Examples of Financial Institution Fraud Investigations - Fiscal Year 2013
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.
Real Estate Agent and Developer/Loan Officer Sentenced for Mortgage Fraud
On September 23, 2013, in Tucson, Ariz., William Michael Naponelli was sentenced to 24 months in prison and ordered to pay $3.1 million in restitution. On September 20, 2013, Bryan Atwood was sentenced to 15 months in prison and ordered to pay approximately $585,000 in restitution. Naponelli pleaded guilty on December 20, 2012 to conspiracy to commit bank fraud and conspiracy to commit transactional money laundering. Atwood pleaded guilty on February 25, 2013, to conspiracy to commit wire fraud. According to court documents, Naponelli, a former real estate developer and loan officer, participated in a scheme to obtain various loans between July 2006 and May 2007. Naponelli and another co-conspirator purchased several properties using various business entities with which they were associated. They then sold these properties to straw buyers. As part of the loan approval process, Naponelli caused to be submitted documents that contained material false statements including representations that the borrowers would provide the down payment or cash to close the real estate transactions. After the fraudulently obtained loan proceeds were received, portions of these proceeds were wired or deposited into bank accounts controlled by Naponelli or another co-conspirator. Atwood, who at the time of this conspiracy was a licensed real estate agent, obtained three properties through fraudulently obtained loans. He knew that documents provided to the lenders on his behalf relating to these properties contained one or more material false representations. The properties obtained as a result of this mortgage fraud scheme went into foreclosure resulting in significant losses to the lenders. Previously, co-defendants Walter Scott Fruit and Sandra Jackson were each sentenced for their involvement in the conspiracy. Fruit, a licensed real estate agent, received 30 months in prison and Jackson, a former escrow agent, received six months in prison.
Virginia Businessman Sentenced for Bank Fraud
On September 18, 2013, in Norfolk, Va., Dwight A. Etheridge, of Chesapeake, Va., was sentenced to 50 months in prison and five years of supervised release. Etheridge was convicted by jury trial on May 24, 2013 for conspiracy to commit bank fraud, bank fraud, making false statements to a financial institution, as well as aiding and abetting misapplication of bank funds. According to trial evidence, Etheridge, President of Tivest Development & Construction, LLC and other corporate entities, conspired with numerous insiders of a bank to engage in an illegal reciprocal relationship where he performed favors to mask the bank’s loan losses in exchange for preferential treatment. Etheridge arranged for Tivest to purchase a construction project located in Virginia Beach. The bank gave Tivest a $4.1 million loan to purchase and renovate this property. During the funding of this loan, Etheridge caused fraudulent construction draws to be submitted to the bank which bank insiders funded without inspecting whether Etheridge had completed the work. Etheridge used construction loan proceeds to make payments on his other loans at the bank, to support his staffing company, to obtain thousands of dollars in cash, to make political donations, and to make charitable contributions. In addition, Etheridge defrauded the bank and a new market tax credit fund called Paramount Community Development Fund in connection with a construction project called the Villas at Broad Creek. Etheridge obtained a construction loan totaling $4,860,000 from Paramount where he promised to use the funds solely to construct a mixed use development project. Etheridge used a portion of the construction loan proceeds to support his staffing company, to make payments on unrelated, overdue loans at the bank, to cover large overdrafts at the bank, to make political donations and to make charitable contributions. At the end of 2010, after the bank could no longer fund loans to Etheridge, his businesses collapsed and he defaulted on millions of dollars of loans at Paramount and the bank, and declared personal bankruptcy.
California Man Sentenced for Role in Mortgage Fraud Scheme
On September 16, 2013, in Fresno, Calif., Eric Ray Hernandez, of Bakersfield, was sentenced to 130 months in prison and ordered to pay $6,087,541 in restitution to the victims of the crime and to forfeit $6,037,541 to the United States. Hernandez pleaded guilty to conspiracy to commit mail fraud, wire fraud, and bank fraud. According to court documents, between October 2005 and May 2007, Hernandez conspired with others to defraud mortgage lenders by submitting false loan applications and fraudulent documentation to lenders, causing the lenders to fund mortgage loans based on false and misleading information. During this time period, Hernandez was employed at mortgage brokerages in Bakersfield. The defendants submitted to lenders loan applications that included material misstatements concerning the borrowers’ income, assets, employment, and the borrowers’ intent to reside in the properties as owners, among other false statements. The defendants also fabricated false supporting documentation and submitted it to lenders in support of the loan applications. Hernandez admitted in his plea agreement that the defendants caused the defrauded lenders losses of approximately $6,037,541.
Indiana Man Sentenced for Bank and Tax Fraud
On September 12, 2013, in Indianapolis, Ind., Todd Van Natta, of Seymour and Columbus, was sentenced to 60 months in prison, five years of supervised release and ordered to pay $6,977,470 in restitution to his victims. Van Natta pleaded guilty to bank fraud, wire fraud and tax fraud. According to court documents, beginning in March 2007 and continuing until 2009, Van Natta defrauded financial institutions by preparing and submitting false documents to banks throughout central and southern Indiana. By using these false documents, including fraudulently-created tax returns that hid the true income and financial affairs of family members, Van Natta was able to secure a number of substantial loans from the financial institutions. These loans included $3.8 million for a property in Evansville, $2.1 million for multiple properties in Seymour, and $3.1 million for a variety of properties in Fort Wayne. Loans were also taken out to purchase a 1970 Cessna Aircraft and a 2007 Fantasy Yacht.
Texan Sentenced for Mortgage Fraud
On September 9, 2013, in Dallas, Texas, Eric Damon Johnson was sentenced to 48 months in prison and ordered to pay $3,753,539 in restitution, jointly with a co-defendant. Johnson pleaded guilty on April 22, 2013 to conspiracy to commit wire fraud affecting a financial institution. According to court documents, Johnson was a licensed loan officer and mortgage broker and the president of Bridgemark Investment Group (BIG). Johnson and his co-defendant conspired to fraudulently obtain mortgage loans in excess of the true sales price of residential real estate properties by making false statements on loan applications and submitting fake invoices for construction upgrades or repairs that were never performed. The conspiracy resulted in more than $10 million in fraudulently-obtained loan proceeds. BIG recruited individuals to purchase residential real estate as “investors” and Johnson and his co-defendant promised investors that BIG would find tenants to rent the property and make the mortgage payments. Johnson and his co-defendant agreed to make payments to the “investors” when the loan closed that were not disclosed to the mortgage lender on the HUD-1 Settlement Statement. The loan applications were submitted to residential mortgage lenders, who on the basis of the false statements in the loan applications, agreed to fund primary and secondary mortgages for residential real estate properties.
Four Individuals Sentenced for Identity Theft Scheme
On September 4, 2013, in Minneapolis, Minn., four individuals were sentenced for their roles in a large, multi-state, identity theft ring. Jerome Davis, Jr. was sentenced to 50 months in prison. Jemall Ronta Williams was sentenced to 36 months in prison. Tierra Samantha Catrina House was sentenced to 32 months in prison. Shanell Collette Brewer was sentenced to 27 months in prison. All four defendants were convicted of one count of conspiracy to commit bank fraud and one count of aggravated identity theft. Form 2006 through December 2011, these individuals, along with more than 100 others, were involved in a conspiracy to defraud banks, bank customers and businesses. The co-conspirators used victim information to create counterfeit checks and false identification documents to conduct fraudulent transactions at retail establishments, where expensive merchandise was purchased and returned for cash. At banks, the conspirators posed as customers and withdrew money from victims’ bank accounts. The members of the conspiracy conducted these fraudulent transactions in Minnesota and at least 13 other states. Victim information was obtained by members of the conspiracy through multiple sources, including from individuals who stole information from their places of employment, from people employed at area banks, from those who stole information from mail, during vehicle break-ins, and through business burglaries, among other sources.
California Man Sentenced for Role in Massive Real Estate Fraud Scheme
On August 26, 2013, in San Diego, Calif., Michael Ivy was sentenced to 21 months in prison, three years of supervised release and ordered to pay $213,000 in restitution to Carrington Mortgage LLC. On February 9, 2010, Ivy pleaded guilty to conspiracy to conduct enterprise affairs through a pattern of racketeering activity which included conspiracy to launder money, wire fraud, bank fraud and money laundering. According to court documents, beginning around January 2005 until April 1, 2008, Ivy and others engaged in a massive real estate fraud scheme that involved 220 properties with a total sales price of more than $100 million dollars. As part of the conspiracy, Ivy and others provided false documents to lenders for funds in excess of the properties' respective and prospective values. Ivy and others sought out buyers for real estate. The property purchase agreements often contained a construction contract stating that a construction company had been engaged to do construction on the property after the sale. In actuality, there was no construction work performed. Instead, Ivy and others received a portion of the cash from the construction project monies.
Husband and Wife Sentenced in Mortgage Fraud Scheme
On August 26, 2013, in Boise, Idaho, Aaron Michael Hymas was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,520,296 in restitution. Tiffany Kim Hymas was sentenced to 60 days in prison, three years of supervised release, beginning with six months of home detention, and ordered to pay $667,505 in restitution. They both pleaded guilty to one count of wire fraud on October 18, 2012. According to the plea agreements, Aaron and Tiffany Hymas defrauded a lender by having Tiffany submit a residential loan application for $295,600, on March 28, 2007, in which she made material misrepresentations. On the application, Tiffany Hymas stated that she was employed by OPM Enterprises and had income and commissions of $72,500 per month, and that she had gross rental income of $14,600 per month from four properties. Based on these misrepresentations, the mortgage corporation funded the loan. In addition to Aaron and Tiffany Hymas, eleven individuals have been sentenced since November 2010 on charges of wire fraud, bank fraud and making false statements.
Texas Antique Automobile Dealer Sentenced for Bank Fraud and Money Laundering
On August 13, 2013, in Sherman, Texas, Ricky Prince, of Prosper, Texas, was sentenced to 36 months in prison, five years of supervised release and ordered to pay $1,461,807 in restitution. Prince pleaded guilty on September 6, 2012 to bank fraud and money laundering. According to information presented in court, from March 2007 to August 2010, Prince owned and operated North Texas Muscle Cars, Inc., which specialized in antique automobile sales. During this time, Prince submitted materially false personal finance statements and income tax returns to financial institutions to secure credit for himself and North Texas Muscle Cars, Inc. To further the scheme, Prince included antique automobiles such as a 1963 Chevrolet Corvette, a 1974 Pantera Detomasoy, a 1967 Chevrolet Chevelle and a 1938 Ford custom street rod, that were never purchased. As a result of the fraudulent activity, the financial institutions incurred actual losses totaling approximately $1,347,472.
