PLANO, TX—A 68-year-old Dallas man has been indicted in a commercial real estate investment scheme in the Eastern District of Texas, announced U.S. Attorney John M. Bales today.

Eric Brauss was named in a 10-count indictment for his role in defrauding investors in a commercial real estate investment scheme. The indictment was returned by a federal grand jury on Feb. 16, 2011.

The indictment alleges that Brauss raised investment capital for two large-scale retail development projects in New Mexico and Fort Worth—Unser Towne Crossing and Parkwood Crossing, respectively—by making false material representations to investors. The indictment further alleges that based on Brauss’ false representations, investors provided $2,042,000 in payments to Brauss for the Unser project and $5,998,925 in payments to Brauss for the Parkwood project, and that Brauss used most of the investment capital raised for expenditures unrelated to the two projects. Brauss faces up to 20 years in federal prison on each of the 10 counts.

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.

This case is being investigated by the FBI and is being prosecuted by Assistant U.S. Attorney Shamoil Shipchandler.

A grand jury indictment is not evidence of guilt and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Defendant Faces Up to 20 Years in Federal Prison

DALLAS—David Boles, 52, of Colleyville, Texas, who owned Metro Buy Homes, LLC., pleaded guilty this afternoon before U.S. Magistrate Judge Irma C. Ramirez to one count of mail fraud, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Boles faces a maximum statutory sentence of 20 years in prison and a $250,000 fine. In addition, as part of his plea agreement with the government, Boles agrees to pay restitution for losses resulting from all of his criminal conduct and not just limited to losses stemming from his conviction offense. Boles is scheduled to be sentenced by U.S. District Judge Jane J. Boyle on May 26, 2011.

According to documents filed in the case, from January 2008 through August 2010, Boles ran a scheme to defraud a number of investors by making materially false representations to them. For instance, he advised that invested money would be used to buy real estate and that investments would be secured by real estate. To further the scheme, Boles sent Deeds of Trust and Real Estate Liens that purportedly gave investors liens against specific properties in exchange for their investment. However, Boles did not own a number of the properties that were supposedly used to secure the investments, and some of the Deeds of Trust and Real Estate Lien Notes that he sent investors were fraudulent. Boles also sent checks to investors and advised them that the checks represented profits from their investments. However, in many cases the checks were simply drawn from the principal investments made by the investor. On other occasions, Boles funded checks written to one investor with money received from other investors. Boles believed that telling the investors that the checks represented earnings on their investments would encourage them to invest more money.

Boles also set up a website which he occasionally used to deceive investors by posting fictitious figures showing investments to be profitable when they were not, again to encourage investors to invest more money.

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.

ANCHORAGE, AK—United States Attorney Karen L. Loeffler announced that on August 21, 2009, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name. Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2,360,185. Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.60. Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.24. Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.77. Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day. Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066.390. Gary Paterna. Mr. Lockard’s father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.86. Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.53. The defendants pled to a total of 64 counts charging conspiracy, wire fraud, bank fraud, and false statements to a financial institution.

The pleas and sentencing bring to a close the largest mortgage fraud scheme ever prosecuted in the District of Alaska. The fraud was perpetrated by professionals in all areas of the real estate industry. Between on or about December 23, 2003, and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudlent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified down payments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved. The effect and result of this conduct was to transfer the investment risk from Lockard and the other co-conspirators to the mortgage lenders and to provide inflated profit and fraudulently obtained loan funds to Lockard and the other co-conspirators. The charges in the indictment to which the defendants pled guilty outlined a total of five separate schemes, involving properties in numerous Anchorage subdivisions, and two large undeveloped properties in the Talkeetna area.

According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no down payments had been made.

The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Company as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.

The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA. Finally, the indictment alleges that Lockard engaged in a “bust out” scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.

At Friday’s sentencing hearing, Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudeulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million dollars. Judge Beistline commented that Mr. Lockard’s crimes were motivated by greed and had an impact on our community. In addition to the financial institutions that were defrauded, one of the individual victims testified at setencing about his personal financial losses, and his struggles to pay the mortgages on three duplexes he had unwittingly purchased for grossly inflated prices. Judge Besitline admonished that there was “no excuse for lying and deception, and no excuse for breaking the law,” and that Mr. Lockard was going to have to “face the consequences of the very poor choices he made.”

United States Attorney Karen L. Loeffler noted that these convictions and sentences point out the vast harm that can be done to an industry and the public when a handful of dishonest individuals are willing to falsify the documents and information on which the mortgage market relies.

Ms. Loeffler also commended the diligent and extensive investigation by special agents of the Federal Bureau of Investigation for their investigation that lead to this result.

SACRAMENTO—United States Attorney Benjamin B. Wagner announced today that Ralondria Stafford, 36, and Necole Ward, 31, both formerly of Vallejo, pleaded guilty today before United States District Judge Morrison C. England, Jr., to Bank Fraud.

According to court documents, from 2004 through 2006, Stafford and Ward, who are sisters, operated RN Realty, a real estate office located in Vallejo, California, from which they carried out a scheme to commit mortgage fraud by using straw buyers to purchase properties at inflated prices. The straw buyers were approached and offered $5,000 for the use of their names, credit histories, and financial information. The defendants represented to the straw buyers that the purchases would be in name only and that the properties would be repurchased by Stafford and Ward from the straw buyers in 6 to 12 months. With one of the straw buyers, the defendants signed a document called the “The $5,000 Deal,” with the terms of the straw buyer agreement.

