Examples of Mortgage and Real Estate Fraud Investigations - Fiscal Year 2013
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.
Real Estate Agent and Developer/Loan Officer Sentenced for Mortgage Fraud
On September 23, 2013, in Tucson, Ariz., William Michael Naponelli was sentenced to 24 months in prison and ordered to pay $3.1 million in restitution. On September 20, 2013, Bryan Atwood was sentenced to 15 months in prison and ordered to pay approximately $585,000 in restitution. Naponelli pleaded guilty on December 20, 2012 to conspiracy to commit bank fraud and conspiracy to commit transactional money laundering. Atwood pleaded guilty on February 25, 2013, to conspiracy to commit wire fraud. According to court documents, Naponelli, a former real estate developer and loan officer, participated in a scheme to obtain various loans between July 2006 and May 2007. Naponelli and another co-conspirator purchased several properties using various business entities with which they were associated. They then sold these properties to straw buyers. As part of the loan approval process, Naponelli caused to be submitted documents that contained material false statements including representations that the borrowers would provide the down payment or cash to close the real estate transactions. After the fraudulently obtained loan proceeds were received, portions of these proceeds were wired or deposited into bank accounts controlled by Naponelli or another co-conspirator. Atwood, who at the time of this conspiracy was a licensed real estate agent, obtained three properties through fraudulently obtained loans. He knew that documents provided to the lenders on his behalf relating to these properties contained one or more material false representations. The properties obtained as a result of this mortgage fraud scheme went into foreclosure resulting in significant losses to the lenders. Previously, co-defendants Walter Scott Fruit and Sandra Jackson were each sentenced for their involvement in the conspiracy. Fruit, a licensed real estate agent, received 30 months in prison and Jackson, a former escrow agent, received six months in prison.
California Man Sentenced for Role in Mortgage Fraud Scheme
On September 16, 2013, in Fresno, Calif., Eric Ray Hernandez, of Bakersfield, was sentenced to 130 months in prison and ordered to pay $6,087,541 in restitution to the victims of the crime and to forfeit $6,037,541 to the United States. Hernandez pleaded guilty to conspiracy to commit mail fraud, wire fraud, and bank fraud. According to court documents, between October 2005 and May 2007, Hernandez conspired with others to defraud mortgage lenders by submitting false loan applications and fraudulent documentation to lenders, causing the lenders to fund mortgage loans based on false and misleading information. During this time period, Hernandez was employed at mortgage brokerages in Bakersfield. The defendants submitted to lenders loan applications that included material misstatements concerning the borrowers’ income, assets, employment, and the borrowers’ intent to reside in the properties as owners, among other false statements. The defendants also fabricated false supporting documentation and submitted it to lenders in support of the loan applications. Hernandez admitted in his plea agreement that the defendants caused the defrauded lenders losses of approximately $6,037,541.
Texan Sentenced for Mortgage Fraud
On September 9, 2013, in Dallas, Texas, Eric Damon Johnson was sentenced to 48 months in prison and ordered to pay $3,753,539 in restitution, jointly with a co-defendant. Johnson pleaded guilty on April 22, 2013 to conspiracy to commit wire fraud affecting a financial institution. According to court documents, Johnson was a licensed loan officer and mortgage broker and the president of Bridgemark Investment Group (BIG). Johnson and his co-defendant conspired to fraudulently obtain mortgage loans in excess of the true sales price of residential real estate properties by making false statements on loan applications and submitting fake invoices for construction upgrades or repairs that were never performed. The conspiracy resulted in more than $10 million in fraudulently-obtained loan proceeds. BIG recruited individuals to purchase residential real estate as “investors” and Johnson and his co-defendant promised investors that BIG would find tenants to rent the property and make the mortgage payments. Johnson and his co-defendant agreed to make payments to the “investors” when the loan closed that were not disclosed to the mortgage lender on the HUD-1 Settlement Statement. The loan applications were submitted to residential mortgage lenders, who on the basis of the false statements in the loan applications, agreed to fund primary and secondary mortgages for residential real estate properties.
Husband and Wife Sentenced in Mortgage Fraud Scheme
On August 26, 2013, in Boise, Idaho, Aaron Michael Hymas was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,520,296 in restitution. Tiffany Kim Hymas was sentenced to 60 days in prison, three years of supervised release, beginning with six months of home detention, and ordered to pay $667,505 in restitution. They both pleaded guilty to one count of wire fraud on October 18, 2012. According to the plea agreements, Aaron and Tiffany Hymas defrauded a lender by having Tiffany submit a residential loan application for $295,600, on March 28, 2007, in which she made material misrepresentations. On the application, Tiffany Hymas stated that she was employed by OPM Enterprises and had income and commissions of $72,500 per month, and that she had gross rental income of $14,600 per month from four properties. Based on these misrepresentations, the mortgage corporation funded the loan. In addition to Aaron and Tiffany Hymas, eleven individuals have been sentenced since November 2010 on charges of wire fraud, bank fraud and making false statements.
Real Estate Broker Sentenced for Multimillion Dollar Mortgage Fraud Scheme
On August 15, 2013, in Sacramento, Calif., Hoda Samuel, of Elk Grove, was sentenced to 120 months in prison for a mortgage fraud scheme that caused more than $5.5 million in loss. According to evidence presented at trial, Samuel, a licensed real estate broker, owned and operated real estate agency Liberty Real Estate & Investment Company and Liberty Mortgage Company. Between April 5, 2006 and February 26, 2007, there were 30 fraudulent sales transactions where Samuel was the real estate agent for the buyer in 29 of the home sales and represented the seller in at least 15 transactions. Each transaction involved false statements on loan applications in order for unqualified buyers to qualify for the loans. These included false statements about income, employment, and rental history. False documents were created and submitted to lenders to support these lies. Persons were paid to answer lender calls and affirm the false statements. All of the properties went into foreclosure. Samuel not only falsified the borrowers’ ability to repay the loans, she also falsified the value of the collateral securing these loans. Fraudulent purchase prices, often exceeding the actual asking prices by $15,000 to $40,000, were inserted into contracts that included repairs and costs for disability access modifications. At times the buyers’ minor children were named as building contractors so that money could be funneled back to buyers. The excess amounts were paid back to the buyers. The repairs and remodeling were seldom if ever done, and the lenders were unaware that the true purchase price for each property was below the total amount funded. Because Samuel saddled the banks with borrowers incapable of making payments, and properties worth less than the loans, loss was practically assured regardless of the market.
