Manhattan U.S. Attorney Announces Arrests of Two Individuals in Multi-Million-Dollar Scam Involving Elderly Woman
U.S. Attorney’s Office May 02, 2012

Southern District of New York (212) 637-2600

Preet Bharara, the United States Attorney for the Southern District of New York; Eric T. Schneiderman, the New York State Attorney General; and Janice K. Fedarcyk, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced charges today against IFEANYICHUKWU ERIC ABAKPORO and LATANYA PIERCE for allegedly swindling an elderly woman out of her multi-million-dollar property in Harlem that she had owned for more than 40 years and then deceiving a bank into giving them a $1.8 million mortgage loan secured by the property. ABAKPORO was arrested Monday in Queens, New York, and PIERCE was arrested yesterday after voluntarily surrendering to the FBI.

Manhattan U.S. Attorney Preet Bharara stated: “As alleged, these two defendants preyed on an elderly woman, using false documents and fraudulent representations to essentially steal her property out from under her. They then allegedly took their brazen scheme one step further, using the property to deceive a bank into lending them more than a million dollars. Sadly, this type of mortgage fraud scheme and exploitation of vulnerable victims have become all too familiar, but as these charges make clear, we are committed to bringing those who perpetrate these types of harmful schemes to justice.”

New York State Attorney General Eric Schneiderman stated: “Through lies and deception, these individuals abused the trust of an elderly woman in order to perpetrate a multi-million-dollar fraud. Now that their despicable scheme has been exposed, they will face justice.”

Assistant Director in Charge Janice K. Fedarcyk stated: “These defendants are charged with spinning a web of lies to steal the victim’s property. Cases like this are rightly a priority for the FBI: fraudulent schemes that victimize the vulnerable and enrich the unscrupulous.”

As alleged in the indictment unsealed yesterday in Manhattan federal court:

Beginning in March 2006, ABAKPORO, a lawyer with an office in Brooklyn, New York, and PIERCE, who worked for ABAKPORO, cultivated a relationship with an elderly woman (“the Victim”) who owned a residential apartment building worth millions of dollars located at 1070 St. Nicholas Avenue in Harlem (the “Property”). As part of the fraud scheme, ABAKPORO and PIERCE earned the Victim’s trust by, among other things, offering to help her manage the Property. This included collecting rent from its tenants on her behalf. However, instead of providing the Victim with the renters’ money, ABAKPORO and PIERCE pocketed it.

ABAKPORO and PIERCE then convinced the Victim to sell her property to them for $3.1 million. While they contracted to buy the property for that amount, at the closing, they presented the Victim with multiple fake and fraudulent checks to make it appear as if they had paid the contracted sale amount, when in fact they had not. Moreover, after the Victim’s attorney had left the closing, ABAKPORO and PIERCE fraudulently induced her to return all of the checks to them by representing that they would safeguard her money and give her a “private mortgage” in the Property, which they explained would include monthly payments made to her based on the money she had effectively loaned them. As part of the scheme, ABAKPORO and PIERCE signed and provided the Victim with a written agreement representing that she had loaned them approximately $1.9 million and in return held a “private mortgage” in the Property. Unbeknownst to the Victim, ABAKPORO and PIERCE never recorded the private mortgage and subsequently submitted a fraudulent application to Washington Mutual Bank seeking a $1.8 mortgage loan secured by the Property. ABAKPORO and PIERCE never disclosed to the bank that the Victim already held a private mortgage on the Property. Instead, ABAKPORO and PIERCE falsely represented to the bank that they had purchased the Property for $3.1 million and owned it “free and clear.” Based on those, and other, fraudulent representations, ABAKPORO and PIERCE obtained a $1.8 million mortgage loan from the bank, which they failed to repay.

As a result of the alleged fraud, the defendants obtained substantially all of the Victim’s assets, and $1.8 million in fraudulently obtained mortgage proceeds. The Property went into default.

***

ABAKPORO, 52, a Nigerian citizen, is a resident of Queens, and PIERCE, 43, is a resident of Brooklyn. They are each charged with wire fraud, bank fraud, wire fraud conspiracy, and bank fraud conspiracy. The wire fraud and wire fraud conspiracy charges each carry a maximum prison term of 20 years. The bank fraud and bank fraud conspiracy charges each carry a maximum prison term of 30 years.

ABAKPORO is currently detained pending his satisfaction of court-ordered bail conditions: a $1 million bond secured by an interest in property and co-signed by three individuals. PIERCE was released on a $500,000 bond to be co-signed by three individuals and secured by two properties.

Mr. Bharara praised the New York State Attorney General’s Office investigative staff and the FBI for their excellent work on the investigation of this matter. He also thanked the New York State Department of Financial Services for its assistance.

The case is being handled by the Office’s Complex Frauds Unit. Southern District of New York Assistant U.S. Attorneys Ryan Poscablo and Michael Lockard, along with Assistant Attorney General Meryl Lutsky, who has been designated a Special Assistant U.S. Attorney, and Assistant Attorney General Rhonda Greenstein, are in charge of the prosecution.

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Mortgage Broker Pleads Guilty to Bank Fraud Related to Residential Loan Applications
West Linn Broker Admits Fraudulent Loan Applications Cost Banks in Excess of $240,000

PORTLAND, OR—Joel D. Surprenant, 43, of West Linn, Oregon, pled guilty today to the crime of bank fraud. Surprenant is scheduled to appear again before U.S. District Judge Robert E. Jones on May 12, 2010, for sentencing on these charges.

In pleading guilty, Surprenant admitted that while employed as a mortgage broker for Morgan Financial, in August, 2006, he provided false information to First Franklin Financial Corporation in order to obtain a loan for himself for property located in Hood River, Oregon. To support the mortgage loan, Surprenant prepared a uniform residential loan application and falsified his financial qualifications. Surprenant created and submitted false supporting documentation, including pay stubs, to corroborate his false financial qualifications. The defendant also inflated the sale price of the residence in order to receive a kickback from the seller outside of the closing of the transaction. In addition, he identified an unsuspecting co-worker as the mortgage broker, forging the co-worker’s signature on the residential loan application. Surprenant subsequently defaulted on the loan, resulting in a loss to First Franklin Financial Corporation in excess of $96,000.

As part of the plea agreement with the United States, Surprenant also admitted and accepted financial responsibility for two other fraudulent loan schemes related to two residential properties he purchased in 2006 in Bend, Oregon. Those schemes involved Surprenant fraudulently obtaining three mortgage loans through Bank of America in which Surprenant identified his brother as the borrower without the brother’s knowledge or consent. The defendant later defaulted on the loans resulting in losses to Bank of America of approximately $145,000.

The maximum penalty for bank fraud is 30 years in prison and a maximum fine of $1,000,000. In addition to pleading guilty, Surprenant agreed to pay restitution for the full amount of the actual losses to the financial institutions. The investigation was initiated by the Portland office of the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Scott Erik Asphaug.