In August 2005, Stafford and Ward sold a property in Vallejo, owned by Stafford’s husband to straw buyer “J.G.” “J.G.” received a loan based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Attached to the application were falsified Internal Revenue Service W-2 forms and a lease agreement.

As a result of these false statements, a mortgage company funded a $475,000 loan to the straw buyer for the purchase of the property. Neither Stafford or Ward ever repurchased the property from the straw buyer. Public records indicate that one year after the sale, in August 2006, the property was foreclosed upon and resold for approximately $400,000.

In April 2006, Stafford and Ward sold Ward’s house in Vallejo to straw buyer “C.S.” A mortgage company funded a $1,000,000 loan to the straw buyer for the purchase of the property based upon information contained in a fraudulent loan application prepared by Stafford and Ward and signed by the straw buyer. This application contained materially false information concerning the straw buyer’s income, employment, and the purpose of the purchased location as a primary residence. Among the false representations on the application were the fact that the straw buyer had a monthly salary of $6,000 and earned $13,000 in rental income; neither of these statements were true.

On April 17, 2006, a title company wired $97,279.00 to Ward. This money represented
Ward’s equity in the property and her profit from the sale. Ward directed that this money be deposited into accounts controlled by Stafford and Ward and that it be disbursed to pay Ward’s creditors.

Neither Stafford or Ward repurchased the property from the straw buyer. Public records indicate that eight months after the sale to the straw buyer, the property was sold in a foreclosure sale for approximately $800,000.

The defendants are scheduled to be sentenced by Judge England on August 26, 2010, at
9:00 a.m. The maximum statutory penalty for Bank Fraud is 30 years’ imprisonment, a $1,000,000, a term of supervised release of five years, and a special assessment of $100. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney Kyle Reardon is prosecuting the case.

BIRMINGHAM—A federal grand jury today indicted a Brookwood man on wire fraud and false statement charges related to a more than $1 million mortgage fraud scheme in the Birmingham area, announced U.S. Attorney Joyce White Vance.

A 34-count indictment filed in U.S. District Court charges SCOTT ERIC PERRY, 34, with 17 counts of wire fraud and 17 counts of making false statements to lending institutions in connection to real estate transactions between February and December, 2006.

“Mortgage fraud damages our banks and lending institutions, but it also hits hard at our neighborhoods and communities,” Vance said. “When a property goes into foreclosure, surrounding homes tend to be harmed by lowered property values. Often the foreclosed properties are abandoned and the vacant houses become a source of vandalism or drug-related activities,” she said. “We are committed to seeking out mortgage fraud and prosecuting the perpetrators.”

According to the indictment, PERRY’s scheme was carried out as follows:

PERRY, doing business as Master Industries, bought houses in Jefferson County for the purpose of reselling them. From about Feb. 22 through Dec. 21, 2006, he sold numerous properties to various buyers throughout the Birmingham area. In each of these transactions, a federal Department of Housing and Urban Development form, a HUD-1 Settlement Statement, was issued that is required to accurately and truthfully disclose the payment of all monies associated with the transaction, and which parties made the payments.

Perry signed and submitted the statements as true and accurate, but failed to disclose that he both made the down-payments for the purchase of the homes and paid the purchasers at least $3,000 as an incentive to buy the properties.

The indictment charges that the submission of the false documents prompted lending institutions to authorize mortgage loans they would not, otherwise, have approved.

Those loan approvals resulted in the electronic wiring of fraudulently obtained money from the lending institutions, through a Federal Reserve Bank outside of Alabama, to a trust account PERRY had at Central Alabama Title in Birmingham, according to the indictment. Amounts of the 17 wire transactions charged as fraud range from $54,400 to $67,200.

The maximum sentence for the wire fraud counts is 20 years in prison and a $250,000 fine. The maximum sentence for the false statements counts is five years in prison and a $100,000 fine.

The indictment seeks forfeiture of $1,062,300, as the amount of the loans fraudulently obtained as a result of Perry’s fraud.

The FBI investigated the case. Assistant U.S. Attorney Patrick Carney is prosecuting it.

Members of the public are reminded that the indictment contains only charges. A defendant is presumed innocent of the charges and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.

TUCSON—U.S. Attorney Dennis K. Burke announced a federal grand jury in Tucson returned a six-count indictment against Scott Tyson, age 43, and Susan Levy, age 69, of Tucson, Arizona. The indictment charges the defendants with wire fraud and conspiracy to commit wire fraud.

According to the indictment, Levy, a licensed Arizona real estate agent, received approximately $1.2 million dollars in loans to purchase multiple real estate properties between February, 2006 and July, 2007. In obtaining her loans, Levy failed to disclose that she had purchased other properties during this time period and/or understated her liabilities, thus constituting a material omission of fact submitted to the lenders. Scott Tyson was the loan officer used by Levy in each of these transactions.

“The defendants conspired to obtain multiple mortgages based upon fraudulent representations. The goal of the conspiracy was to profit from either the commissions received from the loans or the future sale of the properties or ‘flip’,” said U.S. Attorney Dennis K. Burke. “This office is dedicated to prosecuting mortgage fraud related offenses and this indictment is another example of our partnership with the FBI to prosecute and hold industry insiders accountable.”

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

“Arizona has been greatly impacted by all facets of mortgage fraud in the last few years,” said FBI Special Agent in Charge Nate Gray. “The indictment of Tyson and Levy illustrates the FBI’s commitment to investigate those within the mortgage industry who allegedly conspired to profit from mortgage fraud. The FBI will continue to make mortgage fraud a priority and will pursue those who participate in various mortgage fraud schemes.”