Bank Teller Sentenced for Embezzling from Customer Accounts
On August 15, 2013, in Greenbelt, Md., Irene Quansah, of Germantown, Md., was sentenced to 24 months in prison and five years of supervised release for embezzlement and income tax evasion. Quansah was also ordered to forfeit and pay $144,908 in restitution to the victim bank and $30,000 to the IRS. According to her plea agreement, from November 2010 to July 2012, Quansah used her position as a teller coordinator at a bank to fraudulently withdraw funds from customers’ accounts and fail to deposit customer funds. Specifically, on at least 100 occasions, Quansah removed cash from cash deposits made by a restaurant at an ATM, stealing a total of $35,696. On various occasions, she withdrew funds from elderly customers’ accounts and retained portions of proceeds from savings bonds she was asked to redeem for bank customers. The total amount Quansah embezzled was $144,908. She did not report any of the embezzled funds to the IRS on her tax returns and thus owed between $30,000 and $80,000 in taxes.
Real Estate Broker Sentenced for Multimillion Dollar Mortgage Fraud Scheme
On August 15, 2013, in Sacramento, Calif., Hoda Samuel, of Elk Grove, was sentenced to 120 months in prison for a mortgage fraud scheme that caused more than $5.5 million in loss. According to evidence presented at trial, Samuel, a licensed real estate broker, owned and operated real estate agency Liberty Real Estate & Investment Company and Liberty Mortgage Company. Between April 5, 2006 and February 26, 2007, there were 30 fraudulent sales transactions where Samuel was the real estate agent for the buyer in 29 of the home sales and represented the seller in at least 15 transactions. Each transaction involved false statements on loan applications in order for unqualified buyers to qualify for the loans. These included false statements about income, employment, and rental history. False documents were created and submitted to lenders to support these lies. Persons were paid to answer lender calls and affirm the false statements. All of the properties went into foreclosure. Samuel not only falsified the borrowers’ ability to repay the loans, she also falsified the value of the collateral securing these loans. Fraudulent purchase prices, often exceeding the actual asking prices by $15,000 to $40,000, were inserted into contracts that included repairs and costs for disability access modifications. At times the buyers’ minor children were named as building contractors so that money could be funneled back to buyers. The excess amounts were paid back to the buyers. The repairs and remodeling were seldom if ever done, and the lenders were unaware that the true purchase price for each property was below the total amount funded. Because Samuel saddled the banks with borrowers incapable of making payments, and properties worth less than the loans, loss was practically assured regardless of the market.
Real Estate Developer and Escrow Agent Sentenced for Mortgage Fraud
On August 9, 2013, in Tucson, Ariz., Walter Scott Fruit and Sandra Jackson were sentenced for their roles in a mortgage fraud scheme to obtain various loans between July 2006 and May 2007. Fruit was sentenced to 30 months in prison and ordered to pay more than $2.5 million in restitution. Jackson was sentenced to six months in prison and ordered to pay approximately $480,000 in restitution. Fruit pleaded guilty on February 28, 2013, to charges of conspiracy to commit bank fraud and conspiracy to commit transactional money laundering. Jackson pleaded guilty on February 27, 2013, to conspiracy to commit wire fraud. According to court documents, Fruit, a real estate agent and real estate developer, and another co-conspirator purchased several properties using various business entities with which they were associated. Fruit and his co-conspirator then sold these properties to straw buyers. He also fraudulently inflated the true sales price of the properties. As part of the loan approval process, Fruit knowingly caused to be submitted documents containing false statements representing that the borrowers would provide the down payment or cash to close the real estate transactions. Portions of the fraudulently obtained loan proceeds were wired or deposited into bank accounts controlled by Fruit or another co-conspirator. Jackson, a former escrow agent, obtained three properties through fraudulently obtained loans. She provided documents that contained one or more material false representations to the lenders. The properties obtained as result of this mortgage fraud scheme went into foreclosure resulting in significant losses to the lenders.
Defendant Sentenced in Connection with Mortgage Fraud Scheme
On August 5, 2013, in Salt Lake City, Utah, Keith Nelson Cook, of Emmett, Idaho, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $1,905,651 in restitution to victims of his fraud scheme. Cook pleaded guilty in March 2013 to three counts of mail fraud, three counts of wire fraud and one count of money laundering in connection with a scheme to defraud students and mortgage lenders. According to his plea agreement, Cook, or individuals working under his direction, recruited students willing to pay a fee to be coached in the art of investing in real estate at a profit. Cook hired people to mass market the real estate program opportunity by phone. During the calls, individuals acting at Cook’s direction made one or more fraudulent statements, including telling students that he was a nationally recognized real estate expert and guaranteeing that participation in his program would result in either doubling the student’s income or a gain of $50,000 during the first year of participation. Cook solicited payments of between $15,000 and $30,000 from prospective students, and also received the students’ financial and credit information. He solicited $427,500 from students. Cook refused to provide the promised coaching and diverted the $15,000 to $30,000 application fees for his own unauthorized business or personal use. In addition, Cook induced certain students to become straw buyers of residences in Salt Lake County. He represented to the straw buyers that they would not have to make a down payment or invest any money of their own to buy the home; that the straw buyer would have no financial risk from the transaction and would have no obligation to make loan payments. At first, Cook’s entities made payments on the properties to give the mortgage lenders the false impression that the loans were performing appropriately. However, at some point he stopped making payments on the loans, leaving the straw buyers with mortgages they did not have the ability to repay and mortgage lenders with significant losses on the non-performing loans. The total loss amount incurred by the straw buyers and the mortgage lenders in the scheme was $1,905,651.
Final Defendant Sentenced for His Role in a Credit Card Fraud Scheme
On August 5 ,2013, in Los Angeles, Calif., Clayton Stewart, aka Douglas Blackburn, was sentenced to 102 months in prison and ordered to pay $404,284 in restitution to the victim financial institutions. Stewart, of Bellflower, Calif., pleaded guilty in November 2012 to one count each of bank fraud conspiracy, access device fraud, and money laundering conspiracy. According to court documents, Stewart together with his brother Johnny Stewart, of Marina Del Rey, and co-defendant Dexter Hardy, of Los Angeles County, engaged in a scheme to defraud financial institutions through the use of fraudulent credit card applications. Clayton and Johnny Stewart fraudulently applied online for unauthorized credit cards from the financial institutions. They used the credit cards to make unauthorized bank ATM withdrawals and purchases, including purchases of department store gift cards and Apple iPads. To get more money out of the scheme, Clayton Stewart and his brother created sham entities so that charges could be made with the fraudulent credit cards on merchant processors for those entities. The intended dollar loss associated with the scheme is $652,050. Johnny Stewart was previously sentenced to 144 months in prison. Dexter Hardy was previously sentenced to 33 months in prison.
Wisconsin Man Sentenced for Bank Fraud and Money Laundering
On July 29, 2013, in Milwaukee, Wis., Randez J. Long, of Milwaukee, Wis., was sentenced to 21 months in prison, three years of supervised release and ordered to pay $984,043 in restitution to the victims. Long pleaded guilty in March 2013 to bank fraud and money laundering. According to court documents, from approximately January 2008 through April 2008, Long, and others working with him and at his direction, purchased or sold approximately 35 residential properties in the Milwaukee area. In particular, Long bought at least 11 properties in his sister’s name and seven properties in his mother’s name without the consent of either relative. The purchases were typically financed through mortgage companies or federally insured banks. Long, along with others working for him, sent these institutions loan applications and documents that contained false and fraudulent information regarding the borrower’s employment, assets and income. Long and others also provided prospective lenders with false documents purporting to verify the borrower’s employment, income and assets. In some cases, Long inflated the purchase price of the residence, which enabled him to divert significant proceeds of the sale to himself, or to an entity that he controlled. Long frequently provided the funds that the nominal buyer was supposed to contribute to the purchase. He also would contact the lender that the borrower was unable to pay the loan and negotiate a fraudulent “short sale.” Long and others would then provide lenders with false documents, including offers to purchase and settlement statements, for amounts substantially less than the amount owed to the lender. At the same time, Long would then fraudulently arrange to sell the property to a third party for substantially more than the amount represented to the lender.
Defendant Sentenced in Mortgage Fraud Scheme
On July 29, 2013, in Phoenix, Ariz., Daniel Morar was sentenced to 60 months in prison, three years of supervised release and ordered to pay $222,784 in restitution. Morar pleaded guilty on April 16, 2013 to conspiracy to commit wire fraud. According to court documents, from July 1, 2006 through January 1, 2007, Morar and others conspired to use "straw buyers" to purchase multiple properties and to receive "cash back" following the closing of the real estate transactions. Morar and others directed the straw buyers to submit loan applications that falsely represented their assets, income, liabilities, source of down payments, and the intent to occupy the homes as their primary residences. Based on these false misrepresentations, lending institutions wired funds to close the real estate transactions. In fact, the straw buyers were unable to afford the multiple properties and would not be using any of the properties for their primary residences. Throughout the conspiracy, the cash back from at least 19 transactions were deposited into Morar's bank accounts. For each transaction, the cash back was falsely represented on HUD-1 forms as funds for remodeling work. However, the remodeling work was either minimally completed or not done at all. The cash back was used for personal expenses. In addition, a portion of the cash back proceeds were wired to accounts in Romania controlled by family members.
Man Sentenced for Bank Fraud and Money Laundering
On July 19, 2013, in Milwaukee, Wis., James Scalzo, of Kenosha, Wis., was sentenced to 35 months in prison, three years of supervised release and ordered to pay $200 in special assessments. Restitution will be determined at a later date. Scalzo pleaded guilty in January 2013 to bank fraud and money laundering. According to court documents, between April 1, 2008 and October 31, 2009, while employed as a bank officer at a bank in Burlington, Wis., and then at a Credit Union in Round Lake Beach, Ill., Scalzo originated and approved multiple fraudulent loans. He then directed funds to be taken from the loans and transferred by cashier’s check or wire, to personal accounts. Some of the loan funds were applied against earlier loans in order to conceal the fraud. The scheme involved more than $1.4 million in loan funds.