Mortgage Broker and Real Estate Developer Indicted in $19.6 Million Mortgage Fraud Scheme

SAN FRANCISCO— a federal grand jury in San Francisco indicted Michael Ohayon and David Papera with conspiracy to commit bank fraud, bank fraud, and money laundering, United States Attorney Joseph P. Russoniello announced.

According to the indictment, Ohayon, 41, and Papera, 47, are alleged to have recruited thirteen straw buyers who used their good credit scores to obtain more than $19.6 million in fraudulent residential mortgage loans from Washington Mutual Bank, with no intention of making either down payments or mortgage payments on the properties. The indictment further alleges that Ohayon, with Papera’s knowledge, told the straw buyers that an entity controlled by Ohayon and Papera would use the loan proceeds to make the down payments and mortgage payments. Ohayon and Papera created and submitted to Washington Mutual Bank loan applications with numerous misstatements as to the straw buyers’ income and assets.

Ohayon and Papera are currently out of custody. They are scheduled to make their initial appearances on the indictment at 9:30 a.m. on Feb. 16, and Feb. 22, respectively, before the Honorable Maria-Elena James.

The maximum statutory penalty for each count of conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349, and bank fraud, in violation of 18 U.S.C. § 1344, is 30 years’ imprisonment, a fine of $1,000,000, and restitution. The maximum statutory penalty for each count of money laundering, in violation of 18 U.S.C. § 1957, is 10 years’ imprisonment, a fine of $250,000, and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553

Michael Ohayon and David Papera

Former Flint Area Real Estate Broker and Appraiser Sentenced for Multi-Million Dollar Mortgage Fraud Scheme

Kurt Warren Heintz, age 39, of Grand Blanc, Michigan, formerly the owner of Great Lakes Broker Funding in Grand Blanc, Michigan, was sentenced on Wednesday, February 10, 2010, to 65 months in the custody of the Bureau of Prisons on one count of Financial Institution Fraud in violation of Section 1344 of Title 18 of the United States Code. Sentenced at the same time was James Fish, age 41, of Royal Oak, Michigan, formerly a licensed real estate broker in the State of Michigan, who was sentenced to serve 30 months in the custody of the Bureau of Prisons on one count of Financial Institution Fraud in violation of Section 1344 of Title 18 of the United States Code.

The sentences were announced today by United States Attorney Barbara L. McQuade. Ms. McQuade was joined in the announcement by Andrew G. Arena, Special Agent in Charge, Federal Bureau of Investigation, Detroit Field Office. The sentences were imposed by the Honorable Sean F. Cox, United States District Judge sitting in Detroit.

On February 6, 2009 and February 4, 2009, respectively, Mr. Heintz and Mr. Fish pleaded guilty to a one-count Information charging that they had devised and executed a scheme to defraud Indy Mac Bank though the use of a fraudulent mortgage loan application based on a false and inflated property appraisal. Although Mr. Heintz and Mr. Fish pleaded guilty to one count of Financial Institution Fraud, they agreed to be held responsible for the full extent of their scheme to defraud financial institutions in the Flint metropolitan area. This scheme to defraud began in May of 2005 and continued through 2007. In addition to IndyMac Bank the victim financial institutions included, Fifth Third Bank, Bank of America, Independent Bank, Mercantile Bank, and Union Federal Bank. The Federal Bureau of Investigation conducted of a review of the mortgages obtained in the course of this scheme to defraud and calculated the loss to these and other lending institutions at more than $14.4 million.

In sentencing Heintz and Fish, Judge Cox carefully reviewed and summarized the facts of the case, as well as the background and circumstances of each defendant. Judge Cox expressed his “shock” that Mr. Heintz had chosen to devise and commit such a serious and devastating crime. In sentencing Mr. Fish, Judge Cox said his sentenced had been heavily influenced by the fact that Fish had stolen the identity of other appraisers and used them on fraudulent appraisals. In addition to the millions of dollars lost by lending institutions, Judge Cox noted the devastation caused to entire neighborhoods, the financial cost to unsuspecting purchasers and the damaged and destroyed careers of innocent appraisers.

In addition to their custodial sentences, Mr. Heintz was ordered to pay, jointly and severally with Mr. Fish, $14,467,546.50 in restitution to various financial institutions, and Mr. Fish was ordered to pay, jointly and severally with Mr. Heintz, $4,992,400. Each was ordered to pay a $100 special assessment and must serve three years of supervised release upon the completion of their custodial terms.

FBI Special Agent in Charge Arena said that, “These charges and sentences underscore the seriousness with which the United States Attorney’s Office, the Federal Bureau of Investigation, area financial institutions, as well as other local, state and federal law enforcement agencies and regulators, view allegations of mortgage fraud. Mortgage fraud continues to have significant and devastating consequences for the Michigan economy. It is important that investors, consumers and real estate professionals, as well as the public in general, recognize that schemes to defraud involving mortgages and real estate transactions will result in the incarceration of the offenders.”

Mortgage Broker and Real Estate Developer Indicted in $19.6M Mortgage Fraud

SAN FRANCISCO—Yesterday a federal grand jury in San Francisco indicted Michael Ohayon and David Papera with conspiracy to commit bank fraud, bank fraud, and money laundering, United States Attorney Joseph P. Russoniello announced.

According to the indictment, Ohayon, 41, and Papera, 47, are alleged to have recruited thirteen straw buyers who used their good credit scores to obtain more than $19.6 million in fraudulent residential mortgage loans from Washington Mutual Bank, with no intention of making either down payments or mortgage payments on the properties. The indictment further alleges that Ohayon, with Papera’s knowledge, told the straw buyers that an entity controlled by Ohayon and Papera would use the loan proceeds to make the down payments and mortgage payments. Ohayon and Papera created and submitted to Washington Mutual Bank loan applications with numerous misstatements as to the straw buyers’ income and assets.

Ohayon and Papera are currently out of custody. They are scheduled to make their initial appearances on the indictment at 9:30 a.m. on Feb. 16, and Feb. 22, respectively, before the Honorable Maria-Elena James.

The maximum statutory penalty for each count of conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349, and bank fraud, in violation of 18 U.S.C. § 1344, is 30 years’ imprisonment, a fine of $1,000,000, and restitution. The maximum statutory penalty for each count of money laundering, in violation of 18 U.S.C. § 1957, is 10 years’ imprisonment, a fine of $250,000, and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Tracie L. Brown is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of a three-year investigation by IRS-CI and the Federal Bureau of Investigation.

Former President of Inland Empire Mortgage Company Sentenced to 13 Years in Federal Prison in Fraud Scheme That Led to Nearly $30 Million in Losses at HUD

RIVERSIDE,CA—The former president of Mortgage One Corporation in Hesperia was sentenced this afternoon to 13 years in federal prison for defrauding the United States Department of Housing and Urban Development and private lenders by fraudulently obtaining hundreds of federally insured loans and selling those mortgages to private lenders in a scheme that caused tens of millions of dollars in losses to the federal housing agency.

