A 36-year-old Savage man pleaded guilty yesterday in federal court in Minneapolis to participating in a $13 million mortgage fraud scheme that involved no fewer than 25 properties in Prior Lake, Savage, and Minnetonka, among other Minnesota communities. Appearing before United States District Court Judge Ann D. Montgomery this morning, Ericvan Anthony McDavid specifically pleaded guilty to one count of wire fraud. He was indicted, along with two co-defendants, on June 15, 2010. McDavid’s sister, Renee Lynise McDavid, age 38, of Brooklyn Park, pleaded guilty on January 25, 2010, to one count of conspiracy to commit wire fraud in connection with the same scheme. She was charged on January 19, 2011.

In his plea agreement, Ericvan McDavid admitted that between April of 2005 and February of 2009, he conspired to obtain loan proceeds fraudulently by making false representations and promises as well as by withholding material information. During that time, McDavid was either an owner or co-owner of several businesses, including EVM Properties, Skyy Realty, and Universal, Inc., through which he bought, sold, and managed real estate.

To carry out this fraud scheme, McDavid recruited “straw buyers” to purchase selected properties by promising them payments of $15,000 to $52,000 per transaction. Once a buyer agreed to purchase a particular property, McDavid provided that buyer with funds to put toward the purchase, thereby misleading the lender into believing that the buyer actually had a financial interest in repaying the loan, when, in reality, that was not the case.

McDavid then produced or caused the production of false loan applications on behalf of the buyers. Those applications overstated the buyers’ assets and employment status. Because of the false applications, mortgage loans were approved in no fewer than 25 real estate transactions, with total loan proceeds amounting to approximately $13 million. While those proceeds were intended to pay for the properties and other transaction-related expenses, McDavid admittedly used portions of them to benefit himself personally.

Ultimately, the properties involved in the fraudulent transactions fell into default and ended up in foreclosure. Following foreclosure, they were sold for a total of about $4 million, resulting in a loss due to this scheme of about $9.2 million.

In her plea agreement, Renee McDavid admitted participating in the scheme from 2006 through 2008. In her capacity as a licensed real estate agent and mortgage broker, she was responsible for losses incurred in five of the 25 property transactions noted above. In those instances, she entered false information on loan applications so straw buyers would qualify for mortgage loans they otherwise would not be eligible to receive. Again, those misrepresentations included overstating applicant income and falsifying employment histories. As a result of the material misrepresentations in those five instances alone, lenders issued loan proceeds totaling more than $1.7 million and ultimately incurred a loss of approximately $768,000.

Ericvan McDavid’s two co-defendants, Larry Africanus Hutchinson, age 39, of St. Paul, and Jerone Ian Mitchell, age 35, of Minneapolis, have pleaded guilty to one count of conspiracy to commit wire fraud. They are awaiting sentencing.

For his crime, Ericvan McDavid faces a potential maximum penalty of 20 years in prison. Renee McDavid faces a potential maximum penalty of five years for her crime. Judge Montgomery will determine their sentences at a future hearing, yet to be scheduled.

These cases are the result of investigations by the Federal Bureau of Investigation and the Minnetonka Police Department. They are being prosecuted by Assistant U.S. Attorney Christian S. Wilton.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The Task Force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The Task Force is working to improve efforts across the Federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury in Bridgeport has returned an indictment charging DOMINGOS DIAS, 41, of Trumbull, and HECTOR NATERA, 39, formerly of Bridgeport, with conspiracy, wire fraud, and bank fraud offenses stemming from their alleged involvement in a mortgage fraud scheme that has caused more than $3 million in losses to lenders. The indictment was returned on November 18, 2010, and was unsealed on May 11, 2011.

The indictment alleges that from approximately January 2006 to April 2008, DIAS, NATERA, and others conspired to obtain millions of dollars of fraudulent real estate loans from banks and real estate lenders for properties that were purchased in Bridgeport and New Haven. Working from offices located at 1944 Boston Avenue in Bridgeport, DIAS and NATERA held themselves out as real estate agents and mortgage brokers and recruited “straw buyers,” found sellers, and orchestrated and directed the creation and flow of fictitious documentation and information that were needed to obtain the fraudulent loans from lenders. After a loan for a property had been fraudulently obtained and a closing had occurred, DIAS and NATERA kept some of the fraud proceeds and distributed proceeds to other members of the conspiracy.