Real Estate Developer and Escrow Agent Sentenced for Mortgage Fraud
On August 9, 2013, in Tucson, Ariz., Walter Scott Fruit and Sandra Jackson were sentenced for their roles in a mortgage fraud scheme to obtain various loans between July 2006 and May 2007. Fruit was sentenced to 30 months in prison and ordered to pay more than $2.5 million in restitution. Jackson was sentenced to six months in prison and ordered to pay approximately $480,000 in restitution. Fruit pleaded guilty on February 28, 2013, to charges of conspiracy to commit bank fraud and conspiracy to commit transactional money laundering. Jackson pleaded guilty on February 27, 2013, to conspiracy to commit wire fraud. According to court documents, Fruit, a real estate agent and real estate developer, and another co-conspirator purchased several properties using various business entities with which they were associated. Fruit and his co-conspirator then sold these properties to straw buyers. He also fraudulently inflated the true sales price of the properties. As part of the loan approval process, Fruit knowingly caused to be submitted documents containing false statements representing that the borrowers would provide the down payment or cash to close the real estate transactions. Portions of the fraudulently obtained loan proceeds were wired or deposited into bank accounts controlled by Fruit or another co-conspirator. Jackson, a former escrow agent, obtained three properties through fraudulently obtained loans. She provided documents that contained one or more material false representations to the lenders. The properties obtained as result of this mortgage fraud scheme went into foreclosure resulting in significant losses to the lenders.
Defendant Sentenced in Connection with Mortgage Fraud Scheme
On August 5, 2013, in Salt Lake City, Utah, Keith Nelson Cook, of Emmett, Idaho, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $1,905,651 in restitution to victims of his fraud scheme. Cook pleaded guilty in March 2013 to three counts of mail fraud, three counts of wire fraud and one count of money laundering in connection with a scheme to defraud students and mortgage lenders. According to his plea agreement, Cook, or individuals working under his direction, recruited students willing to pay a fee to be coached in the art of investing in real estate at a profit. Cook hired people to mass market the real estate program opportunity by phone. During the calls, individuals acting at Cook’s direction made one or more fraudulent statements, including telling students that he was a nationally recognized real estate expert and guaranteeing that participation in his program would result in either doubling the student’s income or a gain of $50,000 during the first year of participation. Cook solicited payments of between $15,000 and $30,000 from prospective students, and also received the students’ financial and credit information. He solicited $427,500 from students. Cook refused to provide the promised coaching and diverted the $15,000 to $30,000 application fees for his own unauthorized business or personal use. In addition, Cook induced certain students to become straw buyers of residences in Salt Lake County. He represented to the straw buyers that they would not have to make a down payment or invest any money of their own to buy the home; that the straw buyer would have no financial risk from the transaction and would have no obligation to make loan payments. At first, Cook’s entities made payments on the properties to give the mortgage lenders the false impression that the loans were performing appropriately. However, at some point he stopped making payments on the loans, leaving the straw buyers with mortgages they did not have the ability to repay and mortgage lenders with significant losses on the non-performing loans. The total loss amount incurred by the straw buyers and the mortgage lenders in the scheme was $1,905,651.
Wisconsin Man Sentenced for Bank Fraud and Money Laundering
On July 29, 2013, in Milwaukee, Wis., Randez J. Long, of Milwaukee, Wis., was sentenced to 21 months in prison, three years of supervised release and ordered to pay $984,043 in restitution to the victims. Long pleaded guilty in March 2013 to bank fraud and money laundering. According to court documents, from approximately January 2008 through April 2008, Long, and others working with him and at his direction, purchased or sold approximately 35 residential properties in the Milwaukee area. In particular, Long bought at least 11 properties in his sister’s name and seven properties in his mother’s name without the consent of either relative. The purchases were typically financed through mortgage companies or federally insured banks. Long, along with others working for him, sent these institutions loan applications and documents that contained false and fraudulent information regarding the borrower’s employment, assets and income. Long and others also provided prospective lenders with false documents purporting to verify the borrower’s employment, income and assets. In some cases, Long inflated the purchase price of the residence, which enabled him to divert significant proceeds of the sale to himself, or to an entity that he controlled. Long frequently provided the funds that the nominal buyer was supposed to contribute to the purchase. He also would contact the lender that the borrower was unable to pay the loan and negotiate a fraudulent “short sale.” Long and others would then provide lenders with false documents, including offers to purchase and settlement statements, for amounts substantially less than the amount owed to the lender. At the same time, Long would then fraudulently arrange to sell the property to a third party for substantially more than the amount represented to the lender.
Minnesota Resident Sentenced for Mortgage Fraud Scam
On July 31, 2013, in Minneapolis, Minn., Richard Scott Spady, of Bloomington, Minn., was sentenced to 24 months in prison and two years of supervised release. Spady pleaded guilty on September 5, 2012 to one count of conspiracy to commit wire and mail fraud and one count of filing a false income tax return. On April 22, 2013, Spady’s co-defendant, Michele Denise Sengstock, also of Bloomington, was sentenced to 14 months in prison for wire fraud. Spady and Sengstock were ordered to pay $1,127,129 in restitution. According to court documents, Spady operated a company called Unified Home Solutions (UHS), which identified homeowners who were facing mortgage foreclosure or already in foreclosure proceedings. UHS then found third party investors to purchase the homes, planning to sell them back to the original homeowners within one to two years. In the meantime, the distressed homeowners could live in their homes. Though in foreclosure, the homeowners still had some equity in their homes. When the properties were sold, the original homeowners received checks for that equity, which they then signed over and the proceeds were used to pay expenses and divided among the investors, UHS, and others. In his guilty plea, Spady admitted that false mortgage loan applications and loan closing documents were prepared and that lenders were not told about the distribution of equity from the sales, including rolling one homeowner’s equity into the purchase of a subsequent home for an investor. Fewer than 10 percent of the homeowners who used UHS were able to retain their homes, and all the homeowners lost their equity in the process. Spady also admitted that for the tax years 2006 and 2007, he failed to report over $100,000 in income on his tax returns, resulting in a tax loss of more than $30,000.
Defendant Sentenced in Mortgage Fraud Scheme
On July 29, 2013, in Phoenix, Ariz., Daniel Morar was sentenced to 60 months in prison, three years of supervised release and ordered to pay $222,784 in restitution. Morar pleaded guilty on April 16, 2013 to conspiracy to commit wire fraud. According to court documents, from July 1, 2006 through January 1, 2007, Morar and others conspired to use "straw buyers" to purchase multiple properties and to receive "cash back" following the closing of the real estate transactions. Morar and others directed the straw buyers to submit loan applications that falsely represented their assets, income, liabilities, source of down payments, and the intent to occupy the homes as their primary residences. Based on these false misrepresentations, lending institutions wired funds to close the real estate transactions. In fact, the straw buyers were unable to afford the multiple properties and would not be using any of the properties for their primary residences. Throughout the conspiracy, the cash back from at least 19 transactions were deposited into Morar's bank accounts. For each transaction, the cash back was falsely represented on HUD-1 forms as funds for remodeling work. However, the remodeling work was either minimally completed or not done at all. The cash back was used for personal expenses. In addition, a portion of the cash back proceeds were wired to accounts in Romania controlled by family members.
