Examples of Financial Institution Fraud Investigations - Fiscal Year 2012
The following examples of financial institution fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Texas Man Sentenced in Mortgage Fraud Scheme
On September 26, 2012, in Dallas, Texas, Frederick Moore was sentenced to 87 months in prison, three years of supervised release, and ordered to pay $3,968,909 in restitution for his role in a mortgage scheme. According to court documents, from 2006 through 2007 Moore and co-conspirators recruited straw buyers with good credit to buy residential properties in the Dallas area. The conspirators provided loan applications for each straw borrower that included false financial information, including inflated false income figures, false contracts, and false HUD-1 settlement statement forms, to lenders and title companies to help secure the loans. Moore and his co-conspirators had the buyers sign “Authorization for Disbursement of Proceeds” forms so they could receive part of the loan proceeds without disclosing it on the HUD-1 settlement statements. The straw borrowers were promised a bonus or commission of between $3,500 and $25,000 for their participation in a particular real estate transaction. The conspirators falsely represented in loan documents that the straw purchaser intended to use the property as their primary residence, intentionally concealing from lender that each straw borrower, viewed himself as an “investor” who never intended to occupy the home. The scope of the conspiracy involved approximately 23 fraudulent residential property loan closings resulting in the funding of approximately $8.8 million in fraudulent loans.
California Couple Sentenced in Mortgage Fraud Scheme
On September 21, 2012, in Riverside, Calif., Joe Daniel Cody Jr., of Murrieta, was sentenced to 63 months in prison, three years of supervised release and ordered to pay over $1 million in restitution for conspiracy to money laundering in a mortgage fraud scheme. Angela Lynette Cody, of Murrieta, was sentenced to 48 months in prison, three years of supervised release and ordered to pay over $1 million in restitution for conspiracy to money laundering in a mortgage fraud scheme. According to court documents, Joe and Angela Cody were employees of “All Fund Mortgage,” a national mortgage brokerage firm based in Tacoma, Washington, and managed a branch out of their Murrieta residence. As part of the conspiracy, the Codys and others would convince homeowners to refinance or temporarily sell their homes to others to help them lower their monthly mortgage payments. To further the scheme, the Codys would convince the homeowner to allow an “investor” (who was really a “straw buyer”) with good credit to be added to the title of their home, telling the homeowner they could then refinance under more favorable terms. They would then effectuate sales of the properties and cash out the equity at closing once they acquired loans from new lenders based on false and fraudulent information. The Codys and their co-conspirators caused homeowners to lose title to their homes and lenders to hold millions of dollars in bad loans. In most cases, title was never transferred back to the homeowner. Few, if any, payments were ever made and the properties were eventually sold or went through foreclosure proceedings. In furtherance of the scheme, the Codys and others recruited individuals with good credit to act as straw buyers, offering an opportunity to purchase an investment property with an instant tenant and receiving a “kickback” between $1,000 to $25,000 per property.
California Mortgage Company Owner Sentenced in $30 Million Mortgage Fraud Scheme
On September 21, 2012, in Santa Ana, Calif., Eduardo Ruiz, owner of Premier One Lending, a Pasadena mortgage brokerage firm, was sentenced to 108 months in prison and ordered to pay $5.7 million in restitution for participating in a mortgage fraud scheme that obtained more than $30 million in loans. Ruiz was found guilty by jury of conspiracy and mail fraud related to his operation of Premier One Lending. The evidence presented during a three-day trial showed that while operating Premier One Lending in 2005 and 2006, Ruiz and other employees fraudulently obtained more than 100 loans from lenders in Los Angeles and Orange counties. As part of the scheme, Ruiz and his employees prepared mortgage loan applications that inflated borrowers’ income – often by as much as 10 times the their true income. Ruiz and others also obtained phony bank statements and CPA letters, which they provided to the lenders in support of the bogus income figures. According to witnesses that testified in trial, many of the borrowers did not speak English and did not realize that their income had been inflated. As a result of the scheme, the borrowers obtained large mortgage loans that they were unable to make payments on. More than 20 loans went into foreclosure, causing lenders to sustain millions of dollars in losses. Gilma Ruiz and Francisco Ruiz, both of Las Vegas, Nev., were sentenced to 24 months and 18 months in prison, respectively.
North Carolina Man Sentenced for Mortgage Fraud Scheme
On September 19, 2012, in Raleigh, N.C., Daniel P. Ostby, was sentenced to 72 months in prison, five years of supervised release and ordered to pay a $200 special assessment and $1,255,209 in restitution. On December 7, 2011, Ostby pleaded guilty to wire fraud and money laundering. According to court documents, Ostby and his co-defendant, Curt Vanderzee, developed a scheme to "flip" houses, in which they would buy real property, improve the property by building on it, and then quickly sell the property for a profit. Ostby also solicited friends and acquaintances to go into business with him by telling them they could “flip” houses and make $20,000 to $40,000 per property. From 2007 to January 2009, Ostby and Vanderzee submitted fraudulent mortgage applications to purchase real estate, which had misrepresentations of their employment, monthly income, and assets. The financial institutions, relying on the information submitted, approved the applications, and either mailed or wired the funds to the closing real estate attorney’s bank account.
Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On September 14, 2012, in Sacramento, Calif., Kesha Danine Fortune Haynie, of Chico, was sentenced to 46 months in prison. Haynie was convicted by a jury on March 28, 2012 on two counts of mail fraud in connection with a mortgage fraud scheme. According to testimony presented at trial, Haynie operated Empire Mortgage in Chico. From April 2007 through December 2007, Haynie originated fraudulent loan applications in connection with a cash-back to buyer mortgage fraud scheme. Evidence showed that Haynie promised home buyers kickbacks from a Chico home builder in exchange for purchasing homes. The day after the close of escrow, the home builder would write checks averaging $41,000 to the conspirators. Haynie and her co-conspirators would then pay the buyers up to $29,000 of the kickbacks and divide the remainder among themselves. The kickbacks were not disclosed to lenders, escrow officers, or home appraisers. Evidence also showed that Haynie participated in submitting false documents to mortgage lenders in order to obtain the loans.
Two Washington Men Sentenced for Roles in Mortgage Fraud Scheme
On September 13, 2012, in Seattle, Wash., Robert Strong, of Bothell, and Anthony Waldron, of Kirkland, were sentenced to 48 months and 42 months in prison, respectively. According to court documents, between 2005 and 2008, Strong and Waldron used fraudulent information to obtain more than $13 million in loans on 30 different properties. When the scheme ended and the homes went into foreclosure the lenders had lost more than $2.5 million. The defendants recruited straw buyers with good credit to purchase houses. These straw buyers were paid as much as $18,000 for use of their identity and credit score on the loan documents. The defendants submitted false employment information on the straw buyers, in one case claiming the woman made $22,000 per month working for an entity they created and controlled. Using this false information the men got banks to fund the mortgages on the houses, then they would quickly “sell” the house to another straw buyer at a higher price to claim the additional mortgage funds. The men also rented the houses on “rent to own” plans, asking the renters to pay an option, ranging from $400-$7000, to purchase the home at a later date and at an increased price. The defendants also falsely claimed repairs were made to the homes and increased the value of the homes based on those repair bills. Instead they pocketed the money that they claimed went to home improvements.
Mastermind of Multimillion Dollar Mortgage Fraud Conspiracy Sentenced
On September 5, 2012, in Camden, N.J., Jong Shin, of Bronx, N.Y., was sentenced to 186 months in prison, five years of supervised release and ordered to pay $4.6 million in restitution for orchestrating a mortgage fraud scheme in Atlantic City, N.J. Shin was convicted in October 2011 of conspiracy to commit wire fraud, conspiracy to commit money laundering and two counts of making a false statement to a bank on a loan application. According to court documents and evidence at trial, Shin defrauded mortgage lending institutions by purchasing seven residential properties in Atlantic City and then recruiting straw purchasers to buy the properties. Shin prepared fraudulent contracts to sell the properties to the straw purchasers and then included significantly inflated incomes, as high as $29,000 per month, on the loan applications. Shin recruited and made large cash payoffs to a real estate appraiser to falsely inflate the appraisals. Shin also recruited and paid off a local title clerk. A mortgage broker at Summit Mortgage Bankers, conspired with Shin to falsify the numbers on the applications and appraisals so that they would be accepted at the lending institutions. After 17 separate real estate transactions, the straw purchasers owned the seven properties – with mortgages they could not pay that were greater than the properties’ market value. The seven properties all went into foreclosure. Shin reaped $1.2 million in proceeds, which she laundered through several monetary transactions into her bank accounts.
Atlanta Man Sentenced for Defrauding Banks and Mortgage Lenders
On September 4, 2012, in Atlanta, Ga., Carl Wright was sentenced to 62 months in prison, three years of supervised release and ordered to pay more than $30 million in restitution. According to court documents, Wright and others executed a scheme to defraud federally insured banks and mortgage lenders. Wright and others arranged for the purchase of residential properties in the names of straw buyers with fraudulently inflated appraisals. They would pay the straw buyers to use their names and credit ratings and produce false financial/qualifying statements for the lenders. They would represent that the straw buyers paid a down payment or earnest money to the seller. They also filed one or more liens against the property prior to the sale for the purpose of paying out loan proceeds without the knowledge of the lenders.
