Examples of Mortgage and Real Estate Fraud Investigations - Fiscal Year 2012
The following examples of mortgage and real estate fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Texas Man Sentenced in Mortgage Fraud Scheme
On September 26, 2012, in Dallas, Texas, Frederick Moore was sentenced to 87 months in prison, three years of supervised release, and ordered to pay $3,968,909 in restitution for his role in a mortgage scheme. According to court documents, from 2006 through 2007 Moore and co-conspirators recruited straw buyers with good credit to buy residential properties in the Dallas area. The conspirators provided loan applications for each straw borrower that included false financial information, including inflated false income figures, false contracts, and false HUD-1 settlement statement forms, to lenders and title companies to help secure the loans. Moore and his co-conspirators had the buyers sign “Authorization for Disbursement of Proceeds” forms so they could receive part of the loan proceeds without disclosing it on the HUD-1 settlement statements. The straw borrowers were promised a bonus or commission of between $3,500 and $25,000 for their participation in a particular real estate transaction. The conspirators falsely represented in loan documents that the straw purchaser intended to use the property as their primary residence, intentionally concealing from lender that each straw borrower, viewed himself as an “investor” who never intended to occupy the home. The scope of the conspiracy involved approximately 23 fraudulent residential property loan closings resulting in the funding of approximately $8.8 million in fraudulent loans.
California Couple Sentenced in Mortgage Fraud Scheme
On September 21, 2012, in Riverside, Calif., Joe Daniel Cody Jr., of Murrieta, was sentenced to 63 months in prison, three years of supervised release and ordered to pay over $1 million in restitution for conspiracy to money laundering in a mortgage fraud scheme. Angela Lynette Cody, of Murrieta, was sentenced to 48 months in prison, three years of supervised release and ordered to pay over $1 million in restitution for conspiracy to money laundering in a mortgage fraud scheme. According to court documents, Joe and Angela Cody were employees of “All Fund Mortgage,” a national mortgage brokerage firm based in Tacoma, Washington, and managed a branch out of their Murrieta residence. As part of the conspiracy, the Codys and others would convince homeowners to refinance or temporarily sell their homes to others to help them lower their monthly mortgage payments. To further the scheme, the Codys would convince the homeowner to allow an “investor” (who was really a “straw buyer”) with good credit to be added to the title of their home, telling the homeowner they could then refinance under more favorable terms. They would then effectuate sales of the properties and cash out the equity at closing once they acquired loans from new lenders based on false and fraudulent information. The Codys and their co-conspirators caused homeowners to lose title to their homes and lenders to hold millions of dollars in bad loans. In most cases, title was never transferred back to the homeowner. Few, if any, payments were ever made and the properties were eventually sold or went through foreclosure proceedings. In furtherance of the scheme, the Codys and others recruited individuals with good credit to act as straw buyers, offering an opportunity to purchase an investment property with an instant tenant and receiving a “kickback” between $1,000 to $25,000 per property.
California Mortgage Company Owner Sentenced in $30 Million Mortgage Fraud Scheme
On September 21, 2012, in Santa Ana, Calif., Eduardo Ruiz, owner of Premier One Lending, a Pasadena mortgage brokerage firm, was sentenced to 108 months in prison and ordered to pay $5.7 million in restitution for participating in a mortgage fraud scheme that obtained more than $30 million in loans. Ruiz was found guilty by jury of conspiracy and mail fraud related to his operation of Premier One Lending. The evidence presented during a three-day trial showed that while operating Premier One Lending in 2005 and 2006, Ruiz and other employees fraudulently obtained more than 100 loans from lenders in Los Angeles and Orange counties. As part of the scheme, Ruiz and his employees prepared mortgage loan applications that inflated borrowers’ income – often by as much as 10 times the their true income. Ruiz and others also obtained phony bank statements and CPA letters, which they provided to the lenders in support of the bogus income figures. According to witnesses that testified in trial, many of the borrowers did not speak English and did not realize that their income had been inflated. As a result of the scheme, the borrowers obtained large mortgage loans that they were unable to make payments on. More than 20 loans went into foreclosure, causing lenders to sustain millions of dollars in losses. Gilma Ruiz and Francisco Ruiz, both of Las Vegas, Nev., were sentenced to 24 months and 18 months in prison, respectively.
North Carolina Man Sentenced for Mortgage Fraud Scheme
On September 19, 2012, in Raleigh, N.C., Daniel P. Ostby, was sentenced to 72 months in prison, five years of supervised release and ordered to pay a $200 special assessment and $1,255,209 in restitution. On December 7, 2011, Ostby pleaded guilty to wire fraud and money laundering. According to court documents, Ostby and his co-defendant, Curt Vanderzee, developed a scheme to "flip" houses, in which they would buy real property, improve the property by building on it, and then quickly sell the property for a profit. Ostby also solicited friends and acquaintances to go into business with him by telling them they could “flip” houses and make $20,000 to $40,000 per property. From 2007 to January 2009, Ostby and Vanderzee submitted fraudulent mortgage applications to purchase real estate, which had misrepresentations of their employment, monthly income, and assets. The financial institutions, relying on the information submitted, approved the applications, and either mailed or wired the funds to the closing real estate attorney’s bank account.
Two Washington Men Sentenced for Roles in Mortgage Fraud Scheme
On September 13, 2012, in Seattle, Wash., Robert Strong, of Bothell, and Anthony Waldron, of Kirkland, were sentenced to 48 months and 42 months in prison, respectively. According to court documents, between 2005 and 2008, Strong and Waldron used fraudulent information to obtain more than $13 million in loans on 30 different properties. When the scheme ended and the homes went into foreclosure the lenders had lost more than $2.5 million. The defendants recruited straw buyers with good credit to purchase houses. These straw buyers were paid as much as $18,000 for use of their identity and credit score on the loan documents. The defendants submitted false employment information on the straw buyers, in one case claiming the woman made $22,000 per month working for an entity they created and controlled. Using this false information the men got banks to fund the mortgages on the houses, then they would quickly “sell” the house to another straw buyer at a higher price to claim the additional mortgage funds. The men also rented the houses on “rent to own” plans, asking the renters to pay an option, ranging from $400-$7000, to purchase the home at a later date and at an increased price. The defendants also falsely claimed repairs were made to the homes and increased the value of the homes based on those repair bills. Instead they pocketed the money that they claimed went to home improvements.
New Jersey Man Sentenced for $40.8 Million Mortgage Fraud Scheme
On September 6, 2012, in Camden, N.J., William Brown, of Newark, N.J., was sentenced to 66 months in prison, three years of supervised release and ordered to pay $9.3 million in restitution and forfeit $96,000 for his role in a $40.8 million mortgage fraud conspiracy. Brown pleaded guilty to an Information charging him with conspiracy to commit wire fraud and conspiracy to commit money laundering. According to court documents and statements made in court, Brown recruited straw buyers for his co-conspirators to purchase oceanfront condominiums overbuilt by financially distressed developers in Wildwood Crest, N.J., premier real estate in vacation destinations in Georgia and South Carolina, and properties in New Jersey owned by financially distressed homeowners facing foreclosure. Brown’s co-conspirators caused fraudulent mortgage loan applications and supporting documents to be submitted to mortgage lenders in the straw buyers’ names, attributing to them inflated income and assets to induce the mortgage lenders to approve the loans. Once the loans were approved, and the mortgage lenders sent the loan proceeds, Brown’s co-conspirators took a portion of the proceeds from the fraudulent mortgage loans. Brown also admitted that he and his co-conspirators laundered the proceeds of the mortgage fraud by having some of those proceeds transferred to the recruiters and straw buyers. Brown received $96,000 for his role.