Defendant Sentenced for Role in Multi-Million Dollar Mortgage Fraud Scheme
On July 8, 2013, in San Francisco, Calif., Kevin Derricott was sentenced to 20 months in prison, three years of supervised release and ordered to pay $3.43 million in restitution. On February 19, 2013, Derricott pleaded guilty to conspiracy to commit wire and bank fraud and bank fraud. According to the plea agreement, from about February 2006 through December 2008, Derricott conspired with others to submit mortgage applications to various lenders that contained materially false information about the borrower-applicants, such as inflated salary figures, inflated assets claims, or false employment information, in order to trick the lenders into making loans. Derricott also recruited borrower-applicants, procured false supporting documentation for loan applications, and submitted fraudulent loan applications to lenders in exchange for a portion of the fraudulent proceeds.
Defendant Sentenced for Role in Mortgage Fraud Scheme
On July 2, 2013, in San Antonio, Texas, Robert Brooks, of Lantana, Texas, was sentenced to 135 months in prison, five years of supervised release and ordered to pay approximately $8.5 million in restitution for his role in a mortgage fraud operation involving a series of “property flip” schemes. Brooks was convicted by jury on January 29, 2013, of one count of conspiring to commit bank, wire and mail fraud, eight counts of mail fraud and two counts of aiding the filing of false income tax returns. Evidence presented during trial revealed that from May 17, 2005, until February 21, 2008, twenty individuals, under the direction of Robert Brooks, participated in a mortgage fraud scheme where Brooks purchased properties at fair market value then resold at an artificially inflated price to straw purchasers. Brooks recruited his co-defendants, which included appraisers, loan processors, title company employees, and straw purchasers. He provided them with kickbacks from loan proceeds for their participation in the scheme. Brooks used the proceeds from the purported sales to various nominees to pay for his initial purchase of real estate, to pay closing costs for both his purchase and sale to the nominee, to pay the nominee’s down-payment, to pay the nominee for the nominee’s participation, and to pay the mortgage for the first 12 months, after which each mortgage went into default. Brooks’ mortgage loan scheme involved over 40 properties and defrauded financial institutions of over $20 million. In addition, Brooks submitted false 2007 income tax returns for himself and his wife, and for a partnership, which contained a false business expense.
Tennessee Developer Sentenced in Mortgage Fraud Scheme
On July 1, 2013, in Knoxville, Tenn., Jeffrey Whaley, of Sevierville, Tenn., was sentenced to 60 months in prison for his role in a mortgage fraud scheme. Whaley was convicted in May 2012 of wire fraud, bank fraud, and money laundering. On June 6, 2013, Jerry Kerley, a title attorney, was sentenced 48 months in prison. According to court documents, "straw borrowers" were recruited to obtain mortgage loans in their names based on promises that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. Whaley and Kerley concealed eight real estate transactions from the banks where the borrowers did not provide the money identified as the "cash from borrower" on the HUD-1 Settlement Statement. In those eight transactions, the banks wired more than $6 million in loan proceeds to Kerley’s title company. Kerley and Whaley committed money laundering offenses through financial transactions that involved proceeds from the mortgage fraud scheme.
Mortgage Company Owner Sentenced for Role in Conspiracy
On June 14, 2013, in Oakland, Calif., Amy Nicole Schloemann, aka Amy Kinney, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $5,805,902 in restitution. Schloemann pleaded guilty on August 22, 2012, to conspiracy to commit wire fraud. According to court documents, Schloemann was the president of Hiddenbrooke Mortgage Company, a real estate and mortgage brokerage company in operation from 2005 through 2007 in Vallejo, California. Between 2006 and July 2007, Schloemann conspired with others to purchase more than 18 properties in California in the names of fictitious identities and using straw buyers. As part of the conspiracy Schloemann supervised others who processed loan packages with materially false information, including contracts that reflected inflated sales prices above the original sales prices. The purchase loans, which were 100% financed, exceeded the sales prices received by the sellers. The excess amounts from the loan proceeds, or “profits” from the transactions, were dispersed through escrow to entities controlled in part by Schloemann. All but a few of the properties involved in the conspiracy were foreclosed due to the failure to make mortgage payments. The lenders sustained significant losses as a result of the fraud.
Father and Son Sentenced in Mortgage Fraud Scheme
On June 13, 2013, in Newark, N.J., a father and son were sentenced for running a mortgage loan fraud scheme that succeeded in obtaining $4.4 million in mortgage loans. Vito C. Grippo, the president of Morgan Financial Equity Shares and Vanick Holdings, LLC, based in Holmdel, N.J., was sentenced to 96 months in prison and five years of supervised release. He pleaded guilty to one count of conspiracy to commit wire fraud, two counts of filing a false tax return for the years 2006 and 2007, and one count of aiding and procuring the filing of a false tax return for the year 2008. Frederick “Freddie” Grippo, formerly a loan officer at Worldwide Financial Resources and an officer of Vanick Holdings, was sentenced to 41 months in prison and three years of supervised release. He pleaded guilty to one count of conspiracy to commit wire fraud. According to court documents and statements made in court, between January 2008 and February 2010, Vito Grippo held Morgan Financial out to the public as a company that could help homeowners who faced foreclosure on their homes through an “Equity Share Program.” The Equity Share Program involved creating a limited liability company (LLC) in the name of the homeowner’s house, in which the homeowner would supposedly own a 90 percent interest with the rest to be owned by one or two private investors. In reality, the so-called investors invested nothing and were instead straw buyers recruited by Vito and Frederick Grippo, because they had good credit. The Grippos and their associates then applied for mortgages in the names of the “investors” for the purchase of the properties owned by the homeowners in distress. The homeowners frequently did not understand that they would be transferring title to their homes to the “investor.” Once the new loan application was filled out, it would be submitted to Worldwide Financial Resources for processing, where Freddie Grippo, a loan officer, would see to it that the loan was approved. Once the loan was approved and the loan money was wired to the settlement agent for a given transaction, Vito Grippo would direct the settlement agent to forward a portion of those loan proceeds to bank accounts that Vito Grippo controlled. In addition, Vito Grippo did not report over $1.8 million in gross income for the years 2006, 2007 and 2008.
Tennessee Attorney Sentenced for Mortgage Fraud Scheme
On June 6, 2013, in Knoxville, Tenn., Jerry Kerley, of Kodak, Tenn., was sentenced to 48 months in prison. Kerley was convicted in May 2012 of wire fraud, bank fraud, and money laundering. The indictment charged Kerley and Jeffrey Whaley with conspiring to defraud a bank and mortgage company, through a "straw borrower" mortgage fraud scheme. Kerley, a Tennessee licensed attorney, was the owner of Guaranty Land Title Company where the fraudulent loans were closed. Whaley conducted business through a company known as GBO Enterprises which received substantial sums of money from the loan proceeds. Straw borrowers were induced to obtain mortgage loans in their names based on promises that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. The indictment further alleged that materially false representations were made to the bank and mortgage company. The false representations related to the straw borrowers’ source of funds for down payments and amounts recorded as "cash from borrower" on HUD-1 Settlement Statements and loan applications. The banks would disburse the mortgage loan proceeds it had wired to and entrusted with Kerley's title company Guaranty Land Title. In total, the bank and mortgage company wired more than $6 million in loan proceeds to Guaranty Land Title Company for disbursement. The indictment also alleged that Kerley and Whaley committed money laundering offenses through financial transactions that involved proceeds from the mortgage fraud scheme. Whaley is awaiting sentencing.