Defendants Sentenced on Bank Fraud Charges
On August 30, 2012, in San Francisco, Calif., Michael Ohayon and David Papera were sentenced to 60 months and 70 months in prison, respectively, five years of supervised release and ordered to pay more than $10.5 million in restitution. Ohayon pleaded guilty to conspiracy to commit bank fraud, bank fraud, and money laundering on May 24, 2010. Papera pleaded guilty to conspiracy to commit bank fraud and money laundering on April 19, 2012. Ohayon and Papera formed a company called Sage Creek Ranch, LLC, to develop multiple parcels of property in California’s Napa County. According to the plea agreements, they admitted to obtaining millions in loans from a bank by submitting fraudulent loan applications in the names of straw buyers. Individuals with good credit scores would each obtain a residential loan to purchase a parcel from Sage Creek Ranch but would in reality make neither down payments nor mortgage payments on the property. Ohayon and Papera admitted that they knew the straw buyers’ loan applications included materially false information about the buyers’ income. They further admitted that they used more than $1.25 million of the loan proceeds to pay down one of Papera’s loans on a separately owned property. In addition to Ohayon and Papera, six of the straw buyers were charged with and pleaded guilty to tax felonies for failure to report as income approximately $50,000 they each received from Ohayon and Papera for allowing their names and credit to be used in the bank fraud scheme.
California Man Sentenced for Committing Multi-Million Dollar Real Estate and Loan Fraud
On August 28, 2012, in Riverside, Calif., Henrik Sardariani, of Glendale, Calif., was sentenced to 120 months in prison for orchestrating a loan fraud scheme that netted him and his associates well over $5 million. Sardariani was also ordered to pay $5.422 million in restitution to his victims and a $100,000 criminal fine. Sardariani pleaded guilty in January 2012 to conspiracy, wire fraud, and engaging in unlawful monetary transactions. According to court documents, Sardariani admitted that he falsified numerous documents to obtain more than $5 million in loans. To obtain one of the loans, Sardariani fraudulently claimed to be the president of the company that actually owned a property used as collateral. Sardariani also admitted that he had created fraudulent property records to make it appear to the lenders that prior loans secured by the properties had been paid off so the new loans being made by the victim lenders were fully secured. The fraudulent reconveyances bore forged and fraudulent signatures and stamps of notaries public. Sardariani also admitted that in relation to another loan he falsely told the lender that the loan was needed only briefly to extend a pre-existing escrow related to the purchase of a hospital and would be returned to the victim-lender at the close of the pre-existing escrow, less than one month later. In fact, as Sardariani admitted, he did not intend to use the loan proceeds in connection with the purchase of a hospital, nor did he intend to leave the money untouched in the escrow account. Sardariani used the loan proceeds to place bets on horse races. After the lender wired $2.5 million to the escrow account that Sardariani had designated, Sardariani instructed the escrow officer to wire the funds to a Hong Kong bank account to fund the gambling. The escrow officer, Wanda Tenney, who was also charged in the case, pleaded guilty to conspiracy on November 30, 2011. Sardariani’s gambling partner, Christopher Woods, who was charged with money laundering in a related case, has also pleaded guilty.
Two Sentenced in $50 Million Fraud Ring
On August 13, 2012, in Minneapolis, Minn., two men were sentenced for their roles in a $50 million bank fraud conspiracy that operated in six states, involved a network of bank employees, and victimized more than 500 individuals around the world by stealing their personal and financial information. Julian Okeayaninneh, of Colton, California, was sentenced to 324 months in prison on one count of bank fraud conspiracy, 11 counts of bank fraud, six counts of mail fraud, two counts of wire fraud, four counts of aggravated identity theft, one count of money laundering conspiracy, and one count of trafficking in false authentication features. Olugbenga Temidago Adeniran, of New York, was sentenced to 266 months in prison on one count of bank fraud conspiracy, four counts of bank fraud, and four counts of aggravated identity theft. The two men were convicted on February 28, 2012, following a three-week trial. The evidence presented at trial proved that from 2006 through March 2011, Okeayaninneh and Adeniran conspired with others to buy and sell stolen bank customer information that was ultimately used to open fraudulent bank and credit card accounts, apply for loans, and obtain cash. Subsequently, co-conspirators altered checks for deposit into those fraudulent accounts and drafted checks against them. They acquired cash from the fraudulent credit card accounts they established and used the false credit cards to purchase merchandise. They also co-opted home equity lines of credit without the knowledge or consent of the true account holders, using the lines of credit for their personal benefit. In addition to recruiting bank employees to assist in the scheme, co-conspirators regularly recruited other individuals to conduct fraudulent financial transaction, often transporting them to various banks around the country to commit their crimes.
California Business Partners Sentenced for Mortgage Fraud
On August 10, 2012, in Sacramento, Calif., two business partners were sentenced to prison for a mortgage fraud scheme they operated in 2006-2007. Garret Griffith Gililland III, formerly of Chico and Paradise, Calif., was sentenced to 94 months in prison and three years of supervised release. Shane Burreson, of Orland, Calif., was sentenced to 23 months in prison and three years of supervised release. Both defendants pleaded guilty to mail fraud and money laundering. According to court documents, Gililland orchestrated a scheme that falsified the sales prices of approximately 46 homes he brokered in Chico subdivisions between 2006 and 2008. After the close of escrow, homebuilders would write kickback checks of $40,000 to $60,000 per home to various front-companies Gililland and Burreson controlled. Gililland, Burreson, and others would then use this money to pay buyers $20,000 to $30,000 for purchasing the homes. None of the kickbacks were disclosed to the mortgage lenders who financed the properties. Additionally, Gililland and Burreson arranged for straw buyers and investors to fraudulently obtain mortgages for the homes by falsifying income and employment histories.
Ohio Man Sentenced for Role in Credit Union Collapse
On August 7, 2012, in Cleveland, Ohio, Arben Alia, of Eastlake, Ohio, was sentenced to 108 months in prison and ordered to pay $3.2 million in restitution for his criminal activity related to the collapse of a federal credit union. In addition, Alia was ordered to forfeit his 2007 Mercedes-Benz and his interest in Milano's Bar & Grille in Willowick, Ohio. Alia pleaded guilty in February 2011 to bank fraud, money laundering and bank bribery charges. According to court documents, from 2006 through 2009, Alia fraudulently obtained several loans, totaling approximately $4.5 million, from the federal credit union with the assistance of Anthony Raguz, its former Chief Operating Officer. Alia obtained these loans to fund various gambling excursions as well as to purchase and renovate Milano’s Bar and Grill. Alia corruptly gave Raguz approximately $100,000 in exchange for Raguz approving and facilitating the issuance of fraudulent loans to himself and others.
Ohio Man Sentenced for Role in Mortgage Fraud Scheme
On August 2, 2012, in Cleveland, Ohio, Dennis Springer, of Maple Heights, Ohio, was sentenced to 42 months in prison, three years of supervised release, and ordered to pay $100,000 in restitution. Springer was indicted in February 2011 with 16 other individuals in connection with a $7.7 million mortgage fraud conspiracy. According to the Indictment, Springer and others conspired to fraudulently obtain mortgage loans totaling more than $7.7 million during the period from March 2005 through November 2007. The defendants recruited straw, or nominee, buyers who agreed to purchase homes and obtain mortgage loans in their names for a fee. The defendants would create false and fraudulent documents and related financial information to obtain the mortgage loans. These often included a false appraisal which significantly inflated the true value of the property; false income, employment, tax returns and W-2s; false bank statements; and false verifications of funds on deposit by the buyer.
Owner of New Jersey-Based Mortgage Foreclosure Rescue Companies Sentenced for $10 Million Mortgage Fraud
On July 31, 2012, in Newark, N.J., Ronald Harris Jr., of Piscataway, N.J., was sentenced to 46 months in prison, five years of supervised release, fined $12,500, and ordered to forfeit $945,548 and to pay $1.8 million in restitution. Harris pleaded guilty to an Information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. A former Harris employee, Sterling Bruce, of Newark, was sentenced to 18 months in prison. Bruce pleaded guilty to one count of wire fraud conspiracy. According to court documents and statements made in court, Harris owned and operated Harris Capital and Skyline Capital Group, which were advertised as foreclosure rescue companies with offices in Newark and Maplewood, N.J. Harris admitted that he, Bruce, and other individuals fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit. They told homeowners that if they allowed third party purchasers, or straw buyers, to take title to their homes for six months to a year, Harris could help them get more favorable mortgages and improve their credit ratings. Harris also told the homeowners the titles to their homes would be returned to them. Once the distressed homeowners and straw buyers were in place, Harris, Bruce, and others falsified the straw buyers' mortgage loan applications to increase their credit-worthiness and ensure that mortgage lenders would approve the loans. Before the closings on these fraudulent transactions, Harris and Bruce would file fraudulent liens for tens of thousands of dollars on the properties. At the closings, the liens would be paid off with the proceeds of the fraudulently obtained loans. Harris admitted that he regularly laundered these loan proceeds through various bank accounts he controlled. Harris and his co-conspirators caused lenders to fund dozens of fraudulent loans totaling more than $10 million, with Harris receiving approximately $1,145,993 of that amount.