John Richard Varner, 56, of Hesperia, was sentenced to 156 months in prison by United States District Judge Virginia A. Phillips. In addition to the prison sentence, Judge Phillips ordered Varner to pay $29,749,239 in restitution.

Last April, following a nearly four-week trial, a federal jury convicted Varner of one count of conspiracy to defraud HUD, one count of bank fraud, and two counts of subscribing to false income tax returns. Varner was the 15th defendant convicted in relation to the scheme. Varner and co-defendant Richard Elroy Giddens, 69, of Riverside, were at the center of the fraud that was run out of Mortgage One Corporation, which was based in Hesperia, and M-1 Capital Corporation, which was based in Riverside and Rancho Cucamonga. Giddens, the former CEO of Mortgage One, pleaded guilty to the same charges Varner was convicted of at trial and in September 2009 was sentenced to 78 months in federal prison.

From 1997 until 2002, Mortgage One and M-1 Capital were in the business of approving, funding and then selling home mortgage loans, typically obtaining mortgage insurance on the loans from the Federal Housing Administration, which is an agency within HUD. Mortgage One and M-1 Capital obtained FHA mortgage insurance for their loans without HUD review due to their status as HUD-approved Direct Endorsement Lenders. They obtained and kept Direct Endorsement Lender status by submitting false documents, including bogus audits, to HUD.

Varner and his co-defendants defrauded HUD by submitting fraudulent loan application documents in order to qualify the loans for FHA insurance. The loans went to borrowers who either did not meet the FHA requirements to qualify for the mortgages or were only “straw buyers.” Mortgage One and M-1 Capital sold the funded loans to banks, such as the FDIC-insured Firstar Bank, N.A. and Chase Manhattan Mortgage Corporation, using the same fraudulent documents.

As a result of the scheme, HUD lost $23,628,857 on 905 fraudulent loans, and a total of $29,638,011 when interest paid by HUD during the foreclosure and resale process is included.

Varner was found guilty of filing false tax returns for the years 1999 and 2000 when he failed to report income that he used for personal expenses such as a Corvette, a $153,000 RV, jewelry, and more than $150,000 deposited into a personal investment account.

In sentencing papers, prosecutors argued that Varner’s testimony at trial last year “consisted of a series of breathtaking lies that appeared designed to shift responsibility for defendant’s crimes to others and to mislead the jury about the true facts.” For example, Varner “denied knowingly approving fraudulent loan applications, despite testimony from numerous brokers that they discussed the fraud in the loan files and [Varner] indicated they should continue to submit the fraudulent loan files,” according to court documents that concluded Varner “gave blatantly false testimony.” At this afternoon’s sentencing hearing, Judge Phillips agreed with prosecutors, finding that Varner’s testimony “was knowingly untruthful on a number of points.”

Former President of Inland Empire Mortgage Company Sentenced to 13 Years in Federal Prison

Real Estate Appraiser Sentenced to Three Years in Prison in Mortgage Fraud Scheme That Led to $46 Million in Losses

LOS ANGELES—A former state-licensed real estate appraiser was sentenced today to three years in federal prison and ordered to pay more than $46 million in restitution for her role in a massive mortgage fraud scheme that caused tens of millions of dollars in losses to federally insured banks.

Lila Rizk, 43, of Rancho Santa Margarita, received the three-year prison term after her conviction last summer on conspiracy, bank fraud and numerous loan fraud charges.

Rizk was sentenced by United States District Judge Dean D. Pregerson, who warned that other professional real estate appraisers should know that if they inflate appraisals and lie about the value of homes, “there is an overwhelming likelihood that they will be caught and go to prison.”

The evidence presented at Rizk’s trial last summer showed that she was part of a wide-ranging and sophisticated scheme that obtained inflated mortgage loans on homes in some of California’s most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach, and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars more than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.

The evidence presented at trial showed that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme. Her appraisals typically valued the homes three times higher than what the homes really cost. In order to supposedly justify these inflated values, Rizk used “comps,” or comparable homes, that were far bigger, more luxurious, and in better neighborhoods than the homes she appraised. Once she had inflated a few dozen homes, she then used those homes as “comps” to supposedly justify inflated prices for homes later in the scheme.

Ten other real estate professionals have been convicted of federal charges related to the scheme. They are:

Scheme leader Charles Elliott Fitzgerald, a developer formerly of Newbury Park and Beverly Hills, who previously was sentenced to 14 years in prison;
Mark Alan Abrams, of Los Angeles, a mortgage broker who along with Fitzgerald orchestrated the scheme, who is scheduled to be sentenced on April 12;
Nicole LaViolette, of Palm Springs, a loan processor, who is scheduled to be sentenced on June 14;
Jamieson Matykowski, of Laguna Niguel, who found houses for the scheme, is scheduled to be sentenced on March 29;
Timothy Holland, of Santa Ana, an escrow officer, who is scheduled to be sentenced on July 19;
Richard Maize, of Beverly Hills, a mortgage banker, who is scheduled to be sentenced on June 28;
Thomas R. Schiff, of Brentwood, a mortgage banker, who was previously sentenced to 6 months in prison;
L. Scott Robinson, of Dana Point, an appraiser, who is scheduled to be sentenced on April 2;
Kyle Grasso, formerly of Santa Monica, a real estate agent, who is scheduled to be sentenced on February 19; and
Joseph Babajian, of Los Angeles, a real estate agent, who is scheduled to be sentenced on February 22.

Kansas City Man Pleads Guilty in $3.6 Million Mortgage Fraud, Money Laundering Scheme

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., man pleaded guilty in federal court today to his role in a mortgage fraud conspiracy that involved loans on 34 properties in the inner city and midtown areas of Kansas City totaling more than $3.6 million.

Quentin Henley, 37, of Kansas City, pleaded guilty before U.S. Chief District Judge Fernando J. Gaitan this morning to the charges contained in a July 14, 2009, federal indictment.

Henley did business as Quality Remodeling, as All and One Construction and as Corporate Remodeling Associates. Henley admitted that he participated in a mortgage fraud conspiracy from July 2003 to January 2009, in which he acquired residential properties at reduced rates for the stated purpose of rehabbing the properties, then renting or selling them. In reality, Henley did little or no work to rehab some of the properties.

Henley and his co-conspirators submitted materially false, fraudulent and misleading loan applications and supporting documentation to mortgage lenders, all to induce the lenders to approve the applications and lend funds. Henley admitted that he caused mortgage lenders to make loans regarding at least 34 properties in the amount of at least $3,600,482.

In addition to the mortgage fraud conspiracy, Henley also pleaded guilty to money laundering. Henley admitted that he engaged in a financial transaction that involved funds obtained by fraud.

Under federal statutes, Henley is subject to a sentence of up to 15 years in federal prison without parole, plus a fine up to $500,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

Four Sentenced in Mortgage Fraud Scheme

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.

