Four Detroit area residents were indicted on charges of wire fraud and interstate transportation of money taken by fraud, announced United States Attorney Barbara L. McQuade. McQuade was joined in the announcement by Special Agent in Charge Andrew G. Arena, Federal Bureau of Investigation.
Charged in the 14-count indictment, which was unsealed this week, were MELVIN A. JOHNSON, 49, of Lathrup Village; CURTISS JOHNSON, 46, of Novi; BRADY MUSE, JR, 48, of Novi; and LANITA J. GATEWOOD, 53, of Detroit.
The indictment charges that from November 2004 through February 2006, these individuals knowingly participated in a scheme to defraud mortgage lenders. The loan applications were completed or supervised by Melvin Johnson or Curtiss Johnson at CHALLENGE MORTGAGE’s branch office in Southfield, Michigan, where Melvin was the branch manager and Curtiss a loan officer. Challenge Mortgage was a mortgage broker based in Florida.
The indictment alleges that the loan applications were materially false or fraudulent and that when the mortgage loans closed, Melvin Johnson and Curtiss Johnson benefitted financially through checks made payable to Challenge Mortgage and other businesses with which Melvin Johnson was associated, such as JEM Marketing Realty, JEM Processing, and First United Realty.
The indictment also alleges that the fraudulent information provided in the loans documents included false employers, overstated income, fictitious bank accounts, stolen identities, and information obtained from forged deeds, and that as a part of the scheme, Brady Muse created counterfeit documents to support the fraudulent loan packages assembled by Melvin Johnson and Curtiss Johnson. It also alleges that Lanita Gatewood allowed property she did not own to be titled in her name, and that she distributed the proceeds of the fraud to other participants in the scheme.
The defendants are charged with multiple counts of wire fraud and interstate transportation of money taken by fraud. Each count of wire fraud carries a maximum penalty of 20 years’ imprisonment and a $250,000 fine. Each count of interstate transportation of money taken by fraud carries a maximum penalty of 10 years’ imprisonment and a $250,000 fine. The defendants could also be ordered to pay restitution to the mortgage lenders.
An indictment 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.

David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury sitting in New Haven has returned a second superseding indictment charging a total of 10 individuals with various offenses related to their alleged participation in a mortgage fraud conspiracy. Six defendants, including Syed A. Babar of New London, have been charged previously with various mortgage fraud offenses stemming from the alleged scheme. The second superseding indictment charges four additional defendants, MARSHALL ASMAR, 40, of Joanne Drive, Milford; WENDY WERNER, 45, of Sarasota, Florida; REHAN QAMER, 38, formerly of Ashtabula, Ohio, and MOHAMMAD SALEEM, 39, formerly of Flushing, New York.
The indictment alleges that, between August 2006 and May 2010, Syed A. Babar, also known as “Ali” and “Asad,” 28, of New London, was the de facto leader and organizer of a conspiracy to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. The indictment alleges that ASMAR and WERNER entered into sales contracts with straw purchasers to sell homes for a price higher than the actual price that ASMAR and WERNER, as the sellers, would receive. Members of the conspiracy—which included a mortgage broker, two attorneys and a real estate appraiser—submitted false documentation in connection with loan applications that were submitted, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales price and the loan amount being sought to fund each purchase. The indictment further alleges that members of the conspiracy created a fictitious construction company called “Sheda Telle Construction, LLC,” in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. The co-conspirators then split the fraud proceeds.
It is alleged that, in August 2006, WERNER, through her company, Marbo Restorations, LLC, sold three houses on Lake Street in Norwich to QAMER, a straw purchaser working with Babar. The fraudulently inflated sales prices for 35, 37, and 41 Lake Street were $260,000, $270,000, and $270,000, respectively, and QAMER obtained residential real estate loans to purchase homes for those amounts. WERNER provided Babar with approximately $283,000 of the proceeds generated from the sale of the three houses. Babar then wrote 10 checks totaling approximately $179,000 to QAMER.
SALEEM also is alleged to have served as a straw purchaser during the conspiracy. Babar is alleged to have recruited and paid straw purchasers up to $20,000 to nominally purchase homes.
Contrary to the representations made on the loan applications, it is alleged that the straw purchasers never occupied the houses as their primary residences, failed to make payments on the loans and the properties went into foreclosure, including the three Lake Street properties that QAMER purchased from WERNER.
The alleged mortgage fraud scheme involved approximately 35 properties and loans obtained in the amount of approximately $10 million. Current losses from the scheme are estimated to be at least $2.5 million.
The indictment charges ASMAR, WERNER, QAMER, and SALEEM with one count of conspiracy to commit wire fraud, which carries a maximum term of imprisonment of five years. ASMAR and WERNER also are charged with eight counts of wire fraud, which carries a maximum term of imprisonment of 20 years on each count. The indictment also charges ASMAR with four counts of making false statements, which carries a maximum term of imprisonment of five years on each count. Finally, the indictment charges WERNER and QAMER with one count of mail fraud, which carries a maximum term of imprisonment of 20 years.
The second superseding indictment was returned on July 29, 2010, and unsealed on September 15. ASMAR was arrested on August 20. He entered a plea of not guilty to the charges and is released on a bond in the amount of $250,000, fully secured by real property. WERNER was arrested in Florida on September 10. On September 21, she appeared before United States Magistrate Judge Donna F. Martinez in Hartford and entered a plea of not guilty to the charges. She is released on a bond in the amount of $85,000, fully secured by real property.
QAMER and SALEEM are currently being sought by law enforcement.
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.
U.S. Attorney Fein stated that the investigation is ongoing.
This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development – Office of Inspector General, and is being prosecuted by Assistant United States Attorneys Eric J. Glover and Susan Wines.
In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.
The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Farrington is Last Defendant to be Sentenced in Case
U.S. Attorney’s Office June 02, 2011

DALLAS—Eric Rulack Farrington, 58, of Irving, Texas, was sentenced today by U.S. District Judge Sam A. Lindsay to 132 months in federal prison for largely orchestrating a multi-million-dollar mortgage fraud scheme in the Dallas area, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Judge Lindsay also ordered that Farrington pay approximately $2.5 million in restitution and forfeit approximately $1.2 million to the U.S. Farrington and seven other defendants were convicted in April 2010, following a nearly two-month trial on various felony offenses related to the fraud scheme that they operated in the Dallas area from March 2002 until January 2006. He is the last defendant in this case to be sentenced and was ordered to surrender to the Bureau of Prisons on September 6, 2011.

