Examples of Financial Institution Fraud Investigations - Fiscal Year 2014
The following examples of financial institution fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Former Credit Union Manager Sentenced for Bank Fraud and Tax Evasion
On Aug. 12, 2014, in Tulsa, Oklahoma, Eva Barroso, of Broken Arrow, was sentenced to 27 months in prison for bank fraud and tax evasion. Barroso was also ordered to pay a criminal forfeiture money judgment in the amount of $238,177 to Oklahoma Central Credit Union (OCCU) and restitution in the amount of $57,360 to the Internal Revenue Service. At the time of the scheme, Barroso worked as a commercial services manager for OCCU where her duties included marketing and servicing commercial loans. According to court documents, from July 2, 2009 to March 19, 2012, Barroso fabricated at least three false loans in the name of nominee entities and individuals without the knowledge and authorization of the purported borrower. Barroso used the proceeds of these loans for her own personal benefit, including making ATM withdrawals at various casinos. To further the scheme, Barroso used some of the money to make payments on prior loans. In addition, during the 2010 calendar year, Barroso willfully evaded a large part of her income tax by failing to report to the IRS a total of $152,098, which was the money she fraudulently obtained from the scheme.
Missouri Man Sentenced in Multi-Million Dollar Mortgage Fraud Scheme
On July 30, 2014, in Springfield, Missouri, Eric Gagnepain, of Nixa, was sentenced to 48 months in prison and ordered to pay $2,911,214 in restitution. Gagnepain pleaded guilty on Jan. 9, 2014, to conspiracy to commit bank fraud. According to court documents, Gagnepain co-owned and operated Greenleaf Companies and all of its subsidiaries, along with Scott Dasal, of Republic, Mo., from 2006 through May 2008. During this time, Greenleaf sponsored real estate investment seminars that were designed to recruit potential investors to apply for mortgage loans for the construction and sale of residential homes. Gagnepain aided and abetted others in the creation and submission of fraudulent mortgage loan documents. These mortgage loan documents contained false statements regarding the true source of monies provided at the time of closing, as well as fraudulently omitting the payment of monies obtained from the sale of the real estate properties. Gagnepain derived more than $1 million in gross receipts from his criminal conduct. The total loss amount resulting from the bank fraud conspiracy is between $2.5 million and $7 million. Dasal was sentenced on Nov. 21, 2013, to 36 months in prison and ordered to pay $2,911,209 in restitution.
Maine Woman Sentenced for Bank Embezzlement and Tax Fraud
On July 22, 2014, in Bangor, Maine, Lynn M. Bowden, of Bucksport, was sentenced to 97 months in prison, five years of supervised release and ordered to pay $3,822,166 in restitution. On Feb. 19, 2014, Bowden pleaded guilty to embezzlement and tax fraud. According to court documents, in October 2012, she was working as a wealth management officer at a bank managing over 200 trust and investment management accounts when her embezzlement was discovered. From April 4, 2005 to Sept. 26, 2012, Bowden embezzled $2,990,429 from client accounts that she managed by transferring the funds into her personal accounts. She used all of the money for herself and family members. Bowden failed to report this income to the IRS for the period from 2007 to 2011. On Oct. 26, 2012, the bank terminated her employment, and ultimately reimbursed customers for their losses.
Co-Conspirators Sentenced for Roles in Advance-Fee Scheme
On July 17, 2014, in Boston, Massachusetts, John Condo, formerly of Clearwater, Florida, was sentenced to 90 months in prison and three years of supervised release. Condo previously pleaded guilty to conspiracy to commit wire fraud and 14 counts of wire fraud. According to court documents, between 2007 and 2011, Condo and co-conspirators, Frank Barecich, Michael Zanetti and Evripides Georgiadis, participated in a conspiracy to defraud developers who were seeking financing for large-scale alternative energy and commercial projects by pretending to be representatives of a multi-billion dollar fund located in Luxembourg. The co-conspirators convinced developers to give deposits in amounts between $300,000 and $1 million to this fake fund with the promise that the deposit would be fully refundable. The co-conspirators spent the developers' deposit money, and the fake fund never financed any projects. In perpetrating this scheme, the co-conspirators continually reassured developers about the safety of their deposits even as the deposits were being spent. Through the scheme, over $7 million was stolen from victims. Those previously sentenced include:
• Michael Zanetti – sentenced to 37 months in prison and three years of supervised release.
• Frank Barecich - sentenced to 12 months in prison and three years of supervised release.
Evripides Georgiadis is awaiting sentencing.
Fourth Florida Resident Sentenced in $1.5 Million Bank Fraud Scheme
On July 16, 2014, in Miami, Florida, Eduardo Hernandez, Jr., of Miami, was sentenced to 60 months in prison, five years supervised release and ordered to pay joint and several restitution of $1,331,421. Hernandez was the fourth defendant sentenced for his role in defrauding federally insured financial institutions. Previously sentenced include:
• Jose Arias, of Miami, was sentenced to 42 months in prison, five years of supervised release and ordered to pay joint and several restitution of $332,020;
• Alexander Orriols, of Miami Beach, was sentenced to 34 months in prison, five years of supervised release and ordered to pay joint and several restitution of $614,499;
• Milena Hernandez, of Miami, was sentenced to 18 months in prison, three years of supervised release and ordered to pay joint and several restitution of $529,705.
All of the defendants pleaded guilty to one count of conspiracy to commit bank fraud. According to court documents, the defendants recruited individuals to apply for loans from financial institutions for the purchase of boats from the boat manufacturing companies owned by the conspirators. The conspirators furnished the recruited loan applicants with fraudulent bills of sale that falsely showed that the borrowers had made substantial down payments or deposits to the boat manufacturing companies for the purchase of boats. In many instances, the boats for which the loan applicants were seeking loans did not exist. The conspirators created false financial documents which falsely enhanced the credit worthiness of the loan applicants. The financial institutions granted boat loans to the borrowers that the financial institutions would not have granted had they not received the false documents.