Kansas City Man Sentenced in Mortgage Fraud Case
On June 5, 2013, in Kansas City, Kan., Michael D. Robinson of Kansas City, Mo., was sentenced to 12 months and a day in prison. Robinson pleaded guilty to one count of conspiracy to commit mail fraud. According to his plea agreement, Robinson purchased foreclosed houses and then sold them to buyers at inflated prices. He bought and sold houses personally and through companies he established. To advance the scheme and make sure buyers were approved for loans, Robinson gave buyers money for down payments to buy houses. He put money into a bank account in a buyer’s name to make it appear to the lender that the buyer had money to qualify for a loan. Robinson falsely stated that buyers had provided down payments. In order to get the lender to approve loans at inflated prices, Robinson agreed with an appraiser who provided inflated appraisals based on false information.
Husband and Wife Sentenced for Tax Fraud
On May 15, 2013, in Pensacola, Fla., Rudolf Straat and his wife Maria Gudelis, both of Sarnia, Ontario, Canada, were sentenced to 24 months in prison and ordered to pay $575,814 in restitution to the IRS and $5,188,459 to the mortgage lenders they victimized. Gudelis and Straat pleaded guilty for conspiring to commit tax fraud, mortgage fraud and money laundering. According to court documents, between 2004 and 2012, the husband-and-wife team fraudulently obtained mortgage loans to purchase homes in Florida and Nevada for more than $10 million. In applying for these loans, Straat and Gudelis made false statements such as falsely representing they were United States citizens when, in fact, Straat is a citizen of the Netherlands, and Gudelis is a citizen of Canada. Straat and Gudelis concealed income they received on the sales of these homes by transferring the properties into trusts and nominee companies and by taking other steps to ensure that gains from the sales would not be reported under their personal taxpayer identification numbers. The couple lived in Florida from at least October 2005 through July 2007. During that time, Straat failed to file federal income tax returns for tax years 2005 and 2006, failing to report to the IRS $364,902 in capital gains for 2005, and more than $689,368 in capital gains for 2006. Gudelis also failed to file income tax returns for tax years 2005 and 2006, failing to report $749,883 in capital gains for 2005, and more than $30,826 in capital gains for 2006.
Massachusetts Man Sentenced for Mortgage Fraud and Identity Theft
On May 14, 2013, in Boston, Mass., Peterson Cherimond, of Dorchester, was sentenced to 87 months in prison, one year of supervised release and ordered to pay $2.2 million in restitution to six mortgage lender victims. In July 2012, Cherimond pleaded guilty to nine counts of wire fraud and three counts of money laundering. In October 2012, he pleaded guilty to four additional counts of wire fraud, seven counts of identity fraud and two counts of aggravated identity theft. Cherimond recruited co-defendants Judy Bonas and Allison Gates to use stolen identities for the purpose of obtaining fraudulent mortgage loans aggregating more than $3.8 million for seven properties. Cherimond provided Bonas and Gates with bogus identification documents and paid them $1,500 to $3,000 per property to pose as the purported buyers at mortgage loan closings in order to obtain the fraudulent loan proceeds. Bonas was sentenced in February 2013 to six months in prison and two years of supervised release. Gates was sentenced in March 2013 to six months in prison and two years of supervised release.
California Woman Sentenced in Bank Fraud Scheme
On May 13, 2013, in Santa Ana, Calif., Safieh Fard, of Escondido, Calif., was sentenced to 63 months in prison and ordered to pay $594,000 in restitution to the IRS. A jury convicted Fard on November 21, 2012, of one count of conspiracy to defraud the IRS and one count of conspiracy to launder the proceeds of bank fraud. According to the indictment and evidence introduced at trial, starting in 1997 and continuing through 2004, Fard and her co-conspirators purchased valuable residential real estate properties, including numerous beachfront properties in Newport Beach, Calif. To obtain mortgages to purchase these properties, Fard and her co-conspirators provided false information to federally insured banks that substantially overstated their income and assets on mortgage applications. Fard submitted mortgage applications that falsely stated she earned over $40,000 per month, despite claiming no taxable income on her federal income tax returns during the eight year conspiracy. Fard and her co-conspirators bought, sold, and transferred ownership of the properties between and among themselves. Ultimately, the properties were sold to third parties resulting in substantial monetary gain. Fard and her co-conspirators then failed to report capital gains on more than $3.7 million from these sales on their federal income tax returns. The evidence further established that Fard and her co-conspirators sold Newport Beach properties to unrelated third parties and received the proceeds in a large lump-sum payment by either wire transfer or check. The proceeds were then transferred through multiple bank accounts to an account in the name of Fard’s co-conspirator, who withdrew proceeds in cash in amounts slightly below the $10,000 federal reporting requirement. Fraud proceeds were also used to buy new real estate properties.
Four Conspirators Sentenced for Widespread Mortgage Fraud Scheme
On March 6, 2013, in Plano, Texas, four conspirators were sentenced in a mortgage fraud scheme. Davon Willis was sentenced to 48 months in prison, three years of supervised release and ordered to pay $6,744,896 in restitution. Rodney Lavan Giles was sentenced to 46 months in prison, five years of supervised release and ordered to pay $590,781 in restitution. Julila Nicole Allen was sentenced to 24 months in prison and three years of supervised release. Quincy Dynell Harrington was sentenced to 18 months in prison and three years of supervised release. According to court documents, the defendants held various roles in a conspiracy to defraud mortgage companies. Willis and Harrington were mortgage brokers. Allen and Giles were home buyer recruiters. Each defendant pleaded guilty to conspiracy to commit money laundering. Giles also pleaded guilty to conspiracy to commit bank fraud. As part of the conspiracy, the defendants recruited buyers for properties using falsified mortgage loan applications which overstated the amount of the actual purchase price and loan amounts the buyers needed to purchase certain properties. When the mortgage loans were funded, the excess loan funds were used to pay kickbacks to the co-conspirators. In order to conceal the kickbacks from the lenders, the kickbacks were shown as fees for services on the settlement statements and paid to and from bank accounts of business entities controlled by the co-conspirators.
