Examples of Mortgage and Real Estate Fraud Investigations - Fiscal Year 2011
The following case summaries are based on public record court documents on file in the judicial district in which the cases were prosecuted:
Utah Man Sentenced for Role in Mortgage Fraud Scheme
On September 16, 2011, in Salt Lake City, Utah, James Merrill Roberts was sentenced to 37 months in prison, five years of supervised release and ordered to pay $609,991 in restitution. Roberts pleaded guilty to mail fraud and money laundering. According to the indictment, Roberts formed Amerifinance, a company that promoted residential real estate transactions in Utah. Although Amerifinance was originally formed to purchase foreclosed homes, repair them, and sell them at a profit, it soon became a framework for identifying residential properties, recruiting straw buyers and, through misrepresentations on loan applications and other documents in loan packages, falsely and deceptively inflating the apparent value of the properties to induce lenders to grant loans for amounts in excess of their fair market value. These transactions yielded hundreds of thousands of dollars in inflated loan proceeds, which were diverted to the defendants and their employees. Some of the loan proceeds were used to make a few loan payments on the homes to create the appearance the loans were performing well. However, the payments ceased and the loans charged in the indictment went into default.
Minnesotans Sentenced For Mortgage Fraud Scheme
On September 15, 2011, in Minneapolis, Minn., Zack Zafer Dyab, of Golden Valley, was sentenced to 120 months in prison, three years of supervised release and ordered to pay $6,374,950 in restitution for orchestrating a mortgage fraud scheme that resulted in the theft of more than $2.5 million from lenders nationally. The scheme centered around obtaining fraudulent loans for the purchase of 24 homes in the Twin Cities. Dyab was indicted along with Julia Alexander Rozhansky, of Minnetonka, on December 8, 2009. Both defendants pleaded guilty on October 26, 2010. On September 16, 2011, Rozhansky was sentenced to 60 months in prison, three years of supervised release and ordered to pay $6,374,950 in restitution. In his plea agreement, Dyab admitted that from 2003 through early 2007, he conspired with Rozhansky and others to induce through fraudulent means numerous mortgage lenders across the country to loan substantial sums of money to unindicted co-conspirators, who were Rozhansky's relatives. Dyab also admitted stealing large amounts of the mortgage loan proceeds for his own personal use. At the time, Dyab owned American Choice Lending, Inc., a mortgage brokerage company. Rozhansky was his assistant and had supervisory authority over the company’s loan officers and loan processors. To further the fraud scheme, Dyab often arranged for straw buyers to purchase properties at inflated prices from him or companies he owned. In other instances, he had straw buyers purchase properties at inflated prices from third-party sellers. After those sales, Dyab and Rozhansky purportedly caused the sellers to pay them a portion of the sale proceeds. In each transaction, Dyab admitted submitting a mortgage loan application that greatly exaggerated the monthly income and bank balances of the straw buyers. On occasion, he also deposited funds into the bank account of a straw buyer in an effort to trick the lender into thinking that the buyer had substantial liquidity. In addition, Dyab routinely provided straw buyers with money to bring to transaction closings, to be passed off as “down payments.” Moreover, he led lenders to believe that the straw buyers intended to live in the homes they were purchasing, when, in fact, he knew they actually planned to sell the homes to third-party straw buyers within a year. The third-party straw buyers then would default on the mortgage loans.
Brothers Sentenced for Operating a $4 Million Mortgage Fraud Scheme
On September 1, 2011, in Minneapolis, Minn., the second of two brothers was sentenced for orchestrating a $4 million mortgage fraud scheme that defrauded 24 area lenders. Baretta Dean Bork, of Mound, was sentenced to 60 months in prison for conspiracy to commit mortgage fraud and income tax refund fraud. Bork, who was charged on January 31, 2011, along with his brother, Xavier Willis Bork, pleaded guilty on March 9, 2011. On August 26, 2011, Xavier Bork, of Eden Prairie, was sentenced to 60 months in prison for conspiracy to commit mortgage fraud and income tax refund fraud. In their plea agreements, the brothers admitted that between December of 2003 and March of 2008 they engaged in a scheme that resulted in more than $4 million in losses to mortgage lenders. The brothers worked as loan officers through several mortgage brokerage companies located primarily in the Mankato area. Through their work, they recruited straw buyers to purchase 33 properties. To prompt lenders to grant loans to the straw buyers, the Borks exaggerated income figures and lied about the employment status of the straw buyers. They also omitted from the loan applications information regarding other loan obligations the straw buyers already had incurred. As part of the scheme, the properties were purchased at inflated prices and upon receipt of the mortgage loans, the loan proceeds were distributed to the straw buyers and the defendants. In addition, the Borks admitted to recruiting 26 people to file false U.S. Individual Income Tax Returns claiming refunds totaling more than $154,000. The defendants provided those filers with false W-2 forms that indicated they worked for the Borks. To facilitate their tax scheme, the Borks also established two shell companies.
Mortgage Fraud Scheme Lands Oklahoma Man in Prison
On August 30, 2011, in Oklahoma City, Okla., Derrick Reuben Smith, of Midwest City, was sentenced to 40 months in prison, two years of supervised release and ordered to pay $369,355 in restitution for his role in a conspiracy to commit wire fraud in connection with mortgage loans. According to evidence presented at trial, in 2006 and 2007, Smith recruited two individuals to buy two new homes in the Raintree Acres Addition in Edmond. The homes sold for $425,000 and $435,000. The builder of both homes – Dodson Custom Homes, LLC – agreed that T&T Realty, a real estate brokerage operated by Trina Tahir, would receive large commissions and bonuses totaling $51,950 and $77,950. After the closings, T&T Realty wrote checks to Michael Gipson, an agent at T&T Realty, for $27,059 and $58,000. Gipson then wrote checks in those same amounts to “MP Service,” a business that Smith operated. In short, Smith induced lenders to fund mortgages based on inflated real estate prices and misrepresented the distribution of excessive loan proceeds to himself as commissions and bonuses paid to T&T Realty. The houses ultimately went into foreclosure. Each sold for over $100,000 less than the inflated loans that Smith had the buyers receive. Smith’s two co-defendants entered guilty pleas before trial. On March 30, 2011, Michael Gipson pleaded guilty to conspiracy and money laundering related to the Raintree Acres properties that were at issue in Smith’s trial. On April 6, 2011, Trina Tahir pleaded guilty to money laundering in connection with a property that Gipson purchased in May of 2006. Tahir and Gipson await sentencing.