Former Maine Resident Sentenced for Bank Fraud and Tax Evasion
On June 26, 2014, in Portland, Maine, Walter Scott Fox, formerly of Cumberland, and now of Canton, Georgia, was sentenced to 120 months in prison, three years of supervised release and ordered to pay over $9,500,000 in restitution. Fox pleaded guilty on Feb. 4, 2014 to bank fraud and tax evasion. According to court documents, from 1995 until 2011, Fox used his position as a bank loan officer to originate or authorize over $14,000,000 in fraudulent loans and lines of credit using the identities of four real individuals, without their knowledge or consent. He used over $5,800,000 of the fraudulent proceeds to keep the loans current and prevent the detection of his scheme. He used almost $8,200,000 for personal expenses including to pay for his children’s educations and family vacations, and to support his business, “The Boathouse.” Fox failed to report receiving any of this income
to the IRS.
Wisconsin Man Sentenced in Mortgage Fraud Scheme
On June 25, 2014, in Milwaukee, Wisconsin, Billy Cannon, Sr. was sentenced to 48 months in prison for wire fraud and money laundering. His incarceration will be concurrent to a 16 year sentence he received earlier this year in state court for drug and firearm offenses. According to court documents, from at least June 2006 through July 2007, Cannon worked as a mortgage broker and used straw buyers to fraudulently obtain mortgages for numerous properties. Loan applications submitted to lenders by Cannon contained material misrepresentations which made the straw buyers more appealing candidates for a mortgage. The straw buyers almost uniformly defaulted on the loans. In all, nearly a million dollars was lost by lenders as a result of the scheme. Cannon has been ordered to pay restitution to the lenders for the losses incurred.
Washington State Man Sentenced for Participation in a Mortgage Fraud Scheme
On June 6, 2014, in Seattle, Washington, William Beard was sentenced to 16 months in prison, three years of supervised release and ordered to pay $1,343,618 in restitution to the IRS and victim banks. Beard pleaded guilty in February 2014 to evading taxes on his 2005 tax return by failing to report as income the proceeds of a mortgage-elimination scheme. According to court documents, after falling behind on his mortgage payments for his Los Angeles home in 2005, Beard enrolled in a mortgage-elimination program. That scheme, run by Jeff McGrue, Ronald Morgan, and another defendant, involved a series of false documents, including a fraudulent Full Reconveyance purportedly authorized by the lender that was instead signed by Beard’s two roommates. The purpose of the Reconveyance was to make it appear as if Beard had paid off his mortgage. In June 2005, the co-schemer obtained an $800,000 loan and purchased Beard’s Los Angeles home. Beard caused a payoff demand to be sent from McGrue’s company, North West Capital, for the false loan. Based on that payoff demand, the escrow company sent $800,000 to North West Capital’s bank account in Washington. No proceeds were paid to the true holder of the mortgage lien because the title company did recognize the Reconveyance and treated the true mortgage lien as having been satisfied. The $800,000 was divided among the co-schemers with Beard receiving $400,000. Beard filed his 2005 tax return failing to report the $400,000 of scheme proceeds, causing a tax loss to the government of at least $117,905. In addition, Beard participated in a second mortgage-elimination scheme and received just over $40,000, again failing to report the proceeds of the scheme as income on his individual income tax return. In 2011, Jeff McGrue, the mastermind of the scheme that involved duping 300 homeowners to pay thousands of dollars for mortgage elimination, was sentenced to 300 months in prison. Gerald Guidry and Ronald Morgan were sentenced to 36 months and 33 months in prison, respectively.
Real Estate Broker Sentenced for Role in Mortgage Fraud Scheme
On May 21, 2014, in Raleigh, North Carolina, Mark Henry Tkac was sentenced to 42 months in prison, five years of supervised release and ordered to pay $1,612,612 in restitution. On May 24, 2012, Tkac pleaded guilty to conspiracy to commit mail, wire, and bank fraud. Between August 2006 and May 2008, Tkac was a licensed real estate broker who worked in the Wake County area. Tkac participated with others, including developer David Lewis Johnson, developer Arthur Lee Barnes, mortgage broker Mark Thomas Bowe, and attorney Jeffrey Scott Taggart, in a real estate flipping scheme which defrauded various banks and lenders. Johnson, Barnes, Taggart, and Bowe were previously sentenced to prison for their roles in the scheme. Tkac participated in the conspiracy first by acting as a straw buyer, and later recruiting others to serve as straw buyers for Johnson and Barnes. Tkac, Johnson, and Barnes arranged for straw buyers to execute a contract to purchase a home for an inflated price. Tkac, Johnson, and Barnes then directed the straw buyers to attorney Taggart to close the transactions. Taggart prepared false HUD-1 settlement statements for execution by the straw buyers as a part of the real estate closing and loan funding process. Taggart then caused the false HUD-1 settlement statements to be transmitted via mail and wire to banks and mortgage lenders, including FDIC regulated financial institutions, under the pretense that they reflected the economic truth of the underlying transaction. However, the HUD-1 settlement statements prepared by Taggart as a part of the scheme routinely contained false statements that were material to the lenders' funding decisions including the existence and degree of the buyer's down payment, as well as kickbacks to the buyers and other conspirators. Tkac and other conspirators generally received several thousand dollars in kickbacks from each fraudulent transaction closed by Taggart. Ultimately, borrowers defaulted on many of the transactions brokered by Tkac, resulting in substantial losses to various banks and lenders.
California Woman Sentenced for Mortgage Fraud Scheme
On May 14, 2014, Pensacola, Florida, Andrea Lorraine Avery, of Los Angeles, California, was sentenced to 84 months in prison and ordered to pay $10,323,369 in restitution to the FDIC as Receiver for Washington Mutual, GMAC Mortgage, SunTrust Mortgage, Wells Fargo Bank, USBank, and others. Avery pleaded guilty in December 2013 to conspiracy to commit fraud, mail fraud affecting a financial institution, and conspiracy to commit money laundering. According to court documents, beginning in 2005 and continuing through 2008, Avery and others entered into contracts to purchase 24 residences located in Florida, Georgia, Louisiana, Texas, and California. Thereafter, fraudulent loan applications were submitted to financial institutions to fund the purchases. In the loan applications, Avery and other borrowers made false statements to the lenders, which included providing false names and social security numbers; overstating the borrower’s income and assets; and falsely stating the earnest money deposit was not borrowed. In support of the loans, Avery and other borrowers submitted fraudulent supporting documents to the lenders. Approximately $16 million in loans were issued by the lenders in connection with the fraudulent scheme. Avery and her company received more than $3.5 million in kickbacks as a result of the scheme.