It is alleged that losses to mortgage lenders from this scheme total in excess of $3 million.

The indictment charges DIAS and NATERA with one count of conspiracy to commit wire fraud and bank fraud and one count of bank fraud. The indictment also charges DIAS with six counts and NATERA with four counts of wire fraud. Each of the charges carries a maximum term of imprisonment of 30 years and a fine of up to $1 million

DIAS was arrested on November 23, 2010. He had been released on bond until May 11 when U.S. Magistrate Judge Holly B. Fitzsimmons found that DIAS had violated the terms and conditions of his release and ordered the bond revoked and DIAS detained. The indictment was unsealed on that date.

NATERA is currently being sought by law enforcement. Citizens with information about this case, or any other suspected mortgage fraud activity, are encouraged to contact the Connecticut Mortgage Fraud Task Force at 203-333-3512, or by e-mail to ctmortgagefraud@ic.fbi.gov.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service. The case is being prosecuted by Assistant United States Attorney Ann M. Nevins.

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 is focusing on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes and short sale schemes.

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.

INDIANAPOLIS—Jerry J. Jaquess, Indianapolis, age 67, was sentenced to 30 months in prison late yesterday by Chief Judge David F. Hamilton for his participation in a large mortgage fraud scheme in the Indianapolis area, announced Timothy M. Morrison, United States Attorney for the Southern District of Indiana. Jaquess plead guilty to one count of wire fraud and one count of money laundering. Today’s sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division and investigators for the United States Attorney’s Office, with assistance by the Federal Bureau of Investigation. Eight other individuals have been charged in the schemes and those cases are currently pending before Judge Hamilton. The investigation is continuing as to other individuals who were involved in the mortgage fraud schemes.

Jaquess owned and operated Homevestors LLC, a company involved in the development and construction of new real estate properties, as well as the purchase and sale of existing residential real estate properties. As part of the mortgage fraud schemes, Jaquess and other individuals entered into contracts to purchase 186 duplexes in the Windsor Village neighborhood, located near Arlington Avenue and 21st Street, on the east side of Indianapolis. These properties were all owned by one person, thru various land trusts. Jaquess and others negotiated with this individual to purchase all of the duplexes at a price of $50,000.00 each (the last group of these properties actually sold for $60,000.00).

Jaquess used his company Homevestors to negotiate the purchase and sale of the first 11 Windsor Village properties. On each of the properties, Jaquess entered into a land contract (and other documents) immediately preceding the closing, showing that Homevestors LLC was purchasing the property from the owner for $50,000.00. He also entered into agreements to sell the properties to investors for $120,000.00 each. In early February 2005, prior to the first purchase agreements ever being finalized, Jaquess, or individuals associated with him, caused three of the Windsor Village properties to be listed on the Metropolitan Indianapolis Board of Realtors Multiple Listing Service (MLS) showing a list price of $120,000.00. Jaquess did not own the properties at the time they were listed and did not even enter into land contracts to purchase these properties (for $50,000.00 each) until mid-March 2005. These properties were the first three Windsor Village properties closed (on March 17, 2005). A few days after these properties closed, Jaquess and his associates caused these three sales (at $120,000.00 apiece) to be placed on the MLS. This allowed Jaquess and other individuals involved in the scheme to show these three properties as comparables on appraisals to be prepared for all of the remaining Windsor Village properties, thus making it appear that each of those properties were worth $120,000.00. Jaquess attended the closings as the seller of the properties, and generally also took the buyer (investor) down payment check to the closings. Jaquess signed the loan closing documents on behalf of Homevestors LLC, including the false HUD-1 Settlement Statements, showing that the investors were providing the down payments, which he knew to be untrue. After the closing, Jaquess received checks to Homevestors LLC for the amount of the fraudulent loan proceeds (generally more than $70,000.00 per property). Jaquess then caused Homevestors LLC to issue checks disbursing the fraudulent loan proceeds. Included in these checks were payments totaling approximately $42,000.00 payable to Jaquess personally, or a family member of his, as well as checks to repay the individuals “fronting” the down payment (plus $1,000.00 – $3,000.00 fee) and checks to pay the investors $4,000.00 for each property purchased.

