FEB 7, 2013
Compliance Matters

Ex-Judge Convicted of Mortgage Fraud

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FORMER MICHIGAN SUPREME COURT JUSTICE PLEADS GUILTY TO MORTGAGE FRAUD

FACTS

On Jan. 29, Diane M. Hathaway, a former Michigan Supreme Court justice, pleaded guilty to committing bank fraud in connection with a property owned in Grosse Pointe Park, Mich.

During the hearing before U.S. District Judge John Corbett O’Meara, Hathaway admitted that between 2010 and 2011, she knowingly engaged in a scheme to defraud ING Direct Bank by concealing assets from the bank to qualify for a short sale.

Based on her guilty plea and felony conviction for committing bank fraud, Hathaway is facing a maximum of 30 years in prison, a fine of up to $1,000,000, and up to five years of supervised release. (usattyedmi12913)

MORAL

A Supreme Court Justice! Remember, this is why before you go into a real estate transaction an attorney is a good idea and a lot cheaper than representing you in a lawsuit later. 

CHICAGO LAWYER THAT HOSTS NATIONAL RADIO TALK SHOW INDICTED FOR $9.7M MORTGAGE FRAUD

FACTS

On Jan. 28, Warren Ballentine, a lawyer who hosts a national radio talk show was indicted on federal charges for allegedly engaging in two mortgage fraud schemes that defrauded lenders of a total of approximately $9.7 million. Ballentine allegedly schemed with others to obtain more than two dozen fraudulent mortgage loans and represented buyers at multiple closings, knowing that they were fraudulently qualified for loans to purchase homes in Chicago and various southern suburbs.

He was charged with two counts of bank fraud, two counts of making false statements to lenders, and one count each of mail fraud and wire fraud in a six-count indictment. The indictment also seeks forfeiture of approximately $9,775,000 in alleged fraud proceeds.

According to the indictment, between December 2004 and February 2005, Ballentine schemed with others to fraudulently cause various lenders to make at least eight loans totaling approximately $3.6 million by making false statements in loan documents, including applications, HUD-1 settlement statements, and occupancy statements concerning the buyers’ intention to occupy the homes they purchased as a primary residence. Ballentine then represented buyers recruited by others at real estate closings, knowing that they had signed and submitted false documents and had been fraudulently qualified to purchase the properties.

Between February 2005 and May 2006, Ballentine allegedly engaged in a similar, separate scheme with others to fraudulently cause various lenders to make at least 20 loans totaling approximately $6.1 million by making false statements in mortgage documents, including the buyers’ intention to occupy the homes as a primary residence. Ballentine also represented these buyers at closings, knowing that they had been fraudulently qualified for the loans based on false documents, including some that Ballentine advised them to sign at closings.

Each count of the indictment carries a maximum penalty of 30 years in prison and a $1 million fine or, as an alternative, the court may impose a fine of twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.  (usattynoil12813)

MORAL

Notice how they are just now indicting him for acts that occurred eight and nine years ago. That is why we inform our clients that once an investigation starts and they are approached, they should immediately have legal counsel and that the matter can take up to 10 years to resolve because the statute of limitations that the federal prosecutors have allows them 10 years from the final act to indict the person or persons of interest. 

CALIFORNIA MAN BUSTED FOR MORTGAGE FRAUD

FACTS

On Jan. 30, FBI agents arrested Jude Raymond Lopez in connection with a scheme which allegedly defrauded as many as 400 people who paid into a mortgage debt elimination scheme, officials said. He was arrested on four counts of mail fraud, two counts of bankruptcy fraud, and two other counts of fraud related to illegally filing court petitions, according to court records.

A woman, identified as Marcela Gonzalez, was also indicted by authorities in connection with the mortgage debt elimination scheme. She is suspected of six counts of mail fraud.
Investigators believe approximately 400 clients were defrauded of approximately $5 million over approximately two years, "(The) defendants allegedly pitched a `sovereign citizen' argument to homeowners, suggesting that the original liens were invalid."

Court documents indicate the FBI, the Montebello Police Department and the Los Angeles Police Department were involved in the investigation.