Real Estate Agent and Others Sentenced in Mortgage Fraud Scheme
On May 12, 2014, in Kansas City, Missouri, Leann Raejeana Turner, of Blue Springs, was sentenced to 36 months in prison and ordered to pay $4,912,040 in restitution. Turner pleaded guilty on May 30, 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. Turner is one of nine defendants who participated in an $11 million mortgage fraud scheme from early 2005 to Aug. 4, 2006. According to court documents, Turner was a real estate agent working for a series of real estate companies. Mortgage lenders made loans of approximately $11,092,886 on 16 residential properties in Missouri. From that total, buyers received approximately $2,006,845 from the loan proceeds in illegal secret kickbacks. The scheme resulted in a financial loss to mortgage lenders of nearly $5 million. The scheme involved buying and selling homes at inflated prices, obtaining mortgage loans at the inflated prices, then kicking back $100,000 of the excess loan proceeds to each of the home buyers without the lenders’ knowledge. Carole L. Colson, a real estate agent, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $2,291,110 in restitution. Bruce Q. Williams, a loan officer, was sentenced to 12 months and one day in prison and ordered to pay $3,443,123 in restitution. Anthony E. Hicks, a loan officer, was sentenced to 10 months in prison and ordered to pay $953,958 in restitution. Linda Joyce Henry Johnson, of Corona, California, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $228,744 in restitution. Several others in this scheme await sentencing.
Louisiana Man Sentenced for Bank Fraud, Money Laundering and Wire Fraud
On May 1, 2014, in New Orleans, Louisiana, Glen McInerney, of Meraux, was sentenced to 41 months in prison, three years of supervised release, and ordered to pay $845,083 in restitution to the three victims of his crimes. McInerney previously pleaded guilty to two counts of bank fraud, one count of money laundering and one count of wire fraud. According to court documents, McInerney owned and operated GM Motors and Used Cars (GM Motors). Between May 2, 2009, and June 20, 2009, McInerney wrote checks to straw payees to cash the checks and return the cash to him so that he could deposit portions of the proceeds back into the business bank account. McInerney timed the cash deposits to occur prior to account debits, which lead to the straw payees cashing checks that he knew would ultimately bounce. In total, McInerney wrote 288 such checks, resulting in a loss to the bank of approximately $17,000. Separately, between Dec. 29, 2008, and Jan. 7, 2009, McInerney also defrauded Gulf Coast Bank & Trust by negotiating six checks purportedly drawn on funds from a bank account at Twin City Federal National Bank in Minneapolis, Minnesota. McInerney knew that the Twin City Federal National Bank account had been closed since July 30, 2007, that the account belonged to someone other than himself and he no longer had authority or control over the account. These actions caused a loss to Gulf Coast Bank & Trust of approximately $28,083. Finally, between Jan. 3, 2007, and Dec. 15, 2008, McInerney defrauded an individual who had provided him with collateral for a short-term business loan by falsely representing that he had purchased used trailers from the Federal Emergency Management Agency that he intended to resell, when, in fact, he did not purchase such trailers. McInerney’s fraudulent misrepresentations caused the individual who loaned him the money to suffer losses of approximately $800,000.
California Man Sentenced for Mortgage Fraud Scheme
On April 22, 2014, in Sacramento, Calif., Johnny Eugene Grivette, Jr., of Magalia, was sentenced to 54 months in prison for his participation in a mortgage fraud scheme. Grivette pleaded guilty on July 10, 2012, to conspiracy to commit mail fraud and money laundering. According to the plea agreement, Grivette was manager of Advantage Financial Partners (AFP) of California, a company that bought residential properties at market prices and then sold them to straw buyers who were investors in a purported investment program. Once AFP bought the properties, it paid commissions to an appraiser who would appraise them for significantly higher than the true market value. This allowed the homes to be financed for the straw buyers at loan-to-value ratios significantly higher than the limits lenders authorized. If the straw buyers had to make down payments on the properties sold by AFP, the money was quickly reimbursed to them by AFP without the lenders' knowledge.
Florida Woman Sentenced for Role in Real Estate Investment Scheme
On April 11, 2014, in Hartford, Conn., Loretta Seneca, of Boynton Beach, Fla., was sentenced to 27 months in prison, three years of supervised release (the first six months to be served in home confinement) and ordered to pay $5 million in restitution. On Feb. 25, 2013, Seneca pleaded guilty to one count of conspiracy and one count of wire fraud. According to court documents, between approximately November 2006 and December 2007, Robert Rivernider, Robert Ponte and Seneca engaged in a real estate investment conspiracy that defrauded both lenders and individuals they recruited. As part of the scheme, Rivernider, Ponte and others recruited victim borrowers to take out financing to purchase various investment properties with financing from victim lenders. The co-conspirators made false representations to the victim borrowers that Rivernider and Ponte would arrange for the purchase of the properties by the borrowers at markedly discounted values, instead, the purchase price of the properties were frequently marked up, often by as much as 25 percent. Rivernider, Ponte and others also falsely represented that the investment properties would return to the victim borrowers sufficient monies to cover the carrying costs, as well as reduce the borrowers’ other debt burden. Rivernider, Ponte, Seneca and others victimized lenders by making multiple false representations in loan applications and other documents provided to the victim lenders. Seneca, a trained mortgage broker, was actively involved in the real estate transactions, including organizing and gathering many of the materials and performing a range of other background tasks necessary for the lenders to make the loans. This scheme involved at least 100 properties, and the victim lending institutions suffered more than $21 million in losses. Rivernider and Ponte pleaded guilty to multiple charges stemming from both this scheme and a separate scheme that defrauded investors out of approximately $2.2 million. They are currently serving prison terms of 144 months and 90 months, respectively.
