En Espãnol

Federal investigators have identified an increase in frauds and schemes in the real estate business.  These schemes victimize individuals and businesses, including  low-income families lured into home loans they cannot afford, legitimate lenders saddled with over-inflated mortgages and honest real estate investors fleeced out of their investment dollars.

Special agents with IRS Criminal Investigation are uniquely equipped to investigate these types of mortgage fraud and illegal real estate crimes because they are skilled financial investigators whose mission is to 'follow the money.'

Some of the common real estate fraud schemes include:

• Property Flipping — A buyer pays a low price for property, and then resells it quickly for a much higher price. While this may be legal, when it involves false statements to the lender, it is not.
• Two Sets of Settlement Statements — One settlement statement is prepared and provided to the seller accurately reflecting the true selling price of the property. A second fraudulent statement is given to the lender showing a highly inflated purported selling price. The lender provides a loan in excess of the property value, and after the loans are settled, the proceeds are divided among the conspirators.
• Fraudulent Qualifications — Real estate agents assist buyers who would not otherwise qualify by fabricating their employment history or credit record.

The income earned from these types of real estate fraud schemes is often laundered to hide the money from the government.  Money laundering is simply a process of trying to make illegally earned income appear to be legitimately earned.  IRS Criminal Investigation follows the money and collects evidence to prove applicable tax and/or money laundering violations.  Once they have obtained the evidence, IRS agents forward their investigation to the Department of Justice for criminal prosecution.

If a criminal investigation is not warranted, the IRS can also take civil action.  Each year the IRS audits thousands of tax returns involving individuals and entities associated with the real-estate business.

IRS Criminal Investigation
Real Estate/Mortgage Fraud Statistics

Case Summaries

The following case summaries are based on public record court documents on file in the judicial district in which the cases were prosecuted:

Virginia Man Sentenced to 240 Months for Mortgage Fraud

On October 13, 2009, in Newport News, Va., Richard Garries was sentenced to 240 months in prison followed by three years of supervised release for charges related to an elaborate mortgage fraud scheme. He was also ordered to pay more than $900,000 in restitution. On May 20, 2009, Garries was convicted on 24 charges that included conspiracy, wire fraud, mail fraud, money laundering, structuring, and making materially false statements. According to court records and evidence introduced at trial, from the summer of 2005 to May 2008, Garries conspired with others to make money through the resale – or flipping – of residential properties to buyers he brought in through false promises. Garries promised that the properties had been renovated, renters had been arranged for the properties, buyers would not have to spend their own funds, and that buyers would be provided with cash back at closing. To secure mortgage loans for buyers, evidence showed that Garries inflated the buyers’ income levels and bank account balances on loan applications and provided them with money to make it appear the buyers had more funds available to qualify for a loan and/or to have the necessary funds to proceed with closing on the property. Garries arranged for buyers to use lenders selected by him to obtain loan financing, for which Garries received a commission.  At the time of the offense, Garries was on probation from a previous federal conviction for wire fraud, for which he received a 25-month sentence. While on supervised probation, he made numerous false statements to his probation officer concealing income and assets. On June 8, 2009, Garries was ordered to serve 24 months in prison for violating his probation. Garries will serve his 240-month sentence consecutive to the 24-month sentence previously imposed.

Indiana Man Sentenced to 30 Months in Mortgage Fraud Scheme

On September 29, 2009, in Indianapolis, Ind., Jerry J. Jaquess was sentenced to 30 months in prison for his participation in a large mortgage fraud. Jaquess was also ordered to serve three years of supervised release and to pay $824,614 in restitution to Homecomings Financial and Argent Mortgage Company. According to court documents, Jaquess owned and operated Homevestors LLC, a company involved in the development and construction of new real estate properties, as well as the purchase and sale of existing residential real estate properties. Jaquess and other individuals entered into contracts to purchase 186 duplexes on the east side of Indianapolis. They negotiated to purchase all of the duplexes for $50,000 each. Jaquess used Homevestors to negotiate the purchase and sale of the first 11 properties. On each of the properties, he entered into a land contract (and other documents) immediately preceding the closing, showing that Homevestors was purchasing the property from the owner for $50,000. He also entered into agreements to sell the properties to investors for $120,000 each. In early February 2005, prior to actually owning the properties, Jaquess and his associates listed three of the 11 properties for sale at $120,000 each. A few days after these properties closed, Jaquess and his associates listed the three sales on the Multiple Listing Service which allowed the sold properties to be used as comparables on appraisals to be prepared for the remaining properties, thus making it appear that each of the remaining properties was worth $120,000.  Jaquess signed the loan closing documents on behalf of Homevestors, including the false HUD-1 Settlement Statements, showing that the investors were providing the down payments, which he knew to be untrue. After the closing, Jaquess received checks to Homevestors for the amount of the fraudulent loan proceeds.  Jaquess then caused Homevestors to issue checks disbursing the fraudulent loan proceeds. Included in these checks were payments totaling approximately $42,000 payable to Jaquess personally or a family member, as well as checks to repay the individuals “fronting” the down payment and checks to pay the investors $4,000 for each property purchased.

Two Individuals Sentenced in Mortgage Fraud Scheme

On October 6, 2009, in Raliegh, N.C., Stanely Garfield Williams, Jr., was sentenced to 70 months in prison to be followed by five years of supervised release.  On October 5, 2009, Cindy Tilley Greer was sentenced to 36 months in prison to be followed by three years of supervised release.  Williams, Greer, and others were indicted in November 2008 on federal charges related to a mortgage fraud scheme to defraud home buyers, banks, and other leaders.  According to court documents, co-defendant Daniel Rooks bought four tracts of land in Whiteville, North Carolina, subdivided the properties, put trailers on them, and sold them to low income people from around the area. Rooks partnered with Williams and another mortgage broker to finance the mobile homes.  Rooks falsely stated to the buyers the estimated cost of the property, the payment amounts and his ability to secure loans. After taking their Social Security numbers and names, he would then turn the information over to Williams who would falsify the loan applications, sending them in for approval. Greer was employed as a paralegal and notary by a law firm in Whiteville where she prepared and notarized various real estate documents including the HUD-1 settlement statement. She also arranged and conducted real estate closings, sometimes without the borrower’s knowledge or presence, and prepared and disbursed settlement checks. After the first round of sales were foreclosed, because the buyers could not make the payments, Williams began buying up the foreclosed property, finding new buyers or getting straw buyers whose names and Social Security numbers he could use to sell them all over again. Over 100 loans were secured and approximately $6 million in fraudulent funds were received. Daniel Rooks is awaiting sentencing.