The jury convicted Farrington on all 32 counts of the superseding indictment, including: one count of conspiracy to commit wire fraud, one count of bank fraud and aiding and abetting, 15 counts of wire fraud and aiding and abetting, 10 counts of money laundering and aiding and abetting, and five counts of engaging in a monetary transaction with criminally derived property and aiding and abetting. Farrington was the president of Eric Farrington Seminars, Inc. and Prestige Capital Corporation, which did business as Farrington Mortgage Group. He was also a manager of EFC Investments, LLC, which did business as EFC Management Company. All were located in Dallas.

Farrington’s former fiancé, Janice Little Shepherd, 51, of Irving, Texas, a mortgage broker who did business as EFC Capital Mortgage Company, was sentenced yesterday by Judge Lindsay to five years in prison and ordered to pay $1,564,498 in restitution and forfeit approximately $1.2 million to the U.S. She was convicted at trial on one count of conspiracy to commit wire fraud, 11 counts of wire fraud and aiding and abetting, and four counts of engaging in a monetary transaction with criminally derived property and aiding and abetting. She was also ordered to surrender to the Bureau of Prisons on September 6, 2011.

Other defendants convicted and sentenced in the scheme include:

Regis Lamont Williams, 45, of Dallas, was a Texas certified real estate appraiser who did business as Executive Certified Appraisal. He was convicted on one count of conspiracy to commit wire fraud, one count of bank fraoud and aiding and abetting, nine counts of wire fraud and aiding and abetting, and five counts of engaging in a monetary transaction wtih criminally derived property and aiding and abetting. He was sentenced on April 28, 2011 to 46 months in prison and ordered to pay approximately $1 million in restitution and forfeit approximately $1.2 million to the U.S. In addition, the U.S. Attorney’s office will send a copy of his judgment order to the Texas Appraiser Licensing and Certification Board for whatever action they deem appropriate.
Kevin Ray Sanderson, 36, of Irving, Texas, was a business associate of Farrington and the vice president of Farco Construction, Inc., Dallas, which also did business as Farrington Mortgage Group. He was convicted on one count of conspiracy to commit wire fraud, one count of bank fraud, four counts of wire fraud and aiding and abetting, and one count of money laundering. Earlier this week he was sentenced to 57 months in prison and ordered to pay $762,983 restitution, and forfeit approximately $1.2 million to the U.S.
James Edward Jones, 45, of Dallas, was a real estate agent. He was convicted on one count of conspiracy to commit wire fraud and two counts of wire fraud and aiding and abetting. On August 27, 2010, he was sentenced to 30 months in prison and ordered to pay $624,414 restitution and forfeit approximately $1.2 million to the U.S.
Edwin Terrence Bell, 44, of Fort Worth, Texas, was in the real estate management business and was the president of Togetherness, Inc. Bell also did business as The Togetherness Group and TTG, Inc. He was convicted on one count of conspiracy to commit wire fraud, five counts of wire fraud and aiding and abetting, and two counts of engaging in a monetary transaction with criminally derived property and aiding and abetting. On August 27, 2010, he was sentenced to 41 months in prison and ordered to pay $442,604 in restitution and forfeit approximately $1.2 million to the U.S.
Micheal (sic) Lewis Andrews, 51, of Plano, Texas, was chief executive officer of Second Chance Mortgage, Inc. and did business as 2nd Chance Mortgage. He was convicted on two counts of wire fraud and aiding and abetting. He was sentenced last week to 24 months in prison and ordered to pay $108,659 in restitution.
Robert John Mason, 56, of Oak Leaf, Texas, was an employee of Prestige Capital Corporation. He was convicted of two counts of wire fraud and aiding and abetting. He was sentenced in July 2010 to 30 months in prison and ordered to pay $463,722 in restitution.

Prior to trial, Marcus Allen Parker, 36, of Rowlett, Texas, who was an associate of defendant Kevin Ray Sanderson, pleaded guilty to one count of conspiracy to commit wire fraud and was sentenced in July 2010 to three years’ probation.

The scheme was largely orchestrated by Farrington—a motivational speaker and author of a real estate book who had an infomercial on making money in real estate that ran on late night television. The defendants located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence, many times using inflated appraisals. In some cases, they would create a bogus outstanding mortgage lien to be discharged. They recruited individuals with high credit scores to act as borrowers and falsely represented to them that the property would be managed by the defendants and rented by a suitable tenant; that the mortgage, interest, taxes, insurance and property maintenance would be paid from the rental income; and the purchasers/borrowers would have no expenses. The borrowers had no intention to live in the property and did not have sufficient income to repay the loans. They said they relied on Farrington.

The defendants prepared and submitted fraudulent loan documents showing inflated incomes in the names of the borrowers and obtained loans in inflated amounts based on these fraudulent loan documents. Then they used the fraudulently obtained surplus loan proceeds to pay the sellers kickbacks, to conceal the fraud, and distributed the bulk of the proceeds among themselves. They would then allow the loan to go into foreclosure after a few payments were made on the loan.

Some of the residences used in the scheme include:

1420 Travis Circle South, Irving, Texas
6231 Azalea Lane, Dallas
7730 Cliffbrook Drive, Dallas
10907 Cinderella Lane, Dallas
7617 Arborgate Drive, Dallas
13735 Ashridge Drive, Dallas
6824 Winterwood Lane, Dallas
6840 Winterwood Lane, Dallas
6915 Winterwood Lane, Dallas
7012 Creek Bend Road, Dallas
1509 Appalachian Drive, Allen, Texas

Mortgage fraud is a major focus 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. For more information about the task force visit: www.stopfraud.gov.