Oklahoma Bank Officer Sentenced for Embezzlement
On July 30, 2012, in Tulsa, Okla., Janice Adams was sentenced to 57 months in prison, five years of supervised release and ordered to pay $4,158,516 in restitution for embezzlement and filing false tax returns. According to court documents, Adams was a senior vice president over private banking and an internal control officer for a bank. From May 2004 through February 2010, Adams initiated fraudulent loans using account information from well known existing account holders, without the account holder’s knowledge, to embezzle funds. Many of the fictitious loans were set up as lines of credit that eventually matured into permanent loans requiring monthly payments. Adams instructed bank employees to place a “Do Not Mail” tag on the account, preventing notification of the loans or missed payments from being sent to the account holders, and instead sent to her as the Senior Vice President. To get the money from the fraudulent loans, Adams would have the loan transfers made to clearing accounts and then she would transfer the money to accounts of her family members. Also, from 2005 through 2009 Adams filed false tax returns by failing to report the embezzled income from her scheme.
Arizona Man Sentenced for Mortgage Fraud Conspiracy
On July 25, 2012, in Phoenix, Ariz., Clint Bryson Rogers, of Scottsdale, Ariz., was sentenced to 60 months in prison for his role in a mortgage fraud conspiracy. Rogers pleaded guilty on January 18, 2012, to conspiracy to commit the crimes of false loan application, wire fraud, and money laundering. As part of his guilty plea, Rogers admitted that he conspired with Shannon Kato, a real estate investor; Ernest Babbini, a loan originator; and Drew Hull, an escrow officer, to get mortgage loans to buy at least 15 homes in a short period of time by lying about his income and assets. Rogers also admitted that in addition to purchasing homes with the loan proceeds, he artificially inflated the sales prices to divert more than $2.5 million of the proceeds to himself or entities under his control. Evidence presented at sentencing showed Rogers spent these additional proceeds on such things as international travel, luxury cars, and transfers to his investment accounts. At least 10 banks fell victim to the scheme with losses exceeding $2.5 million.
Kansas Business Man Sentenced for Tax Evasion and Bank Fraud
On July 16, 2012, in Kansas City, Kan., James Clark, Overland Park, Kan., a former owner of the Kansas City Knights basketball team, was sentenced to 51 months in prison and ordered to pay more than $1.3 million in restitution. Clark pleaded guilty to one count of tax fraud and one count of bank fraud. According to court documents, Clark withheld payroll taxes from employees of his company, SWISH Holding Corp., while failing to pay more than $502,000 to the IRS. He diverted the funds and used them for his own purposes, including the operation of the basketball franchise. Clark also admitted submitting false information to a bank when he applied for a line of credit. He overstated the income, profits and assets of SWISH. He gave the bank purported copies of federal income tax returns for SWISH for 2002 and 2003. The returns had not actually been filed with the IRS and falsely overstated SWISH’s income. Additionally, as a personal guarantor of the loan, Clark gave the bank statements that over-stated the value of the Kansas City Knights and misrepresented that he had an ownership interest in the American Basketball Association.
Texas Man Sentenced for Bank Fraud
On July 10, 2012, in Plano, Texas, Michael Klein was sentenced to 40 months in prison, three years of supervised release and ordered to pay $971,192 in restitution for bank fraud. According to court documents, Klein was the owner of Four Seasons RV Resort, Inc., Green Poultice, Ltd., and Guitas, LLC. Klein, through Four Seasons, applied for a loan of $3 million so he could purchase land and develop a recreational vehicle resort, RV Resort Land. To secure the loan, he overstated his assets by approximately $2 million and presented a fraudulent letter from the city of McKinney, Texas approving the use of the RV Resort Land for a recreational vehicle park. Klein entered into two contracts through his company, Green Poultice, totaling $1,715,766 to buy adjacent tracts of land to form RV Resort Land. He then sold those tracts to his corporation, Four Seasons, for $2,989,957. Both deals closed on the same day. Klein then applied for a loan of $1.216 million for land to construct a pet day daycare and overstated his assets by $1.98 million to secure that loan. However, Klein had already purchased the land with the proceeds from the RV Resort Land deal. Klein took the proceeds and made three transfers to another bank and purchased official checks from that bank.
New York Man Sentenced for Orchestrating $10 Million Bank Fraud and Bribery Scheme
On June 14, 2012, in Manhattan, N.Y., Christopher Cavounis was sentenced to 97 months in prison, two years of supervised release and ordered to pay $8.2 million in forfeiture and more than $7.9 million in restitution. Cavounis pleaded guilty on December 22, 2011, to one count of conspiracy to commit bank fraud, five counts of bank fraud, and one count of bank bribery. Also sentenced was Jagdesh Cooma, his co-conspirator, to 37 months in prison for conspiracy to commit bank fraud. According to court documents and statements made in court, from 2009 to November 2010, Cavounis, Cooma and others fraudulently obtained at least 16 commercial bank loans and lines of credit, receiving at least $10 million from eight different lenders. All the loans are in default. To induce the lenders into providing the loans, Cavounis and Cooma prepared and submitted applications and supporting documentation that contained false and misleading information on behalf of empty shell companies with no existing businesses or assets. As part of the scheme, straw borrowers were recruited who provided personal identifying information to the defendants in exchange for future payment. In applications for loans, the defendants represented these individuals to be the owners or executives of various companies. In addition, Cavounis and Cooma created fraudulent documents that purportedly reflected the personal and financial information of each straw owner and corresponding company and submitted them to the lenders in support of the loan applications. To obtain the loans, Cavounis paid one bank employee more than $135,000 in bribes in 2010 to secure approval for several lines of credit. In total, Cavounis personally obtained approximately $2.45 million in loans that were issued to empty shell companies he controlled.
Former Bank Vice President Sentenced for Bank Fraud
On June 1, 2012, in Phoenix, Ariz., William Robert Liddle, a former bank vice president, was sentenced to 180 months in prison and five years of supervised release for defrauding Yuma’s AEA Federal Credit Union (AEA) out of more than $20 million. On May 21, 2012, Rhonda Monica Liddle, Williams’s wife, was sentenced to 12 months of home imprisonment and four years of supervised release for her supporting role in the fraud. William Liddle was convicted of 54 counts, including conspiracy, federal credit institution fraud, wire fraud and money laundering. Rhonda Liddle was convicted of 36 of those counts. According to court documents, AEA hired William Liddle in 2004 to launch its business lending department, and in 2006, Liddle became AEA’s Vice President of Business Lending. Using his position as a bank insider, Liddle approved risky business loans and loan increases to several entities owned in whole or part by Frank Ruiz. In exchange for approving the loans, Ruiz paid kickbacks to Liddle in the form of at least $250,000 in cash, a $600,000 house, a Toyota Sequoia and a Corvette. The entities Ruiz used to obtain the loans were financially unstable and unqualified for the loans, and the few legitimate projects that were funded by the loans ended in failure. Ruiz was recently sentenced to 24 months in prison and five years of supervised release.
California Realtor Sentenced for Falsifying Loan Application
On May 24, 2012, in San Francisco, Calif., Abraham Valentino was sentenced to 18 months in prison for falsifying his income on a multi-million dollar loan application. Valentino pleaded guilty in July 2011 to one count of wire fraud and one count of money laundering. According to court documents, in April 2006, Valentino applied for two loans as part of a refinancing of his residence in Tiburon, California. The first loan was for approximately $5,100,000 from HTFC Corporation. The second loan was a home equity line of credit for approximately $500,000, from Greenpoint Mortgage. Around June 2006, Valentino refinanced the Greenpoint Mortgage Loan with a loan of approximately $500,000 from Countrywide Bank, N.A. In connection with the HTFC Loan, the Greenpoint Loan, and the Countrywide Loan, Valentino falsified his loan application by representing that his monthly base employment income was $132,000, when in fact, it was $4,500 to $6,000 per month. Based on the defendant’s loan application, HTFC wired approximately $5,100,000 from HTFC’s bank account to the bank account established by the escrow company for the refinancing transaction.
California Man Sentenced in Multi-Million Dollar Mortgage Fraud Scheme
On May 23, 2012, in San Francisco, Calif., Justin Batemon was sentenced to 37 months in prison and ordered to pay restitution for his role in a multi-million dollar mortgage fraud scheme. Batemon pleaded guilty on January 31, 2012, to conspiracy to commit bank and wire fraud and to wire fraud. According to court documents, from 2006 until early 2007, Batemon was involved in a scheme to fraudulently obtain mortgage loans for parcels of real property located in Northern California. Batemon referred his friends, who included members and associates of the Hells Angels, to co-defendant Jacob Moynihan, a loan officer in San Francisco. As part of the conspiracy, Batemon obtained fraudulent mortgage loans by making up a company where he was self-employed. Batemon inflated his income and then had Moynihan and others provide altered bank statements. In addition, Batemon was involved in rehabilitating properties to be flipped to sell to other fraudulent buyers in the scheme. In total, the scheme involved more than $15 million in fraudulent mortgage loans.