A conviction for conspiracy to commit wire fraud and wire fraud carries a maximum penalty of 20 years’ imprisonment, a $250,000 fine or both for each count. In determining the actual sentence, the judge will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

The investigation preceding the Indictment was conducted by the Federal Bureau of Investigation’s Mortgage Fraud Task Force. The prosecution is being handled by Assistant U.S. Attorney Jonathan Granoff of the U.S. Attorney’s Office for the District of Arizona in Tucson.

BIRMINGHAM—A federal grand jury today indicted a Brookwood man on wire fraud and false statement charges related to a more than $1 million mortgage fraud scheme in the Birmingham area, announced U.S. Attorney Joyce White Vance.

A 34-count indictment filed in U.S. District Court charges SCOTT ERIC PERRY, 34, with 17 counts of wire fraud and 17 counts of making false statements to lending institutions in connection to real estate transactions between February and December, 2006.

“Mortgage fraud damages our banks and lending institutions, but it also hits hard at our neighborhoods and communities,” Vance said. “When a property goes into foreclosure, surrounding homes tend to be harmed by lowered property values. Often the foreclosed properties are abandoned and the vacant houses become a source of vandalism or drug-related activities,” she said. “We are committed to seeking out mortgage fraud and prosecuting the perpetrators.”

According to the indictment, PERRY’s scheme was carried out as follows:

PERRY, doing business as Master Industries, bought houses in Jefferson County for the purpose of reselling them. From about Feb. 22 through Dec. 21, 2006, he sold numerous properties to various buyers throughout the Birmingham area. In each of these transactions, a federal Department of Housing and Urban Development form, a HUD-1 Settlement Statement, was issued that is required to accurately and truthfully disclose the payment of all monies associated with the transaction, and which parties made the payments.

Perry signed and submitted the statements as true and accurate, but failed to disclose that he both made the down-payments for the purchase of the homes and paid the purchasers at least $3,000 as an incentive to buy the properties.

The indictment charges that the submission of the false documents prompted lending institutions to authorize mortgage loans they would not, otherwise, have approved.

Those loan approvals resulted in the electronic wiring of fraudulently obtained money from the lending institutions, through a Federal Reserve Bank outside of Alabama, to a trust account PERRY had at Central Alabama Title in Birmingham, according to the indictment. Amounts of the 17 wire transactions charged as fraud range from $54,400 to $67,200.

The maximum sentence for the wire fraud counts is 20 years in prison and a $250,000 fine. The maximum sentence for the false statements counts is five years in prison and a $100,000 fine.

The indictment seeks forfeiture of $1,062,300, as the amount of the loans fraudulently obtained as a result of Perry’s fraud.

The FBI investigated the case. Assistant U.S. Attorney Patrick Carney is prosecuting it.

Members of the public are reminded that the indictment contains only charges. A defendant is presumed innocent of the charges and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.

Real Estate Investor Indicted for Mail Fraud

LITTLE ROCK—Jane W. Duke, United States Attorney for the Eastern District of Arkansas, announced that Mark Madison, age 37, a licensed agent for a stock broker, was indicted today by a federal grand jury. The indictment charges Madison with 23 counts of wire fraud and 17 counts of mail fraud. Each count carries a statutory penalty of no more than 20 years incarceration and/or a fine of $250,000.

According to the indictment, Madison solicited funds from his clients for several different investments. However, instead of investing the funds as promised Madison used $1,129,457 of the funds for his own personal benefit, including payment of the mortgage on his personal residence, country club dues and expenses, personal tax obligations, credit card payments, and repayment of personal and business loans.

The indictment details five different investments Madison promised to make for his clients, including the capital funding for a healthcare company; loans to a businessman in Utah; bond investments; investment in establishing a trading platform; and investment in an oil well in Australia.

The investigation was conducted by the Little Rock Field Office of the Federal Bureau of Investigation. The Arkansas Securities Department assisted the FBI and the United States Attorney’s Office during the investigation. This case is being prosecuted by Senior Legal Advisor Michael D. Johnson.

An indictment contains only allegations and is not evidence of guilt. The defendant is presumed innocent until and unless proven guilty.

ANCHORAGE, AK—United States Attorney Karen L. Loeffler announced that on August 21, 2009, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name. Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2,360,185. Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.60. Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.24. Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.77. Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day. Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066.390. Gary Paterna. Mr. Lockard’s father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.86. Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.53. The defendants pled to a total of 64 counts charging conspiracy, wire fraud, bank fraud, and false statements to a financial institution.

The pleas and sentencing bring to a close the largest mortgage fraud scheme ever prosecuted in the District of Alaska. The fraud was perpetrated by professionals in all areas of the real estate industry. Between on or about December 23, 2003, and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudlent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified down payments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved. The effect and result of this conduct was to transfer the investment risk from Lockard and the other co-conspirators to the mortgage lenders and to provide inflated profit and fraudulently obtained loan funds to Lockard and the other co-conspirators. The charges in the indictment to which the defendants pled guilty outlined a total of five separate schemes, involving properties in numerous Anchorage subdivisions, and two large undeveloped properties in the Talkeetna area.

According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no down payments had been made.

The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Company as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.

The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA. Finally, the indictment alleges that Lockard engaged in a “bust out” scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.