U.S. Attorney Jacks praised the investigative efforts of the FBI and Internal Revenue Service – Criminal Investigation and the cooperation of several state agencies including the Texas Department of Savings and Mortgage Lending and the Texas Appraiser Licensing and Certification Board. Assistant U.S. Attorneys Joseph Revesz and Walt Junker prosecuted the case.

CHICAGO—Three partners in a failed North Shore development project, a title company executive, and a loan officer were charged in a federal indictment unsealed yesterday with engaging in a $15.7 million residential mortgage and construction loan fraud scheme to help finance the failed mixed-use commercial development known as the Center of the Northshore, federal law enforcement officials announced. The five defendants allegedly caused various lenders and a title company to lose at least $8.45 million. The loan proceeds allegedly were used to make lulling interest payments on multiple fraudulent residential mortgages, as well as to make interest payments on a $26.2 million loan to finance the purchase of 14 acres at the intersection of Dundee Road and Skokie Boulevard in Northbrook for the proposed mixed-use development, which ultimately fell into foreclosure.

The 11-count indictment, which was returned by a federal grand jury on May 26, was unsealed after four of the five defendants were arrested yesterday by federal agents. The arrests and charges were announced today by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Thomas A. Kelly, Special Agent in Charge of the U.S. Secret Service in Chicago; and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

The defendants and charges against each are as follows:

Edward Renko, 49, of Glenview, who was chief executive officer of the now-defunct EAG Capital Holdings, Inc.—two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank;

Alexander Field, 42, of Northbrook, formerly president of EAG Capital—three counts of wire fraud and one count of bank fraud;

Gary Fishkin, 54, of Glencoe, formerly chief operating officer of EAG Capital—two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank;

Kalliope Shaykin, 51, of Chicago, formerly president of Absolute Title Services, Inc., in Schaumburg—seven counts of wire fraud and one count of making a false statement to influence the action of a bank; and

Tatyana Furman, 41, of Northbrook, formerly a loan officer and mortgage broker at American United Mortgage Co., in Northbrook, which was 50 percent-owned by EAG Capital—seven counts of wire fraud.

Renko, Field, Fishkin, and Furman were arraigned yesterday before Magistrate Judge Maria Valdez in U.S. District Court, and were ordered to remain in federal custody pending a detention hearing at 11 a.m. Tuesday. Shaykin was not arrested and was scheduled to be arraigned today before U.S. District Judge Harry Leinenweber in federal court.

According to the indictment, between June 2006 and November 2007, the defendants fraudulently obtained at least $8.45 million in residential loan proceeds by repeatedly obtaining mortgages secured by residences owned by Renko, Field, and Fishkin, located respectively at 711, 700, and 688 Greenwood Rd., Northbrook. The mortgages were obtained purportedly to refinance existing loans secured by those residences, but instead of using the loans to pay off the existing mortgages, the defendants allegedly converted the fraudulently obtained loans to their own use, including to pay personal expenses, business expenses, and interest payments on the $26.21 million loan financing the purchase of property for the proposed Center of the Northshore.

On multiple occasions, the indictment alleges that Furman prepared, and Renko, Field, and Fishkin signed, fraudulent mortgage loan applications that contained false statements that failed to disclose the respective defendant’s existing mortgage liabilities and the purpose of the loans. Shaykin allegedly created and submitted to lenders fraudulent title insurance policies under the name of Title Company A that intentionally omitted prior existing mortgages and liens on the respective defendant’s residences.

The indictment alleges that Renko, Field, and Fishkin distributed at least $720,000 in fraudulently obtained loan proceeds to Shaykin through various means, and that those four defendants distributed at least $240,000 to Furman through various transactions. Overall, Renko, Field, and Fishkin obtained home mortgages and a construction loan totaling at least $15,790,000 and caused actual losses to lenders and Title Company A totaling at least $8.45 million.

The indictment seeks forfeiture totaling nearly $10.5 million from all five defendants.

The government is being represented by Assistant U.S. Attorney Ryan S. Hedges.

Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. However, four of the wire fraud counts allegedly affecting financial institutions, together with bank fraud and making a false statement to influence the action of a bank, each carry a maximum penalty of 30 years in prison and a $1 million fine. As an alternative, the court may impose a maximum fine totaling twice the loss to any victim or twice the gain to any defendant, whichever is greater, and restitution is mandatory. If convicted, the court must determine a reasonable sentence to impose under the advisory United States Sentencing Guidelines.

Ira J. Pressman was charged today by information in connection with a Ponzi scheme that defrauded 20 investors out of more than $6 million, announced United States Attorney Zane David Memeger. The charges include one count each of wire fraud, mail fraud, and money laundering. The information alleges that since 2006, Pressman ran a company called PJI Distribution Corporation that purported to purchase and sell closeout and overstock merchandise. Pressman solicited individuals to invest in these closeout deals, promising investors no risk returns of up to 100 percent annually. Unbeknownst to the investors, however, most of these closeout merchandise deals were fictitious. Pressman instead used new investor’s money to pay returns to the old investors.

Information Regarding the Defendant
Name: Ira J. Pressman
Address: Bala Cynwyd, PA
Age or Year of Birth: 1947

If convicted of all charges, the defendant faces a maximum possible sentence of 60 years in prison, a fine of $1 million, three years of supervised release, and a $300 special assessment.

The case was investigated by the Federal Bureau of Investigation, the United States Postal Inspection Service, and the Montgomery County District Attorney’s Office. It is being prosecuted by Assistant United States Attorney Leo R. Tsao and Special Assistant United States Attorney Steven Latzer.

DENVER—Cedric Lipsey, age 35, and Philip A. Martinez, age 34, both from Denver, Colorado, were indicted by a federal grand jury last week on charges of wire fraud as part of a mortgage fraud scheme, U.S. Attorney David Gaouette, FBI Special Agent in Charge James Davis, and IRS Criminal Investigation Special Agent in Charge Christopher M. Sigerson announced. Lipsey was arrested by federal agents without incident. He appeared in U.S. District Court in Denver on August 31st, 2009 for an initial appearance, where he was advised of the charges pending against him. He appeared in court again today, where U.S. District Court Magistrate Judge Kristen L. Mix authorized his release on a $50,000 property bond.