Minnesota Man Sentenced In Connection to $2 Million Fraudulent Loan Scheme
On August 25, 2011, in Minneapolis, Minn., Richard A. Sand, of White Bear Township was sentenced to 30 months in prison for his role in a $2 million fraudulent loan scheme. Sand, an attorney, pleaded guilty on March 28, 2011, to wire fraud and money laundering charges. He and two co-defendants were charged in a superseding indictment on July 13, 2011. On August 9, 2011, one of those co-defendants, Brenda Epperly, of Oak Grove, was sentenced to six months in prison on one count of aiding and abetting wire fraud. The third defendant, Donald W. Krause, of Plymouth, awaits sentencing. In their respective plea agreements, the defendants admitted using property transactions to defraud a lending institution. Specifically, on February 21, 2008, a purchase agreement was executed for the $1.6 million sale of an Orono residence to a corporation, RSN Companies, at which Krause was a general partner. The next day Krause sold that residence to Sand’s 86-year old mother for $2.6 million, $1 million more than RSN paid for the property the previous day. Under the terms of that transaction, Sand’s mother was to pay approximately $600,000 in cash, and the balance of the purchase price was to be financed through a bank loan. A false loan application was submitted to Bank of America, which approved a $2 million loan. On March 20, 2008, Bank of America wired the loan proceeds to Epperly, a closing agent at a title company, for distribution at the time of closing. However, the following day, Epperly dispersed $900,000 of the loan funds to RSN Companies. Then, on March 22, 2008, the defendants used some of that money to purchase a cashier’s check for $602,018 which was subsequently submitted as the cash payment Sand’s mother was to make as her equity contribution to the property purchase. Epperly then falsified the HUD-1 Settlement Statement provided to the lending institution, indicating that Sand’s mother had provided over $600,000 in cash. As a result, the bank mistakenly believed Sand’s mother had a financial stake in the purchase. On March 22, 2008, Krause purchased another cashier’s check with the loan proceeds. This $224,371 check was made payable to the Ramsey County Sheriff’s Department and was used by Krause and Sand to redeem a foreclosed property Sand owned in St. Paul. In addition, Sand used an additional $170,000 in loan proceeds for his own benefit. At their plea hearings, Krause admitted receiving approximately $50,000 because of this fraud.
Attorney Sentenced to Prison for Multi-Million Dollar Mortgage Fraud Scheme
On July 22, 2011, in Houston, Texas, Vincent Wallace Aldridge, of Fresno, Texas, was sentenced to 63 months in prison, three years of supervised release, and ordered to pay $891,000 in restitution and a special assessment of $1900. Aldridge and his wife, Tori Aldridge, were found guilty in January of 19 counts, including conspiracy to commit money laundering and money laundering charges. Gilbert Isgar, a co-owner of Waterford Homes, was found guilty of 13 counts, including conspiracy to commit money laundering. Both Aldridges’ and Isgar were convicted of conspiring during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least four lending institutions. According to court documents, Vincent Aldridge was a fee attorney for First Southwestern Title Company and Tori Aldridge was also employed by the same company. They lured borrowers by representing the scheme as an investment opportunity. For the use of their credit to obtain mortgage loans, the borrowers were promised $10,000 after the closing of their respective properties and that the property would be sold after a year for a profit. Vincent Aldridge and Tori Aldridge - acting as both an escrow officer and as a loan processor – modified the lending packages they submitted to lending institutions to enhance borrowers’ ability to qualify for the requested loans. These enhancements included fraudulently overstating the borrower’s income, misrepresenting the borrower’s principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. As a part of the scheme, Isgar inflated the sales price of the properties to be purchased by the recruited borrowers. As a part of the agreement between the Aldridges and Isgar, Isgar signed disbursement authorizations for attorney’s fees and additional contractor fees on brand new homes for amounts of $60,000 to more than $80,000 that were in addition to the attorney’s fees stated on the HUD settlement statements and did not appear on the settlement statements. Once the loans were funded to the title company, the Aldridges caused several checks to be drawn on the account of the title company, each totaling amounts of $60,000 to more than $80,000, to Aldridge & Associates IOLTA bank account. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme. The total amount of the money laundering was more than $500,000. On June 29, 2011, Isgar was sentenced to 24 months in prison, three years of supervised release and ordered to pay restitution. Tori Aldridge will be sentenced later this year.
Leader in $78 Million “Dream Home” Mortgage Fraud Scheme Sentenced
On July 1, 2011, in Greenbelt, Md., Michael Anthony Hickson, of Commack, New York, was sentenced to 120 months in prison, followed by three years of supervised release and ordered to pay restitution in the full amount of the loss, with the exact amount to be determined at a later hearing. Hickson was convicted for his participation in a fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. According to evidence presented in court, beginning in 2005, Hickson, the former chief financial officer of Metro Dream Homes (MDH), and his co-conspirators, targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange, for a minimum $50,000 initial investment, the conspirators promised to pay off the homeowners’ mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, MDH spent hundreds of thousands of dollars making presentations at luxury hotels. According to trial testimony, the defendants failed to advise investors that: the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue; and the defendants used the funds from later investors to pay the mortgages of earlier investors. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including the conspirators. As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When the conspirators stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.