Virginia Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme

On October 6, 2009, in Richmond, Va., Darrell Underwood and his wife, Cynthia Underwood, both of Chesterfield, Virginia, were sentenced for their roles in a multi-million dollar fraud scheme.  Darrell Underwood was sentenced to 120 months in prison; Cynthia Underwood was sentenced to 36 months in prison.  Both defendant will serve three years of supervised release following their prison time.  The Underwoods pleaded guilty in June 2009 to conspiracy to commit mail fraud; Darrell Underwood also pleaded guilty to engaging in unlawful monetary transactions.  Darrell and Cynthia Underwood owned and operated Walkwood Properties, a real estate company that offered various home owners an opportunity to save their homes from foreclosure.  In connection with their guilty pleas, the Underwoods admitted to operating a “Ponzi” scheme using an fraudulent investment program.  According to court documents, individuals were induced into investing money with Walkwood Properties by representing that investors’ funds would be funneled directly into investment properties targeted by Walkwood’s foreclosure efforts.  In exchange, the Underwoods promised that the investors would receive returns of up to 50% within 60-120 days.  In 2007, the Underwoods paid their investors a rate of return, but this was rarely taken from the profits of investments.  Instead, the funds used to repay investors were derived from monies paid by subsequent investors, or groups of investors. From April through December 2007, the Underwoods received approximately $18,400,000 in investor funds.  Of that amount, the bank records established that only $2,100,000 was actually paid towards any type of real estate transaction.  During the same time frame, the Underwoods paid approximately $16,200,000 to investors; of that amount, approximately $13,400,000 was derived from investor funds that were simply used to repay other investors.  As of December 13, 2007, the Underwood’s investor account had a balance of $780,557.  As of that same day, the Underwood’s investment program had an outstanding balance of over $14,000,000 owed to various investors.  The final restitution amount for victims will be determined at a hearing in December 2009.

Father and Daughter Who Served as Officers of Mortgage Foreclosure Consulting Companies Sentenced; Ordered to Pay Over $6 Million in Restitution

On October 5, 2009, in Greenbelt, Md., Clifford McCall and his daughter, Chandra Jones, were sentenced for their roles in a mortgage fraud scheme. McCall was sentenced to 48 months in prison, five years of supervised release, and ordered to pay $2,462,107 in restitution.  Jones was sentenced to 33 months in prison, five years of supervised release, and ordered to pay $3,879,093 in restitution.  McCall was president of Burroughs & Smythe Financial Services, Inc., based in Lanham, Maryland, and a director of the Fordham & Fordham (F&F) Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland. These companies, which McCall and others incorporated, assisted the Metropolitan Money Store (MMS). Beginning in September 2004, McCall conspired with others in a scheme to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers). The conspirators applied for mortgages by preparing and submitting fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers’ names.  As a result of this scheme, McCall fraudulently obtained and used for his personal benefit at least $2,462,107 through bank and credit card accounts from 2004 to 2007.  According to Jones’s plea agreement, she was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of F&F and a director of Burroughs & Smythe Financial Services, Inc. During the course of the conspiracy, Jones placed $788,978 from F&F’s bank accounts into her personal bank accounts.  At the direction of co-conspirators, Jones transferred funds from the F&F accounts to pay the personal expenses of co-conspirators. Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. Jones was paid $3,600 for serving as a straw buyer for one property and $5,000 for serving as a straw buyer for another property. As a result of this scheme, the total loss attributable to Jones, including the estimated losses to the mortgage lenders, is $4,189,283.

Senior Loan Officer Sentenced in Mortgage Fraud Scheme

On September 21, 2009, in Greenbelt, Md., Winston Thomas, of New Carrollton, Md., was sentenced to 37 months in prison, followed by three years of supervised release, and ordered to pay $58,418 to the Internal Revenue Service (IRS).  In addition, a forfeiture judgment was entered against Thomas and his co-conspirators for $2,228,878, which represents the proceeds of the criminal activity.  Thomas pleaded guilty in April 2009 to charges of failure to file federal tax returns and conspiracy to commit wire fraud. The charges were in connection with a scheme in which he and others offered to help individuals save their homes from foreclosure, but instead defrauded homeowners and mortgage lenders. According to his plea agreement, from at least 2004 until May 2008, television advertisements targeting financially-vulnerable individuals promised to improve the homeowners’ credit, save their homes from foreclosure, and assist in bankruptcy procedures. Homeowners were induced to sell their property to co-conspirator Earnest Lewis.  Thomas and others told homeowners that the “good credit” of Earnest Lewis would be used to temporarily refinance their homes. The homeowners signed their homes over to Earnest Lewis with the promise that they could repurchase the homes in roughly one year, or once they regained their financial footing.  During the interim, they could remain in their homes only by paying inflated “rent” and fees, which were directly debited from their bank accounts to an account belonging to co-conspirator. Finally, Thomas failed to file individual federal income tax returns for the years 2004 to 2006, resulting in a total tax loss of $57,830.

Florida Businessman Sentenced to 10 Years in Prison in Real Estate Fraud Scheme

On September 16, 2009, in Fort Myers, Fla., Samir Nel Cabrera was sentenced to 120 months in prison, to be followed by three years of supervised release, and ordered to pay an $1,100 special assessment; the amount of restitution will be determined at a later date.  In addition, Cabrera was ordered to forfeit $75,500 in assets.  Cabrera was indicted in August 2008 and charged with perpetrating an investment fraud involving undisclosed transfers or “flips” of real property and same-day closings.  According to court documents, STR & Associates, LLC, a Florida limited liability company controlled by Cabrera, purchased two parcels of undeveloped real property and then flipped the properties on the same days by selling them to real estate investment limited liability companies also controlled by Cabrera and funded by investors. The proceeds created by the flips were approximately $2.8 million, almost all of which Cabrera misappropriated.  The misappropriated funds were from individuals who invested in Cabrera's real estate limited liability companies.