According to Assistant U. S. Attorney Susan Heckard Dowd, who prosecuted the case for the government, Judge Hamilton ordered Jaquess to serve three years on supervised release following his 30 months of incarceration and also ordered him to pay $824,614.33 in restitution to Homecomings Financial and Argent Mortgage Company.

John Bravata, the founder and chairman of BBC Equities, LLC, was arrested yesterday at JFK International Airport, announced U.S. Attorney Barbara L. McQuade. Bravata was arrested on an inbound flight from Italy. McQuade was joined in the announcement by Special Agent in Charge Andrew G. Arena, Federal Bureau of Investigation.

Bravata is charged in a criminal complaint with wire fraud in connection with his solicitation of investor funds for BBC, which Bravata characterized as a real estate investment fund. The complaint charges that from 2006 through 2009, Bravata knowingly participated in a scheme to defraud investors. Bravata and those working on his behalf made multiple misrepresentations to numerous prospective investors, including misrepresentations regarding how their investment funds would be utilized, the security of funds invested with BBC, and the returns that could be expected by investors of BBC.

Bravata also misled investors by telling them that managers of BBC would not earn money unless BBC was profitable. He also represented that the managers of BBC did not take fees, commissions, or a salary. In reality, Bravata and others received lucrative compensation from BBC and related entities despite that fact that BBC was never profitable. Bravata also used investor funds to pay for the construction of his roughly 18,000 square foot personal home and to pay for other personal expenses.

The charge in the complaint, wire fraud, carries a maximum penalty of 20 years’ imprisonment and a $250,000 fine.

A complaint is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Louis P. Gabel.

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

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

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

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

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

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

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

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

TRENTON, NJ—A Marlboro, N.J., real estate developer admitted today to his role in an investment fraud conspiracy which embezzled nearly $1 million raised in connection with purported commercial real estate developments in New Jersey, U.S. Attorney Paul J. Fishman announced.

Allen Weiss, 60, of Marlboro, pleaded guilty to an information charging him with one count of conspiracy to commit wire fraud. Weiss entered his guilty plea before U.S. District Judge Anne E. Thompson in Trenton federal court.

According to the information to which the defendant pleaded guilty and statements made in court:

Weiss admitted that he conspired with others from January 2009 to February 2010 in a scheme to embezzle investment funds he raised in connection with purported commercial real estate developments. Weiss and his co-conspirators founded a series of holding corporations to solicit investments to develop commercial real estate, including professional services locations for physicians in Holdmel, Hazlet, and Neptune, N.J. Weiss admitted that he and his coconspirators embezzled nearly $1 million in investments funds contributed by victims toward the projects. He also admitted that he lied to those and other victims to raise additional funds, which Weiss and his co-conspirators spent on personal expenses. Weiss pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of 20 years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorney André M. Espinosa of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

This case was brought in coordination with 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.

Defense counsel: Robert A. Honecker, Jr., Esq., Ocean, N.J.

Earlier today in Minneapolis, a federal indictment was unsealed charging a 62-year-old Minneapolis man in connection with orchestrating four different investment scams that lured investors into investing millions of dollars in ventures that were never finished. The indictment, which was filed on April 12, 2011, charges Michael Joseph Krzyzaniak with 14 counts of mail fraud, six counts of wire fraud, three counts of money laundering, three counts of income tax evasion, and four counts of failure to file income taxes. The indictment was unsealed following Krzyzaniak’s initial appearance in federal court.

The indictment alleges that from 2003 through January of 2011, Krzyzaniak, also known as Michael Joseph Crosby, conducted a scheme to defraud individuals in Minnesota and elsewhere by convincing them to invest money in prospective business projects, which, in fact, turned out to be fraudulent. In total, investors provided Krzyzaniak with more than $20 million for investment.