Pennsylvania Woman Sentenced for Mortgage Fraud
On March 5, 2013, in Pittsburgh, Pa., Vasilia Berger, aka Vasilia Klimantis, was sentenced to 78 months in prison, three years of supervised release, and ordered to pay $871,669 in restitution. According to court documents, Berger and another individual operated a mortgage business called Steel City Mortgage that assisted individuals in obtaining financing to purchase real estate. From around August 2002 until about January 2006, Berger submitted loan applications to lenders that contained material misrepresentations about the borrower’s financial condition. Berger submitted false documents in connection with the loan applications that inflated the true value of the properties, misrepresented the borrower’s employment status and overstated the borrowers’ income. Additionally, Berger and other co-conspirators deposited illegally obtained loan proceeds into borrower’s accounts to make it appear they had sufficient funds to qualify for loans and down payments. Finally, the borrowers were directed to sign over the checks they received at closing to Berger and others involved in the conspiracy.
Ohio Man Sentenced for Mortgage Fraud
On February 13, 2013, in Columbus, Ohio, Cameron Green, of Pickerington, Ohio, was sentenced to 12 months and one day in prison, three years of supervised release for mortgage fraud. He was also ordered to pay $6,115,965 in restitution, jointly with Jason Simcox and Kevin Simcox. According to court documents, between August 2006 and May 2007, the men used a mortgage brokerage company they co-owned, Vanguard Mortgage, to finance the purchase of 26 properties located in Arizona. Each man inflated his income, minimized his assets, failed to disclose his ownership of several other properties on which he held mortgage loans, and concealed the fact that he intended to receive substantial cash kickbacks after the closing of three properties. Simcox and Green received approximately $1,469,263 in seller kickbacks, real estate agent commissions, real estate agent commission kickbacks, and fees via interstate wire transfers. On January 9, 2013 Jason Simcox, of Pickerington, Ohio was sentenced to 12 months and one day in prison and three years of supervised release.
Ohio Man Sentenced for Mortgage Fraud
On February 13, 2013, in Columbus, Ohio, Branden D. Chatman, of Lewis Center, Ohio was sentenced to 21 months in prison, four years of supervised release and ordered to pay $90,678 in restitution to the victims of a mortgage fraud scheme. On August 23, 2012, Chatman pleaded guilty to one count of money laundering and to one count of conspiracy to commit bank fraud. According to court documents, between May 2006 and January 2007 Chatman knowingly conspired with others to devise a scheme to defraud lending institutions of approximately $1.5 million in loans. Chatman recruited property purchasers and sellers and referred those clients to a specific mortgage broker. He and the mortgage broker submitted loan applications with false statements about the purchaser’s income, place of employment, and the cost of renovating the property. At times, Chatman received excess loan proceeds generated by the property purchasers by submitting false invoices to the title companies in the name of his business, Henderson Homes. Chatman knew the HUD-1 settlement statements prepared by the title company stated that the property buyers were paying money out of the sale proceeds to rehabilitate and renovate the home, when in fact these statements were false. Chatman also received excess loan proceeds in the form of kickbacks. Chatman deposited the proceeds of the bank fraud activities in the form of checks that were made payable to Henderson Homes, and wire transfers received in the name of Henderson Homes, in the total amount of $176,498.
Father and Son Sentenced in Mortgage Fraud Scheme
On February 1, 2013, in Syracuse, N.Y., Kevin M. O’Connell and Kevin D. O’Connell, both of Albany, N.Y., were each sentenced to 24 months in prison. In addition, Kevin M. O’Connell was ordered to pay $2,275,584 in restitution and to forfeit $4,628,886. Kevin D. O’Connell was ordered to pay $2,136,444 in restitution. According to court documents, Kevin M. O’Connell was a principal of PB Enterprises and employed his father, Kevin D. O’Connell, to assist in a series of transactions that defrauded banks that were offering mortgages. PB Enterprises found inexpensive properties, usually rental properties that were for sale. They then recruited buyers to purchase the property at higher prices. They promised the buyer would pay “no money down” and would instead receive a check at the closing. In dozens of transactions, PB Enterprises fraudulently obtained mortgages for those purchasers at the higher purchase price by providing false information to the lenders. PB Enterprises then arranged with closing agents to submit documents to the lenders that disguised the fact that the purchase prices were inflated and that the purchaser and the principals of PB Enterprises were splitting the excess mortgage money. The mortgage lender was falsely led to believe that the mortgage proceeds were necessary to purchase the property.
Kansas Man Sentenced for Role in Mortgage Fraud Scheme
On January 28, 2013, in Kansas City, Kan., Kevin M. Mahoney, of Stilwell, Kan., was sentenced to 15 months in prison, one year of supervised release and ordered to pay a $5,000 fine. Mahoney pleaded guilty to one count of conspiracy to commit wire fraud. In his plea, Mahoney admitted he conspired with co-defendant Paul Hartfield and others to make false representations to lenders in order to fraudulently obtain funds from mortgage lenders. Hartfield owned two businesses: Hart Investments, Inc., and Diamond Mortgage, both in Overland Park, Kan. Kevin Mahoney was a loan officer for Diamond Mortgage. Hart Investments purchased depressed properties in order to rehabilitate them and sell them at a profit. In October 2006, Hartfield stopped rehabilitating houses. Instead, Hartfield, Mahoney and others made false representations to lenders in order to fraudulently obtain loan funds. Mahoney made false statements on loan applications and submitted them to mortgage lenders to fraudulently obtain loan funds for numerous properties in Missouri. Paul Hartfield was previously sentenced to 78 months in prison and ordered to pay $2.6 million restitution.
Colorado Man Sentenced for Orchestrating Real Estate Scheme
On February 1, 2013, in Denver, Colo., Steven J. Mascarenas, of Westminster, Colo., was sentenced to 72 months in prison, three years of supervised release and ordered to $1,776,152 in restitution. Mascarenas pleaded guilty on July 3, 2012, to wire fraud and making a false statement to a pretrial services officer. According to court documents, in 2004, Mascarenas, then an attorney and licensed real estate broker, orchestrated the purchase and resale of residential properties in “The Broadlands”, a subdivision in Broomfield, Colorado. He arranged to have individuals serve as “credit buyers” to obtain loans, purchase the properties, and resell them shortly thereafter at inflated prices to other “credit buyers” in his select group. He concealed from the lenders that these “credit buyers” were only acting at his direction and were being compensated for their participation in having obtained the loans and purchased the properties. Mascarenas had Katrina Roberts prepare appraisal reports in which she fraudulently inflated the fair market values of the properties by $100,000 to $325,000. To make the inflated values in all of her reports appear legitimate, she falsely represented that the purchases, which were actually sales at market value, were “distressed” sales or “quick” sales below market value. Based on the fraudulent appraisals, Mascarenas set the prices for the resales far beyond their true market values, and arranged for the buyers to obtain 100% financing for them. To ensure that the desired funding would be approved for the buyers for both the purchases and the resales, Mascarenas caused false information about their qualifications to be incorporated into their loan applications to enable them to qualify for the loans. He caused the proceeds from the second sales to be directed to entities of his choice. Co-defendant Kathy Mascarenas conducted financial transactions as necessary to facilitate, perpetuate, and conceal the fraud. All of the loans went into default, and the loss to the lenders was approximately $1,776,162. In July 2012, Katrina Roberts was sentenced to 20 months in prison. In November 2012, Kathy Mascarenas was sentenced to 24 months in prison.
Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On January 31, 2013 in Columbus, Ohio, Kevin D. Hightower, of Reynoldsburg, Ohio, was sentenced to 30 months in prison, five years of supervised release and ordered to pay $1,941,798 in restitution. Hightower pleaded guilty on October 4, 2012 to one count each of conspiracy to commit money laundering, money laundering, and making a false statement to a lending institution. According to court documents, between April 2006 and August 2007, Hightower worked with several individuals to secure mortgage loan payments that were obtained through false statements to lenders. Hightower, a mortgage broker, purchased properties with the intent to sell the properties for a profit. Hightower used recruiters and mortgage brokers to assist in selling the properties. The mortgage brokers located purchasers for the properties and assisted them in obtaining financing. The recruiters and brokers were paid a fee by Hightower that ultimately came from the mortgage proceeds. Hightower and others provided the down payment funds knowing that they would be reimbursed by the proceeds from the property sale. Hightower maximized the selling prices for the properties so that he could maximize his profit on the sales, cover the purchaser’s down payments, and pay the recruiters for finding loans for the purchasers. The payments to Hightower’s associates were disguised on the HUD-1 Settlement Statements as construction funds, land contract payoffs, and lien payments. In addition, Hightower made false statements to Huntington Bank as the executor of a charitable remainder trust that he was withdrawing money from the trust for charitable purposes. Instead, he used the money to pay personal debts and for his personal use.
Former Wisconsin Man Sentenced in Mortgage Fraud Scheme
On January 29, 2013, Paul Zaleski, formerly of Twin Lakes, Wis., now living in Ojai, Calif., was sentenced to 14 months in prison and three years of supervised release for his part in a mortgage fraud scheme that spanned from 2004 to 2006. Zaleski pleaded guilty to one count of wire fraud and one count of money laundering. According to the indictment, Zaleski, acting as a mortgage broker, orchestrated a scheme which involved straw buyers, fraudulent loan applications, and inflated appraisals. As a result, he was able to arrange in excess of $14 million in loans for the purchase of approximately 51 properties located in southeastern Wisconsin and northern Illinois. More than $2 million of the loan proceeds wired by the various lenders were funneled to shell companies that Zalesk established. In connection with the scheme, Zaleski represented himself as a person involved in the purchase and improvement of real estate for profit and the coordinator of a group of investors engaged in that activity. All but a few of the properties ultimately went into foreclosure resulting in a loss of more than $5 million. Zaleski used the ill-gotten loan proceeds, in part, for the purchase of additional properties and for personal expenses.
Massachusetts Woman Sentenced for Role in Property Mortgage Scam
On January 24, in Boston, Mass., Rebecca L. Konsevick, of Roslindale, Mass., was sentenced to 30 months in prison and two years of supervised release for bank fraud and money laundering. From 2006 through 2008, Konsevick committed fraud in connection with condominium sales. In addition, Konsevick and another person caused HUD-1 settlement statements to be submitted to the same lenders which falsely represented that straw buyers had paid funds in connection with the property transactions and falsely represented how the proceeds of the mortgage loans were disbursed. In Massachusetts, property transactions must be closed by attorneys so Konsevick, who was a paralegal, falsely signed certifications on these HUD-1 settlement statements and closed the relevant property deals.
Defendant Sentenced for Multi-State Mortgage Fraud Scheme
On January 23, 2013, in Pensacola, Fla., Lonett Rochell Williams, of Woodland Hills, California, was sentenced to 120 months in prison for her participation in a conspiracy to defraud multiple lenders as part of a scheme to fraudulently purchase thirty-seven properties located in Texas, Georgia, California, and Florida. According to court documents, approximately $20,448,767 in loans were issued by the lenders in connection with the real estate deals. In October 2012, Williams pleaded guilty to conspiracy to commit mail fraud, conspiracy to commit money laundering, and mail fraud. Williams and her company received more than $4.5 million in kickbacks because of the scheme. Williams’ son, Raysean K. Richardson, of New York, N.Y., awaits sentencing for his participation in the same scheme. In September 2012, Richardson was convicted on charges of conspiracy to commit mail fraud, mail fraud, and conspiracy to commit money laundering based on his role in the scheme.
Former Florida Mortgage Title Agent Sentenced in Multi-Million Dollar Mortgage Fraud Scheme
On January 22, 2013, in Miami, Fla., Raquel DeJesus Martinez, of Miami-Dade County, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $4,936,714 in restitution. Martinez, who previously worked as a title agent, was part of a scheme to commit mortgage fraud at The Jade apartment complex in Miami. According to court documents, Martinez and others engaged in a multi-million dollar mortgage fraud scheme using straw buyers to purchase residential properties at The Jade. As part of the scheme, the defendants submitted mortgage loan applications and supporting documents containing false information to lending institutions. The lending institutions relied on these documents to make mortgage loans to the straw buyers to purchase the residential properties. The defendants then prepared and submitted to the lenders, false HUD-1 statements. The defendants created a second version of the HUD-1 statements, listing the actual sales prices, which were provided to the seller. To conceal and perpetuate the fraud, the defendants made some payments to the condominium association and made some mortgage payments to the lenders to prevent foreclosure and continue to receive rental income for the units.
Mortgage Broker Sentenced for Federal Offenses
On January 8, 2013, in Honolulu, Hawaii, Estrellita “Esther” Garo Miguel, a Honolulu mortgage broker, was sentenced to 52 months in prison. Restitution will be determined at a later date. Miguel pleaded guilty to conspiracy to commit wire and mortgage fraud, wire fraud and mortgage fraud, and money laundering. According to information presented in court, Miguel was the owner and operator of the mortgage business titled Easy Mortgage. Miguel and others regularly submitted loan applications to lenders with false employment, income and residential occupancy information in order to induce lenders to fund loans for residential purchase. Miguel and other defendants working for Easy Mortgage also sought to deceive lender underwriters by providing false documentation concerning a borrower’s history of employment, payment of rents and bank account deposit information. During the existence of the five year conspiracy to defraud mortgage lending institutions over 200 fraudulent loans were obtained involving over 100 properties. Miguel and her coconspirators utilized a number of methods to get lender underwriters to authorize loans, including false employment and income information, fake Verification of Rent and Deposit forms, along with bank statements which had been cut and pasted to appear as if they were actual bank statements reflecting bank deposits of loan applicants. Some fraudulently obtained loan proceeds were funneled into a bank account controlled by Miguel and later distributed to her and others.