Leader Pleads Guilty in Family Scheme to Conceal Millions in Profits from the Purchase and Sale of Foreclosed Properties
Concealed from IRS Millions of Dollars of Profits Made from “Flipping” Hundreds of Properties Bought at Foreclosure Auctions

GREENBELT, MD—Minh-Vu Hoang, age 59, of Bethesda, Maryland, pleaded guilty today to conspiracy to defraud the Internal Revenue Service and the U.S. Bankruptcy Trustee in connection with a scheme to conceal millions in profits earned from the purchase and sale of foreclosure properties.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge C. André Martin of the Internal Revenue Service – Criminal Investigation; Montgomery County State’s Attorney John McCarthy; and Special Agent in Charge Richard McFeely of the Federal Bureau of Investigation.

“People who create elaborate schemes that have no purpose but to mislead others and defraud the IRS run the risk of prosecution,” stated C. André Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge. “Those Americans who file accurate, honest and timely tax returns can be assured that the Government will hold accountable those who do not.”

According to Hoang’s plea agreement, Minh-Vu Hoang, her husband and other family members purchased property at foreclosure auctions beginning in 1999, and resold some of the properties at a profit. Hoang and others deposited and withdrew money from an escrow account for the purchase and sale of properties, and transferred money from the escrow account to business entities they controlled in order to conceal Hoang’s financial interests in the properties. From 2000 to 2005, Hoang and others purchased and sold hundreds of foreclosure properties using the names of their agents or business entities to conceal their involvement in the purchase and sale of the properties, and thereby avoid taxes.

On May 10, 2005, Minh-Vu Hoang filed for a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland. On May 27, 2005, Minh-Vu Hoang filed several false schedules and a false Statement of Financial

Affairs with the Bankruptcy Court, in support of her petition. In her Schedules, Minh-Vu Hoang reported a financial interest in only six properties, knowing that she had an interest in other properties, and further reported income in 2003 and 2004 of only $96,000 each year, knowing that her income for those years was substantially higher. She also failed to report her interest in various bank accounts.

For example, on or about May 10, 2005, the same day that she filed her bankruptcy petition, Minh-Vu Hoang withdrew $10,000 from an account she controlled in order to purchase property located at 9807 Moreland Street in Fort Washington, Maryland in the name of Cybele GP. Neither that property nor her interest in Cybele PG was reported in the bankruptcy schedules submitted in conjunction with her bankruptcy petition. Similarly, in July 2005, Minh-Vu Hoang’s sister, Van Vu, opened a bank account in the name of Madison Plus LLC. Van Vu was the sole signatory on the account. Over the course of the next several months, proceeds from the sale of real estate controlled by Minh-Vu Hoang were deposited into the Madison Plus LLC account. Over the life of the Madison Plus LLC account, more than $1 million flowed through the account.

The government contends that the tax loss and the loss from the bankruptcy fraud exceeded $2.5 million but was not more than $7 million. The defendant contends that the loss was less. Chief U.S. District Judge Deborah K. Chasanow will determine the amount of loss at Minh-Vu’s sentencing, which has not yet been scheduled. Minh-Vu Hoang faces a maximum sentence of five years in prison.

Minh-Vu’s sister, Van Thanh Vu, age 55, of Bethesda, and Van Vu’s ex-husband, Hai Duc Ngo, age 61, of Fairfax, Virginia pleaded guilty on Monday and Wednesday this week to misprison of a felony, for attempting to conceal Minh-Vu’s interest in the Madison Plus LLC account. Specifically, in July 2005 Van Vu filed a voluntary Chapter 11 bankruptcy petition. Hai Duc Ngo, with Van Vu’s knowledge and consent, submitted an affidavit in Van Vu’s bankruptcy proceeding, claiming that the Madison Plus LLC account was to be managed by Van Vu for Hai Duc Ngo’s exclusive benefit. At the time this affidavit was filed, Van Vu and Hai Duc Ngo knew that Minh-Vu Hoang was in bankruptcy and that Minh-Vu Hoang did not disclose that she had a financial interest in the Madison Plus LLC account on her bankruptcy schedules or in her Statement of Financial Affairs. Knowing that Minh-Vu Hoang had an interest in the Madison Plus LLC account, neither Van Vu nor Hai Duc Ngo made that fact known to any law enforcement personnel, including the IRS.

Van Thanh Vu and Hai Duc Ngo face a maximum sentence of three years in prison. Judge Chasanow has scheduled their sentencings for May 3, 2010 at 2:00 p.m. and July 19, 2010, at 9:00 a.m., respectively.

Minh-Vu’s husband, Thanh Hoang, age 64, of Bethesda, pleaded guilty to conspiracy to impede the IRS for his role in the scheme and is scheduled to be sentenced on June 14, 2010 at 9:00 a.m. Hoang faces a maximum sentence of five years in prison.

Annapolis Mortgage Broker Charged in Fraud Scheme
Allegedly Stole Millions of Dollars to Day Trade and Pay Personal and Business Expenses; SEC Files Civil Action to Enjoin Against Future Securities Violations

BALTIMORE, MD—A criminal information was filed today charging mortgage broker David Wehrs, Sr., age 54, of Annapolis, Maryland, with wire fraud in connection with a scheme to defraud investors and financial institutions of approximately $2.3 million.

The charge 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 information and court documents, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs allegedly induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85 percent. Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs allegedly deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs then wire transferred a large portion of these investor funds to a brokerage account in the name of his title company at Terra Nova Financial LLC located in Chicago, Illinois.

The information alleges that Wehrs then used the money he obtained to “day trade.” Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits. During the scheme, Wehrs is alleged to have conducted millions of dollars of stock trades per month.

In addition to day trading, Wehrs allegedly used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.

The information further alleges that when Wehrs had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing a loss of such amount to a title insurance company. He also allegedly used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual’s home to pay interest to investors, causing a loss of $100,000 to the home buyer.

As a result of the scheme, Wehrs is alleged to have caused a total loss of $2,371,06 to investors and the title insurance company.

Wehrs faces a maximum sentence of 20 years in prison. No court appearance has been scheduled.

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

Simultaneous with the filing of the information, the Securities and Exchange Commission filed a parallel civil action and a proposed settlement today in U.S. District Court for the District of Maryland against Wehrs and Maryland Title, arising out of the same scheme to persuade investors to participate in the purported FDIC-insured fund. The SEC complaint seeks a permanent injunction of future violations of the Securities Act, the Exchange Act, and the Advisers Act; disgorgement of fraudulent gains; prejudgment interest and money penalties. A proposed settlement was also submitted to the court in which Wehrs, without admitting or denying the allegations in the SEC complaint, consents to the entry of the permanent injunction and to entry of an administrative order that will permanently bar him from association with any investment adviser.

Mountain View Woman Convicted of Wire Fraud and Witness Tampering
Self-Proclaimed “Honorable Lady of San Francisco” Defrauded Mortgage Lenders, Financial Institutions of $6.5 Million

SAN FRANCISCO—Judy “Miu Wan” Yeung was convicted of one count of conspiracy to commit wire fraud, eight counts of wire fraud, and three counts of witness tampering by a federal jury yesterday afternoon, United States Attorney Joseph P. Russoniello announced.