According to the indictment, beginning in April 2004, and continuing thereafter until about March 2006, in the District of Colorado and elsewhere, Cedric Lipsey, aided and abetted by defendant Philip A. Martinez, did knowingly devise and intend to devise a scheme to defraud lending companies that funded residential mortgage loans and to obtain money from them by means of materially false and fraudulent pretenses, representations, and promises.

Cedric Lipsey, a licensed real estate agent, held himself out as a successful real estate agent and investor. Philip A. Martinez was a loan officer and mortgage broker.

Lipsey orchestrated the purchase and resale or refinancing of numerous residential properties, including the sale of one of his own homes, by paying individuals to participate as “investors” in what he referred to as an investment “opportunity.” Lipsey and Martinez arranged for these so-called “investors” to use their good credit to obtain mortgage loans to purchase the properties. Shortly after the first set of loans that helped these individuals purchase properties, Lipsey caused them to sell the properties to a second set of buyers at substantially higher prices, with Lipsey and Martinez taking a combination of commissions, fees, and proceeds from the first and second transactions.

Lipsey falsely represented that the first buyers would be purchasing and had purchased the properties for less than their actual market value. The first sales were not “distressed”, as the defendants sometimes represented to facilitate their fraud. In fact, the first buyers purchased the properties at or near their market value, and there was no legitimate reason for the substantial increase in price when the same properties were resold shortly thereafter.

Lipsey and Martinez arranged to have a variety of fraudulent documents submitted to the lenders in support of the loan applications. These consisted primarily of documents purporting to show proof of the borrowers’ employment, proof of the borrowers’ assets, and sources of the borrowers’ asset, and incomes. The defendants also used forged signatures where necessary to facilitate the scheme. Furthermore, Lipsey enabled certain appraisers to create false reports which reflected that the subject properties were “comparable” to the higher quality or otherwise more valuable properties, when they were not.

“Mortgage fraud weakens our economy, threatens the recovery of the housing market, and makes it more difficult for law-abiding folks to purchase a home,” said United States Attorney David Gaouette.
“Mortgage fraud hurts borrowers, financial institutions, and legitimate homeowners,” said FBI Denver Division Special Agent in Charge James Davis. “The FBI, in conjunction with our law enforcement, regulatory, and industry partners, will continue to diligently pursue perpetrators of mortgage fraud schemes.

“Mortgage fraud creates a significant loss of tax revenue, drives buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties,” said Christopher M. Sigerson, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

If convicted of wire fraud, which are counts one through 27, the penalty is not more than 20 years in federal prison, and up to a $250,000 fine, per count. If convicted of count 28, monetary transaction in property derived from unlawful activity, the defendant faces not more than 10 years in federal prison, and up to a $250,000 fine.

The case was investigated by the Federal Bureau of Investigation (FBI), and the Internal Revenue Service – Criminal Investigation (IRS CI).

The case is being prosecuted by Assistant U.S. Attorney Linda Kaufman.

MINNEAPOLIS—Earlier today in federal court in the District of Minnesota, two people pleaded guilty to their roles in a scheme that defrauded mortgage lenders out of approximately $4.2 million. My Dinh Lam, age 30, of Minneapolis, and Ashley Elizabeth Prasil, age 27, of Eden Prairie, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the scheme. The defendants, who were charged on April 21, 2011, entered their pleas before United States District Court Judge Susan Richard Nelson in St. Paul.

In their plea agreements, the defendants admitted that from December 18, 2006, through December of 2007, they conspired to defraud mortgage lenders in connection with the marketing of the Cloud 9 Sky Flats (“Cloud 9″), a Minnetonka development. The defendants admitted that the scheme involved finding buyers to apply for mortgage loans to purchase units in the development, knowing that each buyer would receive a kickback of approximately 30 percent of the reported purchase price of any unit. The application forms submitted to the lenders did not disclose these kickbacks. The kickback payments were returned to the buyers through an account controlled by a co-conspirator, with a portion skimmed off and shared among the defendants. More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted. In excess of $4.2 million was transferred to accounts controlled by Sheri Lynn Delich, a person who has been charged by Information in this case.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Nelson will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Robert M. Lewis.

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.

Two Houston Men Sentenced to Prison for Mortgage Fraud
U.S. Attorney’s Office June 01, 2011

HOUSTON—Adrian Levale Cole and Albert Terrance Watkins, both of Houston, have been sentenced to prison for their roles in a multi-million-dollar mortgage fraud scheme, United States Attorney José Angel Moreno announced today.

Cole, 40, owned and operated the “fictitious” companies AC Homes and WT Homes and generated more than $10 million in fraudulent home loan submissions at and through Phantom Marketing, Capri Mortgage, and United National Mortgage by recruiting borrowers with good credit in Houston and the surrounding area. He pleaded guilty to wire fraud and false representation of Social Security numbers in June 2010. Today, United States District Judge David Hittner sentenced Cole to a 108-month term of incarceration to be followed by a three-year term of supervised release.

Watkins, 47, who devised the scheme with Cole to purchase multiple residential properties in the greater Houston area through fraudulent mortgage loans, was sentenced to 150 months’ incarceration by United States District Judge David Hittner. Watkins’ role in the scheme was two-fold. He was both a recruiter of borrowers with good credit on behalf of Phantom Marketing and a loan processor at Capri Mortgage and subsequently at United National Mortgage. Watkins pleaded guilty in June 2010 to conspiracy to commit wire fraud. Judge Hittner has also imposed a three-year term of supervised release to be served by Watkins upon completion of his prison term.

The scheme involved the borrowers with good credit to agree and to apply for home mortgage loans from multiple lenders, with the understanding that they would not be responsible for the monthly mortgage payments—rather, Phantom Marketing would make all payments on all loans. Watkins explained to the borrowers that the portions of the approved loan proceeds from the purchased homes would go to them and/or Watkins and/or Cole and others. As was true of most of the other loans that were part of this scheme, only the first few monthly mortgage payments were made, and then the mortgage loans went into default for non-payment.