Mortgage Loan Appraiser Sentenced to Prison
On June 30, 2011, in Milwaukee, Wis., John F. Hochrek, Jr., of Spring Grove, Illinois, was sentenced to six months in prison, three years of supervised release, including six months of home confinement, and ordered to pay restitution as determined by the court for his role in a mortgage fraud scheme. Hochrek pleaded guilty on March 14, 2011, to one count of conspiracy to commit wire fraud. According to court records, the fraud scheme was orchestrated by mortgage broker Paul Zaleski, formerly of Twin Lakes, Wisconsin, and Antioch, Illinois. According to court records, Zaleski, who operated First Security Financial Services, solicited investors to purchase properties with the promise that they would reap large profits upon resale. In reality, the values were inflated to create excess funds that were funneled to shell companies organized by Zaleski and his associates. Multiple lenders were induced to fund loans to unqualified buyers for properties in amounts greater than the actual value. Eventually, the properties went into foreclosure, resulting in substantial losses. Hochrek participated in the scheme as a licensed appraiser (doing business as Tri-County Appraisals in Wisconsin and Illinois) and as a real estate agent. Hochrek provided inflated appraisals for approximately 37 properties and negotiated sales contracts for approximately 15 of the properties, knowing that their values would be falsely inflated. Zaleski, and other defendants in this case, await sentencing.
Utah Man Sentenced for Role in Mortgage Fraud Case
On June 13, 2011, in Salt Lake City, Utah, Ronald William Haycock, Sr., of Bountiful, was sentenced to 66 months in prison, followed by five years of supervised release, and ordered to pay $2,384,974 in restitution along with other defendants involved in this fraud scheme. Haycock pleaded guilty in December 2010 to charges of money laundering and conspiracy to commit wire and mail fraud in connection with a mortgage fraud scheme. In his guilty plea, Haycock admitted that in 2006 and 2007, he was an accountant and tax planner offering financial and tax services doing business as Paramount Strategies. Haycock admitted to helping straw buyers acquire “undervalued real estate" that had been paired with properties in Davis, Salt Lake and Utah counties that had previously been identified and placed under contract by Haycock’s associates. Haycock and his co-conspirators caused misrepresentations to be made on loan applications to deceptively inflate the value of the properties and to create the false appearance that straw borrowers were qualified to repay loans to induce lenders to grant loans for amounts in excess of their fair market value. The straw buyer loans were closed in a rushed process and the loan distribution and closing statements were sometimes created in a manner that concealed that the down payments were being refunded to short-term lenders, that the purchasers were stray buyers, and that side agreements and joint venture agreements channeled excess loan proceeds to Paramount.
Dallas Businessman Sentenced To Prison for Orchestrating Multi-Million Dollar Mortgage Fraud Scheme
On June 2, 2011, in Dallas, Texas, Eric Rulack Farrington, of Irving, Texas, was sentenced to 132 months in prison and was ordered to pay approximately $2.5 million in restitution and forfeit approximately $1.2 million to the U.S. Farrington was convicted in April 2010 on various felony offenses including ten counts of money laundering and five counts of engaging in a monetary transaction with criminally derived property. Farrington was the president of Eric Farrington Seminars, Inc. and Prestige Capital Corporation, which did business as Farrington Mortgage Group. He was also a manager of EFC Investments, LLC, which did business as EFC Management Company. Farrington was the last of numerous defendants convicted and sentenced in this scheme. Farrington, a motivational speaker who was a book author and had an infomercial on making money in real estate, largely orchestrated the scheme that involved six other defendants. The defendants located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence, many times using inflated appraisals. They recruited individuals with high credit scores to act as borrowers and falsely represented to them that the property would be managed by the defendants and rented by a suitable tenant; that the mortgage, interest, taxes, insurance and property maintenance would be paid from the rental income; and the purchasers/borrowers would have no expenses. The borrowers had no intention to live in the property and did not have sufficient income to repay the loans. The defendants prepared and submitted fraudulent loan documents showing inflated incomes in the names of the borrowers and obtained loans in inflated amounts based on these fraudulent loan documents. Then they used the fraudulently obtained surplus loan proceeds to pay the sellers kickbacks, to conceal the fraud, and distributed the bulk of the proceeds among themselves. They would then allow the loan to go into foreclosure after a few payments were made on the loan.
Two Houston Men Sentenced To Prison for Mortgage Fraud
On June 1, 2011, in Houston, Texas, Adrian Levale Cole and Albert Terrance Watkins, both of Houston, were sentenced for their roles in a multi-million dollar mortgage fraud scheme. Cole was sentenced to 108 months in prison and three years of supervised release. Watkins was sentenced to 150 months in prison and three years of supervised release. In addition to the prison terms, the judge ordered Cole and Watkins to pay restitution to various financial institutions with the final amount to be determined by the court. According to court documents, Cole owned and operated the fictitious companies AC Homes and WT Homes and generated more than $10 million in fraudulent home loan submissions at and through Phantom Marketing, Capri Mortgage and United National Mortgage by recruiting borrowers with good credit in Houston and the surrounding area. He pleaded guilty to wire fraud and false representation of social security numbers in June 2010. Watkins’ role in the scheme was two-fold. He was both a recruiter of borrowers with good credit on behalf of Phantom Marketing and a loan processor at Capri Mortgage and subsequently at United National Mortgage. Watkins pleaded guilty in June 2010 to conspiracy to commit wire fraud. The scheme involved borrowers with good credit agreeing to apply for home mortgage loans from multiple lenders with the understanding that they would not be responsible for the monthly mortgage payments – rather, Phantom Marketing would make all payments on all loans. Watkins explained to the borrowers that the portions of the approved loan proceeds from the purchased homes would go to them and/or Watkins and/or Cole and others. As was true of most of the other loans that were part of this scheme, only the first few monthly mortgage payments were made, and then the mortgage loans went into default for non-payment.