At Friday’s sentencing hearing, Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudeulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million dollars. Judge Beistline commented that Mr. Lockard’s crimes were motivated by greed and had an impact on our community. In addition to the financial institutions that were defrauded, one of the individual victims testified at setencing about his personal financial losses, and his struggles to pay the mortgages on three duplexes he had unwittingly purchased for grossly inflated prices. Judge Besitline admonished that there was “no excuse for lying and deception, and no excuse for breaking the law,” and that Mr. Lockard was going to have to “face the consequences of the very poor choices he made.”

United States Attorney Karen L. Loeffler noted that these convictions and sentences point out the vast harm that can be done to an industry and the public when a handful of dishonest individuals are willing to falsify the documents and information on which the mortgage market relies.

Ms. Loeffler also commended the diligent and extensive investigation by special agents of the Federal Bureau of Investigation for their investigation that lead to this result.

A 40-year-old lawyer from Hudson, Wisconsin, was sentenced earlier today in federal court in Minneapolis for stealing more than $3 million in a mortgage fraud scheme. United States District Court Judge Patrick J. Schiltz sentenced Jason Eric Fischer to 50 months in prison on one count of mail fraud and one count of money laundering. Fischer was charged on January 28, 2010, and pleaded guilty on February 9, 2010. Judge Schiltz also ordered Fischer to pay more than $3 million in restitution.

In his plea agreement, Fischer admitted that from 2006 through May of 2009, he orchestrated a scheme to divert funds from the escrow account at Real Source Title, a company he jointly owned and managed. The company, which had offices in Mahtomedi and Burnsville as well as in Illinois and Hudson, Wisconsin, routinely accepted wire transfers and checks from buyers and lenders. Those funds were to be held in escrow for the sole purpose of closing residential real estate transactions. Fischer, however, used the diverted funds for personal benefit.

Following today’s sentencing, Kelly R. Jackson, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division’s St. Paul Field Office, said, “Mortgage fraud causes much harm to individuals, businesses, and our economy; but today’s sentencing is a strong reminder how serious our courts consider this criminal activity. Those who line their pockets with profits from these schemes should know they will be held accountable and brought to justice.”

To further his scheme, Fischer represented to buyers, lenders, underwriters, and others that the money deposited into the company’s escrow account was, in fact, used only to close real estate transactions. He made those representations by producing and mailing false HUD-1 settlement statements to people of interest. In truth, however, Fischer regularly withdrew escrow-account money to pay for personal and business expenses as well as to fund prior company real estate transactions. In 2008, for example, Fischer invested approximately $500,000 in escrow dollars into the opening and operation of a restaurant.

Between 2006 and May of 2009, Fischer diverted approximately $3 million from the escrow account at Real Source Title; and by May 2009, the account was depleted and unable to fund 15 loans. As a result, buyers, sellers, lenders, underwriters, and others suffered significant financial loss.

After today’s sentencing, Ralph S. Boelter, Special Agent in Charge of the Federal Bureau of Investigation’s Minneapolis Field Office, reminded the public that the FBI remains steadfast in its commitment to investigating mortgage fraud and related-fraud schemes aggressively. This case was the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorney Joe Dixon.

HOUSTON—Today, a jury sitting in United States District Judge Sim Lake’s Courtroom found Vincent Wallace Aldridge, former fee attorney for First Southwestern Title Company and attorney for Aldridge and Associates, along with Tori Elyse Aldridge, a former employee of First Southwestern Title Company and Gilbert Barry Isgar, a co-owner of Waterford Homes, guilty of charges of wire fraud and money laundering in a scheme to defraud residential mortgage lenders of more than $3.7 million in loans in connection with home purchases in the Houston area, United States Attorney José Angel Moreno announced today along with FBI Special Agent in Charge Richard C. Powers and Internal Revenue Service-Criminal Investigations (IRS-CI) Special Agent in Charge Rodney E. Clarke.

Vincent Aldridge, 45, and Tori Aldridge, 32, both of Fresno, Texas (right outside of Houston), were found guilty of 19 counts which included conspiracy to commit wire and mail fraud, wire fraud, conspiracy to commit money laundering and money laundering charges. Isgar, 50, of Katy, Texas, was found guilty of 13 counts which included conspiracy to commit wire and mail fraud, wire fraud and conspiracy to commit money laundering.

Both of the Aldridges and Isgar conspired to devise and execute a scheme during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least four lending institutions as the basis for an agreement between the lending institutions and borrowers. Vincent Aldridge lured borrowers by representing the scheme as an investment opportunity. For the use of their credit to obtain mortgage loans, the borrowers were promised $10,000 after the closing of their respective property and that the property would be sold after a year for a profit. Once a borrower agreed to the deal, then Vincent Aldridge and Tori Aldridge, acting as an escrow officer and as a loan processor, met with the borrower to obtain the necessary personal identifying information to complete the borrower’s lending package. Prior to the Aldridges submitting the lending packages to the lending institutions, the Aldridges modified the lending package to enhance the borrower’s ability to qualify for the requested loan. These enhancements included fraudulently overstating the borrower’s income, misrepresenting the borrower’s principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. Each property sold in amounts between $344,000 and $360,000 and were funded to First Southwestern Title Company by wire.

As a part of the scheme, Isgar, co-owner of Waterford Custom Homes, inflated the sales price of the properties to be purchased by the aforementioned recruited borrowers. As a part of the agreement between the Aldridges and Isgar, disbursement authorizations for attorney’s fees and additional contractor fees on brand new homes for amounts of $60,000 to more than $80,000 were signed by Isgar. These documents were provided to First Southwestern Title, which was controlled by the Aldridges. These disbursement authorizations were not provided to the lender and were not listed on the HUD Settlement Statement. The disbursements for additional attorney’s fees were in addition to the attorney’s fees stated on the attorney fee line in HUD Settlement Statement.