Specifically, as related to Cole and his counts of conviction, in December 2004 Cole purchased a Houston residential property for $110,000, an “inflated” sales price, using a false Social Security number belonging to a minor on the home mortgage loan application with a “created” line of credit that was ultimately approved for $99,000. Loan funds from the bank account of the lender, People’s Choice Home Loans Inc., were wired into the bank account of the title company. Out of the loan proceeds, a check in the amount of $69,100 issued to AC Homes, Cole’s company, as a “Contractor Loan.” No construction work of any kind was ever done by AC Homes on that property located in Houston. On June 23, 2005, Cole sold this property to a “straw purchaser,” who purchased it for a greater “inflated” sales price of $150,000. According to the title file, $105,000 went to pay off Cole mortgage loan and $39,551.33 cash went to seller, Cole. No improvements were ever done to this property. The straw buyer defaulted on $150,000 in loans and the loss to bank, after resale of the foreclosed home, has been determined to be $105,128.

In addition to the prison terms, Judge Hittner has also ordered Cole and Watkins to pay restitution, jointly and severally, to various financial institutions who are currently the servicers of the loans as a result of the bankruptcy and closure of the now defunct, initial lenders. The final amount of restitution will be determined by the court within 90 days.

The investigation leading to the charges was the result of a joint investigation conducted by agents of the FBI, Friendswood Police Department, Internal Revenue Service – Criminal Investigations and the Social Security Administration – Office of Inspector General. Assistant United States Attorneys Melissa J. Annis and Carolyn Ferko prosecuted the case.

SALT LAKE CITY—A detention hearing is set for 11:15 a.m. Wednesday in federal court for John S. Dudley, age 56, of Sandy, charged last week in a 17-count indictment with money laundering and wire and bank fraud in connection with an alleged Ponzi scheme. Wednesday’s hearing will be before U.S. Magistrate Judge Paul Warner.

Dudley had an initial appearance Friday following his arrest on the indictment. He entered a plea of not guilty to the charges. A status conference has been set for Aug. 8, 2011 at 9:15 a.m. The case is being investigated by the special agents of the FBI and IRS Criminal Investigation. Anyone who believes they might be a victim of the scheme alleged in this indictment should call the FBI in Salt Lake City at 801-579-1400.

According to the indictment, Dudley devised a scheme to induce individuals to invest money with him for use in various investment programs, including a foreign exchange trading program, mining speculation, European and domestic stock options and commodity trading, and a human jetpack rocket suit. In January 2007, Dudley began to solicit investors at investment club meetings, sometimes called “bounce nights” or “Tashi group meetings,” in Salt Lake County by representing himself as an experienced and successful investor and describing his investment programs to prospective investors.

The indictment alleges Dudley made a variety of false representations to potential investors, including telling them they could expect monthly returns of 5-10 percent; that he had not suffered a trading loss since 1978; that investors’ funds would be used exclusively for investment purposes; that he had personally done very well in his investments and had never made less than 5 percent per month over the last 30 years; that investors’ money was backed by a “senior life settlement policy” that reduced or eliminated investors’ risk of loss; and that investing with him was an exclusive opportunity with only a limited number of investors allowed to invest with him at one time.

According to the indictment, Dudley advised prospective investors on how to engage in a process he called “equity mining” to borrow money from banks to invest with him. Using this process, he told individuals they could purchase luxury items, such as homes or boats, which would pay for themselves. Using the scheme, individuals would obtain financing from a bank for more than the sale price of the item and then invest the remainder of the loan proceeds in an investment offering that guaranteed a 10 percent return each month.

The indictment alleges Dudley used new investors’ money to pay old investors’ returns in a scheme commonly referred to as a ponzi scheme. Virtually all of the investors’ money was used by Dudley to either pay “returns” to other investors or for his own personal use, including the purchase of two homes—a $1.5 million home in Sandy and a $860,327.63 home in Riverton; a down payment of $28,978.31 for a ski boat; and to pay for meals, airline tickets, and gifts for his family.

Around 75 to 100 investors gave Dudley more than $12 million from about January 2007 to March 2010, the indictment alleges.

The potential penalty for each of the 10 counts of wire fraud in the indictment is 20 years in prison and a fine of $250,000. Bank fraud, charged in two counts, carries a potential penalty of 30 years per count and a $1 million fine. The maximum potential penalty for each of the five money laundering counts is 10 years and a fine of $250,000.

Indictments are not findings of guilt. Individuals charged in indictments are presumed innocent unless or until proven guilty in court.

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.

CHICAGO—A federal jury convicted a disbarred Chicago lawyer on fraud charges for her role in facilitating staged real estate transactions involving Chicago homes in 2003, federal law enforcement officials announced today. The defendant, Lorie Westerfield, was found guilty on three counts of wire fraud and was acquitted on one additional fraud count by a jury Monday after a week-long trial in U.S. District Court.

Westerfield, 46, of Chicago, acted as a seller’s attorney and title company representative in fraudulent transactions that she knew a co-defendant had arranged to obtain lender proceeds from the fraudulent sales. Westerfield faces a maximum penalty of 20 years in prison and a $250,000 fine on each of the three fraud counts. She remains free on bond while awaiting sentencing, which was set for Aug. 4 by U.S. District Judge Samuel Der-Yeghiayan.

In 2008, following a previous federal conviction involving bankruptcy fraud, Westerfield, voluntarily consented to disbarment.

Westerfield and 11 co-defendants were among 67 Chicago area defendants charged in a dozen separate mortgage fraud cases in June 2008 as part of Operation Malicious Mortgage, a nationwide initiative against fraudulent home-lending schemes. All 11 co-defendants previously pleaded guilty in the case and are also awaiting sentencing. These 11 co-defendants, including five loan officers, admitted to having various roles in a fraud scheme that obtained more than $3.2 million collectively in mortgage loan proceeds from more than a dozen lenders by submitting false loan applications using stolen identities for 17 purported home purchases in Chicago between January 2003 and November 2005. The scheme was orchestrated by defendant Freddie Johnson, who arranged for various co-defendants to appear at staged real estate closings as the purported buyers, sellers, and their representatives, in some instances using the identities of deceased individuals, to obtain the loan proceeds to be paid to the purported sellers and their nominees. Johnson and three other co-defendants testified as government witnesses at Westerfield’s trial.