Leader of Mortgage Fraud Scheme Sentenced to 6 ½ Years in Prison

On September 11, 2009, in Greenbelt, Md., Michael K. Lewis, of Takoma Park, Md., was sentenced to 78 months in prison, followed by three years of supervised release, for conspiracy and bankruptcy fraud.  Lewis previously agreed to a forfeiture judgment of $2,228,878, the proceeds of his criminal activity.  According to his plea agreement, from at least 2004 until May 2008, Lewis and his conspirators offered to help financially vulnerable individuals save their homes from foreclosure, but instead defrauded homeowners and mortgage lenders. Through television advertisements, Lewis represented that he could improve homeowners’ credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with Lewis, for a fee. At the meetings, Lewis solicited individuals to become MKL Associates and to purchase a variety of for-fee services, such as the Michael K. Lewis Financial Diet for reducing debt, as well as a prepaid legal plan, income tax return preparation services and bankruptcy petition preparation.  Lewis and his co-conspirators fraudulently represented to homeowners that their “lease/buy-back program” would help the homeowners to keep their homes. Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that they had to sign their homes over to Earnest Lewis to gain “good credit.”  Earnest Lewis would be used to temporarily refinance their homes and they could repurchase the homes in roughly one year. During the interim, they could remain in their homes only by paying inflated “rent” and fees by having their bank accounts directly debited to an account belonging to co-conspirator Cheryl Brooke’s company “In the House Technologies.” Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit. Lewis also referred several homeowners to Brooke to file bankruptcy related paperwork as a way to postpone foreclosure proceedings in order to give them time to participate in the lease/buy-back program.  Earnest Lewis was sentenced to 54 months in prison.  Winston Thomas was sentenced to 37 months in prison. Cheryl Brooke was sentenced to 46 months in prison.

Florida Businessman Sentenced in Commercial Mortgage Fraud Scheme

On August 10, 2009, in Tampa, Fla., Larry P. Nardelli was sentenced to 48 months in prison for conspiracy to commit loan fraud, bank fraud, and money laundering. The court also entered a forfeiture money judgment against Nardelli for approximately $26.3 million, an amount equal to the proceeds of Nardelli’s criminal conduct.  A jury convicted Nardelli on February 25, 2009, of conspiracy to make false statements to banks in connection with commercial loan applications, making false statements, bank fraud, and money laundering. Evidence at trial established that Nardelli and his co-conspirators, Michael Tringali, Neil Mohamed Husani, and closing attorney John Yanchek, agreed among themselves to purchase and immediately “flip” vacant land in Sarasota for double the money by falsely obtaining loans for the land. Nardelli entered into sham contracts with Tringali so that Tringali could falsely represent to victim banks that the contract proceeds gave him the equity necessary to purchase the vacant land. The banks unwittingly loaned money for approximately 140% of the value of the land. The conspirators then purchased the land and distributed the excess funds among themselves in various amounts while the loans went unpaid. Tringali and Yanchek were previously sentenced 41 months and 60 months in prison, respectively. Neil M. Husani remains a fugitive.

Mortgage Broker/Real Estate Developer Sentenced to 10 Years in Prison

On July 28, 2009, in Houston, Texas, Richard Bell, president and CEO of Harborside Mortgage Corporation, was sentenced to 121 months in prison for bank fraud and money laundering, to be followed by five years of supervised release. Bell was also ordered to pay restitution to his victims in an amount to be determined within 90 days.  According to court documents, in 2005 Bell entered into a contract to purchase 97 acres of land in Rosharon, Texas, for approximately $1.1 million. The contract specified Bell would make an earnest money down payment of $385,000 and obtain a loan for the balance of the purchase price. Bell made application to First National Bank for a loan of $720,000. As part of the loan application package, Bell submitted false and fraudulent documents, including false financial statements, false income tax returns and copies of false and fraudulent cashier’s checks as proof of the $385,000 down payment. The cashier’s checks totaling $385,000 were in reality two money orders obtained from Wells Fargo Bank with a true value of $35. According to Wells Fargo Bank records, Bell purchased a $25 money order November 8, 2005, and a $10 money order December 9, 2005. The money orders were altered using an optical scanner and computer software to make them appear to be cashier’s checks in the amount of $135,000 and $250,000.

Pennsylvania Man Sentenced to Prison for Mortgage Fraud

On July 27, 2009, in Pittsburgh, Pa., Leon Truskowski, of Coraopolis, Pennsylvania, was sentenced to 46 months in prison, to be followed by three years of supervised release on his conviction of wire fraud conspiracy, money laundering conspiracy, and tax evasion. According to information presented in court, Truskowski operated People's Home Mortgage, a mortgage brokerage company that assisted borrowers in obtaining financing collateralized by real estate. Truskowski and his co-conspirators submitted loan applications on behalf of borrowers that contained misrepresentations about the borrowers’ financial condition. They also submitted false documents in connection with the loan applications, including but not limited to, appraisals that inflated the true value of the properties, appraisals that represented that they were prepared by licensed appraisers when they were really prepared by unlicensed appraisers, and employment and income verification documents that misrepresented the borrowers’ employment status and overstated the borrowers’ income. The conspiracy led to losses to financial institutions of over $1,000,000. In addition, Truskoski, despite earning well in excess of the amount triggering the requirement to file his income tax returns, failed to file his income tax returns. He also attempted to evade his tax obligations by depositing funds into nominee accounts, by causing checks to be issued to other individuals, and by causing checks to be issued to shell companies.

Pennsylvania Man Sentenced in Multi-Million Dollar Mortgage Fraud Scheme

On July 21, 2009, in Pittsburgh, Pa., Michael M. Pope was sentenced to 87 months in prison, to be followed by three years of supervised release, and ordered to pay $1,394,851 in restitution. Pope pleaded guilty in February 2009 to charges of conspiracy and money laundering.  According to court documents, Pope and Tiffany Sprouts, a co-conspirator, operated Pope Financial Services and Sprouts Mortgage.  An Indictment filed in January 2008 stated that Pope and others, including Tiffany Sprouts, participated in a mortgage fraud and property flipping scheme.  Pope and Sprouts recruited at least six different straw buyers with favorable credit scores to separately apply for mortgage loans from various financial and mortgage lending institutions to obtain funds and to purchase residential real estate selected by Pope and Sprouts. Pope and Sprouts created and obtained false and fraudulent documents to inflate the straw buyers' employment and financial condition, to overstate income and assets, in order to increase the dollar amount that could be borrowed against the properties.  They also used appraisals with an inflated opinion of market value of the properties in order to increase the dollar amount that could be borrowed against the properties. In addition, Pope and Sprouts temporarily deposited funds into bank accounts of the straw buyers to make it appear that the straw buyers had sufficient assets to qualify for the loans and to make the down payments.  They also created false lease agreements purporting to show that the straw buyers would be renting to others the properties the straw buyers owned to conceal the true domicile of the straw buyers and to make it appear that the straw buyers had a source of income. The Indictment further stated that Pope and Sprouts repeatedly engaged in this conduct over a four and a half year period from June 2002 to December 2006, involving millions of dollars of loans.