Once the loans were funded to the title company, the Aldridges caused several checks to be drawn on the account of the title company, each totaling amounts of $60,000 to more than $80,000, to Aldridge & Associates IOLTA bank account. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme. On one occasion, Isgar wired approximately $81,000 back to Vincent Aldridge’s account after he received the funds from the closing. The total amount of the money laundering was more than $500,000.

United States District Judge Sim Lake pronounced the defendants guilty and reset the case for sentencing on May 25, 2011, at 2:00 p.m. All of the defendants were permitted to remain on bond pending their sentencing hearings.

The maximum penalty for each wire fraud count is 20 years in prison as well as substantial fines. The maximum penalty for each money laundering count is 10 years in prison. A conviction for money laundering carries the most significant fine of $250,000 or twice the amount of the criminally derived property, whichever is greater.

The investigation leading to the charges was conducted by the FBI and IRS-CI. Assistant United States Attorneys Jennifer Lowery and Andrew Leuchtmann are prosecuting the case.

LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of HUGH ZUBER — a lawyer employed by the Office of the Corporation Counsel for the City of New York — for fraud, including mortgage fraud, in connection with the purchase and sale of two buildings, and for forging the signature of a bankruptcy judge on a false bankruptcy court order concerning one of the purchases.

According to the criminal Complaint unsealed today in Manhattan federal court:

In April 2006, a property owner in the Bronx retained ZUBER to represent him in the sale of a building. ZUBER arranged the sale of the property to Alana Property Management LLC for $950,000 — but did not disclose to his client that he had created Alana Property, and that his sister managed the company. At ZUBER’s urging, his client agreed to sell the property to Alana Property for $400,000 in cash and a $550,000 ten-year note, purportedly secured by a mortgage, that ZUBER’s client issued directly to Alana. Alana Property then financed the February 2007 purchase of the property in part via a $705,000 mortgage which it obtained based on a loan application that omitted material facts regarding the transaction. Alana Property diverted a portion of those loan proceeds for its own, unrelated purposes, and provided only approximately $400,000 to ZUBER’s client. After the closing, ZUBER made payments for some months on both the mortgage and the note. When ZUBER and Alana Property failed to make payments additional on the note, ZUBER, among other things, presented to the client documents relating to a lawsuit he had purportedly filed against Alana Property in New York State court, and a May 2008 “Order Confirming Plan” that had purportedly been issued in bankruptcy proceedings involving Alana Property. There were in fact no such proceedings in New York State or federal bankruptcy court.

In 2006, ZUBER represented a Spring Valley, New York, property owner in the sale of a house to an individual for $625,000. ZUBER did not disclose to his client that he had a business relationship with the purchaser. At ZUBER’s urging, his client agreed to sell the property to the purchaser for $425,000 in cash and a $200,000 ten-year note, purportedly secured by a mortgage, that ZUBER’s client issued directly to the purchaser. The purchaser then funded the transaction in part via a $500,000 mortgage obtained via a loan application that omitted material facts regarding the transaction. Following the July 2007 closing ZUBER made payments for some months on both the mortgage and on the note. When payments on the note ceased and the seller advised the purchaser that he was in default, the purchaser denied that he had issued a mortgage to the seller. ZUBER then told his client that he had “messed up” and that he would try to make it up to the client, but failed to do so.

ZUBER, 38, of Monsey, New York, was charged with one count of conspiring to commit wire and mail fraud, and one count of forging a judicial signature. The conspiracy charge carries a maximum sentence of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. The forged judicial signature charge carries a maximum sentence of 5 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. ZUBER is expected to be presented later today before United States Magistrate Judge THEODORE H. KATZ, in Manhattan federal court.

Mr. DASSIN praised the FBI for its outstanding work in the investigation. He also thanked the Bronx District Attorney’s Office for referring the investigation to the United States Attorney’s Office, and thanked the Rockland County District Attorney’s Office and the New York City Department of Investigation for their assistance.

Assistant United States Attorney MARK D. LANPHER is in charge of the prosecution.

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

The following three Maryland defendants were indicted today for mail and wire fraud arising from a scheme to defraud lenders and a title insurance company of over $4 million:

* Stephen J. Troese, Sr., age 71, of Davidsonville;
* James Kevin Hughes, age 52, of Crownsville; and
* Brenda Lukenich, age 60, of Hughesville.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to the 12-count indictment, Troese was an attorney and owned or controlled title companies that he created in the 1980s and 1990s that did business in the Baltimore, Annapolis, and Washington, D.C. metropolitan areas, including Troese Title Services, Inc. (Troese Title), located in Camp Springs, Maryland; Troese/Hughes Title Services, Inc. (Troese/Hughes), located in Greenbelt, Maryland; and Troese/Prestige Title Services, Inc. (Troese/Prestige), located in Ellicott City, Maryland. Troese entered into agency agreements with Chicago Title Company which authorized the Troese title companies to sell its title insurance policies to lenders and buyers. While the title insurance policies obligated Chicago Title to pay losses resulting from undiscovered defects in the title of the property, the agency agreements expressly provided that Troese and the Troese title companies were responsible to Chicago Title for any losses associated with fraud, dishonesty, or theft.