The guilty verdict was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas A. Kelly, Special Agent in Charge of the U.S. Secret Service, Department of Homeland Security.

The government is being represented by Assistant U.S. Attorneys Joel M. Hammerman and Tony U. Iweagwu, Jr.

PROVIDENCE, RI—A federal grand jury in Providence on Tuesday returned indictments against a loan officer and a loan processor employed at the same mortgage company, and a former Rhode Island attorney currently involved in the real estate industry in an alleged “straw borrowing” scheme that netted more than $3.5 million dollars in fraudulently obtained mortgages on 13 properties in five Rhode Island communities, it was announced by United States Attorney Peter F. Neronha.

The grand jury returned a 13-count indictment charging Juan Carlos Hernandez, 41, of West Warwick, R.I., a loan officer with National City Mortgage Company; Miguel Valerio, 51, of Providence, R.I., a loan processor with National City Mortgage Company; and James D. Levitt, 65, of Pawtucket, R.I., a former attorney who controlled two companies formed for the purpose of engaging in real estate transactions. The properties are located in Cranston, Central Falls, Coventry, Pawtucket, and Providence.

In addition, Levitt is named in a separate eight-count indictment alleging three counts of bank fraud, three counts of wire fraud, and two counts of tax fraud in connection with mortgage transactions in Providence separate from the conspiracies outlined in the indictment naming Levitt, Juan Carlos Hernandez, and Miguel Valerio.

The indictments allege that Juan Carlos Hernandez and Miguel Valerio conspired to recruit and pay “straw purchasers” to purchase properties they would not normally qualify to purchase, with the intent of taking control of the properties to collect rent on and to sell within a short period of time, and divide the profits among them. The “straw-borrowers” were paid various fees and were regularly advised by the defendants that they would not be responsible for the mortgages for which they were applying.

In addition, the indictment alleges that Hernandez, Valerio, and Levitt conspired to obtain “straw purchasers” to apply for and obtain mortgages on four properties in which the three had a financial interest.

A separate indictment alleges that James Levitt schemed to commit mail and wire fraud by obtaining mortgages on three properties which he expected to control, two of which were obtained in the name of an associate based on false and fraudulent information.

The cases are being prosecuted by Assistant U.S. Attorney Luis M. Matos.

The matters were investigated by the Federal Bureau of Investigation, U.S. Department of Housing and Urban Development Office of Inspector General, and Internal Revenue Service, Criminal Investigations.

An indictment is merely an allegation 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.

TAMPA, FL—U.S. Attorney Robert E. O’Neill announces that U.S. District Judge Susan C. Bucklew today sentenced Sang Min Kim, a/k/a Sonny Kim (37, Tampa) to 41 months in federal prison for conspiracy to commit wire, mail, and bank fraud and money laundering in connection with a mortgage fraud scheme. As part of his sentence, the court entered a money judgment in the amount of $5,826,778.65, the proceeds of the charged criminal conduct.

Kim pleaded guilty on June 29, 2010. According to court documents, from about January 2005 through October 2008, Kim engaged in numerous residential real estate transactions in the Middle District of Florida, primarily in Hillsborough County, at least 48 of which involved fraud and resulted in losses of approximately $5,826,778.65.

Kim purchased residential properties as an “investor” with the intention of “flipping” the properties in subsequent sales. Kim’s co-conspirators identified the properties he purchased, usually at market value, by accepting quit claim deeds from the sellers. Frequently, Kim’s co-conspirators also identified the “buyers” to whom he flipped the properties. Kim’s buyers’ mortgage loan applications typically included the false claim that they intended to occupy the properties they were purchasing, when in fact they never intended to purchase Kim’s properties as places to live. Moreover, Kim’s buyers made no genuine financial commitment of funds to their purchase transactions. The buyers’ stated down payments were fictitious because the funds used to make the down payments were either provided by Kim or another, or the buyer used his or her own money and was subsequently reimbursed by Kim who used loan proceeds to do so. The “buyers” were motivated to participate in these transactions by the fact that they were being paid to assume the role of “purchaser.”

As a part of the fraud scheme, Kim used appraisers whom he knew would “come in higher” on appraised values. He also regularly provided a title agent with additional compensation in the form of “side commissions” in exchange for expediting closings. Kim was aware that at least one mortgage broker created false W-2 forms to document a prospective borrower’s stated income. Kim was also aware that his company, SK Investment Group, LLC, was used to provide false employment verifications for other fraudulent transactions from which he did not directly benefit. Kim was also aware that one or more mortgage brokers, through whom he conducted his purchase/sales transactions, made up fictitious income and false assets that were inserted on prospective buyers’ loan applications. Kim was assisted in his fraudulent purchase/sales transactions by persons employed by federally insured financial institutions. Those persons were aware that Kim, as the seller, received a portion of funds derived from equity lines of credit acquired by his buyers.

This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. It was prosecuted by Assistant United States Attorney Rachelle DesVaux Bedke.

PITTSBURGH—A resident of Richland Township, Pennsylvania has been sentenced in federal court to 27 months in prison and two years of supervised release on his conviction of wire fraud conspiracy, United States Attorney David J. Hickton announced today.

United States District Judge Nora Barry Fischer imposed the sentence on Daniel Sporrer, 47, of Gibsonia, Pennsylvania. Judge Fischer also ordered Sporrer to pay approximately $575,000 in restitution.

According to information presented to the court, Sporrer participated in a mortgage fraud scheme with Robert Arakelian, who was a mortgage broker associated with Pittsburgh Home Loans; Karen Atkison, who was a closing agent who worked with Sporrer; and others. As part of the conspiracy, Arakelian submitted false loan applications to lenders that falsely reported that the borrowers had sufficient funds in their own accounts to make the down payments associated with the purchases of real estate and to otherwise qualify for the loans to finance the purchases of the real estate. The closing documents, which were prepared and executed by Sporrer and Atkison, falsely reported to the lenders that the borrowers made down payments from their own funds at the closings, when, in fact, they did not make any payments at the closings. In addition, Sporrer advanced money to Arakelian in advance of the closings so that Arakelian could purchase certified checks, copies of which were made to present to the lenders to falsely verify that the borrowers had made the down payments.