The U.S. Attorney's Office asked that Lopez be held as a flight risk, according to court documents.
Prosecutors allege that Lopez, working on behalf of a company identified as Crown Point, filed bankruptcy paperwork for Crown Point clients. The paperwork was intended to delay foreclosure proceedings, officials said.

"From at least in or about September 2010, through in or about May 2012, defendant Lopez who was not a lawyer prepared and filed, and caused to be prepared and filed, legal papers including...bankruptcy petitions on behalf of clients in order to delay foreclosure and eviction actions."
The complaint alleges that in some cases Lopez filed paperwork without the client's knowledge. Some of the petitions contained forged signatures, according to court documents. (whitdlynw13013)

MORAL

I trust they can afford competent counsel. 

COLORADO ATTORNEY DRAWS 6 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

Steven J. Mascarenas was sentenced to serve 72 months in a federal prison after being pleading guilty to wire fraud, making a false statement to a pretrial services officer and escape. Mascarenas was ordered to spend three years on supervised release after he serves his term of imprisonment. Judge Blackburn also ordered Mascarenas to pay restitution totaling $1,776,152.21.

Steven Mascarenas was indicted on April 22, 2010, along with his wife Kathy. Also indicted was Katrina Roberts who pled guilty and was given 20 months in prison. Kathy Mascarenas pleaded guilty and got 24 months in prison.

In 2004, Steven Mascarenas, an attorney and licensed real estate broker, orchestrated the purchase and resale of residential properties in The Broadlands, a subdivision in Broomfield, Colo. 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 after the closings for their participation in having obtained the loans and purchased the properties.

Mascarenas had 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 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, Steven 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, Steven 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.

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 $1,776,162.21.

While out on bond in the fall of 2011, Mascarenas repeatedly lied to his supervising pretrial services officer, telling him that he was employed making sandwiches at a local Quizno’s restaurant. In fact, he was managing the store under the assumed name of “Steven Jay,” in violation of the conditions of his bond.

In June 2011, as a condition of Steven’s bond, he was required to reside in a halfway house, and he was not permitted to leave the facility without permission. Hours before he was to be taken to a prison facility, he fled. An arrest warrant was issued, and on Dec. 4, 2011, Steven was arrested by the Lakewood Police Department at a motel in Lakewood, Colo. (usattyco2113)

MORAL

How stupid is stupid? He spends four years in college, three years in law school, takes a three day test to get a law license and now it is all shot for life.

FOUR INDICTED IN NEW JERSEY FOR MORTGAGE FRAUD

FACTS

On Jan. 31, four individuals from New Jersey were taken into custody for their alleged roles in a $15 million mortgage fraud scheme on an indictment returned by a federal grand jury on January 30, 2013

The four defendants are: Fredric M. Diantonio, Louis V. Catarro, Kathryn W. Lockwood and Thomas E. Morello. All defendants were charged with conspiracy to commit wire fraud. Diantonio, Catarro, and Lockwood were also charged with conspiracy to commit money laundering. In addition, Diantonio and Catarro were charged with making false statements to the U.S. Department of Housing and Urban Development.

[AS WE HAVE ALWAYS TOLD YOU AND OUR CLIENTS, DO NOT LIE TO FEDERAL AGENTS. IT IS IN AND OF ITSELF A CRIME.  JUST TELL THEM YOU WOULD LIKE TO HAVE YOUR LAWYER PRESENT AND THEY WILL STOP QUESTIONING, GIVE YOU THEIR CARD ASKING YOU TO HAVE YOUR LAWYER CALL THEM.  IT IS BETTER TO PAY THE LAWYER THAN TO BE CHARGED WITH THIS OFFENSE SINCE YOU KNOW THE FEDERAL AGENT WOULD BE THE ONE TESTIFYING AGAINST YOU.] 

According to the indictment, real estate agents Diantonio, Catarro, and Lockwood located properties in Wildwood and North Wildwood, N.J., for sale by real estate developers such as Morello. Diantonio, Catarro, and Lockwood caused real estate sales contracts to be created, which listed deposit monies from buyers that often were not collected. The conspirators also agreed that sellers such as Morello would pay kickbacks to the buyers of the properties without disclosing the kickbacks to the lending institutions funding mortgages used by the buyers to purchase the properties. The conspirators caused fraudulent documents to be signed at real estate closings, including HUD Settlement Statements, which failed to disclose the kickbacks paid to the buyers or which falsely stated that a deposit toward the purchase of the property had been collected. Diantonio, Catarro, and Lockwood received real estate sales commissions for putting the transactions together.