Former Illinois Realtor Sentenced to 10 Years in Prison for $3.5 Million Investment Fraud Scheme

On July 20, 2009, in Peoria, Ill. Jimmy Dale Lane, former real estate broker, was to 120 months in prison, to be served concurrent with a sentence of 121 months for mail fraud related to the investment fraud scheme. In addition, Lane was ordered to pay restitution in the amount of $2.3 million to victims of the investment fraud.   He pleaded guilty in February 2009 to money laundering and mail fraud.  During court proceedings and in court documents, Lane admitted that over a period of approximately 10 years, he solicited investments through various entities, including Lane Investment Group, known as LIG, for real estate developments.  As part of the scheme, Lane offered five-year bond certificates with return rates of 10 to 24 percent.  To some investors, Lane represented that the investments were low risk because a real estate lot was collateral.  Investor funds were to be used to develop the infrastructure for residential subdivisions, thereby increasing the value of the real estate.  Lane admitted he solicited funds before he acquired property for the development which was to be known as Pine Ridge Estates, in Washington, Illinois.  Further, unbeknownst to investors, there was an 80% mortgage on the property, which was later foreclosed.  Investors were told they could cancel their investments and receive reimbursements at a reduced interest rate; however, Lane failed to pay those who wished to opt out as well as those whose principle and interest reached maturity.  Instead, investor funds were used for Lane’s personal use, for payments to family members and other business ventures.  Despite these failures, Lane continued to solicit investments through a real estate investment trust known as Preferred Properties, Inc.  Within months, those funds had been spent on himself, his family and other expenses unrelated to the investment.

Pennsylvania Woman Sent to Prison for Mortgage Fraud Violations

On July 17, 2009, in Pittsburgh, Pa., Laurie Waltz was sentenced to 24 months in prison and three years of supervised release relating to her role in a mortgage fraud scheme.   She had previously pleaded guilty to bank fraud and money laundering charges.  In addition the court ordered restitution of $225,704, to be paid jointly with Waltz and her co-offenders.  Court documents and plea hearings revealed Waltz was a loan officer for America’s Mortgage Outlet in Monroeville, Pa.   Waltz and other associates submitted false documents to a bank, as well as committed numerous other criminal actions to secure loans.

Colorado Loan Officer Sentenced to Prison for Mortgage Fraud Scheme

On July 15, 2009, in Denver, Colo., Linda Carnagie, of Bennett, Colorado, was sentenced to 41 months in prison to be followed by three years of supervised release.  Carnagie was order to pay $206,693 in restitution, to forfeit $41,205, which represents the proceeds of her illegal activities, and to pay a $2,100 special assessment to a victim of crime fund.  According to the indictments, as well as evidence presented during the trial, Linda Carnagie was an independent contractor who worked with Highland Mortgage of Evergreen, Colorado.  Starting in February 1999 and continuing through July 2004, Carnagie conspired with others to defraud the United States.  As part of the scheme, she falsified information in loan applications and supporting documentation submitted to mortgage companies and to FHA/HUD for the purpose of obtaining mortgage loans and FHA/HUD mortgage insurance. Carnagie and others working with her would illegally assist buyers who could not qualify for an FHA-insured mortgage legitimately by falsifying the borrowers’ social security numbers, verifications of employment, and prepare and submit false income information, including false Forms W-2 (wage and tax statements), pay stubs, false credit reports, and other false documents.  Carnagie and others would take the false information about the borrowers and then submit it to the mortgage companies falsely representing that the borrowers were financially qualified to undertake their mortgage obligations.

Defendant Receives Prison Sentence in Mortgage Fraud

On July 2, 2009, in Kansas, Kan., Scott Alexander, of Merriam, Kan., was sentenced to one year and a day in federal prison for mortgage fraud. Alexander pleaded guilty in January to one count of conspiracy to commit wire fraud and money laundering. In his plea he admitted that in 2003 and 2004 he conspired with co-defendant Wildor Washington, Jr., and others to obtain mortgage loans by fraudulent means including submitting inflated property appraisals to lenders. Alexander’s company, Atlantic Mortgage, had a contract to process loans originated by one of Washington’s companies, Heritage Financial Investments, Inc., through other business entities owned by Washington. The entities used the mortgage broker’s license issued to Alexander, with his knowledge and consent, to disguise and conceal from lenders the fact that Heritage Financial Investments, Inc., and Washington’s other business entities did not have a valid mortgage broker’s license. In December 2003, Alexander received $198,266 from a loan on a house in the 12400 block of East 58th in Kansas City, Mo. The loan was based on an appraisal with an inflated value and a forged signature.

District of Columbia Metropolitan Money Store Conspiractor Sentenced to 10 Years in Over $35 Million Mortgage Fraud Scheme

On July 10, 2009, in Greenbelt, Md., Kurt Fordham, of Ft. Washington, Maryland, was sentenced to 120 months in prison, followed by five years of supervised release, and ordered to pay $13,131,287 in restitution, as well as forfeit three residential properties and three vehicles.  Fordham pleaded guilty in April 2009 for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit.  According to his plea agreement, Fordham was the president of Fordham & Fordham Investment Group, Ltd. (F&F) and a director of F&F and Burroughs & Smythe Financial Services, Inc. (B&S).  In May 2005, Joy Jackson, Kurt Fordham’s wife, and coconspirator Jennifer McCall incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Also at that time, Fordham, Jackson, McCall and other co-conspirators incorporated F&F and B&S, based in Lanham and Greenbelt, Maryland to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.  From September 2004 to June 2007, Fordham, Jackson, McCall and others conspired to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure, and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names.  Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.  In order to carry out the fraud scheme, Fordham and others obtained large cashier’s checks in the names of straw buyers and Metropolitan Money Store employees in order to conceal transactions from the lenders.  In addition to directing straw buyers to participate in the scheme and facilitate the submission of false settlement documents, Fordham personally served as the straw buyer on at least six properties, completing mortgage loan applications which falsely stated, among other things, his income, that the home would be his primary residence and that he would be making the mortgage payments. During the conspiracy, Fordham and Jackson paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and F&F accounts to facilitate loans in straw buyer’s names.  As a result of this scheme, the total loss attributable to Fordham, including the estimated losses to the mortgage lenders, was $13,554,012.