President of Property Management Company Sentenced for Defrauding Clients, Mortgage Lenders and Government
On September 5, 2012, in Washington, D.C., Bryan W. Talbott, the president of a property management company, was sentenced to 120 months in prison and five years of supervised release for defrauding his clients, mortgage lenders and the government of more than $2.8 million. Talbott and his business partner, Chester D. Ransom, Jr., pleaded guilty in January 2012. Both agreed to criminal forfeiture of more than $2.8 million. Ransom was sentenced in June 2012 to 72 months in prison. According to court documents, from 2004 to early 2012, the defendants engaged in three separate fraudulent schemes. Through their property management company, the defendants defrauded at least 54 clients out of $1,269,278 by using rental receipt funds for their own benefit rather than paying bills for the properties. They also sent forged bank statements to some of their clients misstating the balances in their clients’ accounts. Additionally, the defendants engaged in mortgage fraud related to property in the District of Columbia which included falsifying property sale documents and forging lien releases. Finally, for tax year 2006, the defendants filed false federal and District of Columbia tax returns. The defendants submitted Forms W-2 that indicated false federal and D.C. income tax withholdings when in fact, the defendants did not have any actual federal or D.C. income tax withholdings for tax year 2006.
Mastermind of Multimillion Dollar Mortgage Fraud Conspiracy Sentenced
On September 5, 2012, in Camden, N.J., Jong Shin, of Bronx, N.Y., was sentenced to 186 months in prison, five years of supervised release and ordered to pay $4.6 million in restitution for orchestrating a mortgage fraud scheme in Atlantic City, N.J. Shin was convicted in October 2011 of conspiracy to commit wire fraud, conspiracy to commit money laundering and two counts of making a false statement to a bank on a loan application. According to court documents and evidence at trial, Shin defrauded mortgage lending institutions by purchasing seven residential properties in Atlantic City and then recruiting straw purchasers to buy the properties. Shin prepared fraudulent contracts to sell the properties to the straw purchasers and then included significantly inflated incomes, as high as $29,000 per month, on the loan applications. Shin recruited and made large cash payoffs to a real estate appraiser to falsely inflate the appraisals. Shin also recruited and paid off a local title clerk. A mortgage broker at Summit Mortgage Bankers, conspired with Shin to falsify the numbers on the applications and appraisals so that they would be accepted at the lending institutions. After 17 separate real estate transactions, the straw purchasers owned the seven properties – with mortgages they could not pay that were greater than the properties’ market value. The seven properties all went into foreclosure. Shin reaped $1.2 million in proceeds, which she laundered through several monetary transactions into her bank accounts.
Utah Man Sentenced for Role in Multi-Million Dollar Mortgage Fraud Scheme
On August 10, 2012, in Charleston, W.Va., Michael S. Hurd, of Salt Lake City, Utah, was sentenced to 27 months in prison for his role in a multimillion-dollar mortgage fraud scheme involving properties in Hurricane, West Virginia. Hurd pleaded guilty in November 2011 to conspiracy to commit wire fraud and bank fraud. The defendant also previously pleaded guilty to mail fraud for his role a similar fraud scheme in Modesto, Calif. According to court documents, Hurd admitted that during the early and mid-2000's, he operated a company called “The Gift Program,” which he described as a “seller funded down payment assistance program” to provide home buyer’s money with funds to make a down payment and initial mortgage payments on real estate purchases. Hurd further admitted that he used The Gift Program to create an elaborate scheme to defraud lenders by concealing the transfer of loan funds to the borrower from the lender. Hurd admitted that in 2006 he became involved with Deborah and Todd Joyce, of Hurricane, in “flipping” homes. Deborah Joyce obtained inflated appraisals from two local appraisers, James Thornton and Mark Greenlee, and sent the appraisals to another co-conspirator, Raymond Morris in Salt Lake City, Utah. Morris admitted that he identified investors to purchase the properties at fraudulently inflated prices. Morris then had investors contact Hurd, who used The Gift Program to conceal the transfer of a portion of the loan proceeds to the investor from the lender. Hurd admitted that he paid Morris an undisclosed “commission” for this referral. Once the funds ran out, the investors defaulted on the loans and the properties went into foreclosure. Together, Hurd, Joyce and Morris illegally flipped six properties. Lender losses were almost $2 million. Morris and Hurd also orchestrated a similar scheme in Modesto, where Hurd acknowledged illegally flipping 20 properties with losses exceeding $5.5 million. Morris, of South Weber, Utah, pleaded guilty in July 2012 to wire fraud and bank fraud and awaits sentencing. Thornton, of Wilmington, N.C., was sentenced to five years of probation. Deborah L. Joyce was sentenced in April 2011 to 46 months in prison and five years of supervised release. Joyce’s husband, Todd Joyce, of Hurricane, was also sentenced in April 2011 to 18 months in prison on mortgage fraud and tax evasion charges.
Ohio Man Sentenced for Role in Mortgage Fraud Scheme
On August 2, 2012, in Cleveland, Ohio, Dennis Springer, of Maple Heights, Ohio, was sentenced to 42 months in prison, three years of supervised release, and ordered to pay $100,000 in restitution. Springer was indicted in February 2011 with 16 other individuals in connection with a $7.7 million mortgage fraud conspiracy. According to the Indictment, Springer and others conspired to fraudulently obtain mortgage loans totaling more than $7.7 million during the period from March 2005 through November 2007. The defendants recruited straw, or nominee, buyers who agreed to purchase homes and obtain mortgage loans in their names for a fee. The defendants would create false and fraudulent documents and related financial information to obtain the mortgage loans. These often included a false appraisal which significantly inflated the true value of the property; false income, employment, tax returns and W-2s; false bank statements; and false verifications of funds on deposit by the buyer.
Owner of New Jersey-Based Mortgage Foreclosure Rescue Companies Sentenced for $10 Million Mortgage Fraud
On July 31, 2012, in Newark, N.J., Ronald Harris Jr., of Piscataway, N.J., was sentenced to 46 months in prison, five years of supervised release, fined $12,500, and ordered to forfeit $945,548 and to pay $1.8 million in restitution. Harris pleaded guilty to an Information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. A former Harris employee, Sterling Bruce, of Newark, was sentenced to 18 months in prison. Bruce pleaded guilty to one count of wire fraud conspiracy. According to court documents and statements made in court, Harris owned and operated Harris Capital and Skyline Capital Group, which were advertised as foreclosure rescue companies with offices in Newark and Maplewood, N.J. Harris admitted that he, Bruce, and other individuals fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit. They told homeowners that if they allowed third party purchasers, or straw buyers, to take title to their homes for six months to a year, Harris could help them get more favorable mortgages and improve their credit ratings. Harris also told the homeowners the titles to their homes would be returned to them. Once the distressed homeowners and straw buyers were in place, Harris, Bruce, and others falsified the straw buyers' mortgage loan applications to increase their credit-worthiness and ensure that mortgage lenders would approve the loans. Before the closings on these fraudulent transactions, Harris and Bruce would file fraudulent liens for tens of thousands of dollars on the properties. At the closings, the liens would be paid off with the proceeds of the fraudulently obtained loans. Harris admitted that he regularly laundered these loan proceeds through various bank accounts he controlled. Harris and his co-conspirators caused lenders to fund dozens of fraudulent loans totaling more than $10 million, with Harris receiving approximately $1,145,993 of that amount.