Conspirator Sentenced for Mortgage Fraud Scheme
On January 3, 2013, in Miami, Fla., Juan Carlos Sanchez, of New York, N.Y., was sentenced to 180 months in prison and three years of supervised release. Sanchez pleaded guilty to conspiracy to commit mail and wire fraud. Sanchez was originally indicted with seven other defendants for fraudulently obtaining mortgages for the purchase of condominium units at Marina Oaks Condominiums in Fort Lauderdale, Fla. The other defendants already sentenced include Celeste Mota, of Fort Myers, Fla., who received five years of probation and David Arboleda, of Doral, Fla., who was sentenced to 30 months in prison and three years of supervised release. According to court documents, from January 2007 through November 2008, the defendants conspired to recruit individuals who would be willing to purchase condominium units. These individuals were promised a “buyers’ incentive,” which payment was not disclosed to the lenders or reflected on any of the closing documents. The conspirators would then prepare materially false mortgage applications for the buyers on HUD Uniform Loan Application Form 1003. These forms contained false information regarding the borrowers’ credit worthiness in order to qualify the borrowers for mortgages to purchase the Marina Oaks Condominiums. The conspirators also created false documents to support the mortgage applications. Once the loans closed, the conspirators would divert portions of the mortgage proceeds for their personal use and benefit. In this way, the conspirators obtained approximately $39 million in fraudulent mortgage loans.
Former Attorney Sentenced for Mortgage Fraud
On December 20, 2012, in Boston, Mass., Marc D. Foley, a former attorney who operated a real estate practice in Needham, was sentenced to 72 months in prison and three years of supervised release. In September 2012, Foley was convicted by a jury of 33 counts of wire fraud and five counts of money laundering. According to evidence presented at trial, in December 2006 and January 2007, Foley participated in a scheme to defraud six mortgage lenders in connection with $4.9 million in real estate loans for the purchases of 24 condominium units in Dorchester. When Foley and an associate, acting under his direction, closed the loans, documents sent to the mortgage lenders falsely represented that funds ranging from $9,300 to $39,000 had been collected at the closings from the borrowers, when in fact the borrowers made no down payments and paid no funds at the closings. Furthermore, Foley entered into an undisclosed agreement with the seller to subtract from the seller’s proceeds all the funds that were reported to the lenders as coming from the borrowers. Foley also used various other means to conceal from the lenders that the borrowers had not provided funds for the purchases.
Kansas Man Sentenced for Mortgage Fraud
On December 17, 2012, in Kansas City, Kan., Brian D. Jaimes, of Overland, Kan., was sentenced to 24 months in prison for mortgage fraud. Jaimes pleaded guilty to one count of conspiracy to commit wire fraud and money laundering. According to his plea agreement, Jaimes conspired with co-defendant Paul Hartfield to fraudulently obtain more than $1 million worth of mortgage loans. Hartfield owned Hart Investments, Inc., a company that purchased depressed properties in order to rehabilitate them and sell them at a profit. Hartfield also owned Diamond Mortgage, a company that acted as a mortgage broker for individuals. Jaimes was president of Diamond Mortgage from 2003 to 2006. According to court documents, Hartfield recruited friends and family to purchase some properties. In most cases, the borrowers would not have qualified for a loan to purchase the properties. Hartfield used Diamond Mortgage as the mortgage broker with Brian Jaimes falsifying loan applications and other supporting documents by inflating the borrower’s income and assets to secure loan approval. Jaimes was the loan officer on 11 fraudulently obtained mortgages for properties. The loans totaled more than $1 million.
Florida Defendants Sentenced in Multi-Million Mortgage Fraud Scheme
On December 7, 2012, in Miami, Fla., Lilia Casal-Diaz, the sixth defendant in a multi-million dollar mortgage fraud scheme, was sentenced to 12 months and one day in prison, one year of home confinement and three years of supervised release. Casal-Diaz, a real estate attorney, also was ordered to pay $509,543 in restitution to the IRS. According to court documents, the defendant engaged in a multi-million dollar mortgage fraud scheme using straw buyers to purchase residential properties at an apartment complex in Miami. The scheme resulted in more than $5.6 million in mortgage proceeds that were fraudulently obtained from various lending institutions, as well as tax-related offenses involving willful failure to declare to the IRS proceeds from such transactions. The other defendants sentenced in connection with this scheme include:
• Andres Mendez, Sr., aka Andy Mendez, Sr. - 60 months in prison, five years of supervised release and ordered to pay $4,232,542 in restitution,
• Andy Mendez, Jr. - 12 months and one day in prison,18 months home confinement, five years of supervised release and ordered to pay $4,232,542 in restitution,
• Josephine Santana - 21 months in prison, five years of supervised release and ordered to pay $1,202,861 in restitution,
• Jose Rafael Martinez - 18 months in prison, five years of supervised release and ordered to pay $1,202,861 in restitution,
• Basilio Gomez - 15 months in prison, five years of supervised release and ordered to pay $1,202,861 in restitution.
Ohio Woman Sentenced for Mortgage Fraud
On November 29, 2012, in Cleveland, Ohio, Antoinette Payne was sentenced to 27 months in prison and ordered to pay more than $1.3 million in restitution. Payne pleaded guilty to one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. According to court documents, Payne worked as a mortgage broker and loan officer for Supreme Funding, a mortgage broker in Euclid, Ohio. She was also the owner of TLC Properties and Designer Loan Properties, which were simply sham companies which she used to receive kickbacks and reimbursements for undisclosed down payment assistance she was providing to purchasers from the various loans’ closings she was handling. These funds were in addition to the fees paid to Payne as a mortgage broker and loan officer in handling these transactions. Payne recruited purchasers for properties and promised to pay them money for filling out the paperwork for mortgage loans where the price of the properties had been greatly inflated. She also provided any down payments as necessary. Payne also falsified the income and asset on the loan documents of the purchasers she recruited to ensure their approval. She provided phony lists of improvements to the lender to support the inflated price of the real estate. Once the purchasers stopped making payments on the mortgage loans, the properties went into default, resulting in a loss to lenders in the amount of approximately $1 million.
Former Mortgage Broker Sentenced Role in Mortgage Fraud Scheme
On November 26, 2012, in Phoenix, Ariz., Michele Marie Mitchell, was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $110,490 in restitution. Mitchell pleaded guilty in April 2012 to conspiracy to commit wire fraud. According to court records, Mitchell held herself out to be a mortgage broker, loan officer and real estate investor. Mitchell and an associate, Jeremy West Pratt, recruited people with good credit scores to act as straw buyers to purchase one or more properties as investments. Mitchell and Pratt enticed the straw buyers by offering to pay a kickback of up to $15,000 per property or to make the mortgage payments until the property could be resold for a profit, or both. The defendants submitted false loan applications and supporting documents to induce lenders to fund loans. At the close of escrow they enriched themselves by directing a portion of the loan proceeds, or “cash back,” to a company which one of them controlled. Between October 2005 and February 2007, Mitchell obtained mortgage financing for 17 properties and induced lenders to fund approximately $17 million dollars in loans. Pratt aided Mitchell’s efforts in eight of the 17 properties. The defendants failed to make the mortgage payments as promised and each of the 17 properties went into foreclosure. Pratt was sentenced on July 30, 2012 to six months in prison and three years of supervised release.