Florida Man Sentenced to 22 Years in Prison in $30 Million Mortgage Fraud Scheme

On June 30, 2009, in Fort Myers, Fla., Ronald Luczak, of Cape Coral, was sentenced to 264 months in prison for his role in a large mortgage fraud scheme. Luczak must also pay approximately $5.9 million in restitution to his victims. He had pleaded guilty to wire fraud and money laundering charges on September 10, 2008.  According to court documents, between September 2005 and December 2006, Luczak and his company, Cape Coral Equity and Development (CCEDG), obtained more than $30 million worth of mortgages on at least 37 Cape Coral properties. Despite that CCEDG was responsible for making the mortgage payments, CCEDG recruited 33 “straw buyers” and reported on the mortgage applications that the straw buyers were purchasing the properties. CCEDG also falsely inflated the properties’ values, fraudulently reported the purported buyers’ incomes, provided false schedules of real estate and assets supposedly owned by the buyers, falsely reported the buyers’ occupations and employment, and falsely stated that the buyers intended to use the properties for their primary residences. Luczak paid the straw buyers’ mortgage obligations with other straw buyers’ mortgage proceeds in a Ponzi-type arrangement.  Luczak and CCEDG personally received more than $5.8 million from the scheme.  Luczak’s wife, Lisa Luczak, and Sandra Mainardi, a New Jersey loan processor, previously were sentenced to 46 months each for their part in the scheme.

Ohio Man Sentenced in Mortgage Fraud Scheme

On June 19, 2009, in Columbus, Ohio, Andrew P. Pfeifer was sentenced to 36 months in prison, to be followed by three years of supervised release, and ordered to pay $757,129 in restitution and a $400 special assessment.  Pfeifer pleaded guilty in May 2008 to charges of willfully filing a fraudulent federal income tax return with the Internal Revenue Service (IRS), money laundering, bank fraud, and wire fraud relative to a mortgage fraud scheme.  According to court documents, in 2004 Pfeifer opened Averdan Funding LLC, a mortgage brokerage company.  In 2005, Pfeifer shifted the focus of Averdan Funding LLC from writing mortgages to property investment.  Between 2005 and 2006, Pfeifer engaged in a mortgage fraud scheme whereby he would purchase dilapidated properties in Columbus, Ohio for a very small amount, and then sold the properties to unsuspecting buyers for a falsely inflated price.  Unbeknownst to the buyers, Pfeifer and others assisted them in obtaining financing by using false income, employment and liability figures on the mortgage loan applications.  Pfeifer, with the assistance of others, falsified mortgage loan applications causing lending institutions to wire transfer $1,480,262 to the various title companies.  Pfiefer also laundered $434,576 in proceeds derived from his illegal mortgage fraud scheme by depositing these funds into his various bank accounts.  In addition, Pfeifer obtained $153,815 from National City Bank under false and fraudulent pretenses for the purpose of obtaining property. Through the buying and selling of properties, during 2006, Pfeifer laundered $373,828 by depositing checks made payable to a manufacturing company from Home Depot into his business bank account held at Chase Bank. He then structured cash withdrawals in amounts less than $10,000 in order to avoid the transactions being reported to the IRS. Pfeifer willfully filed a false and fraudulent 2005 income tax return with the IRS by knowingly omitting $145,972 in personal income diverted from his business bank account.  Pfeifer used these funds to purchase properties and to pay personal expenses.  The total amount of tax due and owing to the IRS is $40,340.

Tennessee Man Sentenced to 8 Years in Prison in Mortgage Fraud Scheme

On June 18, 2009, in Nashville, Tenn., Harold Stafford, of Sumner County, Tennessee, was sentenced to 96 months in prison, to be followed by three years of supervised release, and ordered to pay $1,000,773 in restitution to mortgage lenders who were the victims of this scheme and to pay a $5,100 special assessment.  After a six-day jury trial, Stafford was convicted in February 2009 on fifty-one counts of conspiracy, wire fraud, bank fraud and money laundering.  According to testimony at the trial, Stafford engaged in a mortgage fraud scheme that involved the purchase of twenty-two luxury homes in Hendersonville, Gallatin and Goodlettsville by unqualified straw buyers. Two other men involved in the scheme, Miles Black and Jeffrey Hathcock, previously pleaded guilty and testified at the trial of Stafford; they are awaiting sentencing. Stafford, Black, and Hathcock caused false mortgage loan applications for the straw buyers to be submitted to mortgage lenders.  The loan applications overstated the straw buyers’ income, falsely stated that the homes would be the straw buyers’ primary residences, and failed to disclose other recent home purchases by the same straw buyers. All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders, after foreclosure, totaling approximately $2,214,700.

New Orleans Man Sentenced for Role in Mortgage House Flipping Scam

On June 11, 2009, in New Orleans, La., Calvin Davis was sentenced to 40 months in prison and ordered to pay $1,018,449 in restitution to the Department of Housing and Urban Development (HUD) and the Internal Revenue Service (IRS).  Davis pleaded guilty in July 2007 to conspiracy to commit mail fraud, making false statements to obtain HUD insurance and making false statements on income tax returns.  According to the court documents, Davis purchased various properties, obtained fraudulent appraisals and arranged for "straw buyers" to purchase them. He then sent the "straw buyers" to Citywide Mortgage to obtain loans by using fraudulent employment and credit documents as well as false tax returns. These loans were approved by Michelle Cochrane, a former underwriter at Citywide Mortgage. Cochrane admitted in her guilty plea, that she participated in the house flipping scheme with Davis and others. Based on the fraudulent applications, the Department of Housing and Urban Development insured the loans. Citywide then sold the loans to another mortgage company. Various properties eventually went into default and HUD became responsible for paying off those loans. Additionally, Davis failed to report the income he was generating from these various schemes on his income tax returns.  Davis is the fifth person to be sentenced for offenses stemming from this investigation.

Maryland Real Estate Agent Sentenced in Scheme to Defraud Mortgage Lenders

On May 11, 2009, in Greenbelt, Md., Oladipo Olafunmiloye, real estate agent from Gambrills, Maryland, was sentenced to 46 months in prison, to be followed by five years of supervised release, for bank fraud and money laundering in connection with a scheme to defraud mortgage lenders.  At the sentencing, the judge found that Olafunmiloye’s fraudulent scheme incurred losses of $3 million and ordered him to pay restitution in that amount, as well as forfeit his interest in a Rolls Royce automobile and funds held in four bank accounts.  According to his plea agreement, Olafunmiloye owned a real estate company known as LAFA. From November 2004 to December 2006, Olafunmiloye organized a scheme in which co-defendants Sidney Okosun, Oyekunle Ikudayisi, Kolawole Aminu and others sought to fraudulently obtain mortgages and refinance loans to purchase properties for sale in Maryland and the District of Columbia that were owned by Olafunmiloye or LAFA. The defendants recruited individuals to act as purchasers who became owners of the properties in name only and made almost none of the payments related to the purchase of the properties, including down payments, closing costs and mortgage payments. Olafunmiloye supervised the submission of false statements on loan applications as to the straw buyers’ incomes and their intent to make the properties their primary residences, in order to induce mortgage lenders to make loans at more favorable rates. Olafunmiloye also provided capital to the other defendants in order to perpetuate the scheme. Once the purchase of the properties had been funded, Olafunmiloye defaulted on mortgage payments, which forced the lenders to foreclose, thereby incurring losses. During the course of the scheme, Olafunmiloye also provided false information to obtain loans in his own name, including loans on five properties, all of which went into foreclosure, resulting in losses to the mortgage lenders of over $492,767. Finally, Olafunmiloye laundered money obtained from the fraud scheme, including 12 transactions from August 2005 to September 2006 totaling $308,311.