Arizona Man Sentenced for Mortgage Fraud Conspiracy
On July 25, 2012, in Phoenix, Ariz., Clint Bryson Rogers, of Scottsdale, Ariz., was sentenced to 60 months in prison for his role in a mortgage fraud conspiracy. Rogers pleaded guilty on January 18, 2012, to conspiracy to commit the crimes of false loan application, wire fraud, and money laundering. As part of his guilty plea, Rogers admitted that he conspired with Shannon Kato, a real estate investor; Ernest Babbini, a loan originator; and Drew Hull, an escrow officer, to get mortgage loans to buy at least 15 homes in a short period of time by lying about his income and assets. Rogers also admitted that in addition to purchasing homes with the loan proceeds, he artificially inflated the sales prices to divert more than $2.5 million of the proceeds to himself or entities under his control. Evidence presented at sentencing showed Rogers spent these additional proceeds on such things as international travel, luxury cars, and transfers to his investment accounts. At least 10 banks fell victim to the scheme with losses exceeding $2.5 million.
Four Individuals Sentenced for Their Roles in Multi-Million Dollar Mortgage Fraud Scheme
On July 11, 2012, in Chicago, Ill., four individuals, including two Chicago lawyers, were sentenced for participating in a multi-million dollar mortgage fraud scheme involving at least 40 residential properties. All four defendants were convicted of multiple counts of mail and wire fraud for their roles in a scheme that netted them approximately $5.45 million in fraudulently obtained mortgage loan proceeds. The scheme involved paying kickbacks to a non-profit organization to fraudulently obtain some of the properties at a discount from the U.S. Department of Housing and Urban Development (HUD). Charles Murphy, an attorney, was sentenced to 72 months in prison and ordered to forfeit more than $2.4 million and pay $651,290 in restitution. John Farano, an attorney from Palos Park, was sentenced to 108 months in prison and ordered to forfeit more than $2.3 million and pay more than $1.3 million in restitution. Tracey Scullark, a sales agent for Genesis Investment Group, Inc., was sentenced to 78 months in prison. On July 10, 2012, Robert Brunt, the president of Genesis, was sentenced to 150 months in prison. In addition, Scullark and Brunt were each ordered to forfeit $4.2 million and pay more than $1.6 million in restitution. According to the evidence at trial, between 2002 and November 2006, Brunt, Scullark, Farano and Murphy acquired and caused to be acquired at least 40 residential properties in Chicago, often in economically-depressed areas, that needed extensive rehabilitation, with the intent to quickly resell the properties at fraudulently and grossly inflated prices for a profit. The defendants fraudulently acquired many of the properties by paying kickbacks to a former non-profit organization, Westwood Community Development, that was eligible to purchase the properties from HUD at a discount on the condition that the properties be sold to low-to-moderate income buyers. Rather than sell the properties to low-to-moderate income buyers, the defendants sold the properties to buyers who did not intend to reside in the homes and who were fraudulently qualified for financing based on false statements about their qualifications and false statements about the condition of the properties. Many of the residences were bought and sold through Genesis Investment Group Inc., which purported to renovate and sell residential properties.
California Man Sentenced in Mortgage Fraud Conspiracy
On July 9, 2012, in Riverside, Calif., Gregory Flores, manager at All Fund Mortgage in Anaheim Hills, was sentenced to 144 months in prison and three years of supervised release. In addition, Flores was ordered to pay over $1 million in restitution to homeowner victims and over $98,000 in restitution to the IRS. Flores pleaded guilty on February 24, 2012, to one count of wire fraud conspiracy and one count of tax evasion. According to the plea agreement, beginning around May 2003 through around June 2006, Flores or his co-conspirators, using various names including All Fund, Advantage 2000, Crown and Associates, Ichthommol Trust, B Owned, or Right Way, Inc. contacted numerous homeowners to sell or refinance their homes to others controlled by co-conspirators. Flores and others falsely claimed they could save the homeowners from foreclosure. As part of the conspiracy, Flores and others would convince the homeowner to allow an "investor" with good credit to be added to the title of their home, sometimes forging homeowner documents, telling the homeowner they could then refinance under a more favorable term. In most cases, title was never transferred back to the homeowner. Few if any payments were ever made and the properties were eventually sold in the course of foreclosure proceedings. At least 21 homeowners were victimized in a total of $1,042,866. In addition, court documents show that for calendar year 2004, Flores received approximately $340,000 in taxable income. Flores agreed he concealed this income for the purpose of evading the income tax due by creating a shell company in the name of Advantage 2000 for the purpose of disguising and diverting funds paid out of escrow. Flores received approximately $264,000 in taxable income and owed approximately $98,862 in tax.
California Man Sentenced in Multi-Million Dollar Mortgage Fraud Scheme
On May 23, 2012, in San Francisco, Calif., Justin Batemon was sentenced to 37 months in prison and ordered to pay restitution for his role in a multi-million dollar mortgage fraud scheme. Batemon pleaded guilty on January 31, 2012, to conspiracy to commit bank and wire fraud and to wire fraud. According to court documents, from 2006 until early 2007, Batemon was involved in a scheme to fraudulently obtain mortgage loans for parcels of real property located in Northern California. Batemon referred his friends, who included members and associates of the Hells Angels, to co-defendant Jacob Moynihan, a loan officer in San Francisco. As part of the conspiracy, Batemon obtained fraudulent mortgage loans by making up a company where he was self-employed. Batemon inflated his income and then had Moynihan and others provide altered bank statements. In addition, Batemon was involved in rehabilitating properties to be flipped to sell to other fraudulent buyers in the scheme. In total, the scheme involved more than $15 million in fraudulent mortgage loans.
Former Real Estate Attorney Sentenced in Million Dollar Mortgage Fraud Scheme
On May 15, 2012, in Providence, R.I., James D. Levitt, a disbarred real estate attorney from Pawtucket, R.I., was sentenced to 12 months and one day in prison, three years of supervised release, fined $25,000 and ordered to pay $610,500 in restitution. Levitt pleaded guilty on February 1, 2012, to three counts of bank fraud and two counts of filing false tax returns for his role in a $1.1 million mortgage fraud scheme. According to his plea agreement, between July 2006 and November 2007, based on fraudulent information, Levitt received three mortgages totaling more than $1.1 million for two properties in Providence and one in East Providence. Levitt falsely purported to obtain a buyer for the properties who was qualified to obtain financing to purchase the properties. To finance the purchases, Levitt induced a business associate to apply for the mortgages by representing to the investor that they would be partners, would refurbish the properties as condominiums and sell them at a profit. Levitt admitted that the mortgage applications and settlement statements contained false information, including failing to identify the true purchaser of the property and falsely stating that the buyer was putting a down payment in excess of $100,000 for each property. Additionally, Levitt conducted the closings on the properties despite his financial interest and the fact he was a disbarred attorney. After the closings, Levitt deposited the majority of the proceeds of the sale of the properties, approximately $270,000, into bank accounts which he controlled. He provided $25,000 of the proceeds to the seller of the properties shortly after the closing, and he later made periodic payments. Levitt admitted, however, that he used the majority of the proceeds for his business and for personal expenses. The two properties eventually went into foreclosure. Levitt used the third mortgage to buy a property from another company he controlled. He applied for the mortgage in his own name. The application also contained false statements and omissions, including an affirmation by Levitt that there were no outstanding judgments against him. Levitt admitted that he knew that there was an outstanding judgment against him of approximately $432,728 by the State of Rhode Island, which represented restitution owed to the state on a prior criminal conviction. Levitt also failed to disclose to the Internal Revenue Service in tax filings in October 2007 and October 2008 income derived from the ventures as well as from other sources.