The jury, after deliberating for one day, found that Yeung engaged in a mortgage fraud conspiracy between approximately December 2004 and January 2007. Yeung, together with two mortgage brokers, recruited five individuals to submit loan applications in their names in order to obtain loans totaling more than $6.5 million. Evidence at trial established that Yeung had bad credit and could not have obtained these loans in her own name. Yeung engaged in these transactions in order to purchase investment properties in Gilroy, Calif., when real estate prices were still rising. Yeung also fraudulently refinanced her San Francisco residence in Balboa Terrace, in order to obtain cash from mortgage lenders and to pay off existing loans. Testimony at trial established that Yeung obtained more than $624,000 in cash from these fraudulent transactions.

“The conviction of Ms. Yeung should be taken as affirmation that our efforts to uncover and prosecute those engaged in mortgage fraud, at whatever level of their involvement are serious and ongoing,” U.S. Attorney Russoniello said. “Mortgage fraud has weakened our economy nationally and done irreparable damage to households, neighborhoods, and communities throughout this district. Unscrupulous mortgage brokers often encouraged many borrowers who knew or should have known better to exaggerate their qualifications for a loan they couldn’t afford on a home whose value was overstated, often due to the complicity of unprincipled real estate appraisers. With unwarranted confidence that any risk of default could be passed on to unwary investors, many lenders, including some major banks, which had been pressured to relax their lending standards so as to expand the prospect of home ownership to persons otherwise financially unqualified, made loans that will never be repaid.

“To all those homeowners who stay in their homes and struggle each month to meet their contractual obligations, we owe a responsibility to ferret out, wherever possible, the perpetrators and abettors of this massive fraud,” U.S. Attorney Russoniello added. “The Obama Administration through the United States Department of Justice has made the prosecution of mortgage fraud a priority of its white collar crime enforcement program and this office is committed to using its resources to the fullest to meet this mandate. We continue to work with the FBI, other federal investigative agencies and our state and local partners to effectively bring those responsible for misconduct in this district to justice.”

Yeung’s scheme involved the submission of false information and forged documents to mortgage lenders, including Washington Mutual and J.P. Morgan Chase. For example, the loan applications in each case grossly exaggerated the income, assets, and creditworthiness of the individuals posing as borrowers for Yeung. In addition, evidence at trial established that Yeung induced others to forge letters from Hang Seng Bank that falsely verified assets held by the borrowers. The forged letters were then used in support of the loan applications. Some of the individuals posing as borrowers testified at trial. They stated that Yeung had promised to pay the mortgages obtained in their names and that, in two cases, Yeung promised to pay them a reward of $20,000 to $40,000.

Several of the witnesses stated that Yeung touted herself as the “Honorable Lady of San Francisco,” and she even provided business cards reflecting that title. Some witnesses testified that they believed Yeung when she told them that she could further their careers and, in some cases, would use her political connections in San Francisco to do so.

In addition, the jury found Yeung guilty of three counts of witness tampering. Two of the “straw buyers” whom Yeung had recruited testified at trial that Yeung told them to lie to the FBI agents who were investigating the case.

The guilty verdict followed a three week jury trial before U.S. District Court Judge Susan Illston.

Two mortgage brokers were charged in connection with the case, which was referred to the FBI by the San Francisco District Attorney’s Office. They have pleaded guilty to wire fraud conspiracy charges and are awaiting sentencing.

Yeung, 58, of Mountain View, Calif., was indicted by a federal grand jury on April 9, 2009. The grand jury then returned a superseding indictment against her on July 30, 2009.

Yeung is released on a secured bond. The sentencing of Yeung is scheduled for May 14, 2010, before Judge Susan Illston in San Francisco. The maximum statutory penalty for each count in violation of Title 18, United States Code, Section 1349, is 30 years and a fine of $1,000,000, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Susan E. Badger and Jeffrey Rabkin are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Helen Yee and Elizabeth Garcia. The prosecution is the result of a three-year investigation by the Federal Bureau of Investigation.

Investigation by Federal, State, and Local Task Force Leads to Mortgage Fraud Charges Against Six People Involving Million-Dollar-Plus Houses
Two Home Builders and Former Banker Charged

CINCINNATI—A two-year investigation by the Greater Cincinnati Mortgage Fraud Task Force has resulted in a seven-count indictment charging two Cincinnati area home builders, a former Huntington National Bank vice president, and a self-employed tax preparer and interior designer with participating in a mortgage fraud scheme to sell four high-end luxury properties to “straw buyers.” A straw buyer is someone who is listed as the owner of a house, but is not really the one buying the house.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Ohio Attorney General Richard Cordray, Warren County Prosecuting Attorney Rachel Hutzel, and Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI) and other task force participants announced the indictment today.

The grand jury returned charges against:

Eric D. Duke, 35, Newport, Kentucky. Duke is a self-employed tax preparer and interior designer. He also owned a property management company called Rivendale Property Management Group, L.P., in Maineville, Ohio.

Terrence J. Monahan Jr., 36, Cincinnati, formerly with Huntington National Bank.

Bernard J. Kurlemann, 56, of Mason, owner of Kurlemann Homes of Long Cove and Long Cove Management, LLC.

Bryan Sanneman, 38, of Mason, owner of Sanneman Homes, Inc.

The charges stem from the sale of four residential properties in 2006 to 2007, three of which were sold for approximately $2 million each. The indictment alleges that Monahan, Sanneman, and Kurlemann, each conspired with Duke to defraud lenders involved with the sales.

The scheme, as alleged in the indictment, involved Duke locating two people willing to buy the properties in name only and let their names be used on loan applications. The indictment alleges that Duke worked with a mortgage broker who submitted fraudulent loan applications that contained false income and assets. According to the indictment, Monahan gave Duke a customer bank account statement to be used as a “go-by” to create fictitious account statements to support fraudulent assets on the loan applications.

The indictment also alleges that Sanneman and Kurlemann provided documentation to the lenders falsely stating that they had received down payments from the borrowers when they had not. The indictment alleges that the defendants conspired with Duke to have the fraudulent loans approved in order to sell their properties.

The indictment alleges that the defendants benefitted from the scheme because they were able to sell their expensive properties, get out from under substantial mortgages, and receive additional loan proceeds.

The indictment charges all four defendants with conspiracy. Duke and Monahan are charged with conspiracy to commit wire fraud and wire fraud, both crimes punishable by up to 20 years’ imprisonment.

Duke and Kurlemann are charged with conspiracy to commit loan fraud, punishable by up to five years’ imprisonment, and two counts of loan fraud. Each count of loan fraud is punishable by up to 30 years’ imprisonment.

Duke and Sanneman are charged with conspiracy to commit loan fraud and loan fraud.

The indictment also seeks forfeiture of any property or assets derived as a result of the crimes.

Loan proceeds from the alleged fraud totaled approximately $6.7 million.

