most powerful public official.

Dwek began cooperating with the FBI only months after he was arrested on $50 million in bank fraud charges in May 2006. During more than two years working undercover as a government informant, Dwek drove all over New Jersey and into New York City in a Lexus, meeting with public officials and Sephardic rabbis.

The $1,753 monthly rental and insurance fee for his car was paid for by the federal government, which also reimbursed him for tens of thousands of dollars he spent on mileage, meals, tolls and parking.

NEW YORK —Despite a depressed real estate market, mortgage fraud and other related crimes continue to be a major problem, according to Brooklyn District Attorney Charles Hynes. Today he announced charges against 12 people for a variety of unrelated housing schemes, including mortgage fraud.

Three out of the 12 scams involved people posing as landlords and collecting rent and security deposits on apartments they didn’t own.

Those charged come from a variety of backgrounds. “Included among the 12 filings today is an attorney, a resigned attorney, and a suspended attorney. In addition there’s a New York City corrections officer and also, there are incredible to me, repeat offenders,” Hynes says.

Prosecutors say two of the alleged repeat offenders, Russell Pitt and Nathan Farkas, convinced an unemployed Brooklyn woman to grant them power of attorney so they could refinance her home. Instead, prosecutors say they sold her home and kept the proceeds. Attorneys for both men could not be reached.

One victim, Jean Kemp, says she was shocked to learn a $225,000 dollar mortgage had been taken out on her home in Marine Park. “When the guy told me that I said, ‘you’re out of your mind, I never took a mortgage, our house has been paid since 1987,” Kemp says.

The Brooklyn DA’s office says it’s special real estate crimes unit continues to receive hundreds of complaints.

INDIANAPOLIS—Kevin Lafavers, age 46, formerly of Indianapolis, was sentenced today to 33 months in federal prison, and Donald T. Brown, age 67, Lebanon, Indiana was sentenced to 27 months in prison. Circuit Judge David F. Hamilton sentenced both individuals following Lafavers’ guilty pleas to conspiracy to commit wire fraud and wire fraud and Brown’s guilty pleas to conspiracy to commit wire fraud and money laundering. These proceedings concerned the defendants’ participation in a multi-million dollar mortgage fraud scheme operated by Robert Penn in the Indianapolis area.

Today’s sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division, with the assistance of the Federal Bureau of Investigation. Judge Hamilton previously imposed sentence on six other individuals charged in the scheme as follows: Robert Penn, 84 months’ imprisonment; Mark Roth, 43 months’ imprisonment; Timothy Brown, 37 months’ imprisonment; Stephen Scott Brown, 37 months’ imprisonment; Jerry Jaquess, 30 months’ imprisonment; Tamara Scott, 24 months’ imprisonment.

Between November 2003 and August 2005, at least 136 fraudulent loans, totaling $16,613,850.00, were obtained by Robert Penn and his numerous business entities, assisted by Lafavers and Brown and others. The loans were obtained from Argent Mortgage Company, The MoneyStation, and People’s Choice Mortgage/Countrywide Home Loans.

The mortgage fraud schemes carried out by the defendants were accomplished as follows. Participants in the schemes, including Lafavers, located properties and arranged to purchase them at a fair market value generally by means of an option agreement or unrecorded land contract. Other participants in the scheme located straw purchasers who invested their good credit, but no money, to be the purchasers of these properties at a much higher price than that negotiated with the seller. Co-conspirators, including Brown, funded the down payments.

Lafavers was employed by Penn to locate properties for sale, negotiate the purchases of those properties, and enter into option agreements and land contracts with the sellers on behalf of Penn and his businesses. Lafavers generally received $1,000.00 per property located. Lafavers also attended some property closings on behalf of Penn’s companies and received checks that represented illegal proceeds. Lafavers’ sentence reflected his involvement in approximately 19 fraudulent loans. The total amount of those loans was $3,771,000.00.