Minnesota Man Sentenced for Orchestrating Multi-Million-Dollar Mortgage Fraud Scheme
On May 11, 2012 in Minneapolis, Minn., Michael Prieskorn was sentenced to 72 months in prison for orchestrating a mortgage fraud scheme that resulted in at least $18 million in losses by mortgage lenders. According to court documents, Prieskorn admitted he and others conspired to obtain mortgage loan proceeds by luring buyers to purchase properties. In return, Prieskorn promised the buyers $5,000 for every property purchased. He also promised to make all mortgage payments and pay all other bills associated with the properties for a specific term, after which, he would sell the properties at no cost to the original buyers or “investors.” Prieskorn maintained that the mortgage loans were risk free to their investors, knowing all the while the 20 investors were responsible for the loans. Following the closing of these real estate transactions, many investors defaulted on their mortgage loans and were forced into short sales or foreclosure. Yet, Prieskorn admitted receiving at least $1 million in gross receipts as a result of the scam. Prieskorn also admitted concealing from mortgage lenders that he temporarily deposited funds into the bank accounts of some investors to misrepresent the true financial status of those buyers, thereby inducing lender approval of the mortgage loans. He also concealed from the 20 mortgage lenders that he paid the down payments and closing costs for the investors. Prieskorn transferred money, by wire, into investors’ bank accounts and caused the faxing of fraudulent mortgage loan applications to potential mortgage lenders. He also caused lenders to make wire transfers of mortgage loan proceeds on related real estate transactions. Specific to the monetary transaction count, Prieskorn structured financial transactions to conceal that he was the recipient of funds from the fraud.
Mortgage Brokers Sentenced For Federal Offenses
On May 11, 2012, in Honolulu, Hawaii, Welton Kalani was sentenced to 70 months in prison and ordered to pay $714,216 in restitution for participating in a mortgage fraud and money laundering scheme. Stephen Balino was sentenced on April 30, 2012, to 27 months in prison, and Bobby Wood was sentenced on February 2, 2012, to time served (32 months in jail) and was ordered to pay approximately $740,000 in restitution. In December 2011, Kalani was found guilty of 12 counts of conspiracy, mail and wire fraud, obstruction of justice and money laundering; Balino was found guilty of seven counts of conspiracy, mail and wire fraud, making false statements on loan applications, and money laundering. Wood pleaded guilty to conspiracy, money laundering and identity theft charges before trial. All three were ordered to serve terms of supervised release following their release from prison. According to information produced in court, Kalani was co-owner of Accel Mortgage, LLC, and Balino was owner of New Horizons Financial, both of which offered mortgage loans from offices in Honolulu. According to evidence produced at trial, both individuals conspired with others to engage in fraudulent real estate transactions designed to pull equity out of properties about to go into foreclosure. Kalani, Balino and others identified homeowners facing financial difficulties and offered them the chance to stay in their homes, rent free, by transferring title to others temporarily. Kalani and Balino promised the homeowners that a “buyer” would purchase the property and make mortgage payments until the homeowners were able to buy the property back. Kalani and Balino then recruited persons to serve as “straw buyers” by promising them money to induce them to make false loan applications to fund the sham purchases. In three transactions, Kalani, Balino or others found an individual who served as a straw buyer or one who obtained loans by falsely claiming that he would live in the property and by inflating his income. The loans were “stated income loans” where the sub-prime lenders did not verify income, but instead relied on the figures stated by the borrowers. The false loan applications were supported by other false documents produced by others working with Kalani and Balino. Following each sale, the brokers were paid fees and commissions for procuring the loans. The equity in the property was also diverted away from the seller, and channeled through third parties to Kalani, Balino or others. After learning of the criminal investigation, Kalani contacted two witnesses, telling them to destroy documents and to lie to investigators.
Residential Care Home Owners, Real Estate Agents Sentenced in $20 Million Mortgage Loan Fraud Scheme
On May 10, 2012, in San Jose, Calif., Edith Nelson, Ronald Nelson, Nelda Asuncion and Cristeta Lagarejos were sentenced in a mortgage loan scheme involving at least 20 properties, 63 loans, and more than $20 million in fraudulent loan proceeds. Edith Nelson was sentenced to 37 months in prison, five years of supervised release, including 12 months in home detention, and ordered to pay $5,223,476, plus interest and penalties, in restitution. Ronald Nelson was sentenced to 32 months in prison, five years of supervised release, including nine months in home detention, and ordered to pay $5,223,476, plus interest and penalties, in restitution. According to their plea agreements Edith and Ronald Nelson, a married couple, owned and operated Placement Services, a referral service in Pleasant Hill, Calif., that placed elderly people into residential care home facilities. Although the State of California had excluded the Nelsons from facilities licensed by the Department based upon various licensing violations, the Nelsons continued to operate numerous residential care home facilities for the elderly and other properties using straw buyers. The Nelsons maintained full control over the properties by directing the straw buyers to sign grant deeds that either transferred title of the property to Edith Nelson or added her name to the title on the property. The Nelsons instructed some straw buyers to open bank accounts that were then controlled by the Nelsons. Nelda Asuncion, a real estate agent and co-owner of Realty World Pacific West in Concord, Calif., and Cristeta Lagarejos, a real estate agent and broker, and the owner of Legacy Financing in Pleasant Hill, also pleaded guilty on February 3, 2012. Asuncion was sentenced to 30 months in prison, five years of supervised release, including seven months in home detention, and ordered to pay $2,838,868 in restitution. Lagarejos was sentenced to 18 months in prison, five years of supervised release and ordered to pay $318,500 in restitution. In their plea agreements, Asuncion and Lagarejos admitted that they participated in the scheme with the Nelsons. As part of the scheme, Asuncion and Lagarejos determined the qualifying income the lenders required to approve mortgage loans and falsely placed that amount on the loan applications instead of the straw buyers’ actual income. Asuncion provided Placement Services with a summary of the fraudulent employment information on the loan applications prepared by Realty World Pacific West. Edith Nelson then falsely corroborated the employment information when the lenders called to verify employment.
California Man Sentenced for Role in Mortgage Fraud Scheme
On May 2, 2012, in Oakland, Calif., James Delbert McConville, of Fremont, was sentenced to 93 months in prison, three years of supervised release and ordered to pay more than $7 million in restitution. McConville pleaded guilty on January 25, 2012, to conspiracy to commit mail and wire fraud and money laundering. According to the plea agreement, McConville admitted to conspiring with others from March 2008 through approximately 2009 to present fraudulent loan applications to lending institutions. He admitted that members of the conspiracy paid straw buyers between $5,000 and $10,000 to use their names and credit histories to obtain financing from lenders. McConville also admitted that he received, on average, $150,000 per loan transaction as a marketing fee that was concealed from the lender approving the loan. McConville admitted that for each of the approximately 80 properties involved in the scheme, the escrow officer sent the lender a fraudulent settlement statement (HUD-1) that did not disclose the large marketing fee. The scheme resulted in the approval of almost $20 million in fraudulent loans.