Six Individuals Sentenced for their Roles in Large, Multi-State Identity Theft Ring
On July 18, 2013, in St. Paul, Minn., Joel Delano Powell III, of Minneapolis, was sentenced to 42 months in prison and Trey Jeremiah Powell, of Brooklyn Park, was sentenced to 57 months in prison. Both had earlier pleaded guilty to one count of conspiracy to commit bank fraud and one count of aggravated identity theft. Earlier this week, Joel Delano Powell, Jr., of St. Louis Park, was sentenced to 300 months in prison. Powell, Jr. was convicted following a jury trial in August and September 2012 of one count of conspiracy to commit bank fraud, seven counts of aiding and abetting bank fraud, and five counts of aggravated identity theft. On July 17, 2013, Elston Edwards Sharps, of Minneapolis, was sentenced to 32 months in prison; Kevin Terrell Martin, of St. Paul, was sentenced to 124 months in prison; and Steven Lavell Maxwell, of Minneapolis, was sentenced to 140 months in prison. All three pleaded guilty to one count of conspiracy to commit bank fraud and one count of aggravated identity theft. These individuals, along with over 100 others, were involved in a conspiracy from 2006 through December 2011 to defraud banks, bank customers, and businesses. The co-conspirators used victim information to create counterfeit checks and false identification documents to conduct fraudulent transactions at retail establishments where expensive merchandise was purchased and returned for cash. At banks, the conspirators posed as customers and withdrew money from victims’ bank accounts. The members of the conspiracy conducted these fraudulent transactions throughout Minnesota and in at least 13 other states. Victim information was obtained by members of the conspiracy through multiple sources, including from individuals who stole victim information from their places of employment, from individuals employed at area banks, from those who stole the information from the mail, during vehicle break-ins, and business burglaries, among other sources.
Ohio Man Sentenced for Bank Fraud and Money Laundering
On July 10, 2013, in Cleveland, Ohio, Aziz Ukshini, of Westlake, Ohio, was sentenced to 42 months in prison and three years of supervised release for bank fraud and money laundering. Ukshini was also ordered to pay a $400 special assessment and to pay $3,303,817 in restitution jointly with Anthony Raguz to the National Credit Union Administration. According to court documents, from September 2003 through March 2010, Ukshini, aided and abetted by Raguz, the former Chief Operating Officer of St. Paul Croatian Federal Credit Union, fraudulently obtained numerous loans totaling approximately $2.8 million from the credit union. Ukshini obtained these loans by making false representations and promises. He received the loans after having already defaulted on previous loans issued to him by the credit union. These loans were obtained in the names Aziz Ukshini; Hard Rock Crushing, Ltd.; and Azmet, Inc. Ukshini gave Raguz about $90,000 for approving and facilitating the approval of his fraudulent loans. Raguz was sentenced to 168 months in prison in November 2012.
Ohio Man Sentenced for Mortgage Fraud Scheme
On July 8, 2013, in Cleveland, Ohio, Jack R. Coppenger Jr., of Akron, Ohio, was sentenced to 120 months in prison for mortgage fraud. Restitution will be determined later this year. According to court documents, Coppenger conspired to commit bank fraud and making false statements to influence a bank to make a loan. Through the use of "straw buyers," Coppenger secured mortgage loans. Ultimately, Coppenger failed to make mortgage payments on these loans, resulting in a loss of approximately $36 million. Coppenger also conspired to defraud the United States by impairing and impeding the ability of the IRS to assess his taxes in 2006 by concealing funds he received from a land “flip.”
Defendant Sentenced for Role in Multi-Million Dollar Mortgage Fraud Scheme
On July 8, 2013, in San Francisco, Calif., Kevin Derricott was sentenced to 20 months in prison, three years of supervised release and ordered to pay $3.43 million in restitution. On February 19, 2013, Derricott pleaded guilty to conspiracy to commit wire and bank fraud and bank fraud. According to the plea agreement, from about February 2006 through December 2008, Derricott conspired with others to submit mortgage applications to various lenders that contained materially false information about the borrower-applicants, such as inflated salary figures, inflated assets claims, or false employment information, in order to trick the lenders into making loans. Derricott also recruited borrower-applicants, procured false supporting documentation for loan applications, and submitted fraudulent loan applications to lenders in exchange for a portion of the fraudulent proceeds.
Defendant Sentenced for Role in Mortgage Fraud Scheme
On July 2, 2013, in San Antonio, Texas, Robert Brooks, of Lantana, Texas, was sentenced to 135 months in prison, five years of supervised release and ordered to pay approximately $8.5 million in restitution for his role in a mortgage fraud operation involving a series of “property flip” schemes. Brooks was convicted by jury on January 29, 2013, of one count of conspiring to commit bank, wire and mail fraud, eight counts of mail fraud and two counts of aiding the filing of false income tax returns. Evidence presented during trial revealed that from May 17, 2005, until February 21, 2008, twenty individuals, under the direction of Robert Brooks, participated in a mortgage fraud scheme where Brooks purchased properties at fair market value then resold at an artificially inflated price to straw purchasers. Brooks recruited his co-defendants, which included appraisers, loan processors, title company employees, and straw purchasers. He provided them with kickbacks from loan proceeds for their participation in the scheme. Brooks used the proceeds from the purported sales to various nominees to pay for his initial purchase of real estate, to pay closing costs for both his purchase and sale to the nominee, to pay the nominee’s down-payment, to pay the nominee for the nominee’s participation, and to pay the mortgage for the first 12 months, after which each mortgage went into default. Brooks’ mortgage loan scheme involved over 40 properties and defrauded financial institutions of over $20 million. In addition, Brooks submitted false 2007 income tax returns for himself and his wife, and for a partnership, which contained a false business expense.
Ohio Real Estate Broker Sentenced for Filing False Income Tax Returns
On June 25, 2013, in Cincinnati, Ohio, Sylvia Odia Thomas, formerly of West Chester, Ohio, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $313,021 in restitution to lenders and $95,422 to the IRS. Thomas pleaded guilty on October 16, 2012 to one count of mail fraud and one count of filing false income tax returns. According to court documents, Thomas willfully filed false federal income tax returns with the IRS for the 2006 through 2009 income tax years. These returns did not include substantial amounts of additional income that was paid to Thomas in the form of broker closing and processing fees. In total, Thomas under-reported her gross receipts by $312,882 for the 2006 through 2009 income tax years, resulting in a tax loss of $95,422. Thomas operated a home renovation company and later started her own mortgage brokerage business. Eventually, she began writing false income and employment information on loan applications in order to get her clients approved. This practice also involved fabricating false supporting documents that were sent to the lenders. She also engaged in creating false down payments for her clients by making cashier’s checks to look like earnest money from the clients.
Mortgage Company Owner Sentenced for Role in Conspiracy
On June 14, 2013, in Oakland, Calif., Amy Nicole Schloemann, aka Amy Kinney, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $5,805,902 in restitution. Schloemann pleaded guilty on August 22, 2012, to conspiracy to commit wire fraud. According to court documents, Schloemann was the president of Hiddenbrooke Mortgage Company, a real estate and mortgage brokerage company in operation from 2005 through 2007 in Vallejo, California. Between 2006 and July 2007, Schloemann conspired with others to purchase more than 18 properties in California in the names of fictitious identities and using straw buyers. As part of the conspiracy Schloemann supervised others who processed loan packages with materially false information, including contracts that reflected inflated sales prices above the original sales prices. The purchase loans, which were 100% financed, exceeded the sales prices received by the sellers. The excess amounts from the loan proceeds, or “profits” from the transactions, were dispersed through escrow to entities controlled in part by Schloemann. All but a few of the properties involved in the conspiracy were foreclosed due to the failure to make mortgage payments. The lenders sustained significant losses as a result of the fraud.
Ohio Man Sentenced on Tax and Bank Fraud Charges
On June 10, 2013, in Columbus, Ohio, Will N. Walters, of Columbus, was sentenced to eight months in prison, four months of home confinement and five years of supervised release for willfully filing a false income tax return with the IRS and for committing bank fraud. In addition, Walters was ordered to pay $410,160 in restitution to the IRS and $2,436,822 in restitution to the victim lending institutions. According to court documents, between December 2004 and April 2008, Walters devised a scheme to defraud multiple financial institutions. Using properties under Walters’ control and investors located by “Empowerment,” a company with which Walters established a relationship, Walters enacted a scheme whereby investors with qualifying credit scores would obtain mortgage funding to purchase the properties using fraudulent loan applications. Walters used this same scheme to sell seven residential condominium units located in Florida. Walters also defrauded financial institutions by submitting false credit applications in order to obtain small business lines of credit under nominee names. Walters obtained these lines of credit knowingly, and under false pretenses, to raise capital for repayment of existing debts incurred through the real estate investment scheme. In addition, Walters failed to file a federal income tax return for the 2005, 2007, and 2008 income tax years, and he filed a false federal income tax return for the 2006 income tax year.
Tennessee Attorney Sentenced for Mortgage Fraud Scheme
On June 6, 2013, in Knoxville, Tenn., Jerry Kerley, of Kodak, Tenn., was sentenced to 48 months in prison. Kerley was convicted in May 2012 of wire fraud, bank fraud, and money laundering. The indictment charged Kerley and Jeffrey Whaley with conspiring to defraud a bank and mortgage company, through a "straw borrower" mortgage fraud scheme. Kerley, a Tennessee licensed attorney, was the owner of Guaranty Land Title Company where the fraudulent loans were closed. Whaley conducted business through a company known as GBO Enterprises which received substantial sums of money from the loan proceeds. Straw borrowers were induced to obtain mortgage loans in their names based on promises that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. The indictment further alleged that materially false representations were made to the bank and mortgage company. The false representations related to the straw borrowers’ source of funds for down payments and amounts recorded as "cash from borrower" on HUD-1 Settlement Statements and loan applications. The banks would disburse the mortgage loan proceeds it had wired to and entrusted with Kerley's title company Guaranty Land Title. In total, the bank and mortgage company wired more than $6 million in loan proceeds to Guaranty Land Title Company for disbursement. The indictment also alleged that Kerley and Whaley committed money laundering offenses through financial transactions that involved proceeds from the mortgage fraud scheme. Whaley is awaiting sentencing.