Brown was primarily involved in funding down payments for investors on the fraudulent real estate transactions. Brown used a bank account, which was maintained by him and his son in the name of Brown Funding Inc. to fund the down payments. Brown obtained down payment checks and provided those checks to the title company, or to another co-conspirator, to be used for the closing. After the property closing, Brown received repayment of the checks from the fraudulent loan proceeds. In addition, Brown Funding Inc. received a fee of $1,000.00 – $3,000.00 for each down payment provided. The sole purpose of Brown Funding Inc. was to fund down payments for investors.

Brown borrowed some of the money for these down payments from individuals who he knew, but did not tell these people that they were in fact funding a fraudulent real estate scheme. Brown also added investors’ names to the Brown Funding Inc. bank account in order to convince the lenders that the investors had access to money which they did not have. Brown’s sentence reflected his involvement in approximately 113 fraudulent loans, including 86 Windsor Village loans. The total amount of those loans was $12,541,000.00.

According to Assistant U. S. Attorney Susan Heckard Dowd, who prosecuted the cases for the government, Judge Hamilton also ordered Lafavers to serve three years on supervised release, and Brown to serve two years on supervised release following their incarceration. Judge Hamilton also ordered the defendants to pay restitution as follows:  Lafavers – $ 1,475,851.63  and  Brown –  $ 9,985,004.15.

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.

A United States District Court Judge sentenced a 52-year-old Andover man Friday (Feb. 5) to 37 months in prison for his role in orchestrating a residential real estate loan scam.

Eric Krahnke, a loan officer at Associated Bank, bypassed normal loan-approval channels to get 21 real estate loans totaling more than $4 million between March 2003 and October 2003, according to the United States Attorney’s Office in Minneapolis.

The real estate loans were given to Michael Striker, 56, of Minetonka. Judge Joan Ericksen sentenced Striker Feb. 3 to 41 months in prison.

Krahnke and Striker pleaded guilty in August 2000 to one count of bank fraud and one count of money laundering. They had been indicted in federal court in August 2008.

The two men described what their scheme was to the United States Attorney’s Office

The 21 loans were approved either directly for Striker or his real estate company called U.S. Equities of Minnesota. Striker received in excess of $724,000 in net loan proceeds at real estate closings for the 21 loans. Krahnke got commission pay from Associated Bank for originating the loans.

Striker also gave Krahnke 3 percent of the net proceeds of each loan, which totaled over $100,000.

These transactions were labeled as “broker fees” in the loan documents and paid through Worldwide Mortgage, which was a mortgage brokerage company that Krahnke owned. Worldwide Mortgage did not broker any of the loans.

Krahnke did not advise Associated Bank that he was receiving these “broker fees” and had an ownership interest in Worldwide Mortgage, which would have been a conflict of interest given his position as a loan officer, according to the United States Attorney’s Office.

Striker said the loans were for construction rehab projects, he used some proceeds for unrelated expenses and debts. Some alleged rehab projects were actually homes in which financially distressed families still resided.

Krahnke also admitted that on Oct. 24, 2003, he executed a telephone transfer of $17,943 from a Worldwide Mortgage account at Central Bank to a personal account at the same bank. Striker said on Sept. 3, 2003 he issued a check in the amount of $13,000 from a U.S. Equities account at Bremer Bank “River Run Properties.” The defendants admitted they knew the funds subject to those transactions were criminally derived.

“These schemes need to be exposed to stop the cascading negative affect this type of fraud has on our economy and the innocent parties involved,” said Julio LaRosa, special agent in charge of the St. Paul field office of the Internal Revenue Service (IRS) Criminal Investigation Division (CID).

“These sentences send the message that mortgage industry fraudsters will not go unpunished,” LaRosa said in a written statement presented after the Krahnke sentencing.

This case was investigated by the IRS’ CID and the Federal Bureau of Investigation. It was prosecuted by U.S. Attorneys William Otteson and John Docherty.