Pennsylvania Man Sentenced for Mortgage Fraud Scheme
On April 23, 2012, in Pittsburgh, Pa., James C. Platts, a resident of Allegheny County, was sentenced to 46 months in prison, three years of supervised release and ordered to pay $80,145 in restitution on his conviction of mail fraud conspiracy, mail fraud and money laundering. According to information presented to the court, Platts' business, known as Easy Realty Solutions, Inc., entered into agreements with prospective buyers of four residential properties located in Allegheny County. To obtain loans for these buyers, Platts submitted false information to the lenders so they would approve the loans. The fraudulent representations included false statements concerning the buyers' incomes, cash on hand, and rental payment histories.
North Carolina Woman Sentenced for Mortgage Fraud Conspiracy
On April 2, 2012, in New Bern, N.C., Mary Rose Wright, of Raleigh, N.C., was sentenced to 52 months in prison, three years of supervised release and ordered to pay $1,416,022 in restitution. Wright pleaded guilty to wire fraud and conspiring to commit mail fraud, wire fraud and bank fraud. According to the criminal information, from August 2006 to November 2006, Wright, working as a mortgage broker, worked with others to defraud various financial institutions through the submission of false and fictitious mortgage loan applications. The purpose of the conspiracy was to fraudulently obtain mortgage loans by falsifying loan applications and HUD-1 statements and by fabricating supporting documentation to insure that banks would approve the loan applications. Based on these misrepresentations, Wright and others obtained loans and Wright took possession of a property in North Carolina. Since 2006, neither Wright nor the conspirators have made any mortgage payments.
Former Arizona Real Estate Agent Sentenced in Mortgage Fraud Scheme
On March 19, 2012, in Phoenix, Ariz., Joseph Bowen Brown, of Mesa, Ariz., was sentenced to 51 months in prison for conspiracy to commit wire fraud as part of a mortgage fraud scheme based in Phoenix. According to court documents, Brown acknowledged in his guilty plea that as a principal of The Solid Group, a local real estate firm that has since collapsed, he orchestrated illegal “cash back” mortgage sales on homes. From mid-2005 through mid-2007, he and others at The Solid Group purchased properties at or below market value and re-sold them based on inflated appraisals. They used some of the profits to provide cash kickbacks to the buyers and failed to disclose those cash payments to the mortgage lenders. Brown and his co-conspirators then pocketed the difference. Many of the buyers were vastly unqualified for the mortgage loans and only obtained them because of false statements made on loan applications concerning income, employment, and assets. In total, 49 properties were involved in the scheme, all of which have gone into foreclosure. The scheme resulted in nearly $10 million in losses to the mortgage lenders. Brown admitted in his plea agreement that he and his co-conspirators pocketed almost $2.5 million in the deals. Five others have entered guilty pleas in the same scheme. Co-defendant Benjamin Jackson was sentenced to 13 months in prison earlier this year and the remaining four are awaiting sentencing.
Former Loan Officer Sentenced on Mortgage Fraud and Other Federal Charges
On March 7, 2012, in Phoenix, Ariz., Paige Kinney, aka JamieLee Lawler, was sentenced to 180 months in prison and ordered to pay $22,000,000 in restitution. Kinney pleaded guilty in May 2011 to various charges related to a mortgage fraud scheme and to charges of bankruptcy fraud, wire fraud, mail fraud, and bank fraud in two separate indictments. According to court documents related to the first indictment, Kinney played a leadership role in a $40 million mortgage fraud scheme that targeted Countrywide Home Loans and other lenders. According to Kinney’s plea, from January 2005 through December 2007, Kinney and others used unqualified straw buyers to purchase properties, knowing that the straw buyers did not intend to live in the homes or be responsible for the loan payments. Kinney would obtain mortgage financing to purchase homes in the names of the straw buyers by submitting fraudulent mortgage loan applications and altering documents, such as bank statements, to misrepresent the straw buyers’ assets, income, and employment status. Based on these misrepresentations regarding the buyers’ ability to qualify for loans, lenders issued loans that exceeded the homes’ sales prices. Once the funds were obtained from the lenders, the extra proceeds, known as “cash-back,” were directed to bank accounts that Kinney controlled. In total, Kinney caused lending institutions to issue $38,745,215 in fraudulent loans. According to her plea agreement on the second indictment, Kinney declared bankruptcy and then attempted to hide assets and liabilities from the Bankruptcy Court by falsifying her name and social security number. Kinney also committed additional financial fraud by arranging for friends to fraudulently obtain a loan to purchase a Mercedes. In addition, she committed insurance fraud by staging a phony burglary of her residence and then collecting $130,000 from Allstate Insurance Company.
Former Real Estate Agent Sentenced for Role in Mortgage Fraud Scheme
On February 29, 2012, in Phoenix, Ariz., Robert Alexander, a real estate agent, was sentenced to 30 months in prison. According to court documents, Alexander represented buyers who purchased multiple homes with loan applications containing false information and concealing from the lenders “kick backs” to the buyers. Alexander pleaded guilty in August 2011 to conspiracy to commit wire fraud. According to his plea agreement, between September 2005 and August 2006, Alexander found sellers of distressed properties and offered to pay more than the asking price for those properties. He then obtained inflated appraisals to support the higher offers and resulting loan amounts. To further the scheme, Alexander recruited buyers that he knew would not be qualified to purchase multiple homes, and then facilitated the submission of loan applications containing false information for those buyers. At closing, Alexander instructed the escrow officer to disburse monies to third party entities. Alexander obtained both a commission and, in many cases, a bonus from the fraudulent transactions. The conspiracy involved as many as 44 homes that went into foreclosure resulting in estimated losses of $2,500,000.
Defendants Sentenced in Mortgage Fraud Scheme
On February 24, 2012, in Dallas, Texas, two defendants who pleaded guilty to their respective roles in a three-year, multi-million dollar mortgage fraud scheme were sentenced to prison. Michael Baker, a Dallas resident at the time of the fraud, was sentenced to 180 months in prison and ordered to pay $7,546,739 in restitution. Baker pleaded guilty in August 2011 to one count of wire fraud and one count of money laundering. Koreem Dujuan Baker, Michael Baker’s brother, who pleaded guilty to one count of wire fraud and one count of engaging in monetary transactions with criminally derived property, was sentenced to 57 months in prison. According to court documents, the scheme, led by Michael Baker, involved defrauding and obtaining money from lending institutions by, among other things, using straw buyers to purchase homes and submitting false/fraudulent documents to lenders. The defendants obtained nearly $22 million in fraudulently obtained loan proceeds through the scheme. Another defendant in this case, Monique Untae Stallworth, of Garland, Texas, was sentenced in January 2012 to 42 months in prison. Stallworth pleaded guilty to one count of wire fraud and one count of engaging in monetary transactions with criminally derived property. All the defendants were also ordered to pay significant amounts of restitution to the victim lenders who suffered losses because of the fraudulent mortgage loans.
Three Family Members Sentenced for $11 Million Mortgage Fraud Scheme
On February 6, 2012, in Springfield, Mo., three family members involved in a Springfield, Mo., real estate company were sentenced for their roles in a nearly $11 million mortgage fraud scheme that involved more than two dozen residential properties and earned the family more than $1.3 million in illicit profits. Charles Walker was sentenced to 120 months in prison and ordered to pay $4,345,761 in restitution, which represents the actual losses suffered by the lenders as a result of the mortgage fraud scheme. Linda Walker was sentenced to 12 months and one day in prison and Lee Walker was sentenced to 30 months in prison. Both Linda and Lee Walker are jointly liable with Charles Walker to pay the $4,345,761 restitution. The Walkers each pleaded guilty to their roles in a conspiracy to commit wire fraud, which was part of a mortgage fraud scheme that lasted from November 2004 to June 2006. Charles Walker also pleaded guilty to participating in a money-laundering conspiracy. Charles Walker admitted that he was the organizer and leader of the mortgage fraud scheme, from which he personally profited more than $1 million. Conspirators were involved in fraudulent real estate transactions in relation to 26 separate parcels of real estate totaling $10,944,023 in mortgage loans. Conspirators defrauded mortgage lenders by submitting fraudulent loan applications to purchase residential properties at artificially inflated prices, with a significant portion of the purchase price of each home returned to the buyer without the lenders' knowledge or consent. Because of the scheme, conspirators received kickback payments of approximately $4.3 million. Most of the residential properties involved in the mortgage fraud scheme have gone into foreclosure.