Husband and Wife Sentenced for Tax Fraud
On May 15, 2013, in Pensacola, Fla., Rudolf Straat and his wife Maria Gudelis, both of Sarnia, Ontario, Canada, were sentenced to 24 months in prison and ordered to pay $575,814 in restitution to the IRS and $5,188,459 to the mortgage lenders they victimized. Gudelis and Straat pleaded guilty for conspiring to commit tax fraud, mortgage fraud and money laundering. According to court documents, between 2004 and 2012, the husband-and-wife team fraudulently obtained mortgage loans to purchase homes in Florida and Nevada for more than $10 million. In applying for these loans, Straat and Gudelis made false statements such as falsely representing they were United States citizens when, in fact, Straat is a citizen of the Netherlands, and Gudelis is a citizen of Canada. Straat and Gudelis concealed income they received on the sales of these homes by transferring the properties into trusts and nominee companies and by taking other steps to ensure that gains from the sales would not be reported under their personal taxpayer identification numbers. The couple lived in Florida from at least October 2005 through July 2007. During that time, Straat failed to file federal income tax returns for tax years 2005 and 2006, failing to report to the IRS $364,902 in capital gains for 2005, and more than $689,368 in capital gains for 2006. Gudelis also failed to file income tax returns for tax years 2005 and 2006, failing to report $749,883 in capital gains for 2005, and more than $30,826 in capital gains for 2006.
Massachusetts Man Sentenced for Mortgage Fraud and Identity Theft
On May 14, 2013, in Boston, Mass., Peterson Cherimond, of Dorchester, was sentenced to 87 months in prison, one year of supervised release and ordered to pay $2.2 million in restitution to six mortgage lender victims. In July 2012, Cherimond pleaded guilty to nine counts of wire fraud and three counts of money laundering. In October 2012, he pleaded guilty to four additional counts of wire fraud, seven counts of identity fraud and two counts of aggravated identity theft. Cherimond recruited co-defendants Judy Bonas and Allison Gates to use stolen identities for the purpose of obtaining fraudulent mortgage loans aggregating more than $3.8 million for seven properties. Cherimond provided Bonas and Gates with bogus identification documents and paid them $1,500 to $3,000 per property to pose as the purported buyers at mortgage loan closings in order to obtain the fraudulent loan proceeds. Bonas was sentenced in February 2013 to six months in prison and two years of supervised release. Gates was sentenced in March 2013 to six months in prison and two years of supervised release.
Former Arizona Loan Officer Sentenced for Mortgage Fraud
On May 6, 2013, in Tucson, Ariz., Rex Adams was sentenced to 18 months in prison. Adams pleaded guilty on January 7, 2013 to committing wire fraud and transactional money laundering. According to the plea agreement, Adams obtained a $268,000 loan to purchase a property in Tucson. In order to obtain this loan and as part of the loan approval process, Adams knowingly submitted loan applications and other documents that contained material false representations. He falsely represented his intent to reside at the property as a primary residence and submitted a fraudulent lease agreement stating that he had a tenant for his current home and would receive monthly rental income of $3,500. In addition, Adams inflated the purchase price of the property as $335,000 and falsely represented that the down payment or cash to close on the property would be a $66,473 check. In fact, without the lender’s knowledge, Adams fraudulently obtained the mortgage at an inflated price with 100% financing, with no down payment and received $12,349 cash back from the seller.
Officer of Now Defunct Bank Sentenced to Charges Related to the Bank’s Collapse
On April 30, 2013, in Denver, Colo., Gregory William Bell, of Weld County, Colo., was sentenced to 30 months in prison and three years of supervised release for false bank entries, bank misapplication, bank fraud, and money laundering. According to court documents, Bell was an officer of New Frontier Bank. On October 31, 2005, Bell allegedly prepared a form for a $5,583,500 loan to two individuals. However, he failed to disclose that a certificate of deposit which the two individuals pledged as collateral, in fact belonged to another individual, and that Bell would benefit personally as a result of the loan. In March 2008, Bell willfully misapplied approximately $662,045 of New Frontier’s funds. From June 17, 2008 until September 9, 2008, Bell participated in a scheme to defraud the bank and to obtain moneys owned by and under the custody and control of the bank. As part of the scheme, Bell arranged for eight bank customers to borrow money and use the proceeds of those loans to purchase shares of bank stock so New Frontier could inject some of the money paid for the stock into the bank. He also prepared and caused others to prepare bank forms entitled “Credit Presentation and Committee Approval” for the eight loans. Bell failed to disclose on the credit presentation forms that proceeds of the loans would be used to purchase shares of stock in New Frontier Bancorp. Bell also caused false and misleading statements to be included on the credit presentation forms. The bank loaned approximately $20,145,979 to the eight borrowers and they used approximately $4,310,215 of those proceeds to purchase shares of stock in the bank. On August 29, 2008, Bell caused the bank to transfer approximately $260,000 of the proceeds of one of the bank loans to an account of one of the borrowers of that loan. On June 27, 2008, Bell conducted a financial transaction affecting interstate commerce. Specifically, he deposited a check in the amount of $160,000 into his account at the bank. The transaction involved the proceeds of a specified unlawful activity, knowing that the transaction was designed in whole or in part to conceal and disguise the source and the ownership of the proceeds of the unlawful activity.
New Mexico Real Estate Developer Sentenced for Bank Fraud
On April 26, 2013, in Albuquerque, N.M., Vincent J. Garcia, an Albuquerque real estate developer, was sentenced to 27 months in prison, five years of supervised release and ordered to pay $722,543 in restitution to the banks that were the victims of his criminal conduct. In August 2011, Garcia pleaded guilty to committing bank fraud for $365,677, and acknowledged that the gross loss amount to the victims of his fraudulent activity was $842,237. According to court documents, on February 12, 2007, Garcia told Derek Barnhill that he needed $360,000 for a “good faith payment” towards the purchase of a casino. Garcia asked Barnhill to use an old bid from a real estate project to get the money. Barnhill altered the bid to support a fictitious draw-down request for $365,677 and submitted the request based solely on the false invoice to the bank. After the bank disbursed the money, Barnhill transferred the funds to a real estate project account. The next day, Garcia and Barnhill went to the bank and withdrew $360,000 of the proceeds which Garcia then used the money to invest in a casino in Washington State. Barnhill is awaiting sentencing.
Pennsylvania Woman Sentenced on Embezzlement and Tax Evasion Charges
On April 19, 2013, in Pittsburgh, Pa., Stacy L. Attisano, of Lawrence County, Pa., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $259,847 in restitution. Attisano pleaded guilty to embezzlement and income tax evasion. According to court documents, from January 2004 until October 2009, Attisano, an employee of Lawrence County School Employees Federal Credit Union, embezzled and willfully misapplied money in the excess of $1,000. In addition, for the 2006 through 2009 tax years, Attisano filed false and fraudulent income tax returns where she under-reported her taxable income.
Attorney Sentenced for Role in Mortgage Fraud Scheme
On April 17, 2013, in Raleigh, N.C., Jeffrey Scott Taggart, of Wilmington, N.C., was sentenced to 36 months in prison and three years of supervised release on charges of conspiracy to commit mail, wire, and bank fraud and subscribing to a false income tax return. Taggart was also ordered to pay $3,060,896 to 12 banks and lenders who were victims of the fraud. According to court documents, Taggart, in his capacity as a North Carolina attorney, prepared false HUD-1 settlement statements that he sent to banks and lenders on more than 50 loan transactions tied to the scheme. Taggart also participated in the scheme by fronting money from his firm’s escrow account to assist borrowers to appear qualified for loans that he closed. As a result of the scheme, banks and lenders issued loans to the conspirators of approximately $15.8 million, which resulted in $3,060,896 in actual losses to the banks and lenders. Additionally, Taggart falsely listed his taxable income as $80,486, when in fact, his taxable income was $271,003.
Woman Sentenced on Bank Fraud and Identity Theft Charges
On April 15, 2013, in Baltimore, Md., Quanishia Williamson-Ross, aka Quanishia Williamson, aka Quanishia Ross, was sentenced to 42 months in prison and three years of supervised release. Williamson-Ross pleaded guilty to conspiracy to commit bank fraud and aggravated identity theft. In March 2012, Williamson-Ross and others were indicted in connection with a bank fraud scheme to use the personal identifying information of individuals to fraudulently obtain money and property. According to the indictment, from December 2008 through December 22, 2011, in Maryland, Pennsylvania and elsewhere, the defendants opened checking accounts or had others open accounts at banks and obtain check cards, which the conspirators then controlled. The conspirators deposited fraudulent checks into the accounts then used the associated check cards at ATM machines to make cash withdrawals from the accounts. Williamson-Ross and others made fraudulent identification documents using the personal information of others but with their photographs, which they used, along with the check cards, to make purchases at retail stores, later returning the purchased items for cash. In addition, the defendants used the check cards to obtain services, such as utilities, cable, and cellular phone service, and make purchases for their personal benefit at restaurants, drug stores, grocery stores, gas stations and video rentals, and other businesses. Then the defendants would not pay for the services and merchandise obtained through the use of the check cards and checking accounts. The banks suffered a loss when the fraudulent checks deposited by the defendants were returned as unpaid.
North Carolina Mortgage Fraud Promoter Sentenced
On April 9, 2013, in Charlotte, N.C, Kenneth Egri was sentenced to 78 months in prison and two years of supervised release. In July 2011, Egri and a co-conspirator pleaded guilty to conspiracy to commit wire fraud in connection with their operation of a mortgage fraud. In addition, Egri pleaded guilty to two counts of failing to file income tax returns for the 2005 and 2006 tax years. According to court documents, from about 2001 to about 2006, Egri and his co-conspirator owned and operated Direct Home Services (DHS) in Charlotte. The conspirators utilized DHS to generate over $37.4 million in fraudulent loans and to funnel over $5.4 million in fraudulent loan proceeds to themselves. To promote their scheme, the conspirators would agree with a builder to purchase a property at the “true price,” then arrange for a buyer to purchase the property at an inflated price in exchange for a hidden kickback. The difference between the inflated price and the true price would be extracted at closing by the conspirators. To induce lenders to make mortgage loans, the conspirators caused fraudulent loan packages to be submitted. In addition, from 2003 through 2006, Egri failed to file income tax returns reporting $1,288,604 of income from the mortgage fraud scheme. Egri and his co-conspirator were ordered to pay restitution of $1,335,744 to the victim bank and Egri was ordered to pay $257,721 in restitution to the IRS.
Former Bank Manager Sentenced for Embezzlement, Tax Charges, and Bank Fraud
On March 26, 2013, in Cleveland, Ohio, Kevin J. Moore, of Mansfield, Ohio, was sentenced to 51 months in prison and ordered to pay more than $2 million in restitution. On November 26, 2012, Moore pleaded guilty to bank embezzlement, tax charges and bank fraud. According to court documents, from August 2008 to November 2010, Moore was the manager of a bank in Mansfield, Ohio. During this time he embezzled approximately $1.7 million from the bank by opening or renewing Certificates of Deposits for customers, and then stealing the funds in the accounts. Moore also failed to report and pay taxes on the monies he had embezzled and used for his own benefit. In addition, Moore defrauded an individual of more than $360,000 in a phony investment scheme. Moore was charged with bank fraud for opening lines of credit in another individual's name and fraudulently drawing on those lines while Moore was the manager of another bank from the fall of 2007 to the spring of 2008.