The indictment alleges that beginning at least as far back as 2004, a substantial shortfall began to develop in an escrow account maintained by Troese Title and Troese/Hughes for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies. This shortfall is alleged to have been partly the result of mistakes made during the closing process on several transactions that required costly pay-outs to resolve, and partly from several large and long-undetected thefts by individual employees, although these factors did not account for all of the deficit. In the spring of 2005, Lukenich, the escrow accountant for the title companies, advised others at Troese Title and Troese/Hughes that the shortfall totaled at least $2 million. The shortfalls were further aggravated in 2006 through 2008 as the real estate and refinancing boom that had started in approximately 2002 first cooled, then collapsed.

Because of these shortfalls, both Troese Title and Troese Hughes allegedly delayed making the required payoffs to the original lenders after each closing in order to generate a “float,” whereby funds coming into the escrow accounts from later transactions could be used to make the payments due on transactions that had already closed. Initially, funds were held for periods of three to five days, but this “hold” allegedly later grew to 10 days and even longer. By mid-2008, payments were being held for three weeks or more.

The indictment further alleges that instead of disclosing the shortfalls to Chicago Title, the defendants concealed the shortfalls. In an effort to generate cash to cover at least part of the shortfall, Troese and Hughes refinanced their homes, using Troese/Hughes as their title company. Instead of using the money from the new lenders to pay off their old mortgages as required, they allegedly used most of the money to attempt to cover the shortfall, which continued to grow over time. Although they caused the HUD-1 settlement statements to state that funds from the new lenders were used to pay off the outstanding debts, Troese allegedly caused the funds from the new lender to be used to make mortgage pay-offs on other closings previously handled by Troese Title. Because the original lenders were never paid off, the new lenders on the defendants’ residences did not have a first lien on the homes to secure the repayment of funds that the new lenders had advanced. To keep the original lenders from realizing that the homes had been refinanced, Troese and Hughes allegedly continued to make the monthly mortgage payments to the original lenders. Using this same scheme, Troese also allegedly caused a Troese employee, a manager, and a president of Troese Title to refinance their three homes.

Although Chicago Title remained unaware of the scheme to cover up the shortfalls, the indictment alleges that Troese Title and Troese/Hughes employees failed on a number of occasions to uncover title defects and also had made other mistakes that resulted in numerous claims being filed against Chicago Title. In the spring of 2008, Chicago Title determined that its relationships with Troese Title and Troese/Hughes were no longer profitable, and notified Troese that as of May 31, 2008, it was terminating its relationship with Troese individually, and with Troese Title and Troese/Hughes. Chicago Title was, however, willing to continue its relationship with certain other Troese-related title companies, including Troese/Prestige, whose insurance policies had not generated a similarly high volume of claims. Accordingly, a new agency agreement was concluded that covered just those other entities.

According to the indictment, by May of 2008, Troese Title and Troese/Hughes were at least $1.5 million behind in paying off the outstanding mortgages on transactions they had already closed. The defendants knew that if these companies were unable to conduct settlements and stopped receiving additional infusions of loan proceeds to replenish the shortfall, they would quickly find it impossible to make the remaining unpaid mortgage pay-offs still owed by each company, and the entire scheme would be revealed. Troese allegedly decided that Troese Title and Troese/Hughes would continue to operate from their old offices in Camp Springs and Greenbelt, but that without informing Chicago Title, they would operate under the Troese/Prestige name and would issue title insurance policies under the new agreement between Chicago Title and Troese/Prestige. Troese allegedly hid the fact that Troese Title and Troese/Hughes had started conducting operations under the Troese/Prestige name not only from Chicago Title, but also from the manager and employees of the original Troese/Prestige office in Ellicott City. Chicago Title believed that the title insurance policies that were still being sold by the former Troese Title and Troese/Hughes offices were actually originating from the Troese/Prestige office in Ellicott City.

The indictment alleges that the defendants agreed that the initial funds generated by the secret continuation of Troese Title and Troese/Hughes under the Troese/Prestige name would be used to cover the outstanding mortgage pay-offs still owed by each company. From approximately early June until the end of the first week of August 2008, following each closing conducted under the name Troese/Prestige, an employee of Troese Title or Troese/Hughes would send a copy of the HUD-1 by Federal Express to the new lender, falsely representing that the proceeds of the loan had been disbursed to the original lender.

As a result of the scheme, Chicago Title allegedly suffered a loss of over $4 million.

The defendants face a maximum sentence of 20 years in prison on each of the eight counts for mail fraud and on each of the four counts for wire fraud. Troese and Hughes are scheduled to have their initial appearances on January 28, 2011, and Lukenich is scheduled for her initial appearance on February 4, 2011, all in federal court in Baltimore.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention, and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available www.justice.gov/usao/md/Mortgage-Fraud/index.html.

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.

United States Attorney Rod J. Rosenstein commended the FBI for its investigative work, and thanked Assistant U.S. Attorneys Tonya Kelly Kowitz and Jefferson M. Gray, who are prosecuting the case.