Krzyzaniak allegedly contacted potential investors and induced them to contribute funds by making false statements about purported investment opportunities. The business projects he claimed to be developing included Internet terminals at airports; golf courses in various states; a golf club resort in Desert Hot Springs, California;, alternative energy projects in Hartsel Springs, Colorado; and a NASCAR-type race track in Elko, Minnesota.

Krzyzaniak allegedly told investors their money would be invested in a particular project, and that they could expect a substantial investment return. He then indicated that each project was proceeding toward a successful conclusion, having secured appropriate approval from the government, regulatory agencies, and others. In addition, Krzyazniak told investors he had various financing sources available, if needed, and also had a number of celebrity endorsements.

All of those representations were false. Moreover, he failed to disclose that he had been previously convicted of a federal felony involving investment fraud.

Krzyzaniak allegedly spent large portions of the funds provided him to pay for personal expenses, fund his lavish lifestyle, and distribute lulling payments. In some instances, Krzyzaniak reportedly invested funds, but only as an effort to prevent the fraud from being discovered.

If convicted, Krzyzaniak faces a potential maximum penalty of 20 years in prison on each mail and wire fraud count, 10 years on each money laundering count, five years on each tax evasion count, and one year on each failure to file count. All sentences will be determined by a federal district court judge.

This case is the result of an investigation by the Federal Bureau of Investigation, the United States Postal Inspection Service and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Christian S. Wilton.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

NEWARK, NJ—A Union City, New Jersey real estate investor and property manager was sentenced today to 24 months in prison for conspiring to launder money in order to make contributions to public officials in Union City in exchange for favors, U.S. Attorney Paul J. Fishman announced.

Itzhak Friedlander, 43, previously pleaded guilty before U.S. District Judge Jose L. Linares to an information charging him with one count of conspiracy to launder money to conceal and disguise unlawful activity. Judge Linares also imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:

Friedlander admitted that from June 2007 to August 2008, he conspired with government cooperating witness Solomon Dwek and co-conspirators Michael Altman and Shimon Haber to launder money from Dwek through Friedlander’s account at a purported charitable entity called Gmach Shefa Chaim. Dwek said the funds were proceeds of unlawful activities—namely, bank fraud, trafficking in counterfeit goods, and concealment of property from a federal bankruptcy court and trustee. The conspirators planned to funnel the money through Gmach Shefa Chaim to public officials in Union City in exchange for approvals to develop a Union City property. Friedlander admitted that the value of funds that he conspired to launder was approximately $175,000.

In addition to the prison term, Judge Linares sentenced Friedlander to two years of supervised release.

Altman was sentenced on March 31, 2011, to 41 months in prison, and Haber was sentenced on May 25, 2010, to five months in prison and five months of home confinement for their respective roles in the conspiracy.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and IRS – Criminal Investigation, under the direction of Victor W. Lessoff, with the investigation that led to today’s sentence.

The government is represented by Assistant U.S. Attorney Dustin Chao of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Defense counsel: Stacy Ann Biancamano, Esq; Timothy M. Donohue, Esq., West Orange, N.J.

David B. Fein, United States Attorney for the District of Connecticut, announced that KEVIN J. O’KEEFE, 51, of Simsbury, was sentenced today by Chief United States District Judge Alvin W. Thompson in Hartford to one day of imprisonment, time served, and three years of supervised release, for his role in two fraud schemes.

According to court documents and statements made in court, O’KEEFE was a vice president at Fleet Bank (and Bank of America after it acquired Fleet Bank) in Hartford. From approximately October 2001 to February 2007, O’KEEFE conspired with Paul Aparo, an attorney, and Richard R. Girouard, a real estate developer, to enrich themselves through the use of O’KEEFE’s position at the bank and by corrupting the bidding process on distressed loans that Fleet Bank was selling. As part of the scheme, O’KEEFE, Aparo, and Girouard created shell companies through which to submit bids on distressed loans being sold by Fleet Bank and with which to receive and distribute proceeds from the scheme. O’KEEFE had access to and obtained confidential information belonging to Fleet Bank and provided that information to Aparo and Girouard so that it could be used to submit winning bids on distressed loans. O’KEEFE also intentionally provided outdated information to other bidders involved in the bidding process in order to cause those bidders to submit artificially low bids. O’KEEFE provided Aparo and Girouard with access to the most up-to-date information. O’KEEFE also excluded bidders who he, Aparo, and Girouard believed would submit competitive bids for a distressed loan on which O’KEEFE, Aparo, and Girouard sought to bid.