Ohio Man Sentenced for Bank Fraud and Money Laundering Charges
On March 18, 2013, in Cleveland, Ohio, Marko Nikoli was sentenced to 27 months in prison and ordered to pay $1 million in restitution. Nikoli pleaded guilty on bank fraud and money laundering charges. According to court documents, around June 2003, Nikoli presented false documents to St. Paul Croatian Federal Credit Union (SPCFCU) requesting a loan for $250,000 without going through proper procedures and making false representations. The loan was approved by a co-conspirator inside the bank and funds were deposited into a bank account controlled by Nikoli. About June 12, 2003, Nikoli transferred, via international wire transfer, approximately $442,500 from his personal bank account to a bank account controlled by him in Macedonia. Around May 3, 2005, Nikoli again submitted falsified loan documents to SPCFCU. The co-conspirator inside the bank approved a $250,000 loan to Nikoli. On or about May 6, 2005, Nikoli transferred, via international wire transfer, approximately $495,000 from his bank account to an international bank account in Macedonia.
Four Conspirators Sentenced for Widespread Mortgage Fraud Scheme
On March 6, 2013, in Plano, Texas, four conspirators were sentenced in a mortgage fraud scheme. Davon Willis was sentenced to 48 months in prison, three years of supervised release and ordered to pay $6,744,896 in restitution. Rodney Lavan Giles was sentenced to 46 months in prison, five years of supervised release and ordered to pay $590,781 in restitution. Julila Nicole Allen was sentenced to 24 months in prison and three years of supervised release. Quincy Dynell Harrington was sentenced to 18 months in prison and three years of supervised release. According to court documents, the defendants held various roles in a conspiracy to defraud mortgage companies. Willis and Harrington were mortgage brokers. Allen and Giles were home buyer recruiters. Each defendant pleaded guilty to conspiracy to commit money laundering. Giles also pleaded guilty to conspiracy to commit bank fraud. As part of the conspiracy, the defendants recruited buyers for properties using falsified mortgage loan applications which overstated the amount of the actual purchase price and loan amounts the buyers needed to purchase certain properties. When the mortgage loans were funded, the excess loan funds were used to pay kickbacks to the co-conspirators. In order to conceal the kickbacks from the lenders, the kickbacks were shown as fees for services on the settlement statements and paid to and from bank accounts of business entities controlled by the co-conspirators.
Texas Man Sentenced for Multiple Bank Fraud Convictions
On February 25, 2013, in Houston, Texas, Patrick Cody Morgan, of Alvin, Texas, was sentenced to 324 months in prison, five years of supervised release and ordered to pay $25,277,802 in restitution. According to court documents, from July 2004 through September 2007, Morgan and others participated in a scheme to defraud financial institutions insured by the Federal Deposit Insurance Corporation (FDIC) and residential mortgage lenders. Morgan would locate condominium units in the Houston area from a builder or developer. He would then set up trust accounts with names similar to the condominiums through which the title was to pass. Co-defendants would recruit individuals, also known as straw buyers, with good credit to act as borrowers in applications for residential mortgage loans to purchase one or more of the properties, which would ultimately go into foreclosure because of the failure to pay the loans. Within the overall scheme, there were more than 100 properties with a loan amount of more than $39 million.
Virginia Man Sentenced for Multi-Million Dollar Fraud Scheme
On February 15, 2013, in Richmond, Va., Allen Mead Ferguson was sentenced to 14 months in prison, two years of supervised release, ordered to pay $5,652,555 in forfeiture and $2,943,776 in restitution. Ferguson pleaded guilty to mail fraud and money laundering on November 14, 2012. According to court documents, from about February 2006 through April 2010, Ferguson made material misrepresentations and omissions on personal financial statements submitted to various federally insured financial institutions. On these financial statements, he knowingly and intentionally stated, among other things, that he had $1 million in deferred compensation, and/or $2 million in Virginia tax-free bonds. In fact, as Ferguson was aware, he did not have any deferred compensation since 1998 and did not owned $2 million in Virginia tax-free bonds since at least January 2009. In reliance on these false financial statements, the federally insured financial institutions extended various promissory notes and loans to Ferguson. In 2011, Ferguson filed for bankruptcy. At that time, the federally insured financial institutions were owed $5,652,555. As a result of the bankruptcy proceeding, the financial institutions received some compensation, but, at the time of sentencing, still had a loss totaling $2,943,766.
Ohio Man Sentenced for Mortgage Fraud
On February 13, 2013, in Columbus, Ohio, Branden D. Chatman, of Lewis Center, Ohio was sentenced to 21 months in prison, four years of supervised release and ordered to pay $90,678 in restitution to the victims of a mortgage fraud scheme. On August 23, 2012, Chatman pleaded guilty to one count of money laundering and to one count of conspiracy to commit bank fraud. According to court documents, between May 2006 and January 2007 Chatman knowingly conspired with others to devise a scheme to defraud lending institutions of approximately $1.5 million in loans. Chatman recruited property purchasers and sellers and referred those clients to a specific mortgage broker. He and the mortgage broker submitted loan applications with false statements about the purchaser’s income, place of employment, and the cost of renovating the property. At times, Chatman received excess loan proceeds generated by the property purchasers by submitting false invoices to the title companies in the name of his business, Henderson Homes. Chatman knew the HUD-1 settlement statements prepared by the title company stated that the property buyers were paying money out of the sale proceeds to rehabilitate and renovate the home, when in fact these statements were false. Chatman also received excess loan proceeds in the form of kickbacks. Chatman deposited the proceeds of the bank fraud activities in the form of checks that were made payable to Henderson Homes, and wire transfers received in the name of Henderson Homes, in the total amount of $176,498.
North Carolina Man Sentenced on Bank Fraud Charges
On February 8, 2013, in Raleigh, N.C., Loren F. Hamlin was sentenced to 78 months in prison, five years of supervised release and ordered to pay $12,010,536 in restitution. In October 2011, Hamlin pleaded guilty to attempted bank fraud. According to court documents, Hamlin was employed as a banking center manager for a federally insured financial institution located in Kitty Hawk, N.C. In connection with an investment deal, Hamlin executed a scheme to defraud his employer by authorizing a cashier’s check for $13,047,907 from an account with a balance of only $9,827,970 without authorization or approval of his employer.
Phoenix Man Sentenced in Mortgage Scheme
On February 5, 2013, in Phoenix, Ariz., Ernest Babbini was sentenced to 24 months in prison, three years of supervised release and ordered to pay $225,000 in restitution. Babbini pleaded guilty in December 2011 to conspiracy. According to the plea agreement, from February 2006 through May 2007, Babbini and other co-defendants submitted false mortgage loan applications and related documents to banks and other lending institutions to fund real estate purchases. They concealed from the lending institutions portions on the loan proceeds known as "cash back" for their own personal use. To accomplish this they would submit simultaneous loan applications for multiple real estate purchases without disclosing other pending applications. They listed false asset, occupancy, and liability information in the loan applications to obtain the loans. They artificially inflated the sales price of the real estate purchases, in some cases by using "double escrow" transactions in which they transferred or purported to transfer title from the seller to a family trust and then to the buyer. In addition, they directed portions of the proceeds to some of the defendants through the use of entities and concealed material information from the lending institution. During this period Babbini worked as a loan officer and helped the co-defendants obtain the funding to purchase 15 homes and receive more than $2.5 million in "cash back" by submitting loan applications he knew where false.
Ohio Businessman Sentenced for Credit Union Fraud
On February 5, 2013, in Cleveland, Ohio, A. Eddy Zai, of Pepper Pike, Ohio, was sentenced to 87 months in prison, five years of supervised release and ordered to pay more than $23 million in restitution. Zai pleaded guilty to conspiracy to commit bank fraud, bribery, bank fraud, money laundering and making false statements of financial institutions. According to court documents, Zai conspired with others, including Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union (SPCFCU), to submit false loan documents to the credit union, to defraud the credit union of approximately $16.7 million, and to pay bribes and kickbacks to Raguz for using his position at the credit union to approve numerous loans to Zai and the entities and nominee companies he controlled. From December 2003 through March 2010, Zai owned, operated and controlled The Cleveland Group, LLC and its many related entities. Some entities were created primarily to operate as a “safe haven” for credit union proceeds, while others performed little or no legitimate business despite having loan proceeds intended for Zai’s “business” ventures. Zai engaged in a scheme to defraud the credit union by, among other things, submitting loan documents for and receiving loan proceeds on behalf of companies that ceased operations. He continued to seek and obtain loan proceeds in the name of non-operating entities even after he directed that no loan payments be made to the credit union. Zai gave Raguz numerous cash payments, usually in the form of $100 bills concealed in envelopes and hand-delivered to Raguz, totaling more than $5,000. According to court documents, the payments were made to both induce Raguz to approve additional fraudulent loan applications and to reward Raguz for having previously approved false loan applications.
Oklahoma Realtor Sentenced for Mortgage Fraud
On February 1, 2013, in Oklahoma City, Okla., Safiyyah Tahir Battles was sentenced to 30 months in prison and two years of supervised release, including 104 hours of community service. Battles was also ordered to pay $326,902 in restitution and a forfeiture judgment of $102,630. According to court documents, Battles, a former real estate agent, used her sister’s mortgage brokerage company to apply for a $500,000 loan. When she was required to provide twelve months of bank statements to support her income and assets, Battles altered the statements by adding more than $100,000 to the ending balance on each statement, deleting her husband’s name as an account holder and removing numerous overdraft fees. At closing on May 4, 2007, Battles signed a final loan application that stated falsely that she earned $344,677 per year and had $165,907 in her bank account. According to a tax return that she filed in March 2009, Battles’ adjusted gross income for 2006 was $14,001. According to bank records, her actual account balance on May 4, 2007, was $852. Based on the application information, a forged letter, and communications with the mortgage brokerage on the day of closing, the mortgage company authorized $102,630 from the loan proceeds to be paid to a local builder. Battles took the $102,630 check at closing, deposited into her own bank account and used it for her own purposes.