Charges have been filed separately against the straw buyers. Francisca Webster, 46, of Cincinnati, has been charged in a separate information, with conspiracy to commit wire fraud punishable by up to 30 years’ imprisonment. Christopher Gagnon, 37, of Florence, Kentucky has been charged with loan fraud, punishable by up to 30 years’ imprisonment.

Stewart commended the investigation by the Greater Cincinnati Mortgage Fraud Task Force. The Greater Cincinnati Mortgage Fraud Task Force is a multi-agency, multi-jurisdictional initiative dedicated to combating the mortgage fraud problem in the Southern District of Ohio.

The defendants will be summoned for their initial appearances before a U.S. Magistrate Judge.

The case is being prosecuted by Assistant United States Attorney Jennifer C. Barry, and Special Assistant United States Attorneys Bruce McGary of the Warren County Prosecutor’s Office and Christopher Wagner with Ohio Attorney General Richard Cordray’s Office.

Mortgage Fraud Charges Against Six People Involving Million-Dollar-Plus Houses

Stamford Accountant Admits Involvement in Conspiracy to Defraud Mortgage Lenders

Nora R. Dannehy, United States Attorney for the District of Connecticut, today announced that JOSE I. FLORES, 50, of Fairfield Avenue, Stamford, waived his right to indictment and pleaded guilty yesterday, January 20, before United States District Judge Christopher F. Droney in Hartford to one count of conspiracy to commit wire fraud stemming from his participation in a mortgage fraud scheme.

In pleading guilty, FLORES, an accountant, admitted that from approximately 2004 to 2008, he conspired with others to defraud mortgage lenders by causing so-called “accountant letters,” which contained materially false information about the loan applicant, to be submitted to lending institutions on behalf of applicants for residential real estate mortgages.

According to court documents and statements made in court, FLORES, who did business as a tax preparer and accountant under the name Harvard Financial Services in Stamford, was approached by the owner of a real estate and mortgage broker in Stamford to create fraudulent accountant letters. Under a mortgage program offered at the time by certain mortgage lenders, mortgage applicants could apply for a so-called “stated income loan,” which did not require income verification. Through this program, lenders required a letter from the applicant’s accountant or tax preparer verifying, among other things, the applicant’s employment status, particularly for applicants claiming to be self-employed. FLORES agreed to write accountant letters containing false information for the owner of the mortgage brokerage and its loan officers knowing that the letters would be used in connection with loan applications to mortgage lenders. Over the period of several years, FLORES was paid up to $100 per letter by the mortgage brokerage to provide numerous false accountant letters.

Judge Droney has scheduled sentencing for April 9, 2010, at which time FLORES faces a maximum term of imprisonment of five years and a maximum fine of $250,000, or twice the gross gain or loss from the offense.

This matter is being investigated by the Connecticut Mortgage Fraud Task Force and is being prosecuted by Assistant United States Attorney Eric J. Glover. The Connecticut Attorney General’s Office provided valuable assistance to the investigation.

U.S. Attorney Dannehy stated that the investigation is ongoing.

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 e-mail 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 Division; 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.

Mortgage Fraud Task Force Mortgage Fraud Task Force

Mortgage Fraud Task Force Mortgage Fraud Task Force

Fort Lauderdale Attorney Pleads Guilty in Billion-Dollar Ponzi Scheme

MIAMI—Jeffrey H. Sloman, U.S. Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, FBI, Miami Office; and Daniel W. Auer, Special Agent in Charge, Internal Revenue Service (IRS), Criminal Investigation Division, announced today that attorney Scott Rothstein, 47, of Fort Lauderdale, Fla., entered a plea of guilty to a five-count information. Defendant Rothstein is scheduled for sentencing before the Honorable James I. Cohn on May 6, 2010. He faces a total maximum statutory term of 100 years in prison.

Rothstein pleaded guilty to one count of conspiracy to violate the racketeering influenced corrupt organization (RICO) statute (Count 1); one count of conspiracy to commit money laundering (Count 2); one count of conspiracy to commit mail fraud and wire fraud (Count 3); and two counts of wire fraud (Counts 4 and 5). In addition, Rothstein agreed to forfeit $1.2 billion, including 24 pieces of real property, numerous luxury cars, boats, and other vessels, jewelry, sports memorabilia, business interests, bank accounts, and more.

According to court records and statements made in court, Rothstein admitted that from around 2005 through November 2009, he engaged in a pattern of racketeering activity through his law firm, Rothstein, Rosenfeldt, and Adler, P.A. (RRA), located in Ft. Lauderdale. Specifically, Rothstein admitted that RRA was the criminal enterprise through which he and others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes. According to the information, defendant Rothstein and co-conspirators used RRA to fraudulently induce investors to: (1) loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and (2) invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements.

In court, defendant Rothstein admitted that he and other co-conspirators solicited investors to loan money to purported RRA clients through promissory notes and short-term bridge loans. Defendant Rothstein falsely represented to the investors that the purported clients were willing to pay high rates of return on these loans. In the settlement agreement scheme, Rothstein and other co-conspirators solicited clients to invest in purported civil case settlement funds. Rothstein and his co-conspirators falsely told investors that these settlements ranged in amounts from hundreds of thousands to millions of dollars. Rothstein falsely represented to investors that these settlements could be purchased at a discount and would be repaid over time to the investors at full face value. In addition, investors were told that these funds would be held in the trust account of RRA. In both instances, the purported investment vehicles never existed, but were part of an elaborate Ponzi scheme in which new investors’ money was used to repay money owed to earlier investors.

To execute this four-year fraud scheme, Rothstein and his co-conspirators used multiple bank accounts at TD Bank, N.A., Gibraltar Private Bank and Trust and other financial institutions to deposit and launder investors’ money. As well, to perpetuate and conceal the fraud, Rothstein and his co-conspirators created and caused the creation of false bank documents, false online bank account information, and false settlement agreements and promissory notes, which were shown to investors as proof that the settlement and loan monies existed. In fact, however, there were no settlement funds or loan clients and the bank accounts only contained “Ponzi” scheme funds.

To further fund the Ponzi scheme, defendant Rothstein and other co-conspirators defrauded clients of RRA in a civil suit initiated by RRA on their behalf as plaintiffs. Without the clients’ knowledge, RRA settled the lawsuit in favor of the defendant, thereby obligating the clients to pay $500,000 to the defendant in the civil lawsuit. To perpetuate and conceal the fraud, defendant Rothstein and other co-conspirators created a false federal court order, purportedly signed by a U.S. District Judge, stating that the clients had won the lawsuit and were owed a judgment of approximately $23 million. The false court order also stated that the defendant in the civil suit had transferred the funds to the Cayman Islands to avoid paying the judgment. Defendant Rothstein and other co-conspirators falsely advised the clients that to recover those funds, the clients were required to post bonds. In this way, defendant Rothstein caused the clients to wire transfer approximately $57 million to a trust account he controlled, purportedly to satisfy the bonds.