Former Massachusetts Attorney Sentenced for Mortgage Fraud
On April 9, 2014, in Boston, Mass., Charles R. Sammon, of West Pittston, Pa., was sentenced to 33 months in prison, three years of supervised release and ordered to pay $977,042 in restitution to defrauded lenders. In November 2013, Sammon pleaded guilty to wire fraud, mail fraud and unlawful monetary transactions. According to court documents, Sammon, a former attorney practicing in Boston, participated in at least 13 fraudulent real estate transactions involving triple-decker apartment buildings in various sections of Boston. For eight of those transactions, Sammon served as the real estate closing attorney representing the mortgage lender. For the other five, Sammon participated as the seller of real property himself. The basic scheme involved recruiting people to buy properties by promising to pay them as much as $40,000 per transaction, which was not disclosed to the lenders. Many of the buyers were also promised that the seller would pay the mortgage for upwards of a year. Also central to the scheme was telling the lenders that each borrower intended to occupy the property as their primary residence, which was not true. Many of the payments to buyers were made directly from Sammon’s law firm bank account on transactions for which he was the closing attorney, but he failed to disclose those payments to the mortgage lenders that he represented. Sammon also received some of the loan proceeds in addition to his legal fees for doing so, which was also not disclosed to the lender. In one transaction, he received more than $50,000. Each of the loans given for these 13 transactions went into default, usually 12-18 months after the transaction, and all the properties were sold at foreclosure or through a short sale, resulting in combined losses to the lenders of more than $2.5 million.
Former Bank President Sentenced for Bank Fraud and Money Laundering
On April 1, 2014, in Springfield, Mo., Matthew D. Spillman, a former bank president, was sentenced to 30 months in prison and ordered to pay $413,904 in restitution. On Oct. 11, 2013, Spillman pleaded guilty to bank fraud and money laundering. According to court documents, Spillman caused the bank to grant loans in nominee names, and kept the loan proceeds for himself. He also added debt to loans without the borrowers’ knowledge, and converted the additional funds to his own use. He advanced funds on bank customers’ lines of credit, and converted those funds to his own use. Spillman used a bank credit card for personal expenses. He embezzled and converted to his own use loan payments made by bank customers. Spillman also caused the bank to issue cashier’s checks without depositing funds to cover those checks.
Former Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On March 31, 2014, in Raleigh, N.C., Mark Thomas Bowe, Jr., of Jonesboro, Ga., was sentenced to a 42 months in prison, five years of supervised release and ordered to pay $604,550 in restitution. On Aug. 26, 2013, Bowe pleaded guilty to conspiracy to commit bank and wire fraud. According to the indictment, between 2003 and 2008, Bowe, a licensed mortgage broker, participated with others in a real estate flipping scheme which defrauded various banks and lenders. Bowe participated in the scheme by, among other things, falsifying various aspects of loan applications that were submitted to banks and lenders to qualify buyers for mortgages related to properties sold by a co-defendants real estate company. Bowe falsified the amount and source of the borrower’s income and assets, the existing debts of the borrower, and the borrower’s intent to occupy the property as a primary residence. In some instances, Bowe completed loan applications which falsely represented that the information contained within the application had been obtained from a telephonic interview when, in truth and fact, the borrower never spoke to him in a telephonic interview or provided the information in the loan application. The scheme further promoted by deceiving lenders into believing that some borrowers held assets at an investment company, known as Mutual Southern Investments. Bowe and another conspirator supplied false verifications of deposit and false account statements purporting to show that borrowers held, in some instances, millions of dollars in assets, when in truth and fact, Mutual Southern Investments did not exist and the assets and asset statements were entirely fictitious. Bowe and other participants in the scheme benefited by receiving kickbacks or payments out of the loan proceeds at the time of the loan closing. Ultimately, the borrowers defaulted on the loans brokered by Bowe, resulting in substantial losses to various banks and lenders.
Two Sentenced in Mortgage Fraud Scheme
On March 24, 2014, in Pensacola, Fla., Jason Andrew Vitulano, of West Palm Beach, Fla. and Marc A. Gross, of Boca Raton, Fla. were sentenced for their roles in a mortgage fraud scheme. Vitulano was sentenced to 77 months in prison and ordered to pay $4,047,140 in restitution and a $1,404,447 monetary judgment. Gross was sentenced to five years of probation and ordered to pay $3,507,187 in restitution and to forfeited his personal residence valued at approximately $340,000 and his retirement accounts valued at approximately $253,000. In August 2013, both Vitulano and Gross pleaded guilty to several counts that included: conspiracy to commit mail fraud and wire fraud, mail fraud, and conspiracy to commit money laundering. Gross also pleaded guilty to making false statements to a federal agent and perjury. According to court documents, between June 2007 and February 2008, they were involved in the purchase of six town homes in Temple Terrace, Florida, and two homes in Santa Rosa Beach, Florida. All purchases were in the names of straw buyers. In order to finance each of these purchases, Vitulano and Gross caused loan applications containing false information to be submitted to various mortgage lenders and financial institutions. The false information included fraudulent employers and an overstatement of income and assets. The fraudulently obtained loans were foreclosed upon causing harm to the lenders.
Former City Councilwoman Sentenced for Bank Fraud and Money Laundering
On March 11, 2014, in Birmingham, Ala., Bonny Jean Carter, former Childersburg City Councilwoman, was sentenced to 33 months in prison and ordered to pay $37,200 to a bank and $949,287 to its insurance company, Zurich Financial and Security. Carter pleaded guilty in December 2013 to one count each of bank fraud and money laundering. According to court documents, Carter worked as an account clerk at the Sylacauga branch of a bank. In that position, between June 2004 and March 2013, she embezzled from the bank by converting money to personal savings accounts. Carter recorded journal entries to transfer money from various bank general ledger accounts into personal accounts held in her daughter's name. She also skimmed amounts from checks made payable to the bank by depositing the funds into those personal accounts. Additionally, Carter issued debit transactions from the bank’s operating expense account to pay personal debts she owed.