Father and Son Sentenced in Mortgage Fraud Scheme
On February 1, 2013, in Syracuse, N.Y., Kevin M. O’Connell and Kevin D. O’Connell, both of Albany, N.Y., were each sentenced to 24 months in prison. In addition, Kevin M. O’Connell was ordered to pay $2,275,584 in restitution and to forfeit $4,628,886. Kevin D. O’Connell was ordered to pay $2,136,444 in restitution. According to court documents, Kevin M. O’Connell was a principal of PB Enterprises and employed his father, Kevin D. O’Connell, to assist in a series of transactions that defrauded banks that were offering mortgages. PB Enterprises found inexpensive properties, usually rental properties that were for sale. They then recruited buyers to purchase the property at higher prices. They promised the buyer would pay “no money down” and would instead receive a check at the closing. In dozens of transactions, PB Enterprises fraudulently obtained mortgages for those purchasers at the higher purchase price by providing false information to the lenders. PB Enterprises then arranged with closing agents to submit documents to the lenders that disguised the fact that the purchase prices were inflated and that the purchaser and the principals of PB Enterprises were splitting the excess mortgage money. The mortgage lender was falsely led to believe that the mortgage proceeds were necessary to purchase the property.
Kansas Man Sentenced for Role in Mortgage Fraud Scheme
On January 28, 2013, in Kansas City, Kan., Kevin M. Mahoney, of Stilwell, Kan., was sentenced to 15 months in prison, one year of supervised release and ordered to pay a $5,000 fine. Mahoney pleaded guilty to one count of conspiracy to commit wire fraud. In his plea, Mahoney admitted he conspired with co-defendant Paul Hartfield and others to make false representations to lenders in order to fraudulently obtain funds from mortgage lenders. Hartfield owned two businesses: Hart Investments, Inc., and Diamond Mortgage, both in Overland Park, Kan. Kevin Mahoney was a loan officer for Diamond Mortgage. Hart Investments purchased depressed properties in order to rehabilitate them and sell them at a profit. In October 2006, Hartfield stopped rehabilitating houses. Instead, Hartfield, Mahoney and others made false representations to lenders in order to fraudulently obtain loan funds. Mahoney made false statements on loan applications and submitted them to mortgage lenders to fraudulently obtain loan funds for numerous properties in Missouri. Paul Hartfield was previously sentenced to 78 months in prison and ordered to pay $2.6 million restitution.
Colorado Man Sentenced for Orchestrating Real Estate Scheme
On February 1, 2013, in Denver, Colo., Steven J. Mascarenas, of Westminster, Colo., was sentenced to 72 months in prison, three years of supervised release and ordered to $1,776,152 in restitution. Mascarenas pleaded guilty on July 3, 2012, to wire fraud and making a false statement to a pretrial services officer. According to court documents, in 2004, Mascarenas, then an attorney and licensed real estate broker, orchestrated the purchase and resale of residential properties in “The Broadlands”, a subdivision in Broomfield, Colorado. He arranged to have individuals serve as “credit buyers” to obtain loans, purchase the properties, and resell them shortly thereafter at inflated prices to other “credit buyers” in his select group. He concealed from the lenders that these “credit buyers” were only acting at his direction and were being compensated for their participation in having obtained the loans and purchased the properties. Mascarenas had Katrina Roberts prepare appraisal reports in which she fraudulently inflated the fair market values of the properties by $100,000 to $325,000. To make the inflated values in all of her reports appear legitimate, she falsely represented that the purchases, which were actually sales at market value, were “distressed” sales or “quick” sales below market value. Based on the fraudulent appraisals, Mascarenas set the prices for the resales far beyond their true market values, and arranged for the buyers to obtain 100% financing for them. To ensure that the desired funding would be approved for the buyers for both the purchases and the resales, Mascarenas caused false information about their qualifications to be incorporated into their loan applications to enable them to qualify for the loans. He caused the proceeds from the second sales to be directed to entities of his choice. Co-defendant Kathy Mascarenas conducted financial transactions as necessary to facilitate, perpetuate, and conceal the fraud. All of the loans went into default, and the loss to the lenders was approximately $1,776,162. In July 2012, Katrina Roberts was sentenced to 20 months in prison. In November 2012, Kathy Mascarenas was sentenced to 24 months in prison.
Former Wisconsin Man Sentenced in Mortgage Fraud Scheme
On January 29, 2013, Paul Zaleski, formerly of Twin Lakes, Wis., now living in Ojai, Calif., was sentenced to 14 months in prison and three years of supervised release for his part in a mortgage fraud scheme that spanned from 2004 to 2006. Zaleski pleaded guilty to one count of wire fraud and one count of money laundering. According to the indictment, Zaleski, acting as a mortgage broker, orchestrated a scheme which involved straw buyers, fraudulent loan applications, and inflated appraisals. As a result, he was able to arrange in excess of $14 million in loans for the purchase of approximately 51 properties located in southeastern Wisconsin and northern Illinois. More than $2 million of the loan proceeds wired by the various lenders were funneled to shell companies that Zalesk established. In connection with the scheme, Zaleski represented himself as a person involved in the purchase and improvement of real estate for profit and the coordinator of a group of investors engaged in that activity. All but a few of the properties ultimately went into foreclosure resulting in a loss of more than $5 million. Zaleski used the ill-gotten loan proceeds, in part, for the purchase of additional properties and for personal expenses.
Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On January 31, 2013 in Columbus, Ohio, Kevin D. Hightower, of Reynoldsburg, Ohio, was sentenced to 30 months in prison, five years of supervised release and ordered to pay $1,941,798 in restitution. Hightower pleaded guilty on October 4, 2012 to one count each of conspiracy to commit money laundering, money laundering, and making a false statement to a lending institution. According to court documents, between April 2006 and August 2007, Hightower worked with several individuals to secure mortgage loan payments that were obtained through false statements to lenders. Hightower, a mortgage broker, purchased properties with the intent to sell the properties for a profit. Hightower used recruiters and mortgage brokers to assist in selling the properties. The mortgage brokers located purchasers for the properties and assisted them in obtaining financing. The recruiters and brokers were paid a fee by Hightower that ultimately came from the mortgage proceeds. Hightower and others provided the down payment funds knowing that they would be reimbursed by the proceeds from the property sale. Hightower maximized the selling prices for the properties so that he could maximize his profit on the sales, cover the purchaser’s down payments, and pay the recruiters for finding loans for the purchasers. The payments to Hightower’s associates were disguised on the HUD-1 Settlement Statements as construction funds, land contract payoffs, and lien payments. In addition, Hightower made false statements to Huntington Bank as the executor of a charitable remainder trust that he was withdrawing money from the trust for charitable purposes. Instead, he used the money to pay personal debts and for his personal use.
Illinois Man Sentenced for Role in Credit Union Collapse
On January 29, 2013, in Cleveland, Ohio, Bujar Sejdic, of Ottawa, Ill., was sentenced to 24 months in prison and ordered to repay $1.6 million in restitution. Sejdic pleaded guilty to financial institution fraud, giving gifts for procuring loans and money laundering related to his activities at St. Paul Croatian Federal Credit Union (SPCFCU), located in Eastlake, Ohio. According to court documents, between January 2004 through March 2010, Sejdic obtained 25 loans totaling more than $1.6 million from St. Paul Croatian Federal Credit Union. These loans were made under false and fraudulent pretenses and many were made after Sejdic had already defaulted on previous loans. Sejdic obtained these loans with the assistance of the credit union’s then-chief operating officer, Anthony Raguz. In return, Sejdic gave Raguz $40,000 in cash and one check. In 2009 and 2010, Sejdic wired $240,000 from his SPCFCU account to an account in Belgrade, Serbia.
Defendant Sentenced for Multi-State Mortgage Fraud Scheme
On January 23, 2013, in Pensacola, Fla., Lonett Rochell Williams, of Woodland Hills, California, was sentenced to 120 months in prison for her participation in a conspiracy to defraud multiple lenders as part of a scheme to fraudulently purchase thirty-seven properties located in Texas, Georgia, California, and Florida. According to court documents, approximately $20,448,767 in loans were issued by the lenders in connection with the real estate deals. In October 2012, Williams pleaded guilty to conspiracy to commit mail fraud, conspiracy to commit money laundering, and mail fraud. Williams and her company received more than $4.5 million in kickbacks because of the scheme. Williams’ son, Raysean K. Richardson, of New York, N.Y., awaits sentencing for his participation in the same scheme. In September 2012, Richardson was convicted on charges of conspiracy to commit mail fraud, mail fraud, and conspiracy to commit money laundering based on his role in the scheme.
Registered Nurse Sentenced for Misuse of a Social Security Number, Bank Fraud and Tax Evasion
On January 18, 2013, in San Francisco, Calif., Crystal Ann Poole was sentenced to 27 months in prison, three years of supervised release and ordered to pay $476,444 in restitution. Poole pleaded guilty on September 10, 2012 to tax evasion, bank fraud and Social Security fraud. According to court documents, Poole evaded taxes on more than $1.27 million in income that she earned from 1994 through the present as a registered nurse. During her career as a nurse, Poole failed to file returns with the IRS, failed to pay her taxes, used the Social Security number of another individual to hide income and assets, and filed false documents with her employers to stop them from withholding taxes from her wages. According to the plea agreement, Poole committed bank fraud in 2006 when she applied for a loan of $335,000 from a bank to buy a home in Florence, Miss. In her loan application, Poole misrepresented her financial circumstances by omitting debts and supplying a false Social Security number to conceal a then-pending bankruptcy and at least $150,000 in outstanding debts under her true Social Security number. Poole also submitted a falsified Form W-2, Wage and Tax Statement, that purported to be from her employer. This fraudulent document overstated her income and listed a false Social Security number. Based on her fraudulent loan application, the bank approved the loan. Poole ultimately stopped making payments on the loan, resulting in foreclosure and a loss to the bank of $43,822. In 2007, Poole committed Social Security fraud when she used the Social Security number of an Alabama schoolteacher to obtain a $30,158 loan to purchase a Lexus. Poole ultimately stopped making payments on the car loan, resulting in a loss to the bank of $32,424. Poole purchased the schoolteacher’s Social Security number before 2003 and has used the Social Security number to open and maintain bank accounts, hold property, and purchase assets. In using the schoolteacher’s Social Security number, Poole intended to conceal the nature, extent, and location of her assets from the IRS.