Florida Mortgage Fraud Defendant Sentenced to Prison
On May 26, 2011, in Tampa, Fla., Sang Min Kim, aka Sonny Kim, was sentenced to 41 months in prison followed by five years of supervised release. Kim was also ordered to pay $5,826,778 in restitution. Kim pleaded guilty in June 2010, to conspiracy to commit wire, mail, and bank fraud and money laundering in connection with a mortgage fraud scheme. According to court documents, from about January 2005 through October 2008, Kim engaged in numerous residential real estate transactions in the Middle District of Florida, primarily in Hillsborough County, at least 48 of which involved fraud and resulted in losses of approximately $5,826,778. Kim, with the assistance of co-conspirators, purchased residential properties as an “investor” with the intention of “flipping” the properties in subsequent sales. Kim was also aware that his company, SK Investment Group, LLC, was used to provide false employment verifications for other fraudulent transactions from which he did not directly benefit.
Former Real Estate Professionals Sentenced in Mortgage Fraud Scheme
On May 26, 2011, in Sacramento, Calif., Ralondria Stafford, of San Francisco, and Necole Ward, of Las Vegas, were sentenced for their roles in a mortgage fraud scheme carried out between 2005 and 2006. Stafford was sentenced to 21 months in prison and Ward was sentenced to 12 months and a day in prison. Both defendants will serve three years of supervised release after their prison time and both were ordered to pay $200,000 in restitution. According to court documents, Stafford and Ward, who are sisters, operated RN Realtors in Vallejo, California. Between July 2005 and August 2006, they used two straw buyers to purchase properties that they owned in Vallejo. They offered the buyers $5,000 for the use of their names and financial information, and told the buyers that the purchase would be in name only and that Stafford would purchase the properties back in 6 to 12 months. In the course of the conspiracy, Stafford and Ward prepared “Uniform Residential Loan Application” forms in the straw buyers’ names containing false statements that included overstating of the straw buyer’s income, claiming false employment at employers, and misidentifying properties as a primary residence.
Final Defendant Sentenced for Involvement in Large-Scale Mortgage Fraud Ring
On May 25, 2011, in Boston, Mass., Ralph Appolon was sentenced to 70 months in prison to be followed by two years of supervised release for his role in fraudulent property transactions that were part of a larger mortgage fraud conspiracy. In February 2011, Appolon was convicted of wire fraud and conspiring to commit wire fraud. Between May and September 2005, Appolon and others participated in a conspiracy to obtain $10.6 million in mortgage loan proceeds by fraud. The scheme involved the use of “straw” buyers, inflated purchase prices and documents containing numerous false representations, such as false information about purchase price, borrower income, employment, assets, or intent to reside in the properties. The conspiracy involved 21 property transactions in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park and Cohasset. A total of 12 defendants were prosecuted in connection with the conspiracy. Together, the defendants defrauded 10 mortgage lenders of more than $10.6 million in loan proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure. Sentencing’s for the other 11 defendants ranged from three years probation to 144 months in prison. The court also entered a forfeiture order of $1.9 million, to be paid by Appolon and other defendants in this case.
Arizona Investor Sentenced for Role in $4 Million Mortgage Fraud Scheme
On May 2, 2011, in Phoenix, Ariz., Dustin Thompson was sentenced to 27 months in prison, to be followed by three years of supervised release, and ordered to pay $565,467 in restitution. According to court documents, from 2005 through June of 2007, Thompson conspired to commit mortgage fraud by submitting fraudulent mortgage loan applications on behalf of straw buyers, under false pretenses. He obtained and disbursed the proceeds of the fraudulently obtained loans, including directing $1.2 million of the proceeds to a bank account under his control. Thompson used the proceeds from the fraud for personal expenses and to finance other “get rich” schemes. The entire conspiracy resulted in a loss to lending institutions of approximately $4 million.
Texas Real Estate Appraiser Sentenced for Role in Multi-Million Dollar Mortgage Fraud Scheme
On April 28, 2011, in Dallas, Texas, Rejis Lamont Williams, a certified real estate appraiser, was sentenced to 46 months in prison, ordered to pay approximately $1 million in restitution, and ordered to forfeit approximately $1.2 million to the U.S. Williams, who did business as Executive Certified Appraisal, was convicted of various federal charges including engaging in a monetary transaction with criminally derived property. On April 26, 2011, in Dallas, Kevin Ray Sanderson, of Irving, Texas, a co-defendant in the scheme and the vice president of Farco Construction, Inc., Dallas, which also did business as Farrington Mortgage Group, was sentenced to 57 months in prison, ordered to pay $762,983 restitution, and ordered to forfeit approximately $1.2 million to the U.S. Sanderson was convicted on various charges, including one count of money laundering. According to court documents, the defendants located straw buyers for single-family residences for sale in the Dallas area. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence, many times using inflated appraisals. The buyers had no intention of living in the property and did not have sufficient income to repay the loans. The defendants prepared and submitted fraudulent loan documents and used the surplus loan proceeds to pay the sellers kickbacks, to conceal the fraud, and distributed the bulk of the proceeds among themselves. Five other defendants have been previously sentenced in this case.