Defendant Sentenced in Mortgage Fraud Scheme
On March 4, 2014, in Denver, Colo., Dale Johnson was sentenced to 34 months in prison and three years of supervised release. Johnson pleaded guilty on Sept. 10, 2013 to wire fraud and money laundering. According to court documents, in early 2006, Johnson was the president and chief executive officer of a business group based out of Culver City, Calif., called Synergy. Johnson began to present Synergy members with a number of properties available for purchase in Colorado. Johnson and other Synergy members traveled to Colorado where they started purchasing multiple residential properties. The homes were typically purchased in the individual member’s own name, using the member’s personal credit history to qualify for the purchases. As part of the scheme, Synergy members submitted “uniform residential loan applications” to lenders in connection with qualifying for home loans. In a number of loan applications, Synergy members and other buyers provided, or assisted in providing, materially false statements, representations, and omissions to real estate lenders, or the lenders’ agents. False information included income, assets, debts, employment history and/or intent to occupy the home as a primary residence. Furthermore, a portion of lender funds from home purchases were paid to Synergy members as “kickbacks.” Such kickbacks were often concealed from lenders through a series of false statements and material omissions made in connection with closings for properties or in connection with the loan documents submitted to the lenders. To further conceal the kickbacks from lenders, they routed payments through third parties posing as property management companies.
Arizona Man Sentenced for Role in Mortgage Fraud Scheme
On Feb. 27, 2014, in Tucson, Ariz., Mariano Vincente Cano was sentenced to 14 months in prison, three years of supervised release and ordered to pay $350,140 in restitution. Cano pleaded guilty on Nov. 8, 2013 to one count of conspiracy to commit wire fraud. According to court documents, from late 2006 through early 2007, Cano and others recruited or assisted in recruiting straw buyers to purchase real estate in Arizona. As part of the loan approval process, Cano and others submitted fraudulent loan applications or other documents to various lenders in order to qualify the straw buyers for financing. Relying on the fraudulent loan applications, the lenders funded each of the loans. Portions of the fraudulently obtained loan proceeds were generally converted by Cano and others into cash, money orders or deposited into bank accounts controlled by a co-conspirator. Each of the properties charged in the indictment went into foreclosure because of the failure to make payments on the loans. The estimated loss relating to four mortgage fraud properties was approximately $745,942.
Colorado Man Sentenced in Mortgage Fraud Scheme
On Feb. 11, 2013 in Denver, Colo., Roger Keith Howard was sentenced to 108 months in prison and three years of supervised release. Howard pleaded guilty in June 2013 to three counts of wire fraud and one count of money laundering. According to court documents, in 2006 and 2007, Howard devised and participated in three similar but separate mortgage fraud schemes. Howard operated under the business names of Spring Creek Mortgage Real Estate Services and Open Range Development LLC. Howard’s co-defendant Oai Quang Luong worked for a company that processed mortgage loan applications on behalf of potential home buyers. In August 2006, Howard asked Luong to obtain the $250,000, and Luong did so, using funds loaned by another individual. Howard persuaded seventeen individuals, his so-called investors, to purchase the town homes at a development known as Oliveglen Villas in Aurora, Colo. Howard arranged for the individuals to obtain the mortgage loans by causing the applications to include false or misleading information or omit material information. As part of the mortgage application process, a borrower obtained from his or her bank a form known as a Request for Verification of Deposit (VOD), which verified the balance of an account. In this case, VODs were misleading because Howard and others working at his direction arranged for bank account balances to be inflated temporarily by depositing money into the accounts and, after the balances were verified and the VODs were completed, the money was withdrawn. All of the town-home sales prices were supported by appraisals, most of which were done by an associate of Howard’s which he told the appraiser the amount he wanted. For each closing, the closing agent prepared a settlement statement, reflecting that the disbursements of loan proceeds included a payment “from Seller’s Funds at Settlement” to Open Range Development. These payments were the “service fees” mentioned in the contract with the developer; they ranged from $85,700 to $117,204. After the closings, Howard used some of that money to make payments to all but one of the buyers, but those payments were not disclosed to the lenders or their underwriters. Howard for a time wrote checks payable to the borrowers to cover the differences between rental incomes and mortgage payments, but he stopped doing so on April 19, 2007. A few borrowers thereafter used their own money to make mortgage payments, but eventually all of the mortgages went into default and the lenders foreclosed. At that point, there were about twelve different lenders holding the mortgages on the town homes, and they lost approximately $7,609,729. Luong was sentenced in August 2013 to 18 months in prison.
New York Couple Sentenced for Involvement in Mortgage Fraud Scheme
On January 28, 2014, in Hartford, Conn., Winston Shillingford, of Nesconset, N.Y., was sentenced to 48 months in prison and three years of supervised release. His wife, Marleen Shillingford, also of Nesconset, was sentenced to 36 months in prison and three years of supervised release. In October 2011, Winston and Marleen Shillingford each pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. According to court documents, the Shillingfords were involved in the operation of Waikele Properties Corp., a real estate company with offices in Connecticut and New York. From approximately 2001 to August 2011, the Shillingfords and others conspired to obtain fraudulent mortgages for the purchase of more than 40 multi-family properties. As part of the scheme, the Shillingfords and their co-conspirators purchased existing multi-family houses, and vacant parcels of land and erected new houses on them to sell. The co-conspirators recruited individuals to purchase the properties, acted as the buyers’ real estate agent and assisted the buyers in applying for residential mortgage loans to purchase the houses. They then prepared loan applications for the buyers that included fraudulent information concerning, among other things, the buyers’ employment, income, assets and liabilities, previous property ownership and intention to make the properties their primary residences. They also provided fraudulent supporting documentation with the loan applications, including false letters from fictitious employers, false earnings statements and fraudulent bank records. After the loans were approved, the illicit proceeds of the scheme were wired into the Waikele Properties bank account and then transferred to members of the conspiracy. Some of the proceeds also were used to continue the mortgage fraud scheme. The parties have agreed that victim financial institutions suffered losses of between $2.5 million and $7 million as a result of this scheme.
Woman Sentenced in Connection with Mortgage Fraud Investigation
On January 27, 2014, in Raleigh, N.C., Liliana Delia Deiac, of Jamaica, N.Y., was sentenced to 18 months in prison, three years of supervised release and ordered to pay $674,856 in restitution to a bank. Deiac pleaded guilty on August 6, 2013 to making material false statements. According to court documents, on May 18, 2010, Deiac was questioned by special agents with the IRS and the FBI investigating a fraudulent property flipping scheme. Deiac was questioned because evidence showed that she was involved in the purchase of a $2 million property in Raleigh using her husband’s name and credit, and without the husband’s knowledge or consent. Participants in the scheme failed to make mortgage payments on the property, resulting in foreclosure and losses to a bank. When questioned, Deiac lied about the circumstances of her involvement in the transaction. The investigation established that Deiac participated in the transaction based upon promises of cash kickbacks from others who orchestrated the deal.