Former Real Estate Attorney Sentenced in Million Dollar Mortgage Fraud Scheme
On May 15, 2012, in Providence, R.I., James D. Levitt, a disbarred real estate attorney from Pawtucket, R.I., was sentenced to 12 months and one day in prison, three years of supervised release, fined $25,000 and ordered to pay $610,500 in restitution. Levitt pleaded guilty on February 1, 2012, to three counts of bank fraud and two counts of filing false tax returns for his role in a $1.1 million mortgage fraud scheme. According to his plea agreement, between July 2006 and November 2007, based on fraudulent information, Levitt received three mortgages totaling more than $1.1 million for two properties in Providence and one in East Providence. Levitt falsely purported to obtain a buyer for the properties who was qualified to obtain financing to purchase the properties. To finance the purchases, Levitt induced a business associate to apply for the mortgages by representing to the investor that they would be partners, would refurbish the properties as condominiums and sell them at a profit. Levitt admitted that the mortgage applications and settlement statements contained false information, including failing to identify the true purchaser of the property and falsely stating that the buyer was putting a down payment in excess of $100,000 for each property. Additionally, Levitt conducted the closings on the properties despite his financial interest and the fact he was a disbarred attorney. After the closings, Levitt deposited the majority of the proceeds of the sale of the properties, approximately $270,000, into bank accounts which he controlled. He provided $25,000 of the proceeds to the seller of the properties shortly after the closing, and he later made periodic payments. Levitt admitted, however, that he used the majority of the proceeds for his business and for personal expenses. The two properties eventually went into foreclosure. Levitt used the third mortgage to buy a property from another company he controlled. He applied for the mortgage in his own name. The application also contained false statements and omissions, including an affirmation by Levitt that there were no outstanding judgments against him. Levitt admitted that he knew that there was an outstanding judgment against him of approximately $432,728 by the State of Rhode Island, which represented restitution owed to the state on a prior criminal conviction. Levitt also failed to disclose to the Internal Revenue Service in tax filings in October 2007 and October 2008 income derived from the ventures as well as from other sources.
Minnesota Man Sentenced for Orchestrating Multi-Million-Dollar Mortgage Fraud Scheme
On May 11, 2012 in Minneapolis, Minn., Michael Prieskorn was sentenced to 72 months in prison for orchestrating a mortgage fraud scheme that resulted in at least $18 million in losses by mortgage lenders. According to court documents, Prieskorn admitted he and others conspired to obtain mortgage loan proceeds by luring buyers to purchase properties. In return, Prieskorn promised the buyers $5,000 for every property purchased. He also promised to make all mortgage payments and pay all other bills associated with the properties for a specific term, after which, he would sell the properties at no cost to the original buyers or “investors.” Prieskorn maintained that the mortgage loans were risk free to their investors, knowing all the while the 20 investors were responsible for the loans. Following the closing of these real estate transactions, many investors defaulted on their mortgage loans and were forced into short sales or foreclosure. Yet, Prieskorn admitted receiving at least $1 million in gross receipts as a result of the scam. Prieskorn also admitted concealing from mortgage lenders that he temporarily deposited funds into the bank accounts of some investors to misrepresent the true financial status of those buyers, thereby inducing lender approval of the mortgage loans. He also concealed from the 20 mortgage lenders that he paid the down payments and closing costs for the investors. Prieskorn transferred money, by wire, into investors’ bank accounts and caused the faxing of fraudulent mortgage loan applications to potential mortgage lenders. He also caused lenders to make wire transfers of mortgage loan proceeds on related real estate transactions. Specific to the monetary transaction count, Prieskorn structured financial transactions to conceal that he was the recipient of funds from the fraud.
California Man Sentenced for Role in Mortgage Fraud Scheme
On May 2, 2012, in Oakland, Calif., James Delbert McConville, of Fremont, was sentenced to 93 months in prison, three years of supervised release and ordered to pay more than $7 million in restitution. McConville pleaded guilty on January 25, 2012, to conspiracy to commit mail and wire fraud and money laundering. According to the plea agreement, McConville admitted to conspiring with others from March 2008 through approximately 2009 to present fraudulent loan applications to lending institutions. He admitted that members of the conspiracy paid straw buyers between $5,000 and $10,000 to use their names and credit histories to obtain financing from lenders. McConville also admitted that he received, on average, $150,000 per loan transaction as a marketing fee that was concealed from the lender approving the loan. McConville admitted that for each of the approximately 80 properties involved in the scheme, the escrow officer sent the lender a fraudulent settlement statement (HUD-1) that did not disclose the large marketing fee. The scheme resulted in the approval of almost $20 million in fraudulent loans.
Connecticut Man Sentenced for Participating in Scheme to Defraud Bank
On May 1, 2012, in Bridgeport, Conn., Kevin W. Caffrey, of Wolcott, was sentenced to 12 months and one day in prison and three years of supervised release for his role in his ex-wife’s scheme to defraud a bank of more than $6.2 million. Caffrey pleaded guilty to one count of bank fraud and one count of filing a false tax return. According to court documents and statements made in court, between approximately May 2000 and May 2006, Caffrey was married to Susan Curtis, who worked in the Property Services Division of a bank. The Property Services Division was responsible for, among other things, the acquisition and leasing of properties for the bank’s Retail Banking business. In 2002, Curtis and Caffrey formed New House LLC and the only listed member for New House was Caffrey. Curtis, with Caffrey’s assistance, falsely represented to the bank’s Vendor Management Department that New House was a legitimate company entitled to certain fees because of real estate transactions with the bank. In fact, New House was a sham company that never acted as a broker or landlord in any real estate transactions. Between 2002 and at least 2008, Curtis and Caffrey caused the bank to make approximately 90 payments totaling nearly $4.3 million to New House. Caffrey had access and control over the New House's bank account and was aware of the fraudulent deposits made to the bank account. He was also involved in disbursing funds from the bank account to himself and others. In addition, Caffrey did not file federal tax returns on behalf of New House and failed to report the proceeds of the fraud on his personal federal tax returns. In tax years 2005 through 2008, Caffrey failed to report more than $353,000 in income, resulting in a tax loss to the government of $90,054. The judge also ordered Caffrey and Curtis to pay $4,295,588 in restitution to the bank. Caffrey also was ordered to pay $110,256 in back taxes and interest.
California Man Sentenced in $9 Million Mortgage Fraud and Tax Evasion Scheme
On April 16, 2012, in Los Angeles, Calif., Scott Dority, of San Marino, was sentenced to 121 months in prison for defrauding banks and other lenders by using “straw borrowers” and bogus documents to obtain millions of dollars in loans for houses and high-end vehicles. Dority pleaded guilty on March 14, 2011, to wire fraud, conspiracy, aggravated identity theft and two counts of tax evasion. According to his guilty plea, Dority admitted that his fraudulent conduct caused at least $4 million in losses to financial institutions that issued mortgages and approximately $5 million in losses to institutions that issue loans for the sports cars and recreational vehicles. Dority also admitted in court that he failed to file tax returns for 2005 and 2006, even though he had hundreds of thousands of dollars in income in each of those years. According to court documents, Dority, along with others, recruited individuals with good credit to act as straw buyers to purchase residential homes or expensive vehicles. Dority created a package of materials – including fake bank statements, fake pay stubs and bogus fake tax returns – to make it appear that these straw buyers had sufficient assets and income to pay back loans used to purchase the real estate and vehicles. These fake documents were then submitted to lenders who relied upon them to issue more than $9 million in mortgage and vehicle loans.
California Developer Sentenced for Mortgage Fraud Scheme
On April 13, 2012, in Sacramento, Calif., Anthony G. Symmes, of Paradise, was sentenced to 35 months in prison and three years of supervised release for conspiring to commit fraud and one count of money laundering. Symmes was also ordered to forfeit $4 million. According to court documents, from 2006 through 2008, Symmes sold 62 homes to straw buyers recruited by Garret G. Gililland III and others. The purchase price on each home was inflated by up to $60,000. One day after the close of escrow on each property, Symmes would write a check back to front companies controlled by Gililland and others. The rebates on the purchase price were not disclosed to the lenders who financed the properties for the straw buyers. Gililland pleaded guilty and is awaiting sentencing.
Former Executive of Florida-Based Ocean Bank Sentenced for Participating in Bribery Scheme and Filing False Tax Returns
On April 4, 2012, in Miami, Fla., Danilo P. Perez, a former vice president of Ocean Bank headquartered in Miami, was sentenced to 37 months in prison and one year of supervised release. In January 2012, Perez pleaded guilty to one count of conspiracy to solicit or demand money and other things of value to influence an employee of a financial institution and three counts of tax offenses. The charges against Perez stemmed from his accepting nearly $500,000 in cash and other items from co-conspirators in connection with his supervision of certain customer business with the bank. As vice president, Perez generally oversaw Ocean Bank’s lending relationships with corporate customers of the bank. Perez admitted to accepting bribes, including payments for expensive watches, Super Bowl tickets and other items for his personal use, as well as substantial amounts of cash. Perez accepted the payments intending to be rewarded and influenced in connection with his role in approving Ocean Bank’s issuance of letters of credit, loans and overdraft privileges to his co-conspirators. Perez also admitted that he failed to report income from those bribes for tax years 2005, 2006 and 2007, resulting in lost tax revenue of approximately $91,000.