Miami-Dade Mortgage Broker Sentenced For Obtaining Fraudulent Mortgages on Houses Purchased In Palm Beach and St. Lucie Counties
On March 29, 2011, in Miami, Fla., Hugo Oliva, of Miami-Dade, was sentenced to 87 months in prison, five years of supervised release, and was ordered to pay restitution of $886,418. Oliva previously pleaded guilty to mail fraud and money laundering charges in connection with a mortgage fraud scheme. According to court documents and testimony, Oliva, a mortgage broker, purchased homes through his company, MBA Mortgage Services, Inc., in St. Lucie, Palm Beach, and Miami-Dade counties that were being used as marijuana grow houses. Most of these homes were bought with funds obtained by mortgage fraud through his company and his co-defendants, including Sergio Caro. To execute the scheme, the defendants submitted loan applications to mortgage lenders that contained false information, including false bank statements, W2 forms, pay stubs, verifications of deposit and verifications of employment. The defendants in the mortgage fraud scheme were charged with various counts of conspiracy, mail fraud, drug charges, and laundering drug-related money through the purchase of the homes. On December 13, 2010, Sergio Caro was sentenced to 37 months in prison and ordered to pay $671,166 in restitution to victim mortgage lenders. Two additional co-defendants, Ilan Reyes and Orlando Dominguez, both of Miami, pleaded guilty and were each sentenced to five years probation. Another co-defendant, Manuel Caro, is a fugitive.
California Man Sentenced to 22 Years for Multi-Million Dollar Ponzi Scheme and Mortgage Fraud Scheme; Defendant Targeted Spanish-Speaking Victims
On February 14, 2011, in Los Angeles, Calif., Juan Rangel was sentenced to 264 months in prison for running two fraud schemes - a Ponzi scheme that took in at least $30 million from more than 500 victims, and a mortgage fraud scheme that preyed on working-class homeowners by stealing the equity from their homes and secretly taking title to their properties. According to court documents, Rangel and his company, the Commerce-based Financial Plus Investments, recruited investors through advertisements in Spanish-language newspapers, as well as in infomercials broadcast on television. Rangel and Financial Plus promised to pay investors annual returns as high as 60 percent, claiming Financial Plus’ real estate investments and lending business generated substantial profits. However, Rangel admitted in his plea agreement that Financial Plus did not realize any profits from real estate or lending. Rangel instead used victims’ money to make Ponzi payments to prior investors and for his own personal use. Rangel also admitted that he and others operated a mortgage fraud scheme targeting Latino homeowners facing foreclosure. Rather than assisting the distressed homeowners, Rangel took titles to their homes and drained the equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to straw buyers. He then applied for loans in the straw buyers’ names, and used a variety of falsified documents to ensure that the fraudulent loans were approved. Rangel admitted that the mortgage fraud scheme caused lenders to fund more than $10 million in fraudulent loans.
Former California Real Estate Investor Sentenced for His Role in Mortgage Fraud Scheme
On February 14, 2011, in Sacramento, Calif., Iftikhar Ahmad, of Stockton, was sentenced to 21 months in prison, to be followed by three years of supervised release, and ordered to pay $382,750 in restitution. According to his plea agreement, Ahmad admitted that through his company I & R Investment Properties LLC, he bought and sold numerous properties that were funded with loan proceeds fraudulently obtained from Long Beach Mortgage Company. Specifically, Ahmad secretly provided down payments to many of the buyers of the homes he was selling and aided the buyers in submitting loan applications that he knew contained false information about their income and employment. He also inflated the sales price of the properties. Other participants in this mortgage fraud scheme who have been sentenced include John Ngo, a loan processor with Long Beach Mortgage Company, sentenced to nine months in prison; William Bridge, a loan broker operating The Loan Center in San Francisco, was sentenced to 21 months in prison; and Paul Bridge, also a loan broker at The Loan Center, was sentenced to three years of probation.
Florida Real Estate Investor Sentenced to Seven Years in Federal Prison for Mortgage Fraud
On February 11, 2011, in Tampa, Fla., Christopher Alan Stapleton, of Clearwater Beach, was sentenced to 84 months in prison for mortgage fraud-related offenses. As part of his sentence, the court also entered a money judgment of $3,412,460. Stapleton was found guilty by a jury on August 17, 2010 of conspiracy to commit wire fraud affecting a financial institution and making false statements to a federally-insured financial institution. According to court documents and the testimony and evidence presented at trial, Stapleton submitted loan applications and other documents containing false and fraudulent information to various mortgage lenders. Specifically, Stapleton falsely inflated both the contract purchase prices of the properties he was buying and his own gross monthly income to get the lenders to approve the loans. Relying on Stapleton's fraudulent representations, the lenders approved the loans and disbursed loan proceeds in excess of the true contract purchase prices. Stapleton paid the sellers and, unbeknownst to the lenders, pocketed millions of dollars in excess loan proceeds. Two other individuals were charged in connection with this case. William Straub, Jr., a former mortgage broker in Pinellas County, and Warren Jay Knaust, an attorney in Pinellas County, who acted as title agent in the charged transactions. Straub was sentenced to 21 months and Knaust was sentenced to 30 months in prison.
North Carolina Attorney Sentenced for Mortgage Fraud
On January 24, 2011, in Charlotte, N.C., Troy Anthony Smith was sentenced to 18 months in prison and three years of supervised release. On December 22, 2008, Smith pleaded guilty to two counts of mortgage fraud conspiracy and two counts of money laundering conspiracy. According to the indictment, Smith was an attorney with an office in Waxhaw, North Carolina. Smith served as a closing attorney for two mortgage fraud cells operating in Union and Mecklenburg Counties in North Carolina. The mortgage fraud cells would agree with a builder to purchase a property at a set price. The cell would then arrange for a buyer to purchase the property at an inflated price, which was usually between $200,000 and $500,000 above the true price. The builder would sell the property to the buyer at the inflated price and the lender would make the mortgage loan on the basis of the inflated price. The difference between the inflated price and the true price would be distributed among the members of the cell. To induce lenders to make the mortgages, cell participants caused loan packages to be prepared and submitted to lenders that contained false and fraudulent information. Smith and other attorneys received the proceeds of the fraud into their trust accounts and distributed the funds to the members of the mortgage fraud cells.