The wire fraud conspiracy charge is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine. The money laundering conspiracy charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine. The false statements charge carries a maximum potential penalty of two years in prison and a $250,000 fine.  (usattynj13113)

MORAL

If a federal agent calls or comes to see you, call us.

PITTSBURGH JURY FINDS MORTGAGE BROKER GUILTY OF $100 MILLION FRAUD.

FACTS

On Jan. 29, Lewis Whoolery was found guilty of wire fraud conspiracy. He operated a mortgage broker business called First Capital Home Equity. In 2003, Whoolery recruited an unlicensed appraiser named Kenneth Cowden to prepare fraudulent appraisals for First Capital. Between 2003 and 2005, Cowden prepared more than $67 million in fraudulent appraisals for Whoolery and First Capital.

The appraisals were fraudulent not only because they falsely represented that a licensed appraiser prepared the appraisals but also because the appraisals overstated the values of the properties serving as collateral for the loans. In addition, Cowden altered the pictures of the properties being appraised to make it look like the properties were in better condition than they really were, and in some cases, he substituted pictures of completely different properties than the properties subject to the appraisals.

Also in 2003, Whoolery recruited Jeannette Gray, a licensed appraiser, and his own sister, Kimberly Baldwin, to join the conspiracy. Gray, for $4,000 a month, agreed to allow Baldwin to prepare appraisals for First Capital and to sign Gray’s name to the appraisals as if Gray prepared the appraisals. The appraisals, however, were not just fraudulent because they falsely represented that a licensed appraiser prepared the appraisals but also because the appraisals overstated the values of the properties serving as collateral for the loans. Baldwin, like Cowden, also substituted pictures of properties.

In 2004, Gray stopped authorizing First Capital’s use of her license. At that point, Whoolery recruited another appraiser, Jason Sheraw, to join the conspiracy. Similar to Gray, Sheraw, in exchange for $4,000 per month, agreed to allow Baldwin to prepare appraisals under his license as if he were actually preparing the appraisals. Baldwin then began to prepare her fraudulent appraisals for First Capital under Sheraw’s name. Between 2003 and 2007, Baldwin prepared hundreds of fraudulent appraisals for First Capital, resulting in the funding of tens of millions of dollars of fraudulent loans.

Whoolery supervised loan officers who submitted loans using the fraudulent appraisals, including Lawrence Kraynak, Daniel O’Connor, Mark Hipsley, John Polosky, Daniel Gillen, Shawn Cupp, Elizabeth Drake, and others. The submissions to the lenders, however, were not just fraudulent because of the appraisals. Rather, the submissions to the lenders also often included representations that overstated the borrowers’ financial conditions, including their incomes and assets. Whoolery and the loan officers also often submitted fake documents in support of those false representations, including fake paystubs and bank statements. Cowden, Kraynak, O’Connor, Hipsley, Polosky, Gillen, Cupp, Drake, Gray, Sheraw, and Baldwin have all been convicted of mortgage fraud related offenses.

In total, the government estimates that the fraudulent submissions related to this scheme led to the funding of more than $100 million in fraudulent loans, making this case the largest mortgage fraud case ever to go to trial in the Western District of Pennsylvania. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.  (usattywdpa12913)

MORAL

Busy little beavers, weren’t they? Now 11 stand convicted. With a potential loss of $100 million I would say that Whoolery is looking at a lot of prison time.

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

Comments (6)
How does anyone even pay restitution when most of these convicts will never be hired in any good paying jobs and most of them are beyond the age of 30. With life expectacny, have anyone ever paid full restitution? Can surviving family inherit resitutions? LOL
Posted by Restitution? | Friday, February 08 2013 at 3:16PM ET
Outrageous Behavior I would like to say something but at the moment I am perplexed and disgusted this trash is what gives our industry fits and an image that hard working Mtg.professionals do not deserve again Outrageous.

newsjet1

Posted by NewsJet Magazine | Friday, February 08 2013 at 8:16PM ET
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