Hells Angels Leader Sentenced in Mortgage Fraud Scheme
On April 4, 2012, in San Francisco, Calif., Josh Leo Johnson was sentenced to 12 months in prison, three years of supervised release, and ordered to pay $130,000 in restitution to Sun Trust Mortgage for his role in a mortgage fraud scheme. Johnson, the current Vice President of the Hells Angels Sonoma Chapter, pleaded guilty on December 13, 2011 to wire fraud. According to the plea agreement, Johnson admitted that from 2006 until 2007, he was involved in a conspiracy with others to fraudulently obtain mortgage loans. Specifically, in May 2007 he signed loan applications, containing materially false statements, for real property in Healdsburg, Calif. These false statements caused interstate wire transfers of loan funds from mortgage lenders directly to Johnson’s account. Some examples of the false statements contained in the loan applications included that Johnson was the owner of a fictitious company for several years and making a large and recurring salary. The documents supporting the loan applications also contained altered bank statements in Johnson’s name to reflect a series of inflated balances in his bank account. The loan applications Johnson submitted ultimately resulted in a loss to the lender of approximately $135,000, though the amount of loss in the overall conspiracy is at least several million dollars.
North Carolina Woman Sentenced for Mortgage Fraud Conspiracy
On April 2, 2012, in New Bern, N.C., Mary Rose Wright, of Raleigh, N.C., was sentenced to 52 months in prison, three years of supervised release and ordered to pay $1,416,022 in restitution. Wright pleaded guilty to wire fraud and conspiring to commit mail fraud, wire fraud and bank fraud. According to the criminal information, from August 2006 to November 2006, Wright, working as a mortgage broker, worked with others to defraud various financial institutions through the submission of false and fictitious mortgage loan applications. The purpose of the conspiracy was to fraudulently obtain mortgage loans by falsifying loan applications and HUD-1 statements and by fabricating supporting documentation to insure that banks would approve the loan applications. Based on these misrepresentations, Wright and others obtained loans and Wright took possession of a property in North Carolina. Since 2006, neither Wright nor the conspirators have made any mortgage payments.
Woman Sentenced for Orchestrating $6 Million Embezzlement Scheme
On March 29, 2012, in Bridgeport, Conn., Susan A. Curtis, of Naugatuck, was sentenced to 102 months of in prison and five years of supervised release, for defrauding Webster Bank and Bank of America of more than $6.8 million and for failing to pay more than $1 million in federal income taxes. In addition to her prison term, Curtis was ordered to pay restitution of $6,194,589 to Webster Bank, $617,228 to Bank of America and $1,680,128 to the Internal Revenue Service for back taxes. According to court documents and statements made in court, Curtis was employed by Webster Bank with responsibilities that included negotiating and managing bank property leases where Webster Bank was a landlord or tenant. Curtis and her then husband Kevin W. Caffrey established a company called New House, LLC. Later, Curtis and her current husband, Gary Stocking, Jr., established a company called Equity Realty, LLC. Curtis falsely represented to Webster Bank’s Vendor Management Department that both companies were brokers and therefore exempt from due diligence and annual review. Between 2002 and 2007, Curtis falsely represented to Webster Bank that New House and Equity Realty were due millions of dollars of fees for over one hundred real estate-related transactions, causing Webster Bank to make payments of approximately $5 million to New House and Equity Realty. Curtis also caused persons doing business with Webster Bank to send approximately $723,620 in payments for tenant improvements and reimbursements, which were owed to Webster Bank, directly to Curtis; certain of these checks were altered to make them payable to Webster Bank c/o Equity Realty and then were deposited into an Equity Realty account at another bank. Curtis also caused a representative of Webster Bank to send a $450,000 payment, which was owed to Webster Bank, directly to Curtis; the check was made payable to Equity Realty c/o Webster Bank, and was subsequently deposited into the Equity Realty bank account. Finally, Curtis fraudulently applied for, and received, a $649,000 mortgage loan from Bank of America for a property in East Hampton, Connecticut, misrepresenting and concealing the real source of her income and extent of her liabilities. In addition to these fraud schemes, Curtis filed false federal tax returns for the 2006 through 2009 tax years, during which she failed to report more than $3.79 million in embezzled funds. As part of this case, the Government is seeking the forfeiture of more than $1.1 million in property, vehicles, artwork, jewelry and other items purchased by the defendants, and a money judgment in the amount of $7,002,589. On October 14, 2010, Kevin Caffrey pleaded guilty to one count of bank fraud and one count of filing a false tax return. He awaits sentencing. On March 31, 2011, Gary Stocking, Jr. pleaded guilty to three counts of failing to file a return, supply information, and pay federal income taxes. On September 22, 2011, he was sentenced to 24 months in prison.
Former Arizona Real Estate Agent Sentenced in Mortgage Fraud Scheme
On March 19, 2012, in Phoenix, Ariz., Joseph Bowen Brown, of Mesa, Ariz., was sentenced to 51 months in prison for conspiracy to commit wire fraud as part of a mortgage fraud scheme based in Phoenix. According to court documents, Brown acknowledged in his guilty plea that as a principal of The Solid Group, a local real estate firm that has since collapsed, he orchestrated illegal “cash back” mortgage sales on homes. From mid-2005 through mid-2007, he and others at The Solid Group purchased properties at or below market value and re-sold them based on inflated appraisals. They used some of the profits to provide cash kickbacks to the buyers and failed to disclose those cash payments to the mortgage lenders. Brown and his co-conspirators then pocketed the difference. Many of the buyers were vastly unqualified for the mortgage loans and only obtained them because of false statements made on loan applications concerning income, employment, and assets. In total, 49 properties were involved in the scheme, all of which have gone into foreclosure. The scheme resulted in nearly $10 million in losses to the mortgage lenders. Brown admitted in his plea agreement that he and his co-conspirators pocketed almost $2.5 million in the deals. Five others have entered guilty pleas in the same scheme. Co-defendant Benjamin Jackson was sentenced to 13 months in prison earlier this year and the remaining four are awaiting sentencing.
California Real Estate Consultant Sentenced for Mortgage Fraud and Tax Evasion
On March 16, 2012, in San Diego, Calif., John J. Borzellino, a former Carlsbad-based real estate consultant, was sentenced to 60 months in prison, three years of supervised release, and ordered to pay $4,138,660 in restitution. According to court documents, Borzellino, aka John J. Ross, was a self-proclaimed real estate consultant with business ventures throughout the United States. During 2006-2007, Borzellino fraudulently induced lenders to fund millions of dollars in mortgage loans to purchase real estate in Florida, Georgia and California. Borzellino arranged to purchase homes in these various states by offering more than the seller’s asking price – with the understanding that the money over-and-above the asking price would be funneled to an entity under Borzellino’s control. Borzellino disguised the funds diverted to him by falsely characterizing them as “commissions” or “consulting fees” to be paid by the sellers at closing. In order to induce lenders to extend the mortgage loans needed to fund these fraudulent transactions, Borzellino caused numerous false and misleading statements to be made to lenders. Borzellino defrauded lenders into making over $8 million in mortgage loans to purchase properties in the name of his wife and several others. Borzellino further admitted that during these same years he wilfully failed to file individual federal income tax returns with the Internal Revenue Service, and took other steps to evade his tax obligations. Borzellino opened numerous bank accounts in his wife’s name, and used these and other nominee accounts to conduct all of his financial transactions. Borzellino regularly took his “commission” and “consulting fee” payments in cash, and used cash transactions as a means of concealing his income. As a result, Borzellino admitted that he failed to declare to the IRS almost $1 million in income.
California Man Sentenced for Fraudulently Obtaining Credit and Filing False Claims Against the IRS
On March 12, 2012, in Los Angeles, Calif., Jeff Sean Riley, of North Hollywood, was sentenced to 64 months in prison and ordered to pay $722,547 in restitution to the Internal Revenue Service (IRS). Riley pleaded guilty in December 2008 to one count of wire fraud. According to the plea agreement, Riley submitted a fraudulent loan application to a federal credit union, which falsely overstated his income. As proof of income, Riley submitted a false tax return claiming he earned an annual income of $107,598, when in fact, he earned an annual income of approximately $20,000. In June 2010, prior to the sentencing on Riley’s guilty plea, a two-count supplemental information was filed charging Riley with fraudulently obtaining a credit card in the name of another person and using that credit card to make unauthorized purchases. Riley pleaded guilty to aggravated identity theft fraud and access device fraud. According to the supplemental plea agreement, in October 2008, Riley fraudulently obtained a MasterCard in the name of another person. Riley made various unauthorized charges to the fraudulently obtained MasterCard totaling approximately $17,243. In addition to the losses on the fraudulently obtained account, Riley further caused losses to financial institutions from unauthorized or fraudulent credit applications totaling approximately $135,000. According to a stipulated sentencing agreement filed with the court, Riley agreed to an enhanced sentence due to multiple incidents of misconduct while his sentencing was pending, including misconduct involving false claims against the IRS. In conjunction with Riley’s cooperation with the government, the IRS is seeking to forfeit $55,626 held in bank accounts Riley controlled . Riley admitted that the funds constitute the proceeds of his illegal filing activity with the IRS.