Maryland Man Sentenced to 10 Years in Prison for Mortgage Fraud Scheme
On January 19, 2011, in Greenbelt, Md., Robert Dewain Venson, of Fort Washington, Maryland, was sentenced to 120 months in prison, followed by three years of supervised release, and ordered to pay $2,060,021 in restitution and to forfeit $892,368, his proceeds from a mortgage fraud scheme. According to evidence presented at his two week trial, from 2004 to 2007 Venson negotiated the purchase of at least a dozen residential properties in Maryland and the District of Columbia. Rather than purchase the properties in his own name, Venson paid straw buyers to appear at the settlements posing as the buyers. Witnesses at his trial testified that Venson typically would represent to the straw buyer that he would pay the loan obligation. Venson inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price. Venson misrepresented and concealed the true purchase price, his arrangement with the straw buyer and other information from the mortgage lender. Venson also failed to file individual federal income tax returns for 2004, 2005 and 2006.
Defendant Sentenced to Five Years for His Role in Large-Scale Mortgage Fraud Ring
On January 14, 2011, in Boston, Mass., Andre Junior Lamerique, formerly of Sharon, was sentenced to 60 months in prison, to be followed by three years of supervised release. Lamerique pleaded guilty in March 2010 to conspiracy for his role in a mortgage fraud ring that involved 21 fraudulent property transactions in the Greater Boston area, which defrauded 10 mortgage lenders of more than $10.6 million in loan proceeds. A total of 11 defendants were indicted in May 2008. According to court documents, between May 2005 and June 2006, the scheme involved the use of “straw” buyers, inflated purchase prices and documents containing numerous false representations, including false information about the purchase price, borrower income, employment, and intent to reside in the property. The difference between actual purchase prices negotiated with sellers and the inflated purchase prices submitted to lenders ranged as high as $255,000 on some properties. These fraudulent "mark-ups" added up to over $1.9 million. From this $1.9 million, the defendants pocketed more than $1.7 million in illegal proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure. Lamerique participated in the scheme by recruiting straw buyers for the fraudulent loans, creating and sending bogus loan applications to mortgage lenders, and sharing in the illegal proceeds. Lamerique is the ninth defendant sentenced to date. In October and November 2010, the following defendants were sentenced: Daniel Appolon was sentenced to 42 months in prison; Samuel Jean-Louis received 22 months in prison; Ernst Appolon was sentenced to 120 months in prison; Jermaine Blake was ordered to serve 30 months in prison; Widner Lamarre received 60 months in prison; Latoya Haltiwanger was sentenced to 30 months; Jean Noriscat was sentenced to a prison term of 87 months; and J. Daniel Lindley was sentenced to 72 months in prison.
Four Sentenced in Mortgage Fraud Case
On December 14, 2010, in Greenville, N.C., Brain Keith Causey, of Wilmington, N.C., was sentenced to 18 months in prison, followed by three years of supervised release and was ordered to forfeit $250,000. On December 13, 2010, three other defendants in the same mortgage fraud conspiracy were also sentenced: Horace Hance Mayo III, of Wrightsville Beach, North Carolina, received four months imprisonment and four months home detention with electronic monitoring followed by three years of supervised release; Michael Paul Fluharty, of Little River, South Carolina, received six months in prison, followed by five years of supervised release and a $2,000 fine; and Tyrone Ford, of Wilmington, North Carolina, received five months imprisonment followed by five years of supervised release. Additionally, the Court ordered a $50,000 forfeiture against Mayo and his North Carolina mortgage broker license has been cancelled. According to court documents, Daniel Adams Rooks owned property in Columbus County that he subdivided into parcels for mobile homes. Low-income purchasers, who did not qualify for any type of government-backed mortgage, were solicited as buyers. Causey, Mayo, Fluharty, and Ford prepared and submitted loan applications with falsified and fictitious information regarding employment history, income, and other assets, along with letters of credit. Causey, who worked for Wachovia, in Wilmington, North Carolina, was responsible for falsifying information and submitting false documents in support of loan documents. During the conspiracy, over 150 loans were submitted with false and fictitious information and over $6 million in loan disbursements. All but two of the loans were foreclosed upon.
Miami Resident Sentenced On Mortgage Fraud Charges
On December 13, 2010, in Miami, Fla., Sergio Caro, of Miami-Dade, was sentenced to 37 months in prison on mail fraud and money laundering charges in connection with a mortgage fraud scheme. The judge also ordered Caro to pay $671,166 in restitution to victim mortgage lenders. This amount represents the total losses resulting from fraudulent mortgages obtained by Caro and other co-conspirators during 2005-2006 in Palm Beach and St. Lucie Counties. The mortgage fraud scheme was uncovered during an earlier investigation into marijuana grow houses in Port St. Lucie. During that investigation, investigators found that many of the houses were linked to co-defendant Manuel Caro. Manuel Caro was charged in 2006 for his participation in the marijuana grow house operation, but fled after being released on bond. He remains a fugitive. More marijuana grow houses were eventually discovered in St. Lucie, Palm Beach, and Miami-Dade Counties. According to the superseding indictment, most of these homes were purchased with funds obtained through mortgage fraud committed by defendant Hugo Oliva, a mortgage broker, through his company, MBA Mortgage Services, Inc., and his co-defendants, including Sergio Caro. To execute the scheme, the defendants submitted loan applications to mortgage lenders that contained false information, including false bank statements, W2 forms, pay stubs, verifications of deposit and verifications of employment. The defendants in the mortgage fraud scheme were charged with various counts of conspiracy, mail fraud, drug charges, and laundering drug-related money through the purchase of the homes. Two additional co-defendants have pleaded guilty and await sentencing.