Texas Woman Sentenced in Mortgage Fraud Scheme
On January 13, 2012, in Dallas, Texas, Monique Stallworth was sentenced to 42 months in prison; two years of supervised release and ordered to pay $1,724,497 in restitution for money laundering. According to court documents, Stallworth and others opened bank accounts that they used to receive money from title companies for “upgrades” to residential real estate properties based on bogus invoices that were submitted to the title companies at closing. The defendants profited from loans to purchase residences in the Dallas area; fraudulently obtained mortgages in others’ names; and obtained mortgages for more than the sales price. In addition, they found individuals with sufficient credit to qualify for the loans and made each borrower appear to be a qualified, bona fide purchaser who intended to reside in the property, when the borrower had no intention of doing so. They also created surplus loan proceeds by creating bogus invoices for repairs/upgrades which were never done; allowed the residences to go into foreclosure after no, or just a few, payments were made on the loan; and shared in the surplus loan proceeds.
Michigan Real Estate Investors Sentenced for Tax and Mortgage Fraud
On January 12, 2012, in Detroit, Mich., Deangelo Wade was sentenced to 40 months in prison, three years of supervised release and ordered to pay $224,000 in restitution to the IRS. In addition to Wade, Abe Beydoun was sentenced to 12 months and a day in prison and three years of supervised release. Beydoun and Wade were also ordered to pay $1.8 million in restitution to the FDIC for mortgage fraud. According to court documents, between 2004 and 2006, Wade, Beydoun and others executed a scheme to defraud a bank in connection with the purchase of four properties located on in Plymouth, Michigan. Wade conducted real estate transactions by flipping houses and Beydoun was a loan officer. Wade used straw buyers and false information to obtain mortgages on the properties under his real estate business with the assistance of Beydoun. Wade repaired the properties and sold them at higher values resulting in large gains. At the sales closing, the title company would issue a check to the straw buyer and the straw buyer would sign the check over to Wade. At the time of the offense, the bank was insured by the FDIC. From 2004 through 2006, Wade failed to report the income he made from his real estate business and failed to report the commissions and gains he earned from the sale of the properties. In November 2006, Wade purchased a home and secured a mortgage for $1.6 million with the assistance of Beydoun. After inflating the value of the property, Wade received over $395,000 from the loan proceeds of the home. Wade also failed to report this additional income on his 2006 tax returns.
Defendant Sentenced in Two Mortgage Fraud Schemes
On December 21, 2011, Tampa, Fla., Chad Evans, of Brookville, Indiana, was sentenced to 70 months in prison and five years of supervised release for conspiracy to commit wire fraud, bank and mail fraud, and money laundering. The court also ordered a money judgment of $12,804,070, which represents the proceeds of the conspiracy. According to court documents, from November 2004 through October 2006, Evans conspired with others to buy approximately fifty houses in Florida through fraudulent methods. Evans and his conspirators paid individuals to act as "straw purchasers." These individuals were not real home buyers, but instead bought five or more properties each, and were generally paid approximately $5,000 per property for their respective roles. In addition, Evans and his conspirators secretly provided the straw purchasers with the down payments directly, or by subtracting the down payment amounts from their profits from the sale of the properties. As part of the scheme, the conspirators then took the difference between the respective loan amount and the sale price, less the down payment and the fee to the straw purchaser, as their profit. Evans' roles in the conspiracy were to identify properties to use in the scheme, and act as principal in two corporations: Shorefront Ventures, LLC, and Tye Funding, LLC. After October 2006, the scheme in Florida collapsed, causing $6,591,159 in losses. Evans moved to Ohio and starting in October 2007 and continuing through May 2008, Evans committed substantially the same crime. Using a new company, TC Funding, Evans fraudulently provided down payments to straw purchasers to purchase approximately 20 low-value properties and skimmed equity out of those transactions through purported payoffs for construction loans for improvements to the properties. Eventually, the Ohio scheme also collapsed, causing $892,114 in losses.
Three Sentenced in Mortgage Fraud Scheme
On December 14, 2011, in Salt Lake City, Utah, Christopher Ethington, of Riverton, was sentenced to 37 months in prison for his role in a mortgage fraud scheme involving properties in Davis, Salt Lake and Utah counties. Janet H. Ethington, of Riverton, was sentenced to five years probation, with 30 days in a county jail as a condition of supervision. In addition, Christopher and Janet Ethington were ordered to pay $1,336,773 in restitution. James Merrill Roberts, of Cedar Hills, was sentenced to 37 months in prison in the case. According to the indictment, the three defendants operated a scheme to identify residential properties, recruit straw buyers, and, through false statements on loan applications, falsely inflate the apparent value of the properties to induce lenders to grant loans for amounts in excess of their fair market value. According to court documents, Roberts formed Amerifinance Group, LLC, which promoted residential real estate transactions in Utah. Roberts admitted that he and Christopher Ethington recruited straw buyers to participate in purchasing many of the Amerifinance properties. Janet Ethington worked in the real estate business in the roles of loan processor, loan broker, and loan officer. As a part of her plea agreement, Janet Ethington admitted that she acted as a loan officer or broker in closing approximately 30 Amerifinance loans, although she was not a licensed by the State of Utah as a loan officer or mortgage broker. Roberts admitted he induced the straw buyers to participate in purchasing the properties by telling them they would not have to make a down payment or invest any of their own money to buy the home and that Amerifinance, not the straw buyers, would make the loan payments. These false representations were not disclosed to the mortgage lenders. When the loan payments were not made on the properties, the loans went into default and each was eventually the subject of a foreclosure sale or short sale, each resulting in a loss to the victim lender.
New York Man Sentenced to Participating in Mortgage Fraud Conspiracy
On December 13, 2011, in Hartford, Conn., Gary Snook, of Yorktown Heights, N.Y., was sentenced to 24 months in prison and three years of supervised release for participating in a mortgage fraud conspiracy. According to court documents and statements made in court, between approximately October 2003 and August 2006, Snook and others engaged in a conspiracy to defraud various residential mortgage lenders in connection with the financing of residential properties in Connecticut. Snook owned and operated York Accounting and Financial Services, which had an office in Danbury. At the request of an individual who was a loan originator working for several mortgage brokerage firms, Snook created false loan documentation, including fraudulent letters and phony tax returns that inflated prospective borrowers’ income. The documents were then faxed to the lenders to qualify prospective borrowers for mortgage loans. Snook created fraudulent documentation for 18 mortgage loans. Many of the loans ended in default, and the properties were foreclosed on. As a result, lenders suffered losses of more than $1 million.