Assistant United States Attorney Brendan T. Conway prosecuted this case on behalf of the government.

U.S. Attorney Hickton commended the Mortgage Fraud Task Force who conducted the investigation that led to the conviction of Sporrer. The Mortgage Fraud Task Force is comprised of investigators from federal, state, and local law enforcement agencies and others involved in the mortgage industry. Federal law enforcement agencies participating in the Mortgage Task Force include the United States Secret Service; Federal Bureau of Investigation; the Internal Revenue Service – Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; and the United States Postal Inspection Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff’s Office; the Pennsylvania Attorney General’s Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee’s Office.

Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894-7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General’s Consumer Protection Hotline at (800) 441-2555.

MINNEAPOLIS—Earlier today in federal court in St. Paul, a jury convicted a 44-year-old Burnsville man of conspiring with others to bilk mortgage lenders out of more than $43 million. Following a six-day trial, the jury found Troy David Chaika guilty on seven counts of wire fraud, three counts of mail fraud, and one count of conspiracy to commit wire fraud and mail fraud. Chaika was indicted on April 12, 2010.

The indictment filed in this case and the evidence presented at trial indicated that between 2005 and 2008, Chaika conspired with others, including Dustin Lee LaFavre, prosecuted in a separate action, to obtain money fraudulently through over 100 residential property transactions. To further this scheme, Chaika and LaFavre negotiated with builders of new properties as well as owners of existing properties to buy both single pieces of property and property groupings, known as “bulk purchases,” at greatly reduced prices. Chaika and LaFavre then solicited real estate purchasers by promising they would receive large cash pay-outs, or “kickbacks,” from lenders’ funds.

Chaika and LaFavre failed to tell potential buyers about the reduced prices they had negotiated for the properties, choosing instead to quote them the grossly inflated prices. By charging buyers the higher prices, Chaika and LaFavre acquired enough cash from loan proceeds to pay buyers their kickbacks and still have money left for themselves and their co-conspirators. Once a potential buyer was recruited through this scheme, Chaika and LaFavre, or someone working on their behalf, drafted a purchase agreement that reflected the inflated sale price only and failed to disclose to lenders the kickback amount to the buyer. Occasionally, Chaika, LaFavre, or someone working for them drafted a so-called addendum to the purchase agreement, setting forth the planned kickback, or “pay-out,” to the buyer, but that document was never provided to the lender.

In several instances, Chaika and LaFavre, or others on their behalf, worked with buyers and mortgage loan officers to prepare false documents for use in the application process. In addition, Chaika and LaFavre sometimes loaned buyers money for down payments or to pad their bank balances while the application process was pending. Because of those material misrepresentations, numerous lenders agreed to fund mortgage loans for the purchase of the residential properties. Furthermore, after the mortgage loans were secured, property title companies prepared documents and handled closings based on the fraudulent information provided by Chaika and LaFavre or others on their behalf. Again, those misrepresentations were material.

In furtherance of this scheme, Chaika prompted no fewer than seven wire transfers of loan proceeds from which he and others obtained cash kickbacks. He also caused false documents to be sent through the U.S. mail and by commercial carriers on at least three occasions.

For his crimes, Chaika faces a potential maximum penalty of 20 years in federal prison on each count. United States District Court Judge Richard H. Kyle will determine his sentence at a future hearing, yet to be scheduled. On December 7, 2009, Dustin Lee LaFavre pleaded guilty to one count of conspiracy and awaits sentencing.

This case is the result of an investigation by the Federal Bureau of Investigation and the U.S. Postal Inspection Service. It is being prosecuted by Assistant U.S. Attorneys Nancy E. Brasel and David M. Genrich.

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.

MINNEAPOLIS—Earlier today in federal court in the District of Minnesota, two people pleaded guilty to their roles in a scheme that defrauded mortgage lenders out of approximately $4.2 million. My Dinh Lam, age 30, of Minneapolis, and Ashley Elizabeth Prasil, age 27, of Eden Prairie, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the scheme. The defendants, who were charged on April 21, 2011, entered their pleas before United States District Court Judge Susan Richard Nelson in St. Paul.

In their plea agreements, the defendants admitted that from December 18, 2006, through December of 2007, they conspired to defraud mortgage lenders in connection with the marketing of the Cloud 9 Sky Flats (“Cloud 9″), a Minnetonka development. The defendants admitted that the scheme involved finding buyers to apply for mortgage loans to purchase units in the development, knowing that each buyer would receive a kickback of approximately 30 percent of the reported purchase price of any unit. The application forms submitted to the lenders did not disclose these kickbacks. The kickback payments were returned to the buyers through an account controlled by a co-conspirator, with a portion skimmed off and shared among the defendants. More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted. In excess of $4.2 million was transferred to accounts controlled by Sheri Lynn Delich, a person who has been charged by Information in this case.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Nelson will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Robert M. Lewis.

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.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (“FBI”), Miami Field Office, announce that defendant Michael J. McNerney, a founding partner of the Ft. Lauderdale law firm formerly known as Brinkley, McNerney, Morgan, Solomon & Tatum, LLP, pled guilty on May 18, 2011, to a one-count criminal information charging him with conspiracy to commit mail fraud and wire fraud in connection with a scheme to defraud investors in the Mutual Benefits Corporation (“MBC”). As part of his plea agreement, McNerney agreed to be responsible for $837 million in restitution to the investors who were victims of this fraud.

Sentencing has been scheduled for August 26, 2011 before U.S. District Judge Adalberto Jordan. At sentencing, McNerney faces a maximum statutory sentence of five years in prison.

For almost 10 years, from about October 1994 through at least May 2004, McNerney was the lead outside lawyer for MBC, and participated in a scheme through which MBC sold investment interests in viatical and life settlement insurance policies to the general public, raising more than $1.25 billion from approximately 30,000 investors worldwide. A viatical settlement is a transaction in which a terminally ill person sells the death benefit of his or her life insurance policy to a third party in return for a lump-sum cash payment, which is a discounted percentage of the policy’s face value. A life settlement is similar to a viatical settlement, except the seller is not terminally ill, but is a senior citizen. In the sale of viatical or life settlements, an investor would realize a profit if, when the insured dies and the policy matures, the policy benefit is more than the price paid for policy. Any profit realized would be decreased by additional out-of-pocket costs, such as premium payments.