Former Builder Sentenced for Fraud and Theft of His Ex-Wife’s Identity
On January 14, 2014, in Pensacola, Fla., Lawrence Allen Wright, of Niceville, Fla., was sentenced to 75 months in prison and ordered to pay over $3.7 million in restitution. Wright pleaded guilty on October 2013 to conspiracy to commit bank fraud, conspiracy to commit money laundering, bank fraud, mail fraud, aggravated identity theft, and making a false statement to federally insured financial institution. According to court documents, Wright solicited individuals to act as straw buyers to purchase unimproved lots located in Walton County, so Wright could build homes on the lots. While soliciting the straw buyers, Wright promised to make payments on the fraudulent loans and pay the earnest money deposit and closing costs for the straw buyers. Wright told the straw buyers that he would be able to sell the properties for a profit after he built homes on them and that he would then share a portion of the proceeds with the straw buyers. In addition, Wright caused another individual to sign his ex-wife’s name on legal documents without his ex-wife’s knowledge or permission. The legal documents included mortgage loan documents, promissory notes, and tax returns.
Developer Sentenced for Role in Mortgage Fraud Scheme
On January 14, 2014, in Raleigh, N.C., David Lewis Johnson, Jr., of Cary, N.C., was sentenced to a 96 months in prison, five years of supervised release and ordered to pay $2,413,605 to 11 banks and lenders who were victims of the fraud. Johnson was sentenced on conspiracy to commit mail, wire, and bank fraud. According to court records, Johnson, operating through E-Z N Homes, engaged in a real estate “flipping” scheme. Johnson and others utilized various schemes to fraudulently obtain more than 100 properties with total mortgage loans in excess of $20,000,000. The defendant used straw buyers to purchase properties in exchange for a kickback from the loan proceeds. Johnson also fabricated investment statements to make it appear that straw buyers had, in some instances, one million dollars in assets. In fact, the straw buyers recruited by Johnson did not possess the income or assets to support the loans obtained in their names. As a result of the scheme and Johnson’s conduct, banks and lenders issued loans to the conspirators in the amount of approximately $9.1 million, which resulted in $3.4 million in actual losses to the banks and lenders.
Former Connecticut Resident Sentenced for Defrauding Banks
On January 13, 2014, in New Haven, Conn., William Leckey, of Buffalo, N.Y., formerly of Madison, Conn., was sentenced to 29 months in prison, three years of supervised release and ordered to pay $1,709,640 in restitution to two victim financial institutions. On August 1, 2013, Leckey pleaded guilty to one count of conspiracy to commit bank fraud. According to court documents, from approximately 2002 until 2012, Leckey was the president and owner of Anchor Capital Services, Inc. (ACS), which provided financing to companies looking to purchase heavy equipment. ACS provided its customers with high interest rate leases, and funded the transactions through lines of credit it had available with various financial institutions. ACS would draw down on the lines of credit it had with these financial institutions by pledging its lease agreements and the related equipment as collateral. After each deal was funded by the financial institutions, ACS’s customer would make monthly payments to ACS on the lease, and ACS would use those funds to pay down the line of credit with the bank. Leckey and others engaged in a long-running fraud scheme to obtain money from financial institutions to use as operating capital for ACS. As part of the scheme, Leckey and others made false representations to the financial institutions that ACS had entered into lease transactions with customers for specified pieces of heavy equipment when, in fact, they knew that no such lease transaction had been conducted or the transaction never transpired after the lease had been signed. As a result of these false statements, the financial institutions funded these nonexistent transactions in amounts well in excess of $100,000 on a number of occasions. As a result of this scheme, ACS received more than $1.7 million from financial institutions on its letters of credit.
Leader of Mortgage Company Sentenced for Role in Fraud Scheme
On December 16, 2013, in San Diego, Calif., Brian Nels Peterson, the head of a mortgage company called Terra Finance, was sentenced to 41 months in prison and ordered to pay $542,075 in restitution. According to court documents, Peterson obtained mortgage funds through deceptive means, including falsifying income on applications to qualify borrowers for loans. Peterson, who held a broker’s license with the California Department of Real Estate, personally signed most of the fraudulent loan applications containing false income, employment, asset, and liability information submitted under his license number. Peterson orchestrated the fraudulent conduct of employees, borrowers, and industry professionals as the head of Terra Finance. He recruited a cadre of loan officers, loan processors, office staff, real estate “investors” and other industry professionals to participate in his scheme, including appraisers, tax preparers, and lender representatives. These knowing participants included people who made up job titles and income figures so borrowers would appear to qualify for a loan, added borrowers to another person’s bank account and then had the borrowers falsely claim the funds in the account as assets, fabricated false “verifications” of phony information in the loan applications, and prepared appraisals “to order” based on the property value Peterson sought. Borrowers used a succession of fake loan applications to purchase multiple properties that they could not afford. Peterson earned over $1 million from his fraudulent loan business through broker’s fees, kickbacks from cash-out refinances, and other sources in 2006 alone. He failed to report his over $1 million income in 2006 and he evaded paying taxes by arranging to be paid in cash, and other means.
Former Real Estate Investor Sentenced for Bank Fraud and Money Laundering
On December 9, 2013, in Orlando, Fla., James Olivos, of Lake Mary, Fla., was sentenced to 60 months in prison and ordered to pay a $2,866,121 money judgment. Olivos pleaded guilty on September 18, 2013 to bank fraud and money laundering. According to court documents, between March 2003 and November 2007, Olivos engaged in a scheme wherein he recruited "straw purchasers" to purchase expensive homes, which they could not afford. Olivos prepared loan applications for these straw purchasers, which grossly overstated their incomes and gave false employment histories. Additionally, these applications stated that these homes would be used as primary residences, but Olivos had actually told these buyers that the homes would be investments and that he would find renters to cover the mortgage payments. Further, in order to increase his profits, Olivos convinced the sellers of the homes to inflate the sales prices by stating additional money would be necessary for home improvement. Olivos would then split the proceeds of the sales with the sellers. As a result of this fraud, Olivos caused a total loss to the lenders of approximately $3.2 million dollars.