Colorado Woman Sentenced for Role in Mortgage Fraud Scheme
On December 9, 2011, in Denver, Colo., Kimberly K. White, of Elizabeth, Colo., was sentenced to five years probation of which 12 months will be served in home confinement, and ordered to pay $1,088,912 in restitution. White pleaded guilty in July 2011 to one count of wire fraud related to a mortgage fraud scheme. According to the stipulated facts contained in the plea agreement and indictment, between March 26, 2005, and June 30, 2005, White worked with her co-defendants, Shawn Tieskotter and Craig Patterson, to execute a scheme to defraud various financial institutions as well as commercial mortgage lenders in connection with residential mortgage loan applications related to 13 properties in the Denver, Colorado metropolitan area. White, a licensed real estate agent, helped find various residential properties available for purchase and drafted contracts for the purchase of the properties. Tieskotter and Patterson prepared and submitted applications for two loans, a first mortgage and a second mortgage. Each of these applications contained materially false and fraudulent representations that Tieskotter intended to use the property as his primary residence. Most of the applications also contained materially false and fraudulent representations about the extent of Tieskotter’s liabilities related to other residential mortgage loans, in that they failed to include a complete list of the properties Tieskotter owned or was in the process of purchasing and falsely indicated that one of Tieskotter’s other properties was leased. Some of the applications were supported by fictitious leases. Tieskotter was previously sentenced to 9 months in prison, followed by 9 months of home detention and three years of supervised release. Patterson was sentenced to serve 10 months in prison, followed by 10 months of home detention and three years of supervised release. In addition, Tieskotter and Patterson were ordered to pay $1,181,528 in restitution.
Connecticut Man Sentenced for Participating in Mortgage Fraud Conspiracies
On December 7, 2011, in New Haven, Conn., Genaro R. Hathaway, of Weston, was sentenced to 33 months in prison and three years of supervised release for participating in two mortgage fraud conspiracies. Hathaway, an attorney, pleaded guilty in April 2011 to two counts of conspiracy and one count of tax evasion. According to court documents and statements made in court, Hathaway conspired with his husband, Steven Kottage, to commit wire fraud by making materially false statements to H&R Block Home Mortgage, Inc., including a false loan application, W-2, employment verification, and pay stub in connection with a mortgage on a home on Fire Island, New York. In addition, Hathaway and Kottage conspired to commit bank fraud by submitting a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. A co-defendant, Mary Ellen Durso, served as the straw owner for the condo to obtain the fraudulent loan proceeds for the benefit of Hathaway and Kottage. Through both schemes, Hathaway and Kottage defrauded Wells Fargo and Freddie Mac of more than $600,000. Hathaway and Kottage fraudulently appropriated nearly $750,000 in Hathaways clients’ funds while Hathaway was serving as the clients’ closing attorney for real estate transactions. When confronted by those clients, Hathaway and Kottage devised the mortgage fraud schemes to repay the stolen money. Kottage was sentenced in November 2011 to 41 months in prison. Durso was sentenced in March 2011 to three years of probation.
Colorado Real Estate Agent Sentenced in Mortgage Fraud Scheme
On November 23, 2011, in Denver, Colo., Cedric Lipsey was sentenced to 63 months in prison and three years of supervised release. According to the indictment, beginning in April 2004 and continuing until about March 2006, Lipsey and his co-defendant devised a scheme to defraud lending companies that funded residential mortgage loans and to obtain money from them by means of materially false and fraudulent pretenses, representations, and promises. Lipsey, a licensed real estate agent, held himself out as a successful real estate agent and investor. He orchestrated the purchase and resale or refinancing of numerous residential properties, including the sale of one of his own homes, by paying individuals to participate as “investors” in what he referred to as an investment “opportunity.” Lipsey arranged for these so-called “investors” to use their good credit to obtain mortgage loans to purchase the properties. Shortly after the first set of loans that helped these individuals purchase properties, Lipsey caused them to sell the properties to a second set of buyers at substantially higher prices, with Lipsey and his co-defendant taking a combination of commissions, fees, and proceeds from the first and second transactions. Lipsey falsely represented that the first buyers would be purchasing and had purchased the properties for less than their actual market value. The first sales were not “distressed”, as the defendants sometimes represented to facilitate their fraud. In fact, the first buyers purchased the properties at or near their market value, and there was no legitimate reason for the substantial increase in price when the same properties were resold shortly thereafter.
Former New Jersey Resident Sentenced in Mortgage Fraud Scheme
On November 18, 2011, in Springfield, Mass., Jason Foisy, formerly of South Hadley, N.J., was sentenced to 54 months in prison, five years of supervised release and ordered to pay $15 million in restitution for defrauding multiple lending institutions in connection with a mortgage fraud scheme. Foisy pleaded guilty on May 21, 2011 to conspiracy, wire fraud, bank fraud and money laundering. Had the case proceeded to trial the Government’s evidence would have proven that Foisy was part of a multi-million mortgage and bank fraud conspiracy involving more than 100 real estate transactions in Florida and western Massachusetts and multiple lines of credit originating out of a West Springfield branch bank. The scheme involved an aggregate loan value of at least $75 million and that the vast majority of the loans went into default. The scheme reached its pinnacle in October 2006, when co-defendant James June and Foisy started construction of a $6.6 million waterfront home in an exclusive area of Fort Lauderdale, Fla.
Connecticut Man Sentenced for Participating in Mortgage Fraud Conspiracies
On November 10, 2011, in New Haven, Conn., Steven J. Kottage, of Weston, Conn., was sentenced to 41 months in prison and five years of supervised release for participating in two mortgage fraud conspiracies. According to court documents and statements made in court, Kottage conspired with his husband, Genaro Hathaway, to commit wire fraud by making materially false statements to H&R Block Home Mortgage, Inc., in connection with a mortgage on a home on Fire Island, New York. In addition, Kottage and Hathaway conspired to commit bank fraud by submitting a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. A co-defendant, Mary Ellen Durso, served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of Kottage and Hathaway. Through both schemes, Kottage and Hathaway defrauded Wells Fargo and Freddie Mac of more than $600,000. On April 29, 2011, Hathaway pleaded guilty to two counts of conspiracy and one count of tax evasion. He awaits sentencing. Durso was previously sentenced to three years of probation, the first six months of which she must serve in home confinement.
Loan Officer and Title Agent Sentenced
On November 3, 2011, in Miami, Fla., Kimberly Mackey, of Pittsburgh, Pa., was sentenced to 60 months in prison, five years of supervised release and ordered to pay $1,654,805 in restitution. Marcos Echevarria, of Palm Beach, Fla., was sentenced to 24 months in prison and five years of supervised release. Mackey, Echevarria and two additional defendants (Louis Gendason, of Delray Beach, Fla., and John Incandela, of Palm Beach, Fla.) previously pleaded guilty to a criminal information charging them with one count of conspiracy to commit wire fraud for their participation in a $2.5 million home equity conversion mortgage (aka. reverse mortgage) scheme that defrauded unwitting borrowers, a reverse mortgage company, and the Federal Housing Administration (FHA). Defendants Gendason and Incandela worked as loan officers and solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan. Gendason altered real estate appraisals to fraudulently inflate the value of the borrowers’ properties since none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. Based on the false documentation, the reverse mortgage company approved and the FHA insured more than $2,572,813 in reverse mortgage loans. Mackey, a licensed title agent in Pittsburgh, Pa., fraudulently closed the loans, failing to pay off the borrowers existing mortgage loans. To perpetuate the fraud, the defendants engaged in a loan modification scheme to conceal the existence of the reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. Between May 2009 and November 2010, Mackey received loan proceeds from the scheme totaling $2,572,813. Mackey fraudulently diverted at least $988,086 to a bank account controlled by Incandela and Gendason, who used this money for their personal benefit. Defendants Louis Gendason, of Delray Beach, Fla., and John Incandela, of Palm Beach, Fla., is awaiting sentencing.