Florida Attorney Sentenced in Mortgage Loan Fraud Scheme

On May 11, 2009, in Tampa, Fla., John A. Yanchek was sentenced to 60 months in prison and ordered to forfeit $7.6 million. Yanchek pleaded guilty on February 4, 2009 to conspiracy to commit loan fraud, bank fraud, and money laundering.. According to court documents, Yanchek was a licensed Florida attorney who did business as the law firm of John A. Yanchek, P.A., in Sarasota, Florida. Yanchek represented G & T Land Development LLC and Steeplechase Properties LLC, legal entities owned and/or controlled by his co-conspirators, that purchased and developed commercial real estate in the Sarasota area. Yanchek also functioned as a closing agent.  According to the plea agreement, Yanchek entered into a conspiracy to make false statements to federally-insured banks in connection with applications for commercial loans used to purchase vacant land for development. The object of the conspiracy was to obtain enough loan money to allow the conspirators to purchase the property without contributing any equity of their own and to receive excess loan proceeds for their personal use. Yanchek, as the closing attorney for the loans, made false statements to the banks regarding: the financial resources of the borrower, the amount and source of equity contributed by the borrower, compliance with the seller's obligation to provide marketable title to the property, and distribution of the loan proceeds.  Co-defendant Larry P. Nardelli was convicted on February 19, 2009 and is awaiting sentencing.  Michael A. Tringali pleaded guilty and received a 41-month sentence. The third co-defendant Neil M. Husani remains a fugitive.

Attorney Sentenced in Mortgage "Rescue" Scheme

On March 24, 2009, in Richmond, Va., Colin C. Connelly was sentenced to 24 months in prison and ordered to pay $376,464 in restitution to the victims of his criminal conduct. According to court records, Connelly was involved with others in a mortgage fraud conspiracy that spanned from February through November 2007. During that time period, Connelly owned and operated Connelly & Associates, P.C., located in Chester, Virginia. Acting through that business, Connelly assisted representatives from Walkwood Properties, Inc., Midlothian, Virginia, in closing a number of housing transactions under Walkwood’s real estate purchase program. This program offered various home owners an opportunity to sell their home to someone associated with Walkwood Properties in an attempt to save the home from foreclosure. As Connelly has admitted, however, the real estate purchase program was executed without full disclosure of how each transaction worked and a significant portion of the equity in the victim’s homes was skimmed to Walkwood Properties and other entities. In executing the scheme, Connelly assisted representatives from Walkwood Properties in making a number of false representations in connection with the transactions to allow the loans to go through. In connection with his guilty plea, Connelly agreed that if the true nature of the transactions had been revealed to the mortgage lenders, the loans would not have been approved. Overall, Connelly agreed to his involvement in six different mortgage transactions resulting in a total loss of $376,464.

Pennsylvania Man Sentenced for His Involvement in Million Dollar Mortgage Fraud Scheme

On March 19, 2009, in Erie, Pa., Gregory M. Finney was sentenced to 53 months in prison and ordered to pay $33,188 in restitution on his conviction of conspiracy, mail fraud and money laundering. According to information presented in the court, Finney and others conspired to falsify mortgage loan applications for home buyers who could not have otherwise obtained a mortgage. Finney and others also accompanied prospective home buyers to the buyers' banks and deposited money into the buyer’s accounts to make it appear as if the buyers had higher account balances.

Metro Denver Real Estate Agent Sentenced To Federal Prison for Mortgage Fraud Scheme

On February 6, 2009, in Denver, Colo., real estate agent Linda Edwards, of Centennial, Colorado, was sentenced to 41 months in prison, ordered to pay $646,521 in restitution, and forfeit $139,854 for wire fraud, false statements, and false use of a social security number. Edwards was indicted in February 2005 and found guilty following a jury trial in July 2008. According to the indictment, Edwards, aided and abetted by others, devised a scheme to defraud and to obtain money and property by means of fraudulent representations and promises from mortgage companies that funded federally insured loans. As part of the scheme, Edwards, and others working with her, located buyers to buy residences, but were unable to qualify for a mortgage using the buyers’ accurate credit history, income and employment, and/or other financial information. The defendant, and others working with her, would assist the buyers who could not legitimately qualify for an FHA-insured mortgage by: (i) obtaining a false social security number (“SSN”) for the buyer, which would conceal the buyer’s unfavorable credit history; (ii) creating false W-2s or other income documents, which would inflate or wholly create income that would purportedly be available for the buyer to make mortgage payments; (iii) creating false verifications of rent (“VOR”) or employment (“VOE”) to support false information about the buyer; (iv) creating false alternate credit letters, which would create an appearance that the buyer had a history of paying debts timely; and (v) creating false “gift letters,” which falsely stated that the buyer had an appropriate source of funds for the down payment, and/or other false financial information.

Four Participants in Mortgage Fraud Scheme Sentenced to Prison

On February 4, 2009, in Columbus, Ohio, four people were sentenced for their roles in schemes that fraudulently secured more than $2.6 million in mortgage loans in 2003, 2004 and 2005. Donald F. Green was sentenced to 36 months in prison, followed by five years of supervised release, and ordered to pay $1,282,514 in restitution to Stillwater Capital Partners and 23 victim banks, jointly with his co-conspirators, and ordered to pay $230,376 in restitution to the Internal Revenue Service (IRS). Green pleaded guilty in April 2008 to one count each of conspiracy, income tax evasion, and bank fraud. George T. Jordan was sentenced to 12 months and one day in prison, followed by three years of supervised release, 416 hours of community service, and ordered to pay $1,182,691 in restitution to ABN Amro. Jordan pleaded guilty in April 2008 to one count of conspiracy and one count of money laundering. Aryeh M. Schottenstein was sentenced to 42 months imprisonment, followed by three years of supervised release, 416 hours of community service, and ordered to pay $3,740,173 in restitution to the victim financial institutions. Schottenstein pleaded guilty in May 2008 to one count each of conspiracy and money laundering. Jeffrey M. Lieberman was sentenced to 16 months in prison, followed by three years of supervised release, and ordered to pay $400,000 in restitution to Stillwater Capital Partners. Lieberman pleaded guilty in April 2008 to one count each of conspiracy and money laundering. Jordan is a real estate agent who generated a mortgage fraud scheme, selling houses at inflated prices and splitting the excess funds received from the mortgage lender with his co-conspirator, Griffin. Schottenstein and Lieberman solicited funds from private investors interested in renovating houses in distressed neighborhoods. A substantial amount of those funds was used to purchase houses from Green, who owned hundreds of houses in distressed areas of Columbus, at prices well in excess of their true values. Griffin helped locate “straw buyers” for those houses and also received funds for renovation purposes.