Deputy Attorney General Mark Filip and FBI Director Robert Mueller announced the results of “Operation Malicious Mortgage,” a massive multiagency takedown of mortgage fraud schemes involving more than 400 defendants nationwide who have been charged over the past three and a half months.
The operation focused primarily on three types of mortgage fraud—lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes. “To persons who are involved in such schemes, we will find you, you will be investigated, and you will be prosecuted,” said Mueller. “To those who would contemplate misleading, engaging in such schemes, you will spend time in jail.”
Among the 400-plus subjects of Operation Malicious Mortgage, there have been 173 convictions and 81 sentencings so far for crimes that have accounted for more than $1 billion in estimated losses. Forty-six of our 56 field offices around the country took part in the operation, which has secured more than $60 million in assets.
During its investigative phase, we worked closely with our partner agencies—including the Postal Inspection Service, Internal Revenue Service, Immigration and Customs Enforcement, Secret Service, U.S. Trustee Program, and the Inspector General Offices of the Department of Housing and Urban Development, Department of Veterans Affairs, and Federal Deposit Insurance Corporation.
The FBI’s mortgage fraud caseload has doubled in the past three years to more than 1,400 pending cases. To address this steady growth, Mueller noted that every FBI field office focuses on this criminal priority. The Bureau also takes part in 42 mortgage fraud task forces and working groups. And we continue our joint efforts with federal, state, and local agencies.
“Our objective, as always,” said Mueller, ”is to protect the consumer and stabilize our economic markets.”
Among the Bureau’s mortgage fraud cases are 19 sub-prime-related corporate fraud investigations. Most of these corporate fraud investigations, said Mueller, deal with accounting fraud, with insider trading, and with criminal intent, the failure to disclose the proper valuations of the securitized loans and derivatives.
Deputy Attorney General Filip also said that the Justice Departments remains committed to investigating and prosecuting cases of mortgage-related securities fraud, noting today’s announcement of an indictment against two senior managers of failed Bear Stearns hedge funds.

DAYTON—Four participants in an extensive mortgage fraud scheme that affected 210 residential properties, including 205 in Montgomery County, were sentenced today in federal court by U.S. District Judge Michael R. Barrett.
Carter M. Stewart, United States Attorney for the Southern District of Ohio, Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation; Jose Gonzalez, Special Agent in Charge, Internal Revenue Service Criminal Investigation, and other members of the Dayton Mortgage Fraud Task Force announced the sentences handed down today by U.S. District Judge Michael A. Barrett.
Edward McGee, 76, was sentenced to three years’ probation and fined $140,000. Edward McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit money laundering.
His son, Kenneth O. McGee, 50, was sentenced to 32 months in prison and fined $12,500. Kenneth McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud, and money laundering, and one count of conspiracy to commit money laundering.
Robert Mitchell, 43, Vandalia, was sentenced to 32 months in prison and fined $12,500. Mitchell pleaded guilty on March 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.
Kamal J. Gregory, 36, Centerville, was sentenced to 10 months in prison and fined $12,500. Gregory pleaded guilty April 14, 2009 to one count of conspiracy to commit mail fraud, wire fraud’ and money laundering, and one count of conspiracy to commit money laundering.
These cases stem from a 13-count indictment involving six defendants which was originally handed down on June 25, 2008. The four sentenced today were part of a conspiracy that operated and controlled various Dayton-based real estate mortgage and title insurance related businesses and corporations that schemed to defraud 33 mortgage lending institutions out of over $7 million in loan proceeds and other things of value. This scheme involved arranging, facilitating, and manipulating documents associated with real estate sales and closings in order to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties for the personal benefit of the co-conspirators.
Two others involved in the scheme were previously sentenced. Julian M. Hickman, 32, formerly of Centerville and now living in East Cleveland, pleaded guilty on December 15, 2008 to conspiracy and tax crimes. Hickman was sentenced on December 10, 2009 to 33 months’ imprisonment. Jessica A. Zbacnik, 42, of Monroe, pleaded guilty on July 29, 2009 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud, and money laundering. She was sentenced on December 3, 2009 to 30 months’ imprisonment.
Agencies participating in the Greater Dayton Mortgage Fraud Task Force in addition to the FBI and IRS include the Ohio Department of Commerce Division of Financial Institutions, the Ohio Attorney General’s Office, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, and the Perry Township Police Department.

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
Brown – $ 9,985,004.15.

David B. Fein, United States Attorney for the District of Connecticut, announced that NATHAN RUSSO, 34, of Johnston, Rhode Island, pled guilty today before Chief United States District Judge Alvin W. Thompson in Hartford to one count of conspiracy to commit wire fraud stemming from his participation in a mortgage fraud conspiracy.

According to court documents and statements made in court, RUSSO and others engaged in a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals.

RUSSO was a mortgage broker employed by Action Mortgage Corp., a licensed mortgage broker in Cranston, Rhode Island. In pleading guilty, RUSSO admitted that he acted as a mortgage broker for five residential property sales that closed in between April and September 2007. All but one of these properties were in Connecticut. RUSSO prepared loan packages for these transactions, including loan applications for the buyer, which he knew to include false information about the buyer’s employment, assets and liabilities and the buyer’s intention to occupy the property as his principal residence. The loan applications also were supported by false documentation, including earning statements and fraudulent bank records.

Judge Thompson has scheduled sentencing for April 4, 2011, at which time RUSSO faces a maximum term of imprisonment of five years and a fine of up to $250,000.

The investigation is ongoing.

This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development – Office of Inspector General and is being prosecuted by Assistant United States Attorneys Eric J. Glover and Susan Wines.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Mail Fraud and Wire Fraud are offences under United States Federal Law which refer to specific statutory crimes committed in the United States of America pursuant to any scheme that attempts to unlawfully obtain money or property in which the U S Postal system is used at any point in the commission of a criminal offense.

Michael Milan, 49, of Bethesda, MD, faces a maximum penalty of 20 years in prison when he is sentenced on Feb. 12, 2010. As part of a guilty plea, Milan has agreed to pay restitution of $3,141,409 and to forfeit $1,061,890.31 in proceeds he obtained.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Joseph Persichini Jr., Assistant Director in Charge of the FBI Washington Field Office, announced that Milan pleaded guilty yesterday to conspiracy to commit mail and wire fraud for his role in carrying out a multi-million dollar mortgage fraud scheme. The plea was accepted by United States District Judge T.S. Ellis, III.