Minnesota Man Sentenced for Involvement in $7.7 Million Mortgage Fraud Scheme
On October 31, 2011, in Minneapolis, Minn., John Spencer was sentenced to 125 months in prison for money laundering, wire fraud and conspiracy to commit mortgage fraud. According to court documents, Spencer, a mortgage broker at Minnesota One Mortgage, brokered fraudulent loans that were used by recruited straw buyers to buy residential real estate at inflated prices. The transactions generated proceeds that greatly exceeded what the sellers were content to accept as full payment for their properties. The excess money was split up among the buyers Spencer recruited as well as Spencer himself and accomplices he solicited in an effort to bring the transactions to fruition. Spencer recruited co-defendant Bryan Joseph Lenton, a real estate appraiser, to appraise each of the units at substantially more than the owner of the units was willing to accept as full payment for them. Spencer used the straw buyers to purchase the units with loan proceeds obtained via fraudulent loan applications prepared by Spencer and Patrick Arthur Dols, another mortgage broker. On March 8, 2011, Lenton pleaded guilty to one count of conspiracy. In his plea agreement, Lenton admitted he provided appraisals for properties that falsely inflated market values to create a pool of funds to be split among him, Spencer, and the straw buyers. On March 1, 2011, Dols pleaded guilty to one count of conspiracy. In his plea agreement, Dols admitted that his role in the conspiracy was to take fraudulently drafted loan applications in the names of various straw buyers and find lenders willing to make mortgage loans based on the false information he was providing. Dols and Lenton await sentencing.
South Carolina Man Sentenced in Rock Hill Mortgage Fraud Case
On October 25, 2011, in Columbia, S.C., Laney Earl Allen, of Ft. Mill, South Carolina, was sentenced to 21 months in prison for conspiracy to commit mail fraud. Evidence presented in this case, established that Allen owned and ran Flex Buy Homes and Blue Granite Homes in Ft. Mill. He and co-conspirator Samuel Cowles, who was sentenced to 15 months imprisonment in July, took pre-qualification documents from investors and used them to obtain loans for real estate purchases. Cowles, with Allen’s knowledge and cooperation, falsified multiple loan applications by submitting to lenders that investment properties were going to be primary residences, which reduced the down payments. By falsifying loan applications, Cowles made it possible for Allen to make smaller down payments, increasing the profit Allen expected when he flipped the property. Allen and Cowles were responsible for falsifying approximately 20 loan applications, resulting in fraudulent loans totaling $2,160,650.
Three Sentenced in Mortgage Fraud Conspiracy
On October 18, 2011, in Portland, Ore., Chadwick Amsden was sentenced to 27 months in prison and five years of supervised release. On October 5, 2011, Joel Rosabal was sentenced to 33 months in prison and five years supervised release. On September 19, 2011, Adam Perkins was sentenced to 21 months in prison and ordered to pay over $1.2 million in restitution. Amsden and Rosabal were indicted by a grand jury on May 18, 2010, on charges of conspiracy, mail fraud, wire fraud, money laundering, and a forfeiture allegation. The conspiracy was to defraud lending institutions by inducing them to lend funds for the purchase of residential properties at an inflated price through the use of materially false representations and omissions, and in doing so, to fraudulently obtain a portion of those funds. During the course of the conspiracy, defendants ensured that loan proceeds were paid to borrowers as incentives or cash “kickbacks.” These cash kickbacks were not disclosed to the lender and ranged from approximately $8,000 to as much as almost $90,000. Defendants manipulated the underwriting process in order to qualify borrowers to purchase homes they would not have otherwise been able to buy. Perkins, through Rosabal and Amsden, purchased eleven homes in eight months, totaling more than $5.8 million in real estate using materially false representations to obtain cash kickbacks. The loss to lenders from the defendants’ scheme was over $3.8 million.
Former Arizona Loan Officer Sentenced for His Role in Mortgage Fraud Conspiracy
On October 11, 2011, in Phoenix, Ariz., Jaco Huguet, a former Arizona loan officer who worked in the metropolitan-Phoenix area, was sentenced to 24 months in prison and ordered to pay over $500,000 in restitution. Huguet pleaded guilty in July 2011 to one count of conspiracy to commit wire fraud and one count of conspiracy to commit transactional money laundering. According to court documents, Huguet, while acting as a loan officer for a mortgage broker, took part in a conspiracy to submit mortgage loan applications on behalf of straw buyers that contained at least one or more of the following material false statements: false statements concerning the intent of the loan applicant to occupy the property as a primary residence; inflated income; false representations concerning employment; or failed to disclose that the loan applicant had recently purchased another property that contained a major liability, a mortgage. After the title company received the proceeds from the fraudulently obtained loans, Huguet directed others to convert portions of these proceeds into cash. In Huguet’s plea agreement, he admitted to his involvement in this scheme relating to the sale of nine properties that were purchased between January and February 2007. Each of these properties went into foreclosure after the buyers failed to pay the mortgage payments. The estimated losses to the various financial institutions and/or the Federal Deposit Insurance Corporation (FDIC) relating to these transactions exceeded $1,000,000.
Former Missouri Real Estate Agent Sentenced for Mortgage Fraud Conspiracy
On October 3, 2011, in Kansas City, Mo., Angela R. Clark, of Lee’s Summit, Mo., was sentenced to 20 months in prison and ordered to pay $5,634,747 in restitution for her role in a mortgage fraud conspiracy. According to court documents, Clark orchestrated the mortgage fraud scheme, which also involved two mortgage loan officers and 15 straw buyers who purchased homes at inflated prices. Buyers obtained mortgage loans for more than the actual sale price by providing false information to mortgage lenders. The buyers, without the lenders’ knowledge, then kept the extra loan proceeds. These kickbacks were paid by submitting false invoices to the title companies, which showed payment was due to business entities that, in reality, were shell companies created by co-conspirators to conceal the fact that the buyers were receiving cash back from the loan proceeds. Buyers received kickbacks of about $100,000 on each house. Clark knew the loan applications and supporting documentation that contained false information would be submitted to mortgage lenders. Clark submitted false documentation and made fraudulent representations to title companies. In total during the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received more than $2.3 million without the lenders’ knowledge. Clark received commissions and other payments from the inflated prices totaling $405,197. According to court documents, Clark engaged in a similar mortgage fraud scheme with six other properties that are not part of this conspiracy, shortly before and during the same time frame as the conspiracy. The government contends that Clark received an additional $168,361 in commissions and other payments from those fraudulent purchases.
Pennsylvania Woman Sentenced for Mortgage Fraud Scheme, Failing to File Tax Returns
On October 5, 2011, in Pittsburgh, Pa., Deborah Kitay, a resident of Leetsdale, Pa., was sentenced to 18 months in prison and three years of supervised release on her convictions for failing to file her income tax returns and wire fraud conspiracy. According to information presented to the court, Kitay participated in a mortgage fraud conspiracy in which she and other members of the conspiracy submitted false loan applications to lending institutions that overstated the borrowers' income and assets, among other misrepresentations. In addition, as part of the conspiracy, fraudulent appraisals were submitted to the lending institutions as well as fraudulent settlement statements that falsely represented how the proceeds of the loan were to be distributed. Kitay also used the money from the fraud scheme to support her lifestyle and the lifestyles of other members of the conspiracy, but failed to file income tax returns reporting as income her illegally obtained earnings.