Girouard paid O’KEEFE and Aparo approximately $100,000 on one loan that Girouard obtained through the corrupt assistance of O’KEEFE and Aparo. In addition, Girouard agreed to pay a shell company, called “Lexington Associates,” 15 percent of the profits on another distressed loan on which Girouard, with O’KEEFE and Aparo’s corrupt assistance, had submitted a winning bid. The 15 percent of the profits on the loan that Girouard (through his own shell company) paid to Lexington Associates amounted to more than $1.4 million, which O’KEEFE and APARO essentially split evenly.

Between December 2005 and January 2006, as part of a second scheme, O’KEEFE and Aparo defrauded Bank of America and Aparo’s client out of money. In that scheme, a client contacted Aparo about getting a mortgage release from Bank of America for an old mortgage. Aparo contacted O’KEEFE about it, and O’KEEFE checked Bank of America’s internal records for the mortgage. O’KEEFE found that no record of the mortgage existed within the bank. However, Aparo and O’KEEFE conspired to defraud the client and the bank by telling the client that the bank would release the mortgage for $55,000, which the client paid to Aparo through his law firm’s trust account. Aparo then paid the $55,000 to O’KEEFE, and a mortgage release on behalf of Bank of America was provided to the client.

On June 11, 2008, O’KEEFE pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud.

On November 24, 2009, Girouard pleaded guilty to one count of conspiracy to commit financial institution bribery. On April 30, 2010, he was sentenced to 30 months of imprisonment and was ordered to pay a fine in the amount of $15,000.

On July 24, 2008, Aparo pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud. On March 8, 2011, he was sentenced to 24 months of imprisonment and was ordered to pay a fine of $20,000.

This case was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Eric J. Glover.

NEWARK, NJ—Michael Kaufman, the CEO and founder of purported real estate investment firm Home Start America, Inc. (“HSA”), and loan officer David Wynn admitted yesterday and today to directing a long-running, large-scale wire fraud conspiracy through Kaufman’s company, U.S. Attorney Paul J. Fishman announced.

Kaufman, 43, of Reading, Pa., pleaded guilty Monday, April 11, 2011, to a superseding indictment charging both men with conspiracy to commit wire fraud. Wynn, 45, of Englewood, N.J., pleaded guilty today to the same charge. Both defendants entered their guilty pleas before U.S. District Judge Dennis M. Cavanaugh in Newark federal court.

According to documents filed in this case and statements made in court:

Kaufman founded HSA in Bloomfield, N.J., and at one time employed more than 30 people. Kaufman, through HSA, purchased and sold residential real estate properties. As part of the scheme, Kaufman and others recruited people—often first-time home buyers—to purchase properties quickly, with promises of no money down, no closing costs, and repairs paid for by HSA. Kaufman would then steer the purchasers to loan officers, including Wynn.

Many of the properties sold by HSA had actually been bought by HSA shortly before, and then “flipped” to the unsuspecting buyers for far more than HSA paid. Kaufman, Wynn, and others falsely inflated the buyers’ income and assets on loan documents to make it appear that the buyers could afford the properties HSA was selling, when the purchasers did not have the means to buy the properties.

Victim financial institutions—relying on the false figures in the loan documents—then issued the mortgage loans, unaware of the purchasers’ true financial conditions. HSA and Kaufman received illicit profits when the transactions closed, and Wynn and other loan officers received commissions for their fraudulent work. After the closings, the buyers could not make the payments on the properties, and nearly always lost the properties to foreclosure.

The fraud, which began as early as 2002 and lasted through June 2005, caused over $1.5 million in loss to the banks, and earned hundreds of thousands of dollars in profits for Kaufman and HSA.

At sentencing, Kaufman and Wynn each face a maximum of 20 years in jail and a fine of $250,000, or twice the gain or loss derived from their offenses.

U.S. Attorney Fishman praised the Department of Housing and Urban Development’s Office of Inspector General, under the direction of Joseph W. Clarke, Special Agent in Charge for the Mid-Atlantic Region; and the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation of this case.