Green Bay, Wis. Man Sentenced to Six Years in Prison and Ordered to Pay $3.65 Million in Restitution for Tax Fraud and Wire Fraud

On January 14, 2009, in Green Bay, Wis., Daniel LaMarch was sentenced to 72 months in prison and ordered to pay restitution in the amount of $3.65 million for tax and wire fraud. LaMarch is the former owner of Title Services of Green Bay, a company that also maintained offices in Appleton, Shawano, Oconto, and Kewaunee. He pleaded guilty to carrying out a scheme to defraud in which he diverted money from his business escrow account, intended to be used to pay closing costs on real estate transactions handled by his business. From March 2002 through February 2008, LaMarch diverted more than $1.5 million from the escrow account to his own personal benefit and the operation of his business. LaMarch also pleaded guilty to failing to pay over to the IRS more than $500,000 in payroll taxes withheld from his employees, and under reporting his income by more than $118,000. At sentencing, the government emphasized the duration and magnitude of LaMarch’s fraud, as well as the fact that LaMarch continued his crime even after he was contacted by IRS agents.

Kansas Real Estate Agent Gets 12+ Years in Federal Mortgage Fraud Case

On January 10, 2009, in Kansas City, Kan., David Kostelec was sentenced to 154 months in prison and ordered to pay $1.3 million in restitution for leading a scheme to fraudulently acquire $12 million in home loans. Kostelec pleaded guilty in October 2008 to one count of conspiracy to commit wire fraud and money laundering, one count of wire fraud, one count of providing false information to lenders and one count of aggravated identity theft. In his plea, Kostelec admitted that from 2002 through 2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks. Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internet for information including the appraisers’ state license numbers. After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park Development to receive the money from escrow companies. Then they moved the money to personal accounts.

Brothers Sentenced in Million Dollar Mortgage Fraud Conspiracy

On December 5, 2008, in Alexandria, Va., Mohammed Rababeh, of Vienna, Va., and Ahmed Rababeh, of Haymarket, Va., were sentenced for their roles in a million dollar mortgage fraud conspiracy. Mohammed Rababeh was sentenced to 24 months in prison and Ahmed Rababeh received 18 months in prison. The two men had pleaded guilty on September 24, 2008, to conspiracy charges arising from a fraud scheme involving several real estate mortgage loans that they and their co-conspirators obtained between April 2004 and September 2006. According to court documents, the brothers conspired with Randolph Baltimore, 50, of Leesburg, Virginia, to submit fraudulent loan applications overstating Baltimore’s income and omitting his liabilities, so that Baltimore could purchase properties the Rababehs wanted to sell. The Rababehs agreed to pay Baltimore $27,500 to serve as the buyer on four such properties. Mohammed and Ahmed Rababeh engaged in similar fraud schemes to obtain loans to buy properties in their own names, according to court papers. Mohammad Rababeh obtained more than $2 million in such loans, and the losses to the lenders could be as much as $1 million. Baltimore pleaded guilty to the conspiracy on June 24, 2008, and was sentenced September 26, 2008, to 12 months in prison.

Ohio Man Sentenced in Mortgage Fraud Scheme

On December 4, 2008, in Cincinnati, Ohio, Eric Philpot was sentenced to 37 months in prison for a scheme he ran that defrauded mortgage lenders out of more than $200,000.  Philpot pleaded guilty on June 17, 2008, to one count of mail fraud and one count of conspiracy to commit money laundering. According to court documents, Philpot solicited people to buy residential properties and helped them secure financing by providing lenders with false information about the buyers’ income, source and scope of the down payments and other information. Additionally, Philpot failed to disclose to the lenders material information about the true nature of the real estate deals so that appropriate business decisions could be made by the lenders. Philpot admitted that, once the loans were approved, he maintained control both of the properties which were often deeded in the names of others and the loan proceeds. Philpot also fraudulently obtained financing for the sale of one property while he knew he was under federal investigation for mortgage fraud. The judge scheduled a hearing in February 2009 to determine the amount of restitution Philpot must pay.

Three Palm Beach County Residents Sentenced for Mortgage Fraud

On December 4, 2008, in Miami, Fla., three Palm Beach County residents were sentenced for their participation in a mortgage fraud scheme totaling more than $6.5 million. Defendant Lauren Jasky was sentenced to 36 months’ imprisonment, to be followed by 5 years of supervised release. On December 1, 2008, defendant Ralph Michel, a/k/a Ralph Duverneau, was sentenced to 30 months’ imprisonment, to be followed by 4 years of supervised release. On November 19, 2008, defendant Berry Louidort was sentenced to 37 months’ imprisonment, to be followed by 5 years of supervised release. All three defendants previously pled guilty to conspiracy to commit bank fraud and mail fraud. Defendants Michel and Louidort also pleaded guilty to a money laundering charge. According to court documents and court testimony, this investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 sub-prime mortgage loans initiated by Compass Mortgage Service, Inc. (“Compass Mortgage”), of Boca Raton, FL. The initial audit revealed that the loans included excessively large fees paid to defendants Berry Louidort and Ralph Michel.  The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. In fact, however, the fees were kickbacks to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by defendant Lauren Jasky, senior vice president of Compass Mortgage. To execute the scheme, the defendants fraudulently bought and sold residential property in Palm Beach County, FL.  Defendants Louidort and Michel received large assignment and marketing fees and Jasky received mortgage brokerage fees. The defendants prepared fraudulent loan applications for the purchasers and submitted them to the lenders. The applications included materially false information about the borrowers’ employment verification, income, funds on deposit, and rent history.