Real Estate Agent Sentenced to Prison for Fraud
On December 13, 2010, in Tucson, Ariz., Roy Fife was sentenced to 30 months in prison, five years of supervised release, and ordered to pay restitution of $1,820,977. On December 15, 2009, Fife pleaded guilty to wire fraud and conspiracy to commit money laundering. According to his plea agreement, Fife, a licensed real estate agent, participated in a "cash back" mortgage fraud scheme with Chris Nero and others in Arizona. Using his business relationships with local mortgage brokers, Fife assisted buyers in qualifying for mortgages. Fife admitted that he knew some of these buyers were being paid to be straw buyers and were purchasing multiple properties that they were not going to live in. Further, he knew some of the buyers were submitting materially false loan applications that included false statements regarding assets, liabilities, and the intent to occupy the subject properties as primary residences. As part of the scheme and to hide his involvement, Fife did not receive documented real estate commissions even though he was a licensed realtor at the time of the transactions. All disbursements at the close of a property must be disclosed to the lender. Fife received at least $225,000 in cashier's checks from Chris Nero and others outside the close of escrow. Chris Nero was previously sentenced to 58 months in prison for his role in the conspiracy and for tax evasion.
Four Sentenced In Mortgage Fraud
On December 7, 2010, in Kansas City, Kan., four defendants were sentenced on charges of taking part in a $3 million mortgage fraud scheme. Bora Ly, of Raytown, Mo., was sentenced to 18 months in federal prison; Debora Saulmon, of Olathe, Kan., was sentenced to 15 months; Kong Bun Ly, of Kansas City, Mo., was sentenced to 12 months; and Rebecca Gelwix, of Des Moines, Iowa, was sentenced to eight months. According to court documents, the defendants conspired with co-defendant Eric M. Rabicoff and others to defraud mortgage lenders and obtain more than $3 million in loans to straw buyers who were not qualified to receive them. They obtained financing by submitting loan applications to lenders that contained false information on employment, income and rent history. The scheme also called for contract prices to be increased and for conspirators to receive money by submitting false invoices to title companies at closing.
Owners of Guaranty Title Sentenced for $4.1 Million Fraud
On December 1, 2010, in Springfield, Mo., Richard Burton and Kathy Allen were sentenced to 78 months and 39 months in prison, respectively. They were also ordered to jointly and equally pay $4.15 million in restitution. According to court documents, Burton was the president and majority owner of Guaranty Title Company of Southwest Missouri; Guaranty Title Company, dba Guaranty Title and Closing Company; and Guaranty Properties, Inc. The companies, referred to collectively as Guaranty, provided real estate title and closing services. Allen, who had a 42 percent ownership interest in Guaranty, was the vice president during the time of the conspiracy. Burton and Allen each admitted that from May 2005 to June 2007 they defrauded mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs. When real estate buyers and sellers hired Guaranty to facilitate the closing of real estate contracts, Guaranty agreed to hold buyers’ money for closing costs in an escrow funds account separate from funds that Guaranty owned. Guaranty was prohibited from commingling that escrow money with the firm’s business operations money because it did not own the escrow money it received. Burton and Allen admitted that they took a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty’s promise not to do so, they caused $3,467,709 of stolen escrow funds to be diverted into the firm’s business operations account and used the money for the day to day business operations of Guaranty. To conceal the source of those deposits into the operations account, they instructed Guaranty’s in-house bookkeeper to record deposits of stolen escrow money into Guaranty’s business operations account as loans, including loans from a fictitious company called “K & S Investments.” By April 2007, deposits into Guaranty’s main escrow account no longer covered shortages caused by the theft of escrow funds. Allen and Burton concealed this shortage by writing and depositing checks between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks. This check-kiting scheme continued until June 18, 2007, when Old Missouri Bank discovered the fraud and closed the bank account. As a result of this check kiting, they caused Ozark Mountain Bank to lose nearly $700,000.
Mortgage Fraud Defendant Gets 14 Years in Federal Prison
On November 19, 2010, in Kansas City, Kan., Maurice Ragland was sentenced to 168 months in prison for mortgage fraud. According to court documents, Ragland pleaded guilty to one count of wire fraud and one count of money laundering. In his plea, Ragland admitted that in 2003 and 2004 he conspired with co-defendant Wildor Washington, Jr. and others to obtain mortgage loans by submitting inflated property appraisals and other false information to lenders. The conspirators targeted borrowers with low incomes and little knowledge of the real estate industry. They urged borrowers to apply for real estate loans that were processed through various entities the conspirators controlled including Heritage Financial Investments, Legacy Enterprises, Atlantic Mortgage, Inc., T.E.R.M. Appraisers, the Real Estate Group, J.T.F. Enterprises, Liberty Escrow and AMSTAR Mortgage. Many of the real estate appraisals submitted by Ragland and the conspirators contained inflated property values and forged signatures of licensed appraisers whose identities had been stolen. In addition, Ragland and other conspirators acted as home buyers and submitted loan applications containing false income and asset information, as well as false information about the appraiser of the property and the intended use of the property. Two conspirators, Eryc Reese and Lydell Flowers, are awaiting sentencing. Wildor Washington, Jr., sentenced to 200 months; Terrell Ford sentenced to 135 months; Ryan Miller sentenced to 135 months; Ron Brown sentenced to 121 months; Les Saunders sentenced to 108 months; Greg Stevenson sentenced to 97 months; Terrence Cole sentenced to 37 months; Kara E. Robinson-Franks sentenced to 36 months; Victoria Bennett sentenced to 24 months; and Scott Alexander, Emma Holmes, and Amanda Childs each were sentenced to 12 months and a day.