The government is represented by Assistant U.S. Attorneys Bohdan Vitvitsky and Zach Intrater of the U.S. Attorney’s Office Criminal Division in Newark.

Defense counsel:
Kaufman: Robert De Groot, Esq., Newark, N.J.
Wynn: Stephen N. Dratch, Esq., Livingston, N.J.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that STEVEN BYERS, the former president and chief executive officer of the private equity firm WexTrust Capital, LLC (“WexTrust Capital”), was sentenced today to 160 months in prison on charges stemming from a fraud that raised more than $9 million from investors in private placement real estate offerings. BYERS, 48, was sentenced in Manhattan federal court by U.S. Court of Appeals Judge DENNY CHIN.

Manhattan U.S. Attorney PREET BHARARA said: “Steven Byers used smoke and mirrors to defraud his investors out of millions of dollars. But his scheme was ultimately exposed for the sham that it was, and now he will be punished severely for his crimes.”

According to the indictment and other documents previously filed in Manhattan federal court:

From 2003 to 2008, WexTrust Capital was a globally diversified private equity company specializing in investments in real estate and specialty finance opportunities. It was affiliated with several companies of a similar name, including WexTrust Securities, LLC, a broker-dealer registered with the United States Securities and Exchange Commission (“SEC”).

Beginning in 2003, BYERS, along with co-defendant JOSEPH SHERESHEVSKY and others, raised money from investors pursuant to private placement offerings, and then used material amounts of that money for other purposes without disclosing the diversion of funds to investors. In one such private placement, BYERS and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration (“GSA”). According to the GSA private placement memorandum issued to investors by WexTrust Capital, the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses. The seven GSA properties, however, were never purchased. Instead, funds raised from investors were diverted for other purposes, none of which was disclosed to investors. BYERS and others later agreed to make up a story that they would then tell the GSA investors regarding what happened to their investment.

* * *

BYERS, of Oakbrook, Illinois, previously pled guilty to conspiracy to commit securities fraud and securities fraud. In addition to his prison term, Judge CHIN sentenced BYERS to three years of supervised release and ordered him to pay $7,700,630.35 in restitution and to forfeit $9.2 million in proceeds from his crimes.

BYERS’ co-defendant, JOSEPH SHERESHEVSKY, 54, of Brooklyn, New York, and Norfolk, Virginia, pled guilty to similar charges on February 3, 2011, and is scheduled to be sentenced on May 13, 2011, at 10:30 a.m., before Judge CHIN.

Mr. BHARARA praised the work of the Federal Bureau of Investigation in this case. Mr. BHARARA also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation.

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

Assistant United States Attorneys VIRGINIA CHAVEZ ROMANO and JILLIAN B. BERMAN are in charge of the prosecution.

LOS ANGELES—The promoter of a bogus investment scheme that promised quick returns through the resale of office equipment was sentenced today to 108 months in federal prison for orchestrating a Ponzi scheme that caused victims across the United States to lose more than $8 million.

Peter Jerald Frommer, 35, of Santa Barbara, was sentenced by United States District Judge George H. Wu. In addition to the prison term, Judge Wu ordered Frommer to pay $8.1 million in restitution.

Frommer pleaded guilty in November to wire fraud, money laundering, and three counts of failing to file federal income tax returns for the tax years 2004 through 2006.

Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X,” companies that he falsely claimed traded in surplus property of defunct companies. Frommer told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.

>From early 2004 through August 2006, Frommer solicited more than $13 million from more than five dozen victims by promising “guaranteed” returns of up to 15 percent in as little as six weeks. Frommer obtained money from 64 investors throughout the United States. Frommer claimed that he would use victims’ money to buy the distressed assets for Cap X, and then would share profits from the subsequent sales. Instead, Frommer used the victims’ money to make Ponzi payments and to maintain a lavish personal lifestyle, which included a $20 million Malibu mansion, parties that featured celebrity performers, and luxurious personal travel and automobiles.

Additionally, Frommer convinced many investors to put money into other bogus ventures that he pitched, including a wireless Internet company, a high-end automobile parts venture, real estate deals, and other investments beyond Cap-X.