Three Florida Residents Sentenced for Mortgage Fraud

On December 1, 2008, in Miami, Fla., Berry Louidort received a 37 month prison sentence for his participation in a $6.5 million mortgage fraud scheme. His co-defendant, Lauren Jasky, was sentenced to 36 months imprisonment on December 4, 2008. Another co-defendant, Ralph Michel, a/k/a Ralph Duverneau, was sentenced to 30 months imprisonment. The three defendants previously pleaded guilty to conspiracy to commit bank fraud and mail fraud. Michel and Louidort also pleaded guilty to a money laundering charge. According to court documents and court testimony, the Florida Office of Financial Regulation audited 24 sub-prime mortgage loans initiated by Compass Mortgage Service, Inc. (“Compass Mortgage”), in Boca Raton, FL. The initial audit revealed that the loans included excessively large fees paid to defendants Louidort and Michel. The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. However, the fees were kickbacks based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by Jasky, who was the company’s senior vice president. The defendants fraudulently bought and sold residential property in Palm Beach County, FL. Louidort and Michel received large assignment and marketing fees and Jasky received mortgage brokerage fees. The defendants prepared fraudulent loan applications for the purchasers and submitted them to lenders. The applications included false information about the borrowers’ employment verification, income, funds on deposit, and rent history.

Mortgage Fraud Scheme in Texas Results in Prison Term for Florida Man

On November 24, 2008, in Sherman, Texas, Michael Guy Cary, Sr., of Hollywood, Florida, was sentenced to 60 months in prison and ordered to pay $5 million for money laundering, bank fraud and conspiracy to commit mail fraud. Cary and his co-defendant, Richard Kirkpatrick, were convicted earlier for their roles in a mortgage fraud scheme.  According to court testimony, Cary’s scheme involved the purchase and sale of 211 homes in Texas involving a variety of fraudulent transactions. Cary purchased the homes directly from home builders and then arranged the transfers of the deeds into names deceptively similar to that of the home builders. Upon completion of the transfers, Cary had real estate appraisers artificially inflate the values of the homes and arranged their subsequent sales to out-of-state investors who believed that they were purchasing the homes directly from the home builders and who qualified for mortgage loans on the inflated amounts based on fraudulent loan applications. Kirkpatrick provided the inflated appraisals on 89 of the 211 homes.

Owner of Funding Corporation Sentenced on Income Tax and Bank Fraud Charges

On November 4, 2008, in Cincinnati, Ohio, Toby Groves was sentenced to 24 months in prison, followed by three years of supervised release, and ordered to pay $299,997 in restitution to the Internal Revenue Service (IRS) for income tax evasion and bank fraud.  According to court documents and testimony, Groves owned a business known as Groves Funding Corporation (Groves Funding). Beginning in June 2003 and continuing through 2005, Groves provided loans to individuals who were purchasing residential real estate through his business. Groves obtained the funds to make these residential real estate loans from a line of credit supplied by a financial institution to Groves Funding. Groves Funding sold these loans to other financial institutions and Groves profited through the sale of these loans. Groves used Groves Funding to obtain loan proceeds from lenders at interest rates and in greater total sum than he would have otherwise been able to obtain. He submitted loan applications and real estate closing packages to lenders that contained false statements and omissions with the intent of inducing the lenders to provide funding. At times, Groves provided lenders with fraudulent income tax returns that were never filed with the IRS. Additionally, on his 2003 federal income tax return, Groves falsely reported his taxable income was $1,718 and that he owed no federal income tax. In his plea agreement, Groves admitted that the tax loss to the IRS for 2003 was $111,409. Also pursuant to his plea agreement, Groves agreed that there would be an additional total tax loss to the IRS for the 2001 and 2002 tax years.

Second Tucson Defendant Pleads Guilty to $13 Million Mortgage Fraud Conspiracy

On November 3, 2008, in Tucson, Ariz., Carlos Bent was sentenced to 16 months in prison and ordered to pay $867,916 in restitution for wire fraud and engaging in illegal monetary transactions in a $13 million mortgage fraud scheme. Bent pleaded guilty in January 2007 admitting that he and co-defendant Frank Padilla solicited the owners of residential real estate that had not been sold despite being on the market for substantial periods of time, and convinced these owners to use them as sales agents. The owners were told that the properties were worth more than the listed price, and that a buyer would be found if the owners agreed to a “net listing” of the property wherein Padilla and Bent would retain any sales proceeds above the owner’s asking price. Bent and Padilla found “straw buyers” to be the purported purchasers of the properties and paid the “straw buyers” a substantial fee for their fraudulent participation. Bent, Padilla and others created fraudulent documents, including false employment verifications, bank statements, mortgage loan applications and contractor’s licenses in order to qualify the “straw buyers” for 23 mortgage loans from financial institutions totaling over $13 million in order to purchase 21 residential properties (2 properties were each sold twice). Minimal, if any, mortgage payments were made on the properties and they were allowed to go into default and foreclosure. Finally, the defendants negotiated 33 checks totaling $1.3 million from title companies for currency. Every check totaled more than $10,000 and represented proceeds of the fraud. Padilla received a 24 month prison sentence in June 2008 and was ordered to pay $1.1 million in restitution.

Florida Man Sentenced to 240 Months on Mortgage Fraud and Tax Evasion Charges

On October 30, 2008, in West Palm Beach, Fla., Gregory Claude Brown was sentenced to 240 months in prison, to be followed by three years of supervised release, and ordered to pay over $2 million restitution to the financial institutions and other victims of his fraud. In June 2008, Brown was convicted by a trial jury of conspiracy, wire fraud and mail fraud arising from a scheme to obtain more than $9 million in home mortgages by submitting false information to banks regarding the purchase of more than 10 homes.  Brown was also convicted of failure to timely file his federal income tax returns for the 2001 through 2005 tax years and of income tax evasion with regard to his 1998, 1999, and 2001 through 2005 taxes. According to the superseding indictment and evidence presented at trial, Brown failed to pay his 1998, 1999, and 2001 through 2005 income tax liabilities, which totaled approximately $214,299, and engaged in willful acts of evasion, including concealing his income and assets, filing false documents with the Internal Revenue Service, and placing funds and property in the names of nominees.  According to evidence presented during the trial, Brown and others created false income tax returns to justify the false income information on the mortgage applications.  Brown filed these false returns well after the filing dates required and failed to pay any taxes due and owing despite buying more houses, buying a 40 foot go-fast boat, traveling to foreign countries, leasing high end motor vehicles, and buying luxury items.  Co-defendant Monica Martinez, defendant Brown’s girlfriend, pleaded guilty to filing a false tax return in connection with the scheme to obtain mortgages fraudulently. On July 28, 2008, defendant Monica Martinez was sentenced to three years of probation. In addition, co-defendant Wilfredo Martinez pleaded guilty to one count of wire fraud and was sentenced to 12 months probation on August 25, 2008.

FY 2008 - Examples of Real Estate/Mortgage Fraud Investigations

All Areas of Fraud Investigated by Criminal Investigation (CI)

Criminal Investigation (CI)

How to Report Suspected Tax Fraud