Two Sentenced for $2.5 Million Mortgage Fraud Scam
On November 17, 2010, in Minneapolis, Minn., Christopher Glenn Kennedy and Beau Gensmer were sentenced to 48 months and 36 months in prison, respectively. According to court documents, both men were indicted on April 21, 2010, and pleaded guilty in August of 2010 to charges of wire fraud and money laundering. Kennedy and Gensmer admitted that from July 2007 to September 2008, they executed a mortgage-fraud scheme. In April 2007, a multi-unit condominium building was owned by one of Gensmer’s relatives. The units were listed for sale but were removed from the market after only a few were sold. Later, during the summer of 2007, Kennedy and Gensmer solicited three individuals to purchase multiple condominium units as “investments.” Kennedy and Gensmer assured the “investors” they would pay nothing to buy the properties because the down payments and monthly mortgage payments would be provided to them by the two of them. Moreover, they recruited the investors by telling them the condos would be rented for a time but ultimately sold at a profit, and that the investors would share in that profit. In order for the investors to qualify for mortgage loans, Kennedy and Gensmer caused accountants to prepare tax returns that reflected inflated income figures. Those returns and other fraudulent documents were then submitted to potential mortgage lenders by the two men. They also temporarily deposited money into the bank accounts of some of the investors to make it appear to potential lenders that the investors had more cash on hand than they actually did. As a result of those actions, ten mortgage lenders funded the purchase of 18 condominium units by the three investors. Eventually, Kennedy and Gensmer stopped supplying the property purchasers with monthly mortgage payments, causing the loans to go into default and then into foreclosure.
Ohio Real Estate Agent Sentenced for Mortgage and Tax Fraud
On November 10, 2010, in Columbus, Ohio, Todd M. Gongwer, a licensed real estate agent, was sentenced to 24 months in prison and ordered to forfeit $250,000. In addition, he was ordered to pay restitution to the Internal Revenue Service (IRS) and the financial institutions he defrauded in amounts to be determined by the court. Gongwer pleaded guilty in May 2009 to conspiracy to commit bank fraud and tax evasion charges. According to court documents, during 2005 through 2007, Gongwer and others negotiated and participated in five real estate deals in which Gongwer, a nominee or another buyer would purchase a luxury home for a falsely-inflated purchase price and receive a kick-back. In each transaction, the buyer, or Gongwer on the buyer’s behalf, would misrepresent his or her income and assets in order to obtain financing for approximately 90 percent of the inflated purchase price. The inflated purchase prices were justified by creating false work-change orders and addenda that created the appearance that the inflated prices represented additional, substantial work to be completed on the homes. The object of each transaction was to use the loan proceeds in excess of the actual purchase price to fund hundreds of thousands of dollars in kick-back payments to the buyers. The buyers have been unable to maintain the mortgage payments on the luxury homes and have all defaulted on the loans. During tax year 2004, Gongwer worked for ReMax Affiliates Inc. and was paid approximately $158,333 in gross income. Gongwer deposited that income into nominee accounts to conceal his receipt of that income from the IRS. Gongwer failed to file income tax returns for tax years 2000 through 2005.
Tucson Man Sentenced for Mortgage Fraud and Tax Evasion
On November 10, 2010, in Tucson, Ariz., Chris Nero, of Tucson, was sentenced to 58 months in prison. Nero, aka Christopher Sisneros, pleaded guilty to three counts of attempted evasion of income taxes. Nero was originally indicted June 11, 2008, on charges related to his involvement in a mortgage fraud scheme. According to information presented in court, from 2003 through 2005, Nero and a co-defendant conspired to commit mortgage fraud in Tucson. Nero took part in a conspiracy to fraudulently submit mortgage applications on behalf of straw buyers under false pretenses. Nero then obtained and disbursed the proceeds of fraudulently obtained loans to bank accounts under his control or to others acting on his behalf. The conspiracy resulted in losses to institutions of over $2 million. In his plea agreement to the tax charges, Nero admitted he earned a total gross income of at least $2.7 million for the years 2001 through 2007. He also admitted he failed to file any income tax returns either personally or through his company, MIH Real Estate Investor's Inc., for tax years 2001 to 2008.
Leader of Property-Flipping Scheme and Husband Sentenced; Defendants Concealed Millions of Dollars of Profits
On October 13, 2010, in Greenbelt, Md., Minh-Vu Hoang, and her husband, Thanh Hoang, of Bethesda, Maryland, were sentenced for their roles in a conspiracy to defraud the Internal Revenue Service (IRS) and the U.S. Bankruptcy Trustee in connection with a scheme to conceal millions in profits earned from the purchase and sale of hundreds of foreclosure properties. Minh-Vu Hoang was sentenced to 60 months in prison to be followed by three years of supervised release. Thanh Hoang was sentenced by 12 months and a day in prison to be followed by two years of supervised release. According to their plea agreements, the Hoangs and other family members purchased property at foreclosure auctions beginning in 1999 and resold some of the properties at a profit. The Hoangs and others deposited and withdrew money from an escrow account for the purchase and sale of properties. They transferred money from the escrow account to business entities they controlled in order to conceal their financial interests in the properties. From 2000 to 2005, the Hoangs and others purchased and sold hundreds of foreclosure properties using the names of their agents or business entities to conceal their involvement in the purchase and sale of the properties, and thereby avoid taxes. In addition, on May 10, 2005, Minh-Vu Hoang filed for bankruptcy in Maryland. She filed several false schedules and a false statement of financial affairs with the bankruptcy court in support of her bankruptcy petition in which she: reported a financial interest in only six properties, knowing that she had an interest in other properties; substantially under-reported the income she earned in 2003 and 2004; and failed to report her interest in various bank accounts. The court determined that the tax loss from the fraud was between $2.5 and $7 million. Because the bankruptcy proceedings are ongoing, the court made no separate determination of the bankruptcy loss.