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.
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.