Texas Couple Sentenced on Wire Fraud and Money Laundering Charges
On November 26, 2012, in Houston, Texas, Derwin Frazier and his wife, Veronica, both of Pearland, Texas, were sentenced for their roles in the sham sales of condominiums. Derwin pleaded guilty to money laundering and was sentenced to 85 months in prison and ordered to pay $16,316,102 in restitution. Veronica pleaded guilty to wire fraud and was sentenced to 12 months and one day in prison and ordered to pay $321,742 in restitution. According to court documents, from December 2004 to October 2006, the Fraziers defrauded residential lenders using straw borrowers. Co-conspirator, Brenda East, assisted these straw borrowers by providing false information and documents, including bogus tax letters and false verifications of bank balances and employment. The Fraziers submitted invoices for payment from loan proceeds and used the money to pay themselves and the straw borrowers. East pleaded guilty to conspiracy to commit wire fraud and was sentenced to 57 months in prison. A fifth defendant, Duane Wardell, of Palestine, also pleaded guilty to conspiracy to commit wire fraud and is awaiting sentencing.
New Jersey Woman Sentenced in Mortgage Loan Fraud Scheme
On November 9, 2012, in Trenton, N.J., Crystal Paling, of Sussex, N.J., was sentenced to 37 months in prison, three years of supervised release, and ordered to pay $532,497 in restitution. Paling was convicted by a jury in March 2012 on conspiracy to commit wire fraud and conspiracy to commit money laundering. According to documents and trial evidence, Paling acted as the closing agent for fraudulent mortgage loans orchestrated by her co-conspirators, Daniel Verdia, of Mahwah, N.J., Jaye Miller, of Pocono Lake, Pa., and Sandra Mainardi, of Wayne, N.J. The co-conspirators put together buyers and sellers in real estate transactions that they could control, then filed false and fraudulent loan applications containing inflated income figures for the borrowers. Specifically, Paling wired loan proceeds due to the sellers from a trust account that she controlled to an account in the name of Capital Investment Strategies, a shell company owned by Verdia and Miller. She concealed illicit payments to Capital Investment Strategies by failing to disclose them on the settlement statements. She collected a portion of the disclosed closing fees that appeared on the settlement statements. She also received undisclosed kickbacks paid from Capital Investment Strategies to her own shell company, XL Partnership. Verdia and Miller were sentenced to 30 months and six months in prison, respectively. Mainardi was sentenced to 46 months in prison. Two additional defendants were sentenced in this scheme: Donald Apolito, of Elmwood Park, N.J., received five years of probation and Robert Gorman, of Long Valley, N.J., received two years of probation.
Couple Sentenced for Orchestrating Million Dollar Mortgage Fraud Scheme
On November 8, 2012, in Minneapolis, Minn., James Warren Hoffman was sentenced to 78 months in prison and ordered to pay $344,409 in restitution. Teresa Gay Hoffman was sentenced to 12 months and one day in prison. The Hoffmans pleaded guilty on February 3, 2012 to one count of tax evasion. In addition, James Hoffman pleaded guilty to one count of engaging in a monetary transaction in criminally derived property. According to court documents, the Hoffmans recruited straw buyers to purchase real estate in both Minnesota and Wisconsin with the proceeds of fraudulent mortgage loans. From August 2001 through 2008, the couple lived in a Hastings home without ever owning it. James Hoffman arranged for a series of straw purchasers to buy the property entirely with the proceeds of fraudulent loans. From June 2001 through 2008, the couple used a Spicer Lake property as their vacation home without ever owning it by also arranging fraudulent mortgage loans for a series of straw buyers. Starting in June 2006, the couple, through three businesses, purchased apartment buildings in Rochester, Sauk Rapids, and Spicer. They converted the apartments into condominiums and sold them to straw buyers, who paid for them with proceeds of fraudulent mortgage loans arranged by the defendants. In total, the estimated loss to mortgage lenders is approximately $5 million.
Arizona Man Sentenced for Role in Fraud Scheme
On November 7, 2012, in Phoenix, Ariz., Shannon Robert Kato was sentenced to 24 months in prison, three years of supervised release and ordered to pay $225,000 in restitution. Kato pleaded guilty on October 11, 2012 to conspiracy. According to his plea agreement, from February 2006 through May 2007, Kato and others submitted mortgage loan applications and related documents to banks and lending institutions containing false information. They also induced those institutions to fund residential real estate purchases. In addition, they created a "straw man" double escrow transaction to obtain "cash back" from the financing for the benefit of the purchasers and concealed from the lending institutions the methods and means by which "cash back" flowed to the ultimate purchasers instead of the "straw" buyer/seller. To accomplish this, Kato and others submitted simultaneous loan applications for multiple real estate purchases without fully disclosing other pending applications, provided false information on the loan applications to obtain mortgage loans, inflated the sales price, and directed portions of the lending proceeds to some of the defendants through the use of entities. At least 15 homes were purchased through this process and $2.5 million in "cash back" was obtained. Kato's role was to act as the "straw buyer" using his own name, his company's name, or a fictitious family trust, so that it would appear that he had purchased the property from the seller. Kato then turned around and sold it at a higher price to one of the other defendants. The lending institutions would fund at the higher price and the profit would be diverted to a controlled entity of one of the other defendants.
Florida Man Sentenced for Participating in Mortgage Fraud Scheme
On October 17, 2012, in Miami, Fla., Juan Carlos Rodriguez, a real estate agent and mortgage broker from Weston, Florida, was sentenced to 42 months in prison and three years of supervised release. On May 11, 2012, Rodriguez pleaded guilty to conspiracy to commit mail fraud, wire fraud, financial institution fraud, and conspiracy to commit money laundering. According to court documents, Rodriguez and others used “straw buyers” to submit false documentation to various mortgage lenders substantially inflating the purchase price of the properties. The fraudulent loan proceeds were laundered through multiple accounts to conceal the source and distribution of the money and were ultimately used for the benefit of the co-conspirators. Other individuals sentenced in mortgage fraud schemes include:
• David Lam was sentenced to 42 months in prison, two years of supervised release, and ordered to pay $7,117,000 in restitution.
• Pamela Higgins was sentenced to 36 months in prison, two years of supervised release, and ordered to pay $2,141,536 in restitution.
• Carl Alexander was sentenced to 48 months in prison, three years of supervised release, and ordered to pay $3,576,724 in restitution.
• Carol Asbury was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $6,510,291 in restitution.
• Patrick Brinson was sentenced to 78 months in prison, three years of supervised release, and ordered to pay $1,602,250 in restitution.