According to the information, defendant Rothstein and other co-conspirators used the funds obtained through the Ponzi scheme for their own benefit. This included, for example, using the money to fund and operate RRA, to make contributions to federal, state, and local political candidates, and generous donations to public and private charitable institutions. The money was also used to pay for lavish gifts, including exotic cars, jewelry, boats, cash and bonuses to individuals and members of RRA, to hire local police officers to provide security, and to provide gratuities to high ranking members of police agencies. In addition, the money was used to purchase controlling interests in restaurants and other businesses, and to socialize with politicians and sports figures. According to the information, these expenditures were calculated to enhance defendant Rothstein’s reputation and ability to solicit potential investors in the Ponzi scheme, provide an air of legitimacy and credibility to RRA, engender loyalty, and deflect law enforcement scrutiny.

U.S. Attorney Jeffrey H. Sloman said, “Today’s guilty plea is an important step in bringing to justice those who perpetrated a $1.2 billion Ponzi scheme under the guise of operating a legitimate law firm. The U.S. Attorney’s office will continue to pursue all leads and evidence as they are uncovered.Rest assured, those who are criminally culpable will be held accountable. Victims can also take comfort in knowing that the United States will do everything it can to identify, seize and equitably refund fraud proceeds.”

“Scott Rothstein used a classic approach to mislead investors—an ostentatious lifestyle, a charismatic personality and guarantees of sky-high returns—all red flags in the world of Ponzi schemes,” said FBI Special Agent in Charge John V. Gillies. “It is a lesson for all investors to learn that they need to look beyond the hype. We will continue to work with our partners to investigate investment fraud schemes. The quick resolution of this case was the direct result of the outstanding teamwork between the U.S. Attorney’s Office, the Internal Revenue Service, and the FBI.”

IRS Special Agent in Charge Daniel W. Auer stated, “This case shows that the appearance of success can be a mask for a tangled financial web of lies. This investigation is not over as we are committed to ‘following the money trail.’ We will continue to pursue the evidence wherever it leads, leaving no financial stone unturned.”

Mr. Sloman commended the investigative efforts of the FBI and the IRS in connection with this investigation. Mr. Sloman also noted the cooperative efforts of the Securities and Exchange Commission, Miami Regional Office. The case is being prosecuted by Assistant U.S. Attorneys Lawrence LaVecchio, Paul F. Schwartz and Jeffrey N. Kaplan. The forfeiture proceedings are being handled by Alison Lehr and Evelyn Baltodano-Sheehan.

Milton Retana  Con Man Found Guilty of Operating $62 Million Ponzi Scheme That Targeted Spanish-Speaking Investors

LOS ANGELES—A Huntington Park man who preyed on Spanish-speaking investors with promises of hefty returns in the real estate bubble has been found guilty of federal charges for bilking more than 2,000 victims out of more than $62 million. , 46, was convicted yesterday by a federal jury of six counts of mail fraud and one count of making false statements to government agents who were investigating the case.

Following a week-long trial in United States District Court, jurors deliberated for less than an hour on Tuesday before convicting Retana of charges that carry a potential penalty of 125 years in federal prison. Dozens of victims were in court to hear the announcement of the guilty verdicts.

Retana began soliciting investors in 2006 through his company, Best Diamond Funding, by telling them that their money would be used to buy and sell real estate. Best Diamond Funding solicited money through advertisements in Spanish-language magazines, on the Internet, and during weekly investment seminars at locations across Los Angeles. The investment seminars often had as many as 300 potential investors and incorporated religious messages. Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit. However, records obtained by federal investigators showed that Retana used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money.

During the trial, several victims testified that they mortgaged their homes and drained their retirement accounts because they believed Retana’s promises that their investments would be safe. The victims who testified at trial were largely from working-class families in East Los Angeles, and they included a stone mason, a long-haul truck driver, and a roofer who was also a pastor at his local church.

Retana’s scheme was almost uncovered in the summer of 2008, when the California Department of Real Estate audited his company. But Retana stymied that investigation by ordering his employees to hide all of the investor files at the back of his wife’s religious bookstore, La Libreria Del Exito Mundial. His scheme was disrupted in October 2008, when federal agents from the United States Postal Inspection Service and the Federal Bureau of Investigation executed search warrants on the offices of Best Diamond Funding and the bookstore. During those searches, agents found $800,000 in cash stashed in Retana’s desk, as well as another $3.2 million in cash hidden in the back of the bookstore. The FBI also seized another $8 million from Retana’s bank accounts.

Soon after the execution of the federal search warrants, agents interviewed Retana, who lied about how much money he had received from the investors and claimed that he could pay all of them back. Retana was later secretly recorded telling a Best Diamond employee not to tell the government how much money Best Diamond had received from the investors.

Retana is scheduled to be sentenced by United States District Judge R. Gary Klausner on April 26

Milton Retana  Milton Retana

Former Attorney Sentenced in Fraud Case

INDIANAPOLIS—Brian L. Nehrig, 43, Fishers, Indiana, was sentenced to three years’ probation today by U.S. District Judge Sarah E. Barker following his guilty plea to mail fraud. This case was the result of a investigation by the Federal Bureau of Investigation.

During 2005 and 2006, Nehrig worked as a foreclosure attorney doing foreclosure work for Citifinancial. Citifinancial required Nehrig to submit a bid at sheriff’s sales for foreclosed houses, sell the houses at arm’s length transactions, and then submit the proceeds if the home sold to a third party. Instead, Nehrig sometimes submitted inflated bids and had arrangements with friends and associates to buy the properties. Nehrig did not tell Citifinancial about the side deals, which were usually for a few thousand dollars more than the minimum bid requested by Citifinancial. Nehrig did not send Citifinancial the profits. The Court determined the loss to Citifinancial to be $66,000. Citifinancial has been paid through an insurance claim.

According to Assistant U.S. Attorney Gayle L. Helart, who prosecuted the case for the government, Judge Barker also imposed six months’ home confinement, and a requirement that Nehrig perform eight hours of community service per month for each of the 36 months that he is on probation. Nehrig was fined in the amount of $2500. Judge Barker noted that Nehrig’s law license was previously revoked and ordered that he not be self-employed and give full disclosure of this felony conviction to any future employer.

“Arm’s Length Transactions”

Seven Indicted in Mortgage Fraud Scheme  Debbie Sferrazza

CINCINNATI—A federal grand jury here has indicted six members of a family and one of their employees charging them with operating a mortgage fraud conspiracy between 2004 and 2009.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, Keith L. Bennett, Special Agent in Charge, Federal Bureau of Investigation (FBI), Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service Criminal Investigation, and Gerald A. O’Farrell, Assistant Inspector in Charge, announced the indictment returned yesterday against the following individuals:

- Debbie Sferrazza, 45, of West Chester,
- Salvatore Sferrazza, 70, the husband of Debbie Sferrazza,
- Keiron Ashurst, 44, Fairfield, a brother of Debbie Sferrazza,
- Whitney Bonapfel, 21, Cincinnati, a daughter of Debbie Sferrazza,
- James Ashurst, 26, West Chester, a son of Debbie Sferrazza,
- Heather Ashurst, 26, the wife of James Ashurst,
- Tabatha Sturgill, 34, Hamilton, an employee of Debbie Sferrazza.