Ohio Woman Sentenced for Financial Crimes
On December 5, 2013, in Akron, Ohio, Jocelyn Hale, of Cleveland, Ohio, was sentenced to 45 months in prison and ordered to pay $78,004 in restitution. Hale pleaded guilty in October 2013 to conspiracy to commit bank fraud, money laundering, conspiracy to commit wire fraud and mail fraud, and aggravated identity theft. According to her plea agreement, Hale used identities of several individuals without their authority, and assisted another defendant to defraud two banks and the Lending Club Corporation. Hale and her co-defendant funded two difference bank accounts with fraudulent checks totaling $13,027 and $6,172 and then attempted to quickly remove and launder the fraudulent proceeds. They then funded another bank account with illegally obtained funds from a fraudulently obtained Lending Club loan in the amount of $30,000. Once the illegal obtain funds were deposited, Hale and the co-defendant again quickly attempted to remove and launder those funds. Finally, Hale admitted to assisting the co-defendant to defraud the Ohio Department of Job and Family Services by filing false and fraudulent claims for unemployment benefits using a fictitious company and fictitious employees based on stolen identities.
Connecticut Man Sentenced for Mortgage Fraud
On November 18, 2013, in Hartford, Conn., Juan Velez, of Waterford, was sentenced to 12 months and one day in prison, five years of supervised release and ordered to pay $908,695 in restitution to four victim financial institutions. Velez was also ordered to spend the first six months of his supervised release in home confinement. On June 20, 2013, Velez pleaded guilty to one count of bank fraud for his role in a mortgage fraud scheme. According to court documents, in 2006 and 2007, Velez and others engaged in a mortgage fraud scheme involving multiple properties in New London, Conn. As part of the scheme, Velez acquired properties from a co-defendant and other individuals and then sold the properties to another co-defendant at inflated prices using fraudulently obtained mortgage loans. When Velez sold the property to his co-defendant, the loan paperwork contained multiple false statements, including information related to income, intention to occupy the property as a primary residence, and the amount of money provided to purchase the property. Based on these false statements, a co-defendant obtained a mortgage loan in the amount of $492,699 from the bank. Velez and others shared the profits of this and other fraudulently obtained residential mortgage loans, which totaled more than $1.2 million.
Former Illinois Real Estate Developer Sentenced for Fraud Scheme
On November 8, 2013, in Springfield, Ill., Shara Andrews, aka Shara Manning, of Mobile , Ala., was sentenced to 24 months in prison, five years of supervised release and ordered to pay $598,536 in restitution. According to court documents, in November 2004, Andrews purchased, on behalf of her company, a residential development property in Peoria known as the Wyndhill Estates subdivision. To finance the purchase, Andrews obtained a bank loan of $895,000. In March 2005, Andrews obtained a second loan from the bank for $670,000 for development of the subdivision. The two loans were later consolidated into a single loan of approximately $1,453,000, which was secured by the Wyndhill Estates Project real estate. Andrews’ firm was the developer and general contractor for the project. From August 2006 to January 2009, Andrews sold lots, ranging in price from $80,000 to $300,000, to various real estate buyers and then served as the general contractor for construction of the buyers’ homes. Andrews admitted that she used the money for her personal use and for her company, rather than repaying the bank as required and ensuring clear title to the buyers. As part of the fraud scheme, Andrews wrote a check, which she knew would bounce due to insufficient funds, to the bank for release of a mortgage, and then converted the proceeds from the lot’s sale to her and her company’s use. Andrews submitted fraudulent lien waivers from subcontractors and suppliers to real estate buyers to cause the buyers to release funds to her.
Ohio Couple Sentenced for Mortgage Fraud Schemes
On November 6, 2013, in Columbus, Ohio, Deborah L. Kistner was sentenced to 66 months in prison, five years of supervised release and ordered to pay $9,644,601 to victims. Her husband, Mark A. Kistner, was sentenced to five years of probation, ordered to forfeit his retirement account worth about $300,000 and to pay $381,764 in restitution. Deborah Kistner pleaded guilty to three counts of conspiracy to commit bank fraud, three counts of conspiracy to commit money laundering and one count of bank fraud. Mark Kistner pleaded guilty to one count of conspiracy to commit money laundering. According to court documents, Deborah Kistner operated Premiere Title Company in Hilliard, Ohio. She deceived lenders while securing fraudulent real estate loans between July 2006 and July 2010. She conspired with others to secure inflated loans for real estate and kept the excess proceeds or used them to pay others involved in the conspiracy. Deborah Kistner intentionally failed to provide lenders with critical purchase contract language and accurate settlement statements. Deborah and Mark Kistner also schemed to defraud lenders and launder the money they received through simultaneous “short sale” closings where the lenders would agree to absorb losses on existing mortgage loans while Deborah Kistner actually sold those properties on the same day for a profit and laundered the profits through bank accounts controlled by Mark Kistner.
Three Sentenced for Conspiracy, Insider Trading and Tax Evasion
On November 6, 2013, in Atlanta, Ga., Douglas Ballard, Guy Mitchell and Joseph Todd Foster were sentenced for their roles in a conspiracy to commit bribery and bank fraud, insider trading and tax evasion that occurred at the now-failed Integrity Bank. Ballard was sentenced to 30 months in prison, three years of supervised release and ordered to pay $1,000,000 in restitution. Ballard pleaded guilty on July 6, 2010 to conspiracy to commit bank fraud, bribery and income tax evasion. Mitchell, of Miami, Fla., was sentenced to 60 months in prison, three years of supervised release and ordered to pay $5,661,650 in restitution. Mitchell pleaded guilty on July 1, 2013 to conspiring to commit bank fraud and bribery. Foster, of Blakely, Ga., was sentenced to three years of probation. Foster pleaded guilty on July 6, 2010 to securities fraud. According to information presented in court, Ballard, a former Executive Vice-President at the now-failed Integrity Bank, formerly headquartered in Alpharetta, Ga., received more than $200,000 in cash bribes from Mitchell, the bank’s largest borrower. At the same time in 2006, when Ballard was being bribed, he allowed Mitchell to draw more than $7 million from a loan that was supposed to be used for renovation and construction at the Casa Madrona Hotel in Sausalito, Calif., despite the fact that no renovation or construction work was done. Instead, Mitchell used the money to buy an island in the Bahamas, travel by private jet, purchase Miami Heat basketball tickets, buy fancy jewelry and expensive cars, and a mansion in Coconut Grove, Fla. Mitchell received $20 million in additional business loans from Integrity Bank after the Casa Madrona loan proceeds were exhausted, and he continued to use some of that money for personal expenses. Mitchell defaulted on the loans and Integrity Bank eventually failed. Foster was Integrity Bank’s Vice President in charge of Risk Management. He sold nearly all of his Integrity stock in August 2006 based on materially adverse information about the company that was not available to the public. Specifically, Foster knew that the bank was in an increasingly precarious position because of Mitchell’s financial difficulties and pending default.