This is the statement of facts issued by the Department of Justice in its press release filed on Tuesday, December 1, 2009:

“Milan admitted that he was a consultant to various mortgage brokerage companies and conspired with others to defraud mortgage lenders into lending funds for the purchase and refinance of residential properties. Milan caused his associates to prepare false mortgage applications which contained false information about the income and assets of the borrowers. Some of the mortgage applications falsely claimed that the borrowers earned hundreds of thousands of dollars from a company, Collid LLC, which Milan controlled. Milan’s conspiracy submitted fraudulent loan applications for the purchase or refinance of 11 different properties and caused losses of more than $2.5 million but less than $7 million.

Milan fled from the United States after the execution of a search warrant at his office in June 2008 and did not return until April 2009. During a detention hearing held after his return, Milan attempted to explain his extended flight from the U.S. by providing fraudulent Iranian court documents, which falsely claimed that he had been incarcerated in Iran during the summer of 2008. As part of his plea, Milan acknowledged that he attempted to obstruct justice with these false documents.”

Milan is the sixth defendant convicted by the investigation. Others convicted include a settlement agent, a loan officer who worked with Milan, and Milan’s son, Dustin Milan.
This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorneys Edmund P. Power and Stephen P. Learned prosecuted the case on behalf of the United States.

Real Estate Investor Ordered to Pay Over $4.1 Million in Restitution

SHERMAN, TX—U.S. Attorney John M. Bales announced today that a 38-year-old Grapevine, Texas man has been sentenced to federal prison for his role in a mortgage fraud scheme in the Eastern District of Texas.

Esshan Samuel “Sam” Agha pleaded guilty on Oct. 19, 2009, to conspiracy to commit mail fraud and was sentenced to 51 months in federal prison today by U.S. District Judge Marcia Crone. Agha was also ordered to pay restitution in the amount of $4,127,131.50.

According to information presented in court, from Oct. 2005 to Feb. 2008, Agha, a real estate investor, devised a scheme in which he solicited others to buy homes that in most cases were in fact owned by himself or an unnamed co-conspirator. A smaller number of homes were also owned by a third party for whom Agha brokered the sales. Agha facilitated the scheme by making false statements that included misrepresentations such as overstating the buyers’ income and stating that the buyers intended to occupy the homes as their primary residence. All of the loans involved in the scheme went into default when the buyers failed to make the mortgage payments on the homes, which included 24 properties in Collin County and one in Tarrant County.

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.

These cases were investigated by the FBI and prosecuted by Assistant U.S. Attorney J. Andrew Williams.

FRESNO, CA—Jesse Alvin Cripps Sr., 57, previously of Visalia, California, surrendered to the FBI this morning in Dallas. He is charged with 27 counts of mail fraud and three counts of money laundering, U.S. Attorney for the Eastern District of California Benjamin B. Wagner announced today. A federal grand jury in Fresno, Calif., returned the indictment on Nov. 10, 2010. Cripps and will appear before the magistrate judge today in Dallas. He is scheduled to appear in Fresno before U.S. Magistrate Judge Gary S. Austin on Dec. 8, 2010.
The indictment alleges that between July 2001 and June 2008, Cripps, who was working as a financial advisor, devised a scheme to defraud investors through various means, using his church contacts to solicit individuals to invest money with him. In most instances, Cripps offered individuals an opportunity to purportedly invest in a real estate investment trust (REIT). The indictment alleges that Cripps told investors that the REIT fund was an investment group for real estate in either Nevada or California, that the REIT fund was secured by the property, that they would earn typically 10 to 12 percent interest per month, and that if the investment did not work out, the investor would still own the property and could sell it. The indictment alleges that as a result of Cripps’s false and fraudulent statements, investors gave him money to invest in the purported real estate investment trusts. Instead of investing, Cripps used the money for his own business and personal expenses.
The indictment also alleges that as part of his scheme to defraud, Cripps would periodically send the investors statements showing the purported progress of their investments and the interest earned to date. The defendant would also use investors’ money to pay interest amounts owed to other investors. The indictment alleges that both the periodic payments and statements lulled the investors into believing the legitimacy of their investments, brought in new investors, and avoided reporting to and detection by law enforcement.
In addition to the mail fraud charges, the indictment also charges Cripps with money laundering. After depositing the investors money into his accounts, Cripps made cash withdrawals in amounts greater than $10,000 and wired $25,000 overseas to his account in Gibraltar. As a result of his scheme, Cripps obtained at least $2 million from investors, many of whom lost their entire life savings and retirement.
If convicted, Cripps faces a maximum statutory penalty of 30 years in prison for each count of mail fraud, a $250,000 fine and up to five years of supervised release following incarceration. The maximum statutory penalty for international money laundering is 20 years in prison, a $500,000 fine and up to three years of supervised release following incarceration, and the maximum statutory penalty for money laundering proceeds in amounts greater than $10,000 is 10 years in prison, a $250,000 fine, to be followed by three years of supervised release.
The charges are only allegations and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case is the product of an investigation by the FBI. Assistant U.S. Attorney Michele Thielhorn is prosecuting the case.
This law enforcement action is part of the work being done by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). 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 Securities Fraud Working Group, which is tasked with combating investment fraud schemes. For more information on the task force, visit www.stopfraud.gov.