Kansas Man Sentenced on Bank Fraud Charges
On January 14, 2013, in Kansas City, Kan., John T. Bradfield, of Overland Park, was sentenced to 15 months in prison and ordered to pay approximately $1.3 million restitution. Bradfield pleaded guilty to one count of conspiracy to commit bank fraud. In his plea agreement, Bradfield admitted to conspiring with co-defendant Paul Hartfield to make false representations to mortgage lenders in order to fraudulently obtain funds. Hartfield owned two businesses in Overland Park: Hart Investments, Inc., and Diamond Mortgage. Bradfield was the director of Operations of Hart Investments and purchased depressed properties in order to rehabilitate them and sell them at a profit. Starting in October 2006, Hartfield stopped rehabilitating houses, but Bradfield and others made false representations to lenders in order to fraudulently obtain loan funds. Hartfield was sentenced to 78 months in prison and ordered to pay $2.6 million restitution.
Mortgage Broker Sentenced for Federal Offenses
On January 8, 2013, in Honolulu, Hawaii, Estrellita “Esther” Garo Miguel, a Honolulu mortgage broker, was sentenced to 52 months in prison. Restitution will be determined at a later date. Miguel pleaded guilty to conspiracy to commit wire and mortgage fraud, wire fraud and mortgage fraud, and money laundering. According to information presented in court, Miguel was the owner and operator of the mortgage business titled Easy Mortgage. Miguel and others regularly submitted loan applications to lenders with false employment, income and residential occupancy information in order to induce lenders to fund loans for residential purchase. Miguel and other defendants working for Easy Mortgage also sought to deceive lender underwriters by providing false documentation concerning a borrower’s history of employment, payment of rents and bank account deposit information. During the existence of the five year conspiracy to defraud mortgage lending institutions over 200 fraudulent loans were obtained involving over 100 properties. Miguel and her coconspirators utilized a number of methods to get lender underwriters to authorize loans, including false employment and income information, fake Verification of Rent and Deposit forms, along with bank statements which had been cut and pasted to appear as if they were actual bank statements reflecting bank deposits of loan applicants. Some fraudulently obtained loan proceeds were funneled into a bank account controlled by Miguel and later distributed to her and others.
Former Attorney Sentenced for Mortgage Fraud
On December 20, 2012, in Boston, Mass., Marc D. Foley, a former attorney who operated a real estate practice in Needham, was sentenced to 72 months in prison and three years of supervised release. In September 2012, Foley was convicted by a jury of 33 counts of wire fraud and five counts of money laundering. According to evidence presented at trial, in December 2006 and January 2007, Foley participated in a scheme to defraud six mortgage lenders in connection with $4.9 million in real estate loans for the purchases of 24 condominium units in Dorchester. When Foley and an associate, acting under his direction, closed the loans, documents sent to the mortgage lenders falsely represented that funds ranging from $9,300 to $39,000 had been collected at the closings from the borrowers, when in fact the borrowers made no down payments and paid no funds at the closings. Furthermore, Foley entered into an undisclosed agreement with the seller to subtract from the seller’s proceeds all the funds that were reported to the lenders as coming from the borrowers. Foley also used various other means to conceal from the lenders that the borrowers had not provided funds for the purchases.
Man Sentenced in Mortgage Fraud Scheme
On December 17, 2012, in Springfield, Mass., James June, of Rockville, Md., was sentenced to 81 months in prison, five years of supervised release and ordered to pay $15 million in restitution. In April 2012, June pleaded guilty to conspiracy, wire fraud, bank fraud, and money laundering charges. According to court documents, June orchestrated a multi-million dollar mortgage fraud and bank fraud conspiracy involving more than 100 real estate transactions in Florida and western Massachusetts and multiple business lines of credit originating out of a West Springfield bank. The scheme involved an aggregate loan value of at least $75 million in which the vast majority of the loans went into default.
Kansas Man Sentenced for Mortgage Fraud
On December 17, 2012, in Kansas City, Kan., Brian D. Jaimes, of Overland, Kan., was sentenced to 24 months in prison for mortgage fraud. Jaimes pleaded guilty to one count of conspiracy to commit wire fraud and money laundering. According to his plea agreement, Jaimes conspired with co-defendant Paul Hartfield to fraudulently obtain more than $1 million worth of mortgage loans. Hartfield owned Hart Investments, Inc., a company that purchased depressed properties in order to rehabilitate them and sell them at a profit. Hartfield also owned Diamond Mortgage, a company that acted as a mortgage broker for individuals. Jaimes was president of Diamond Mortgage from 2003 to 2006. According to court documents, Hartfield recruited friends and family to purchase some properties. In most cases, the borrowers would not have qualified for a loan to purchase the properties. Hartfield used Diamond Mortgage as the mortgage broker with Brian Jaimes falsifying loan applications and other supporting documents by inflating the borrower’s income and assets to secure loan approval. Jaimes was the loan officer on 11 fraudulently obtained mortgages for properties. The loans totaled more than $1 million.
California Man Sentenced for Role in Indoor Marijuana Growing Scheme
On November 30, 2012, in Sacramento, Calif., Michael Giang was sentenced to 32 months in prison for mortgage fraud in an indoor marijuana growing scheme. According to court documents, in 2006, Giang and others engaged in a scheme to purchase residential properties in Stockton to use for marijuana cultivation. During the scheme, at least 26 homes were bought by straw buyers, who each bought two homes using 100 percent financing. Dickson Hung obtained personal identification information from straw buyers and gave it to Giang for use in the mortgage loan application packages. Giang prepared and submitted false loan applications and other related loan documents to the financial institutions and mortgage lenders on behalf of the straw buyers. The loan applications and other documents contained false representations and omissions regarding the borrower's monthly income, employment history, rental history, assets, and intent to reside at the residence. Most of the homes went into foreclosure. As a result of the scheme, Giang was responsible for a total loss of $7,280,167.
Ohio Woman Sentenced for Mortgage Fraud
On November 29, 2012, in Cleveland, Ohio, Antoinette Payne was sentenced to 27 months in prison and ordered to pay more than $1.3 million in restitution. Payne pleaded guilty to one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. According to court documents, Payne worked as a mortgage broker and loan officer for Supreme Funding, a mortgage broker in Euclid, Ohio. She was also the owner of TLC Properties and Designer Loan Properties, which were simply sham companies which she used to receive kickbacks and reimbursements for undisclosed down payment assistance she was providing to purchasers from the various loans’ closings she was handling. These funds were in addition to the fees paid to Payne as a mortgage broker and loan officer in handling these transactions. Payne recruited purchasers for properties and promised to pay them money for filling out the paperwork for mortgage loans where the price of the properties had been greatly inflated. She also provided any down payments as necessary. Payne also falsified the income and asset on the loan documents of the purchasers she recruited to ensure their approval. She provided phony lists of improvements to the lender to support the inflated price of the real estate. Once the purchasers stopped making payments on the mortgage loans, the properties went into default, resulting in a loss to lenders in the amount of approximately $1 million.
Former Mortgage Broker Sentenced Role in Mortgage Fraud Scheme
On November 26, 2012, in Phoenix, Ariz., Michele Marie Mitchell, was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $110,490 in restitution. Mitchell pleaded guilty in April 2012 to conspiracy to commit wire fraud. According to court records, Mitchell held herself out to be a mortgage broker, loan officer and real estate investor. Mitchell and an associate, Jeremy West Pratt, recruited people with good credit scores to act as straw buyers to purchase one or more properties as investments. Mitchell and Pratt enticed the straw buyers by offering to pay a kickback of up to $15,000 per property or to make the mortgage payments until the property could be resold for a profit, or both. The defendants submitted false loan applications and supporting documents to induce lenders to fund loans. At the close of escrow they enriched themselves by directing a portion of the loan proceeds, or “cash back,” to a company which one of them controlled. Between October 2005 and February 2007, Mitchell obtained mortgage financing for 17 properties and induced lenders to fund approximately $17 million dollars in loans. Pratt aided Mitchell’s efforts in eight of the 17 properties. The defendants failed to make the mortgage payments as promised and each of the 17 properties went into foreclosure. Pratt was sentenced on July 30, 2012 to six months in prison and three years of supervised release.
Credit Union Executive Sentenced for Role in Massive Fraud
On November 26, 2012, in Cleveland, Ohio, Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union, was sentenced to 168 months in prison and ordered to pay more than $72.5 million. Raguz, of Mentor, Ohio, pleaded guilty in September 2011 to charges of bank fraud, money laundering and bank bribery. According to court documents, Raguz issued more than 1,000 fraudulent loans totaling more than $70 million to over 300 account holders from 2000 to April 2010. In addition, he accepted more than $1 million worth of bribes, kickbacks and gifts in exchange for the fraudulent loans, according to court documents.
Texas Couple Sentenced on Wire Fraud and Money Laundering Charges
On November 26, 2012, in Houston, Texas, Derwin Frazier and his wife, Veronica, both of Pearland, Texas, were sentenced for their roles in the sham sales of condominiums. Derwin pleaded guilty to money laundering and was sentenced to 85 months in prison and ordered to pay $16,316,102 in restitution. Veronica pleaded guilty to wire fraud and was sentenced to 12 months and one day in prison and ordered to pay $321,742 in restitution. According to court documents, from December 2004 to October 2006, the Fraziers defrauded residential lenders using straw borrowers. Co-conspirator, Brenda East, assisted these straw borrowers by providing false information and documents, including bogus tax letters and false verifications of bank balances and employment. The Fraziers submitted invoices for payment from loan proceeds and used the money to pay themselves and the straw borrowers. East pleaded guilty to conspiracy to commit wire fraud and was sentenced to 57 months in prison. A fifth defendant, Duane Wardell, of Palestine, also pleaded guilty to conspiracy to commit wire fraud and is awaiting sentencing.
Pennsylvania Man Sentenced on Conspiracy, False Statements, and Mail Fraud Charges
On November 14, 2012, in Philadelphia, Pa., Kelly DeFeo was sentenced to 33 months in prison, five years of supervised release and ordered to pay $747,000 in restitution. DeFeo was convicted by a jury in April 2012 on charges involving conspiracy, false statements and mail fraud. According to court documents, DeFeo was a general contractor and real estate developer in the Philadelphia area. DeFeo sought loans from the First National Bank of Chester County to finance various real estate projects he was undertaking. However, as part of the loan approval process, the bank required DeFeo to submit tax returns and other financial information to assess his ability to pay back the loans. DeFeo conspired with his accountant, William Easton, to produce false tax returns and to send those false tax returns to the bank to aid in the loan approval process. These tax returns significantly inflated the income that had been reported to the IRS. In addition, DeFeo devised a scheme to defraud investors and to obtain money by means of false and fraudulent pretenses. DeFeo solicited four individuals to invest $75,000 each in a property in Drexel Hill, Pa. He sent letters to each investor requesting payment, falsely representing that the funds would be used to purchase the property. However, rather than using the monies to purchase the Drexel Hill property, DeFeo transferred the majority of the funds to his personal account, from which he paid personal and unrelated business expenses.