In a series of filings made in relation to today’s sentencing hearing, prosecutors focused on the impact Frommer had on his victims. “Plainly put, Frommer’s greed led to pain, distress, and a terrible disruption of the lives of his victims,” according to one of the government’s briefs.

In one of the filings, prosecutors quoted extensively from a series of letters sent by victims who urged Judge Wu to impose a stiff sentence. Those comments included:

“The effects of Peter Frommer’s crimes have been devastating for me. The only event in my lifetime that was worse was the death of my child.”

“He is the West Coast version of Bernie Madoff.”

“I am sorry to admit my family was victimized by Peter Frommer. A close relative of ours introduced us when my family and I were in California seeking cancer treatment for our youngest son. In a moment of weakness, when we were struggling with the cost of his cancer treatment, we were duped and convinced ourselves, our adult children, and a sister that this was a smart and safe investment. We made a terrible mistake.”

“My son values his education and was very intent on attending a prestigious California university. Unfortunately, he has not been able to attend that college because of the change in financial circumstances caused by Peter Frommer’s actions. What value do you put on the quashing of a teen’s dreams?”

Judge Wu ordered Frommer to begin serving his sentence on May 31.

The investigation into Frommer was conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation.

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.

The case is being investigated by the FBI. Assistant U.S. Attorney Jay S. Weimer is in charge of the prosecution.

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.

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.

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.

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.

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.

PREET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment yesterday charging LOUIS CHERICO, a lawyer who practiced in New York City and Westchester County, with participating in a wide-ranging scheme to commit mortgage fraud, obstruction of justice, and money laundering.
According to the Indictment filed in Manhattan federal court:
From July through December of 2002, CHERICO participated in a fraudulent real estate investment scheme which had, as its primary objective, the purchase of multimilliondollar residential properties in various communities in Westchester County, New York, including Purchase, Eastchester, and Rye, with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were equal to or in excess of one hundred percent of a property’s actual sale price, so that the defendant and his coconspirators did not have to put any of their own money at risk in the transaction.
CHERICO served as the attorney for various coconspirators in negotiating and closing the fraudulent purchases that were part of the scheme. CHERICO and his co-conspirators submitted to numerous federally-insured banks various documents, including loan applications, contracts of sale, deeds, real estate transfer documents, and title reports. Those documents contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home, as well as the borrower’s intent to reside in the property as a primary residence, when, in fact, the properties were typically purchased for investment purposes. As a result of the scheme to defraud, CHERICO and his co-conspirators obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance.
The Indictment also charges CHERICO with laundering the illegal proceeds obtained from the sale of one of the properties used in the mortgage fraud scheme by transferring the proceeds from a bank account controlled by CHERICO to an account that was controlled by one of his co-conspirators, DOMINICK DeVITO. The transaction was designed to conceal and disguise the nature, location, source, ownership, and control of the illegal proceeds.
The Indictment further charges CHERICO with obstruction of justice, and conspiracy to obstruct justice, in connection with the 2003 sentencing of DOMINICK DeVITO, following DeVITO’s conviction in United States v. Pasquale Parello, et al.,(01 Cr. 1120) in United States District Court for the Southern District of New York on charges of racketeering and mortgage fraud. Specifically, CHERICO assisted DeVITO in concealing profits that DeVITO earned from the sale of a property located in Purchase, New York, and in submitting an affidavit containing false and misleading information about the sale to the United States Probation Office.
CHERICO, 69, of Eastchester, New York, was arrested this morning and was presented and arraigned this afernoon in Manhattan federal court. The case has been assigned to United States District Judge COLLEEN McMAHON.
If convicted, CHERICO faces a maximum sentence of 30 years in prison on each of the six counts of mortgage fraud, 20 years in prison on the money laundering count, 10 years in prison on the obstruction count, five years in prison on the conspiracy to obstruct justice, and a fine of the greater of $1,000,000, or twice the gross gain or loss resulting from the crime.
Mr. BHARARA praised the work of the FBI.
This case is being prosecuted by the Office’s Organized Crime Unit. Assistant United States Attorney JONATHAN B. NEW is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.