Former Loan Officer Sentenced on Mortgage Fraud and Other Federal Charges
On March 7, 2012, in Phoenix, Ariz., Paige Kinney, aka JamieLee Lawler, was sentenced to 180 months in prison and ordered to pay $22,000,000 in restitution. Kinney pleaded guilty in May 2011 to various charges related to a mortgage fraud scheme and to charges of bankruptcy fraud, wire fraud, mail fraud, and bank fraud in two separate indictments. According to court documents related to the first indictment, Kinney played a leadership role in a $40 million mortgage fraud scheme that targeted Countrywide Home Loans and other lenders. According to Kinney’s plea, from January 2005 through December 2007, Kinney and others used unqualified straw buyers to purchase properties, knowing that the straw buyers did not intend to live in the homes or be responsible for the loan payments. Kinney would obtain mortgage financing to purchase homes in the names of the straw buyers by submitting fraudulent mortgage loan applications and altering documents, such as bank statements, to misrepresent the straw buyers’ assets, income, and employment status. Based on these misrepresentations regarding the buyers’ ability to qualify for loans, lenders issued loans that exceeded the homes’ sales prices. Once the funds were obtained from the lenders, the extra proceeds, known as “cash-back,” were directed to bank accounts that Kinney controlled. In total, Kinney caused lending institutions to issue $38,745,215 in fraudulent loans. According to her plea agreement on the second indictment, Kinney declared bankruptcy and then attempted to hide assets and liabilities from the Bankruptcy Court by falsifying her name and social security number. Kinney also committed additional financial fraud by arranging for friends to fraudulently obtain a loan to purchase a Mercedes. In addition, she committed insurance fraud by staging a phony burglary of her residence and then collecting $130,000 from Allstate Insurance Company.
Michigan Office Manager Sentenced for Embezzlement and Tax Fraud
On March 1, 2012, in Detroit, Mich., Tracy McInchak was sentenced to 15 months in prison and three years of supervised release for embezzlement and making a false statement on a federal tax return. According to court documents, from August 2004 until March 2010, McInchak was employed as an office manager at an investment bank in Detroit, Michigan. During that time, she embezzled approximately $462,000 by writing corporate checks to herself and to credit card companies to pay personal expenses. Over the six year period, checks were created for up to $6,000, several times a month. She also knowingly failed to report over $224,000 of her embezzled monies on her 2009 federal income tax return.
Massachusetts Man Sentenced in Mortgage Fraud Scheme
On February 29, 2012, in Boston, Mass., David Tarczynski, formerly of South Hadley, was sentenced to 20 months in prison, three years of supervised release and ordered to pay $923,000 in restitution for defrauding multiple lending institutions in connection with a mortgage fraud scheme. According to court documents, had the case proceeded to trial, the government’s evidence would have proven that Tarczynski was part of a mortgage and bank fraud conspiracy involving two properties in Florida, one property in South Hadley, and a $100,000 line of credit originating out of a West Springfield branch bank. The scheme involved loans in excess of $1 million and losses of nearly $1 million.
Defendants Sentenced in Mortgage Fraud Scheme
On February 24, 2012, in Dallas, Texas, two defendants who pleaded guilty to their respective roles in a three-year, multi-million dollar mortgage fraud scheme were sentenced to prison. Michael Baker, a Dallas resident at the time of the fraud, was sentenced to 180 months in prison and ordered to pay $7,546,739 in restitution. Baker pleaded guilty in August 2011 to one count of wire fraud and one count of money laundering. Koreem Dujuan Baker, Michael Baker’s brother, who pleaded guilty to one count of wire fraud and one count of engaging in monetary transactions with criminally derived property, was sentenced to 57 months in prison. According to court documents, the scheme, led by Michael Baker, involved defrauding and obtaining money from lending institutions by, among other things, using straw buyers to purchase homes and submitting false/fraudulent documents to lenders. The defendants obtained nearly $22 million in fraudulently obtained loan proceeds through the scheme. Another defendant in this case, Monique Untae Stallworth, of Garland, Texas, was sentenced in January 2012 to 42 months in prison. Stallworth pleaded guilty to one count of wire fraud and one count of engaging in monetary transactions with criminally derived property. All the defendants were also ordered to pay significant amounts of restitution to the victim lenders who suffered losses because of the fraudulent mortgage loans.
Couple Sentenced for Embezzling Over $1 Million from Federal Credit Union
On February 1, 2012, in Los Angeles, Calif., Mireya Guadalupe Gonzalez was sentenced to 18 months in prison and ordered to pay $868,122 in restitution to the National Credit Union Administration (successor to Sharebuilder) and Cumis Insurance Society, Inc. Her husband, Jorge Luis Gonzalez, was sentenced to six months in prison. Both were ordered to pay $301,244 in restitution to the Internal Revenue Service (IRS). Both defendants pleaded guilty in May 2011 to one count of subscribing to a false income tax return for the 2006 tax year. In addition, Mireya Gonzalez pleaded guilty to embezzling funds from a federally insured credit union. According to Mireya's plea agreement, between January 2005 and March 2007 she worked as the manager of Sharebuilders Federal Credit Union. Mireya Gonzalez had access to the computerized records of the credit union and was able to authorize transfers between accounts. During her employment at Sharebuilders, Mireya Gonzalez identified various “dormant accounts” that were inactive and had minimal or no customer funds on deposit. She used the computers to generate electronic transfers of funds to accounts over which she had signatory authority, including a joint checking account with her husband and two accounts in the names of her children. After transferring the funds to the Gonzalez family accounts, Mireya Gonzalez and her husband withdrew money and used it to buy personal items such as jewelry, automobiles, and luxury items. During tax years 2005, 2006, and 2007, Mireya Gonzalez and her husband received income related to her scheme to embezzle funds from Sharebuilders and did not report that income on their tax returns. According to her plea agreement, Mireya admitted that she and her husband received unreported income of $676,000 for 2005; $338,000 for 2006; and $150,000 for 2007.
Minnesota Man Sentenced for Role in $2 Million Fraudulent Loan Scheme
On February 2, 2012, in Minneapolis, Minn., Donald Krause was sentenced to 18 months in prison, three years of supervised release and ordered to pay $1,289,481 in restitution. In March 2011, Krause pleaded guilty to one count of aiding and abetting wire fraud and one count of aiding and abetting money laundering. According to his plea agreement, Krause admitted using property transactions to defraud a lending institution. Specifically, on February 21, 2008, a purchase agreement was executed for the $1.6 million sale of an Orono residence to a corporation, RSN Companies, at which Krause was a general partner. The next day Krause sold that residence to the mother of co-defendant Richard Sand for $2.6 million, $1 million more than was paid for it the previous day. Under the terms of that transaction, Sand’s mother was to pay approximately $600,000 in cash, and the balance of the purchase price was to be acquired through a bank loan. To obtain the $2 million loan, a false loan application was submitted, and based on that application, a $2 million loan was approved by a bank. On March 20, 2008, the loan proceeds were wired to co-defendant Brenda Epperly, a closing agent at a title company, for distribution at the time of closing. However, the following day, Epperly dispersed $900,000 of the loan funds to RSN Companies. Then, on March 22, 2008, Krause used some of that money to purchase a $602,018 cashier’s check, which was subsequently submitted as the cash payment Sand's mother was to make as her equity contribution to the property purchase. Epperly then falsified the HUD-1 Settlement Statement provided to the lending institution, indicating that Sand’s mother had provided over $600,000 in cash. As a result, the bank was misled into believing that Sands’ mother had a financial stake in the purchase, when, in truth, that was not the case. On March 22, 2008, Krause purchased another cashier’s check with loan proceeds. This $224,371 check was payable to the Ramsey County Sheriff’s Department and was used by Krause and Sand to redeem a foreclosed property Sand owned in St. Paul. In addition, Sand admitted using $170,000 in loan proceeds for his own benefit. At their plea hearings, Krause admitted receiving approximately $50,000 as a result of this fraud, while Epperly indicated she received approximately $250 for her role in the scam. On August 25, 2011, Sand was sentenced to 30 months in prison and on August 9, 2011, Brenda Epperly was sentenced to six months in prison.
New Jersey Woman Sentenced for Role in Structuring and Mortgage Fraud
On January 23, 2012, in Newark, N.J., Kim S. Morris, of Belleville, N.J., was sentenced to 33 months in prison, three years of supervised release and ordered to forfeit $708,855 for participating in a mortgage fraud scheme and structuring money orders to evade transaction reporting and identification requirements. Morris, a part-time court clerk at the Essex County Courthouse, pleaded guilty to an information charging her with one count of bank fraud and one count of structuring. According to the court documents and statements made in court, Morris admitted that she applied for a mortgage loan from a bank in January 2008 by completing a fraudulent Uniform Residential Loan Application to procure approximately $624,000 for a home loan. The loan application contained material misrepresentations, including inflating Morris’ personal income and falsifying the name of her employer. These fraudulent misrepresentations caused the bank to extend a home loan to Morris. Morris also admitted that from March 2008 through late June 2009, she structured approximately 110 money orders, totaling $84,855, for the purpose of evading the reporting and identification requirements.