Texan Sentenced for Money Laundering and Mail Fraud
On November 1, 2013, in Austin, Texas, Robert Andrew Perkins, aka Robert Johnson, was sentenced to 120 months in prison, three years of supervised release and ordered to pay $6,273,562 in restitution. Perkins pleaded guilty on August 2, 2013 to money laundering and mail fraud. According to court documents, on or about May 31, 2007, Perkins knowingly made a false statement to a financial institution for the purpose of influencing that institution’s decision whether to grant a loan application. He represented to a bank that the home to be constructed with the loan proceeds would be his primary residence, even though he intended to sell the home rather than live in it. Perkins also falsely stated that he had cash and liquid assets worth more than $1,000,000, when in fact the value of his cash and liquid assets was less than $10,000. He further stated that he owned real property in Katy, Texas that in fact did not exist, and he stated that his total liabilities were less than $1,000,000, even though he had liabilities of approximately $5,000,000. The bank granted the loan and paid substantial loan proceeds based on Perkins’ false loan application.
Former Board of Directors Member Sentenced in Scheme Contributing to Closure of Federal Credit Union
On October 24, 2013, in Philadelphia., Pa., Miqueas Santana was sentenced to 36 months in prison, five years of supervised release and ordered to pay $528,798 in restitution to the victim credit union. Santana previously pleaded guilty to misapplication and embezzlement and money laundering. According to court documents, between July 2009 and June 2011, Santana, with the permission and approval of the former manager of the victim credit union, Ignacio Morales, withdrew money from his accounts without depositing sufficient money into the accounts to cover the withdrawals. This resulted in deficit account balances in Santana’s five personal and business savings and checking accounts of more than $500,000. Santana used this money to purchase multiple pieces of real estate throughout Philadelphia. In June 2011, the National Credit Union Association took over the operation of the victim credit union, but within two weeks, closed the credit union and liquidated its assets. The victim credit union’s former manager, Ignacio Morales, has previously been sentenced to 90 months in prison on multiple counts relating to embezzlement and conspiracy to defraud the government regarding the cashing of fraudulent tax refund checks.
Man Sentenced in Mortgage Fraud Scheme
On October 23, 2013, in Los Angeles, Calif., Lemuel David Thornton, of Las Vegas, was sentenced to 24 months in prison and ordered to pay $232,000 in restitution to a victim bank. Thornton pleaded guilty in June 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. According to his plea agreement, Thornton engaged in an illegal scheme to defraud lenders who made residential mortgage loans. In early 2006, Thornton and his co-conspirators obtained financing to purchase residential properties by preparing Uniform Residential Loan applications for lenders which contained false and misleading statements about income and employment. Thornton and his co-conspirator submitted to the escrow companies fraudulent demand letters from sham companies, directing that specified funds be disbursed to the sham companies to be used for upgrades, construction, repairs, and landscaping for the property to be purchased. Thornton and his co-conspirator would cause the money paid to the sham third-party company at the close of escrow to be wired from the escrow company into an account over which Thornton or his co-conspirator had control. The money would then be used for a purpose other than the improvements specified in the demand letters and the term of the loan.
Frontman in Rock Band Sentenced in Multi-Million Dollar Loan Fraud Case
On October 21, 2013, in Santa Ana, Calif., Robert Brandon Mawhinney, the singer in a Los Angeles-based rock band called Lights Over Paris, was sentenced 84 months in prison. Mawhinney, of Anaheim, pleaded guilty on April 22, 2013, to four counts of making false statements to federally insured banks and one count of money laundering. According to court documents, Mawhinney obtained more than $11 million in credit after applying for loans by submitting phony brokerage statements that falsely showed that he had almost $8 million in assets. The phony statements were altered versions of real statements from brokerage accounts that actually contained less than $10,000. Mawhinney told bank officials that he needed the money to fund his music business and to purchase recording equipment. Mawhinney used the money from the loans to pay for travel, entertainment and a luxury tour bus that cost well over $750,000. In a related case, Mawhinney helped two associates fraudulently obtain more than $1.7 in loans for their music business. When Mawhinney defaulted on his loans, the victim banks sustained actual losses of over $8.4 million. When his associates defaulted on their loans, lending institutions suffered losses of approximately $1.75 million.
Pennsylvania Man Sentenced for Bank Fraud and Money Laundering
On October 18, 2013, in Pittsburgh, Pa., Peter M. Cicero, of Gibsonia, Pa., was sentenced to 54 months in prison, five years of supervised release and ordered to pay $3,632,298 in restitution to various victim companies. Cicero previously pleaded guilty to bank fraud and money laundering. According to court documents, Cicero participated in several fraud schemes. Cicero defrauded one bank in connection with the $1.8 million loan made to fund Cicero's $3.3 million purchase of certain companies associated with closing real estate transactions. Cicero defrauded that bank by overstating the true sales price of the companies, falsely representing that sources outside of the closing companies would make substantial payment toward the purchase of the companies, when, in fact, Cicero took money from the very companies that he was purchasing to fund the purchase. Cicero submitted a forged subordination agreement to the bank and received $500,000 back from the seller of the companies after the closing, which represented an overstatement of the sales price. In separate schemes, Cicero caused the submission of fraudulent loan applications and other documents to lenders to obtain loan collateralized by real estate. Cicero committed money laundering by causing a wire transfer of some of the proceeds of the mortgage fraud scheme to an account at another bank. Cicero also committed bankruptcy fraud by concealing money and jewelry in connection with his bankruptcy filings, and access device fraud by using a credit card without authorization.