As charged in the information, McNerney, as outside counsel for MBC, made and caused others to make, knowingly misleading representations concerning such matters as the management of MBC and its related entities and the sufficiency of the funds set aside to make premium payments on the investors’ policies. For example, among the misrepresentations made to investors, MBC’s sales agents falsely promised a “fixed return” on investments and falsely represented that MBC had a strong track record of accurately predicting life expectancies. In addition, McNerney and his conspirators concealed from investors and regulators the fact that Joel Steinger, a convicted felon, was the key decision maker at MBC. Through these and other misrepresentations, MBC engaged in an unsustainable Ponzi scheme, in which it used new investors’ monies to pay previous investors.

United States Attorney Wifredo A. Ferrer stated, “Attorneys hold a position of trust in our society. As such, they are expected to deal honestly and truthfully with their clients and the general public in the exercise of their duties. This attorney breached that duty and defrauded investors by providing “legal cover” to what was essentially nothing more than a Ponzi scheme. McNerney abused his position of trust and used his law license to help commit this massive fraud. Such abuse will not be tolerated.”

“This is another case about an attorney who instead of doing the right thing was motivated by his personal greed and defrauded thousands of investors out of hundreds of millions of dollars,” said Special Agent in Charge John V. Gillies. “McNerney’s actions were illegal and unethical and those who engage in such behavior need to know that they will be brought to justice, regardless of how elaborate or complex they think their scheme is.”

Mr. Ferrer commended the investigative efforts of the FBI and the Southeast Regional Office of the Securities and Exchange Commission, which previously brought a civil action against MBC and its principals. The matter is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.

MINNEAPOLIS—Earlier today in federal court in the District of Minnesota, two people pleaded guilty to their roles in a scheme that defrauded mortgage lenders out of approximately $4.2 million. My Dinh Lam, age 30, of Minneapolis, and Ashley Elizabeth Prasil, age 27, of Eden Prairie, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the scheme. The defendants, who were charged on April 21, 2011, entered their pleas before United States District Court Judge Susan Richard Nelson in St. Paul.

In their plea agreements, the defendants admitted that from December 18, 2006, through December of 2007, they conspired to defraud mortgage lenders in connection with the marketing of the Cloud 9 Sky Flats (“Cloud 9″), a Minnetonka development. The defendants admitted that the scheme involved finding buyers to apply for mortgage loans to purchase units in the development, knowing that each buyer would receive a kickback of approximately 30 percent of the reported purchase price of any unit. The application forms submitted to the lenders did not disclose these kickbacks. The kickback payments were returned to the buyers through an account controlled by a co-conspirator, with a portion skimmed off and shared among the defendants. More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted. In excess of $4.2 million was transferred to accounts controlled by Sheri Lynn Delich, a person who has been charged by Information in this case.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Nelson will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Robert M. Lewis.

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.

A Shaker Heights man was sentenced to 18 months in prison for his role in a mortgage fraud scheme that involved more than two dozen properties, Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today.

Beyond Wynn, age 37, pleaded guilty last year to conspiracy to commit wire fraud.

Wynn admitted selling properties, and profiting from those sales, to people he knew to be straw buyers, according to court documents.

This case was prosecuted by Assistant U.S. Attorney Mark S. Bennett following an investigation by the Cleveland Division of the Federal Bureau of Investigation.

GRAND RAPIDS, MI—Roger Lee Clark, 66, formerly of Wyoming, Michigan, received a sentence of 6 ½ years in prison for committing a multi-million-dollar Ponzi scheme and filing false income tax returns, U.S. Attorney Donald A. Davis announced today. U.S. Attorney Davis was joined in the announcement by FBI Special Agent in Charge Andrew Arena and IRS Criminal Investigation Special Agent in Charge Erick Martinez. Special agents of the FBI and of the IRS Criminal Investigation Division had investigated the case.

The Honorable Janet T. Neff, U.S. District Judge, presided over the sentencing. Judge Neff expressed her concern regarding the seriousness of the “knowing and willing theft” by Clark and the trail of financial ruin he left behind. “The pain of that financial ruin for older people is particularly reprehensible.” In a terse attempt to explain the $9.3 million fraud, Clark said, “things happened.” Judge Neff replied, “Wow, that takes the cake.” Judge Neff also ordered Clark to pay restitution to the victims and serve a combined total of four years of supervised release. Clark also agreed to a money judgment of $9,162,380.99 and the forfeiture of undeveloped real property in Byron Center as well as numerous vehicles.

Clark claimed that he owned and operated CRM Investors Corporation for the past 16 years, despite never having any training in financial planning or any related financial fields. Clark used CRM, along with other fictitious businesses that he created, to hide money and assets from victims and evade his income taxes.

In 2007, Clark instructed a California investor to wire transfer $1,001,500 into a bank account controlled by him. Clark explained to the investor that she was investing in the T-Bill trading program and that her investment was 100 percent secure. Clark admitted that in September and October of 2007, he sent the victim two wire transfers of $180,000 each and lied to her that the payments represented earnings from her investment, when in fact, the first payment came from her own principle and the second payment was from the principle of another investor. On January 29, 2009, Clark e-mailed the California investor indicating that all of her money was lost, but never stated where the money actually went.

Clark filed a 2007 tax return that reported his total income to be slightly over $11,000 when he knew that his actual total income was significantly higher. As part of his sentence, Clark was also ordered to pay total of $163,646.00 in back taxes.

“Investment fraudsters prey on trusting investors by enticing them with a ‘can’t miss’ deal and then stealing their hard earned money,” said Special Agent in Charge Erick Martinez.

“IRS Criminal Investigation is committed to investigating investment schemes in an effort to protect the financial well being of the American investor.”

FBI Special Agent in Charge Andrew G. Arena added, “The public should be aware that even though the FBI continues to vigilantly pursue these types of criminal violations, we live in a buyer-beware investment environment. Investors should vigorously investigate the background information of all investments and the individuals handling them.”