Texas Woman Sentenced in Mortgage Fraud Scheme
On January 13, 2012, in Dallas, Texas, Monique Stallworth was sentenced to 42 months in prison, two years of supervised release and ordered to pay $1,724,497 in restitution for money laundering. According to court documents, Stallworth and others opened bank accounts that they used to receive money from title companies for “upgrades” to residential real estate properties based on bogus invoices that were submitted to the title companies at closing. The defendants profited from loans to purchase residences in the Dallas area, fraudulently obtained mortgages in others’ names and obtained mortgages for more than the sales price. In addition, they found individuals with sufficient credit to qualify for the loans and made each borrower appear to be a qualified, bona fide purchaser who intended to reside in the property, when the borrower had no intention of doing so. They also created surplus loan proceeds by creating bogus invoices for repairs/upgrades which were never done, allowed the residences to go into foreclosure after no, or just a few, payments were made on the loan and shared in the surplus loan proceeds.
Three Sentenced in Mortgage Fraud Scheme
On December 14, 2011, in Salt Lake City, Utah, Christopher Ethington, of Riverton, was sentenced to 37 months in prison for his role in a mortgage fraud scheme involving properties in Davis, Salt Lake and Utah counties. Janet H. Ethington, of Riverton, was sentenced to five years probation, with 30 days in a county jail as a condition of supervision. In addition, Christopher and Janet Ethington were ordered to pay $1,336,773 in restitution. James Merrill Roberts, of Cedar Hills, was sentenced to 37 months in prison in the case. According to the indictment, the three defendants operated a scheme to identify residential properties, recruit straw buyers, and, through false statements on loan applications, falsely inflate the apparent value of the properties to induce lenders to grant loans for amounts in excess of their fair market value. According to court documents, Roberts formed Amerifinance Group, LLC, which promoted residential real estate transactions in Utah. Roberts admitted that he and Christopher Ethington recruited straw buyers to participate in purchasing many of the Amerifinance properties. Janet Ethington worked in the real estate business in the roles of loan processor, loan broker, and loan officer. As a part of her plea agreement, Janet Ethington admitted that she acted as a loan officer or broker in closing approximately 30 Amerifinance loans, although she was not a licensed by the State of Utah as a loan officer or mortgage broker. Roberts admitted he induced the straw buyers to participate in purchasing the properties by telling them they would not have to make a down payment or invest any of their own money to buy the home and that Amerifinance, not the straw buyers, would make the loan payments. These false representations were not disclosed to the mortgage lenders. When the loan payments were not made on the properties, the loans went into default and each was eventually the subject of a foreclosure sale or short sale, each resulting in a loss to the victim lender.
New York Man Sentenced for Participating in Mortgage Fraud Conspiracy
On December 13, 2011, in Hartford, Conn., Gary Snook, of Yorktown Heights, N.Y., was sentenced to 24 months in prison and three years of supervised release for participating in a mortgage fraud conspiracy. On May 14, 2010, Snook pleaded guilty to one count of conspiracy to commit wire fraud. According to court documents and statements made in court, between approximately October 2003 and August 2006, Snook and others engaged in a conspiracy to defraud various residential mortgage lenders in connection with the financing of residential properties in Connecticut. Snook owned and operated York Accounting and Financial Services, which had an office in Danbury. At the request of an individual who was a loan originator working for several mortgage brokerage firms, Snook created false loan documentation, including fraudulent letters and phony tax returns that inflated prospective borrowers’ income. The documents were then faxed to the lenders to qualify prospective borrowers for mortgage loans. Snook created fraudulent documentation for 18 mortgage loans. Many of the loans ended in default, and the properties were foreclosed on. As a result, lenders suffered losses of more than $1 million.
Colorado Woman Sentenced for Role in Mortgage Fraud Scheme
On December 9, 2011, in Denver, Colo., Kimberly K. White, of Elizabeth, Colo., was sentenced to five years probation of which 12 months will be served in home confinement, and ordered to pay $1,088,912 in restitution. White pleaded guilty in July 2011 to one count of wire fraud related to a mortgage fraud scheme. According to the stipulated facts contained in the plea agreement and indictment, between March 26, 2005, and June 30, 2005, White worked with her co-defendants, Shawn Tieskotter and Craig Patterson, to execute a scheme to defraud various financial institutions as well as commercial mortgage lenders in connection with residential mortgage loan applications related to 13 properties in the Denver, Colorado metropolitan area. White, a licensed real estate agent, helped find various residential properties available for purchase and drafted contracts for the purchase of the properties. Tieskotter and Patterson prepared and submitted applications for two loans, a first mortgage and a second mortgage. Each of these applications contained materially false and fraudulent representations that Tieskotter intended to use the property as his primary residence. Most of the applications also contained materially false and fraudulent representations about the extent of Tieskotter’s liabilities related to other residential mortgage loans, in that they failed to include a complete list of the properties Tieskotter owned or was in the process of purchasing and falsely indicated that one of Tieskotter’s other properties was leased. Some of the applications were supported by fictitious leases. Tieskotter was previously sentenced to 9 months in prison, followed by 9 months of home detention and three years of supervised release. Patterson was sentenced to serve 10 months in prison, followed by 10 months of home detention and three years of supervised release. In addition, Tieskotter and Patterson were ordered to pay $1,181,528 in restitution.
Minnesota Man Sentenced for Conspiring to Commit Bank Fraud and Money Laundering
On December 2, 2011, in St. Paul, Minn., William Schluter was sentenced to 12 months in prison on one count of conspiracy to commit both bank fraud and money laundering. According to court documents, Schluter admitted that from 2002 through 2006, he conspired with an unnamed individual to obtain money fraudulently from the bank through the use of straw borrowers. Schluter and the companies he owned had reached the limits on the loan amounts allowed to any one borrower. To bypass those limits, Schluter arranged for straw borrowers to apply for loans and then transfer the loan proceeds to business concerns owned by him. Many of the straw borrowers were companies that had no ability to repay the loans. Schluter also commingled various funds, including deposits and loan repayments, among his various ownership interests in an effort to cover up the conspiracy. Schluter and the unnamed individual created and submitted to the bank false loan-purpose statements as well as falsified bank records. Once the loan proceeds were secured, Schluter used them for his personal use. In September 2005, Schluter submitted a false loan-purpose statement to the bank in order to obtain a $174,431 loan in the name of a straw company, then, later that day, the loan proceeds were transferred to an entity he owned; and, ultimately, the money was used for his own benefit and for the benefit of his companies. The total estimated loss amount from this scheme was between $1 million and $2.5 million.
Two Sentenced for Conspiring to Commit Bank Fraud, Money Laundering
On December 1, 2011, in Minneapolis, Minn., Golden Osagiede and Angelo Banks were both sentenced to 33 months in prison and ordered to pay $186,939 in restitution for conspiracy to commit bank fraud and one count of conspiracy to commit money laundering. According to his plea agreement, Osagiede admitted that between April and December 2009, he and Banks conspired to defraud banks. First, they deposited counterfeit checks into bank accounts they controlled and then withdrew funds before the counterfeit nature of the checks was discovered. Second, they obtained access to victims’ bank accounts and transferred money from the victims’ bank accounts to the defendants’ accounts. Withdrawals of fraud proceeds were made in amounts of less than $10,000 per withdrawal in order to avoid a reporting requirement. According to Banks' plea agreement, he admitted presenting for payment checks which he knew to be counterfeit; withdrawing fraud proceeds from automatic teller machines; and opening bank accounts in the names of non-existent businesses. Banks also admitted that he received from Osagiede a number of counterfeit checks drawn against the accounts of various Twin Cities-area health care facilities, which Banks negotiated for cash. The total amount of fraud loss is approximately $250,000, while the amount of money laundered is approximately $90,000.
Colorado Real Estate Agent Sentenced in Mortgage Fraud Scheme
On November 23, 2011, in Denver, Colo., Cedric Lipsey was sentenced to 63 months in prison and three years of supervised release. According to the indictment, beginning in April 2004 and continuing until about March 2006, Lipsey and his co-defendant devised 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. Lipsey, a licensed real estate agent, held himself out as a successful real estate agent and investor. He 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 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 his co-defendant 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.
Former New Jersey Resident Sentenced in Mortgage Fraud Scheme
On November 18, 2011, in Springfield, Mass., Jason Foisy, formerly of South Hadley, N.J., was sentenced to 54 months in prison, five years of supervised release and ordered to pay $15 million in restitution for defrauding multiple lending institutions in connection with a mortgage fraud scheme. Foisy pleaded guilty on May 21, 2011 to conspiracy, wire fraud, bank fraud and money laundering. Had the case proceeded to trial the Government’s evidence would have proven that Foisy was part of a multi-million mortgage and bank fraud conspiracy involving more than 100 real estate transactions in Florida and western Massachusetts and multiple lines of credit originating out of a West Springfield branch bank. The scheme involved an aggregate loan value of at least $75 million and that the vast majority of the loans went into default. The scheme reached its pinnacle in October 2006, when co-defendant James June and Foisy started construction of a $6.6 million waterfront home in an exclusive area of Fort Lauderdale, Fla.