The indictment alleges that Debbie Sferrazza worked in the mortgage lending and real estate industry through her management of several different companies, including Alpha Mortgage Lending, LLC; Alpha Mortgage Exchange, LLC; S.D.S. Processing LLC (also known as S.D.S. Inc.); and Target Loan Packaging (also known as Target Loan Processing). The indictment accuses the seven of operating a mortgage fraud conspiracy that involved family members and mortgage brokerage businesses from at least 2004 to 2009. The charges center around 14 real estate transactions involving eight residential properties during that time period.

“The 33-count indictment charges the defendants with conspiracy, wire fraud, mail fraud, money laundering, and the filing of false tax returns,” Stewart said.

Each count is punishable by a maximum sentence of 20 years’ imprisonment, except for filing false income tax returns, which is punishable by up to three years’ imprisonment.

According to the indictment, Debbie Sferrazza, Tabatha Sturgill, and the others used their mortgage lending companies to submit fraudulent loan applications for herself, her family, and her customers. The loan applications showed a pattern of inflating the borrower’s income by, among other methods, creating false Verifications of Employment, fake paystubs, fake Social Security benefit letters, and fake W-2 forms. The loan applications sometimes misrepresented the borrower’s assets, supported by fake bank statements or Verifications of Deposit. The loan applications allegedly misrepresented the identity of the mortgage broker or contained forged signatures for the borrower or other names involved in the loan application process. The loan applications sometimes misrepresented whether the property would be used as a primary residence or whether another property had been sold by the borrower.

In one allegation, a false and forged rental agreement was submitted to the lender relating to the property to be purchased. In another instance, property was transferred to an unemployed mother-in-law who had no intention of paying for or ever living in the property. At the closings, the defendants would often misrepresent the source of the borrower’s funds at closing and divert the sale proceeds back through Debbie Sferrazza’s family. The scheme also included the sale of properties at inflated values in order to obtain additional funds from the mortgage lenders.

The gross funds that were allegedly fraudulently obtained in these 14 transactions is in excess of $3 million, and the net amount of funds laundered through the Sferrazza family is allegedly in excess of $900,000.

Stewart commended the investigation which was by the Greater Cincinnati Mortgage Fraud Task Force, primarily through the Federal Bureau of Investigation, the Internal Revenue Service, and the United States Postal Inspection Service.

In addition to the FBI, IRS, and Postal Inspection Service, agencies participating in the Task Force include Ohio Attorney General Rich Cordray’s Office, U.S. Housing and Urban Development Office of Inspector General, the Cincinnati Police Department, the U.S. Secret Service,Debbie Sferrazza the Springdale Police Department, Warren County Prosecutor Rachel Hutzel, Hamilton County Prosecutor Joe Deters, the U.S. Attorney’s Office in the Eastern District of Kentucky, the West Chester Police Department, the Middletown Police Department, Hamilton County Sheriff Simon Leis, the FDIC, and the Ohio Department of Commerce Division of Financial Institutions.

Debbie Sferrazza  Debbie Sferrazza

Charles E. Walker, 56, owner and president of the Charles E. Walker Realty in Springfield, Missouri was indicted by a federal grand jury December 16, 2009 along with 16 other people on 52 counts related to mortgage fraud conspiracy.

Also indicted with Walker were his wife Lind, his son Lee, five real estate agents at the realty, three mortgage brokers, two real appraisers and four investors.

Federal agents raided the Walker Realty three years ago after their investigation revealed that Walker and co-defendants inflated home values defrauding lenders and submitting false loan applications totaling nearly $11 million dollars.

Don Ledford, spokesman for the U.S. attorney’s office for western Missouri, said he could not provide details of the investigation because of the lengthy process of the paperwork.

“When you have this kind of financial crime, there is quite a bit of paperwork to be investigated and evaluated,” he said. “That takes time.”

A news release from the U.S. attorney outlined alleged fraud that involved 26 residential properties between Nov. 1, 2004, and June 30, 2006. The allegations include the following:

Investors, some of whom were real estate agents at Walker Realty or mortgage brokers, bought and resold homes among themselves to increasingly inflate the property values.

Walker Realty and its agents received commissions for many of those transactions.

Potential home buyers represented by Walker Realty were told they could receive substantial funds at the time of closing under the guise of repair costs or remodeling, which they could use for their personal benefit if they agreed to buy the homes at inflated prices.

Defendants Vincent Cantrell, 40, and Charles V. Pursley, 82, submitted inflated appraisals on the properties to support inflated prices.

Mortgage brokers William Wagoner, 56, Steve Casarez Jr., 32, and Juan A. Johnson, 41 — all named as defendants — reportedly facilitated the scheme by giving lenders false information about borrowers’ actual income, assets and liabilities. They also concealed the fact that portions of the loan proceeds would be remitted to the borrowers after closing.

Knowing the applications contained false information and omitted material facts, the borrowers signed and approved the loan applications. Some of the borrowers were indicted.

In some cases, Charles Walker, his agents and investors provided temporary loans to borrowers for down payments, with the understanding they would be paid back from future loan proceeds. Such information was not disclosed to lenders.

The loan applications also falsely reflected that the properties were purchased as the borrower’s primary residence rather than for investment purposes.

The loan proceeds totaled about $10,944,023, and the defendants pocketed $4.3 million, prosecutors alleged.

More than 20 of the 26 homes have since been foreclosed on, causing financial losses to the lenders, said Ledford.

In addition to the 26 mortgage fraud cases in which Charles and Linda Walker are charged, the federal indictment also alleges that:

- Lee Walker engaged in seven fraudulent real estate transactions totaling about $3,080,229.

- Frankie R. Powell, 67, a Walker Realty agent and an investor, engaged in nine fraudulent transactions totaling about $3,272,771.

- James H. Powell, 71, an investor, engaged in eight fraudulent transactions totaling about $4,197,139.

- Wagoner, a mortgage broker and an investor, prepared and submitted nine loan applications for himself and on behalf of other borrowers totaling about $2,578,531.

- Casarez, a mortgage broker and an investor, prepared and submitted five loan applications for himself and on behalf of other borrowers totaling about $2,345,588.

- Johnson, a mortgage broker, prepared and submitted nine loan applications for himself and on behalf of other borrowers totaling about $3,104,265.

- Eddie Lee Rohrs, 37, an investor, bought and sold four properties through Walker Realty at artificially inflated prices totaling about $2,416,919.

- Christopher Forrester, 29, an investor, bought and sold one property through Walker Realty at an artificially inflated price of about $1,501,595.

- Robert C. Barnica, 35, an investor, bought and sold two properties through Walker Realty at artificially inflated prices totaling about $1,006,015.