Arizona Man Sentenced for Role in Fraud Scheme
On November 7, 2012, in Phoenix, Ariz., Shannon Robert Kato was sentenced to 24 months in prison, three years of supervised release and ordered to pay $225,000 in restitution. Kato pleaded guilty on October 11, 2012 to conspiracy. According to his plea agreement, from February 2006 through May 2007, Kato and others submitted mortgage loan applications and related documents to banks and lending institutions containing false information. They also induced those institutions to fund residential real estate purchases. In addition, they created a "straw man" double escrow transaction to obtain "cash back" from the financing for the benefit of the purchasers and concealed from the lending institutions the methods and means by which "cash back" flowed to the ultimate purchasers instead of the "straw" buyer/seller. To accomplish this, Kato and others submitted simultaneous loan applications for multiple real estate purchases without fully disclosing other pending applications, provided false information on the loan applications to obtain mortgage loans, inflated the sales price, and directed portions of the lending proceeds to some of the defendants through the use of entities. At least 15 homes were purchased through this process and $2.5 million in "cash back" was obtained. Kato's role was to act as the "straw buyer" using his own name, his company's name, or a fictitious family trust, so that it would appear that he had purchased the property from the seller. Kato then turned around and sold it at a higher price to one of the other defendants. The lending institutions would fund at the higher price and the profit would be diverted to a controlled entity of one of the other defendants.
Mexican Pecan Company Owner Sentenced for Scheme to Defraud the U.S. Export-Import Bank
On November 7, 2012, in El Paso, Texas, Leopoldo Valencia-Urrea, the owner of a pecan brokerage company in Ciudad Juarez, Chihuahua, Mexico, was sentenced to 48 months in prison, three years of supervised release and ordered to pay $58,000 in restitution and $399,075 in forfeiture. Valencia pleaded guilty on October 13, 2011, to one count of conspiracy to commit wire fraud, one count of wire fraud and one count of money laundering conspiracy in connection with the scheme to defraud the Export-Import Bank of the United States (Ex-Im Bank) of approximately $400,000. According to court documents, Valencia, a U.S. citizen, was the owner of a pecan brokerage company in Ciudad Juarez and resided in El Paso. Valencia admitted that in 2006, he applied for an Ex-Im Bank insured loan for $406,258 through a bank in Miami. Valencia and others submitted a fraudulent loan application, financial statements, invoices, letters and bills of lading to falsely represent to the Miami bank and the Ex-Im Bank the purchase and export of U.S. goods to Valencia in Mexico. After the exporter who conspired with Valencia received $399,075 from the Miami bank, Valencia and others diverted the loan proceeds directly to Valencia and others in Mexico. As a result of the fraud, Valencia’s loan defaulted, causing the Ex-Im Bank to pay a claim to the lending bank on a $371,962 loss.
Loan Originator Sentenced for Leading a Multi-Million Dollar Mortgage Fraud Scheme
On November 5, 2012, in Phoenix, Ariz., Thomas Gregory Alexander, of San Diego, Calif., was sentenced to 120 months in prison, five years of supervised release and ordered to pay $5,463,769 in restitution. On June 9, 2011, Alexander pleaded guilty to wire fraud and conspiracy to commit wire fraud. According to court documents, between 2005 and 2007, Alexander worked as a loan originator for American Mortgage Funding (AMF). Through AMF, Alexander assisted borrowers to qualify for loans from Mesa Bank (now known as Sunrise Bank of Arizona). Borrowers used the loan funds to acquire parcels of land in Maricopa County, and to fund the construction of custom homes on those parcels. Alexander defrauded Mesa Bank by creating fraudulent documents for unqualified borrowers. In many cases, Alexander directed the borrower to sign a blank Uniform Residential Loan Application (URLA), which he and his co-conspirators would then complete by 1) overstating the borrower’s monthly income; 2) overstating the amount of money in the borrower’s bank accounts; 3) misrepresenting that the borrower would make a down payment at closing; and 4) misrepresenting the intent of the borrower to use the property as a primary residence. Alexander and his co-conspirators would also alter Verification of Deposit documents to falsely overstate the amount of money in the borrowers’ bank accounts. In addition, they would alter the borrower’s credit report to falsely represent a higher credit score. Alexander and his co-conspirators also submitted false documents to show that the borrowers had made the required 5 to 10% down payment when, in fact, none of the borrowers ever actually paid a down payment. In addition to submitting false loan documents, Alexander also directed many of the borrowers to acquire loans to purchase lots from Sea Rock, LLC, a company that he owned. The borrowers were unaware that they were purchasing lots owned by their loan originator. Alexander ultimately received a significant amount of profit from the lot sales because he directed a co-conspirator to create false appraisals to inflate the prices of the lots. In total, Alexander’s mortgage fraud scheme induced Mesa Bank to issue over $40 million in loans, and caused tens of millions of dollars in losses to the bank. The substantial loss eventually led to Mesa Bank’s merger into Sunrise Bank of Arizona.
Kansas Man Sentenced on Bank Fraud Charges
On October 24, 2012, in Kansas City, Kan., Paul L. Hartfield, of Overland Park, Kan., was sentenced to 78 months in prison and ordered to pay approximately $2.6 million in restitution. Hartfield pleaded guilty to one count of conspiracy to commit bank fraud and money laundering. According to court documents, Hartfield owned two businesses: Hart Investments, Inc., and Diamond Mortgage. Hart Investments purchased depressed properties in order to rehabilitate the properties and sell them at a profit. Hartfield obtained loans to rehabilitate homes on a “subject to appraisal” basis that allowed him to withdraw money as rehabilitation progressed. Starting in October 2006, Hartfield stopped rehabilitating houses. Instead, he and others made false representations to lenders in order to fraudulently obtain loan funds.
New Jersey Real Estate Developer Sentenced for Bank Fraud
On October 18, 2012, in Newark, N.J., Solomon Dwek, a Monmouth County, New Jersey real estate developer, was sentenced to 72 months in prison, five years of supervised released and ordered to pay $22.8 million in restitution. Dwek pleaded guilty in October 2009 to an Information charging him with one count each of bank fraud and money laundering. According to court documents and statements made in court, Dwek and Joseph S. Kohen, of Deal, schemed to defraud PNC Bank of more than $50 million and to launder approximately $22.8 million of the proceeds through other banks. On April 24, 2006, Dwek and Kohen presented a $25,212,076 check drawn on a Dwek-controlled account in the name of Corbett Holdings at a PNC Bank. Dwek wanted the check deposited into another PNC account that he controlled in the name of SEM Realty Associates LLC. A PNC Bank official advised Dwek that the Corbett Holdings account was closed with a zero balance. Dwek falsely represented that “corporate” was reopening the account and that a wire transfer of funds into the Corbett Holdings account would be forthcoming, which did not occur. Dwek’s check was honored and deposited. The next day, Dwek phoned in four wire transfers out of the SEM Realty account to various other banks, including $20 million and $2.2 million wire transfers to HSBC Bank USA N.A. The $20 million wire transfer to HSBC was to pay off an overdue and fraudulently obtained $20 million line of credit. As a result, the SEM Realty account was overdrawn by $22.8 million. On April 25, 2006, Dwek presented another bogus $25 million check to be drawn on the same Corbett Holdings account for deposit into the same SEM Realty account at a different branch of PNC Bank. The bank did not honor or deposit this check. Dwek made a number of false statements and representations to cover up this scheme, including falsely advising a PNC bank official that he was expecting a wire transfer from an attorney that would cover the $25,212,076 check drawn on the Corbett account. Kohen pleaded guilty to bank fraud on March 21, 2007, and was sentenced to 30 months in prison.
Virginia Businessman Sentenced for Bank and Tax Fraud
On October 15, 2012, in Norfolk, Va., George P. Hranowskyj, of Chesapeake, Va., was sentenced to 168 months in prison for carrying out fraud schemes that contributed to the failure of the Bank of the Commonwealth and defrauded investors and the government of millions of dollars. Hranowskyj pleaded guilty on July 12, 2012, to conspiracy to commit wire fraud and conspiracy to commit bank fraud. According to court records, from January 2008 through August 2011, Hranowskyj and his business partner, Eric H. Menden performed favors for insiders at the Bank of Commonwealth in exchange for preferential lending treatment. In addition, Hranowskyj was sentenced for a separate scheme aimed at illegally profiting from historic rehabilitation tax credits. In this scheme, Hranowskyj and Menden systematically falsified invoices for large construction projects and used them to apply for federal and state historic tax credits. They had no personal use for the tax credits, but instead sold them to investors who needed to reduce their tax liability. Corporate investors paid Hranowskyj and Menden approximately $8.7 million for illegitimate tax credits. As a result, the U.S. government suffered a loss of approximately $6.2 million and the Commonwealth of Virginia suffered a loss of approximately $6.3 million. Menden was sentenced on September 26, 2012, to 138 months in prison.
Pennsylvania Man Sentenced for Bank Fraud and Money Laundering
On October 3, 2012, in Johnstown, Pa., Holger P. Scheid, of Jennerstown, Pa., was sentenced to 96 months in prison, three years of supervised release and ordered to pay $1,269,190 in restitution following his conviction for fraud and money laundering. According to information presented to the court, on June 20, 2005, Scheid submitted two fraudulent loan applications to Vartan Bank. One was for the conversion of property in Johnstown, Pa., into a long-term care facility. The other was for the conversion of property into luxury condominiums. Both loans were secured by certificates of deposit Scheid fraudulently obtained from the United Methodist Stewardship Foundation of Central Pennsylvania, Mechanicsburg, Pa. The two loans, totaling $1.9 million, were deposited into Scheid's Crown Phynex operating account at First Commonwealth Bank. To conceal the fraudulent nature of the loans, Scheid paid off the first $400,000 loan with part of the money from the second loan. He used the second loan, of $1,500,000, to pay personal credit cards, repay other investors, fund operating expenses for Crown Phynex, and to enrich himself personally. In addition to his bank fraud scheme, Scheid laundered more than $10,000 from the bank fraud offense by transferring $100,000 out of his Crown Phynex operating account into an account at Franklin Johnstown Federal Credit Union. He later withdrew the $100,000 in the form of a cashier's check made payable to the Criminal Division of the Court of Common Pleas of Northampton Co., Pa., to pay restitution to the Commonwealth of Pennsylvania.