Loan Officer and Title Agent Sentenced
On November 3, 2011, in Miami, Fla., Kimberly Mackey, of Pittsburgh, Pa., was sentenced to 60 months in prison, five years of supervised release and ordered to pay $1,654,805 in restitution. Marcos Echevarria, of Palm Beach, Fla., was sentenced to 24 months in prison and five years of supervised release. Mackey, Echevarria and two additional defendants (Louis Gendason, of Delray Beach, Fla., and John Incandela, of Palm Beach, Fla.) previously pleaded guilty to a criminal information charging them with one count of conspiracy to commit wire fraud for their participation in a $2.5 million home equity conversion mortgage (aka. reverse mortgage) scheme that defrauded unwitting borrowers, a reverse mortgage company, and the Federal Housing Administration (FHA). Defendants Gendason and Incandela worked as loan officers and solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan. Gendason altered real estate appraisals to fraudulently inflate the value of the borrowers’ properties since none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. Based on the false documentation, the reverse mortgage company approved and the FHA insured more than $2,572,813 in reverse mortgage loans. Mackey, a licensed title agent in Pittsburgh, Pa., fraudulently closed the loans, failing to pay off the borrowers existing mortgage loans. To perpetuate the fraud, the defendants engaged in a loan modification scheme to conceal the existence of the reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. Between May 2009 and November 2010, Mackey received loan proceeds from the scheme totaling $2,572,813. Mackey fraudulently diverted at least $988,086 to a bank account controlled by Incandela and Gendason, who used this money for their personal benefit. Defendants Louis Gendason, of Delray Beach, Fla., and John Incandela, of Palm Beach, Fla., are awaiting sentencing.
Owner of Florida Company Sentenced for Scheme to Defraud the U.S. Export-Import Bank
On November 1, 2011, in Washington, D.C., Guillermo O. Mondino was sentenced to 46 months in prison and three years of supervised release. Mondino was also ordered to pay $13.3 million in restitution and $2.7 million in forfeiture. Mondino pleaded guilty on June 23, 2010, to one count of conspiracy to commit mail fraud and one count of money laundering in connection with a scheme to defraud the Export-Import Bank of the United States (Ex-Im Bank) of approximately $24 million. According to court documents, Mondino was the owner of Texon Inc., an export company located in Miami, Florida, which purported to export various types of equipment to South and Central America buyers. Mondino admitted that he assisted numerous foreign buyers to obtain fraudulent loans that were insured by the Ex-Im Bank. According to court records, Mondino and others misappropriated the loan proceeds for their own use and benefit. According to court records, all of the loans involving Mondino were fraudulent. As a result of the fraud, the loans went into default, causing the Ex-Im Bank to pay claims to the lending banks on $14.1 million of loans.
Top Bank Executives and Borrower are Sentenced
On October 25, 2011, in Fort Myers, Fla., Thomas Hebble, former executive vice president of Orion Bank, was sentenced to 30 months in prison; Angel Guerzon, former senior vice president of Orion Bank, was sentenced to 24 months in prison; and Francesco Mileto, a former Orion Bank borrower, was sentenced to 66 months in prison. Hebble, Guerzon, and Mileto pleaded guilty in May 2011 to participation in a conspiracy to mislead state and federal regulators that Orion Bank was in a better capital position than it was in truth and fact. Hebble was also sentenced for his participation in a second round-trip stock transaction which occurred in June and July 2009. According to court documents, the conspiracy to which the defendants were sentenced had two objectives: 1) to finance the sale of promissory notes secured by mortgages held by Orion Bank on distressed properties, thereby creating the illusion that non-performing loans were performing loans; and 2) to conceal the financing for the sale of Orion Bancorp, Inc. stock to a borrower to create the illusion of a legitimate capital infusion into the bank. The defendants accomplished these objectives by falsifying the books and records of Orion Bank and deceiving state and federal regulators over a period of seven months, from May 2009 until November 13, 2009. The Florida Office of Financial Regulation closed Orion Bank on November 13, 2009, and appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver. The FDIC requested $33,512,618 in restitution for Hebble and Guerzon's participation in the scheme and a restitution hearing will be held to apportion liability among the defendants. Mileto was ordered to pay $65,214,491 in restitution to the FDIC. As part of their sentence, the three were also ordered to pay a money judgment of $2,000,000, part of the proceeds of Mileto’s charged criminal conduct.
South Carolina Man Sentenced in Mortgage Fraud Case
On October 25, 2011, in Columbia, S.C., Laney Earl Allen, of Ft. Mill, South Carolina, was sentenced to 21 months in prison for conspiracy to commit mail fraud. Evidence presented established that Allen owned and ran Flex Buy Homes and Blue Granite Homes in Ft. Mill. He and co-conspirator Samuel Cowles, who was sentenced to 15 months imprisonment in July, took pre-qualification documents from investors and used them to obtain loans for real estate purchases. Cowles, with Allen’s knowledge and cooperation, falsified multiple loan applications by submitting to lenders that investment properties were going to be primary residences, which reduced the down payments. By falsifying loan applications, Cowles made it possible for Allen to make smaller down payments, increasing the profit Allen expected when he flipped the property. Allen and Cowles were responsible for falsifying approximately 20 loan applications, resulting in fraudulent loans totaling $2,160,650.
Three Sentenced in Mortgage Fraud Conspiracy
On October 18, 2011, in Portland, Ore., Chadwick Amsden was sentenced to 27 months in prison and five years of supervised release. On October 5, 2011, Joel Rosabal was sentenced to 33 months in prison and five years of supervised release. On September 19, 2011, Adam Perkins was sentenced to 21 months in prison and ordered to pay over $1.2 million in restitution. Amsden and Rosabal were indicted by a grand jury on May 18, 2010, on charges of conspiracy, mail fraud, wire fraud, money laundering, and a forfeiture allegation. The conspiracy was to defraud lending institutions by inducing them to lend funds for the purchase of residential properties at an inflated price through the use of materially false representations and omissions, and in doing so, to fraudulently obtain a portion of those funds. During the course of the conspiracy, defendants ensured that loan proceeds were paid to borrowers as incentives or cash “kickbacks.” These cash kickbacks were not disclosed to the lender and ranged from approximately $8,000 to as much as almost $90,000. Defendants manipulated the underwriting process in order to qualify borrowers to purchase homes they would not have otherwise been able to buy. Perkins, through Rosabal and Amsden, purchased eleven homes in eight months, totaling more than $5.8 million in real estate using materially false representations to obtain cash kickbacks. The loss to lenders from the defendants’ scheme was over $3.8 million.
Former Arizona Loan Officer Sentenced for His Role in Mortgage Fraud Conspiracy
On October 11, 2011, in Phoenix, Ariz., Jaco Huguet, a former Arizona loan officer who worked in the metropolitan-Phoenix area, was sentenced to 24 months in prison and ordered to pay over $500,000 in restitution. Huguet pleaded guilty in July 2011 to one count of conspiracy to commit wire fraud and one count of conspiracy to commit transactional money laundering. According to court documents, Huguet, while acting as a loan officer for a mortgage broker, took part in a conspiracy to submit mortgage loan applications on behalf of straw buyers that contained at least one or more of the following material false statements: false statements concerning the intent of the loan applicant to occupy the property as a primary residence; inflated income; false representations concerning employment; or failed to disclose that the loan applicant had recently purchased another property that contained a major liability, a mortgage. After the title company received the proceeds from the fraudulently obtained loans, Huguet directed others to convert portions of these proceeds into cash. In Huguet’s plea agreement, he admitted to his involvement in this scheme relating to the sale of nine properties that were purchased between January and February 2007. Each of these properties went into foreclosure after the buyers failed to pay the mortgage payments. The estimated losses to the various financial institutions and/or the Federal Deposit Insurance Corporation (FDIC) relating to these transactions exceeded $1,000,000.
Former Missouri Real Estate Agent Sentenced for Mortgage Fraud Conspiracy
On October 3, 2011, in Kansas City, Mo., Angela R. Clark, of Lee’s Summit, Mo., was sentenced to 20 months in prison and ordered to pay $5,634,747 in restitution for her role in a $12.6 million mortgage fraud conspiracy. According to court documents, Clark orchestrated the mortgage fraud scheme, which also involved two mortgage loan officers and 15 straw buyers who purchased homes at inflated prices. Buyers obtained mortgage loans for more than the actual sale price by providing false information to mortgage lenders. The buyers, without the lenders’ knowledge, then kept the extra loan proceeds. These kickbacks were paid by submitting false invoices to the title companies, which showed payment was due to business entities that, in reality, were shell companies created by co-conspirators to conceal the fact that the buyers were receiving cash back from the loan proceeds. Buyers received kickbacks of about $100,000 on each house. Clark knew the loan applications and supporting documentation that contained material false information would be submitted to mortgage lenders. Clark submitted false documentation and made fraudulent material representations to title companies. In total during the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received more than $2.3 million without the lenders’ knowledge. Clark received commissions and other payments from the inflated prices totaling $405,197. According to court documents, Clark engaged in a similar mortgage fraud scheme with six other properties that are not part of this conspiracy, shortly before and during the same time frame as the conspiracy. The government contends that Clark received an additional $168,361 in commissions and other payments from those fraudulent purchases.