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Fidelity Settles California Kickback Case

JAN 31, 2013 3:45pm ET
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FIDELITY NATIONAL FINANCIAL STIPULATES TO JUDGMENT FOR USING SOFTWARE WITH REAL ESTATE BROKERS RESULTING IN ILLEGAL KICKBACKS.

FACTS

The District Attorneys of Ventura, San Diego and Los Angeles Counties sued Fidelity National Financial, the nation’s largest title underwriter, for unfair competition. The case involves use of Fidelity’s  “Transaction Point” real estate software system and they alleged that the software platform which Fidelity operated for real estate brokers and others settlement service providers in California, facilitated unlawful secret payments to the brokers for the referral of business to title insurers and other service providers. Fidelity agreed to stipulate to final judgment enjoining it from operating any such real estate software system and requiring that it pay a total of $873,588 in civil penalties and agency costs.  (People of State of Calif. v. Fidelity National, etc./56-2012-00429232 Ventura Sup. Ct. 1-8-13)

MORAL

Kind of makes you wonder where RESPA enforcement and CFPB were all this time? If I were the brokers and providers referred to I would suggest they see their respective attorneys to see what their ongoing risks are. Especially when you consider that the District Attorneys may have also reported the brokers to DRE, RESPA and CFPB.

OWNER OF ELK GROVE, CA COMPANY FOUND GUILTY OF MORTGAGE FRAUD

FACTS

On Jan. 22, after a 10-day trial, a federal jury found Hoda Samuel guilty of a conspiracy to commit mortgage fraud and of 30 individual counts of mail fraud.

Samuel, a licensed real estate broker, was the owner and principal operator of Liberty Real Estate & Investment Co. and Liberty Mortgage Co. Between April 5, 2006 and February 26, 2007, (notice how the federal prosecutors went back eight years for the mortgage loans?) Samuel’s companies facilitated 30 residential real estate transactions that defrauded the lending institutions that provided the financing. In all 30 of these transactions, Samuel served as the real estate broker for the purchaser. In at least 15 of them, she also represented the seller. In 29 of the transactions, Liberty Mortgage secured the financing for the purchaser. At least 28 of the properties went into foreclosure, resulting in a loss to lenders of more than $5.5 million.

As part of the scheme, Samuel’s co-conspirators and employees at Liberty Mortgage prepared loan applications containing false information that misrepresented the buyers’ ability to pay back loans and/or overstated or falsified their employment, income, assets, and liabilities. When a lender would attempt to verify the information by calling the purported employer, the phone number on the application led to a Liberty employee or associate who falsely verified the information.

The offers reflected in the purchase contracts prepared by Liberty Real Estate overstated the value of the properties, often exceeding the actual asking prices by $15,000 to $40,000. The excess amounts were paid back to the buyers out of escrow, disguised as payments for fictional repairs and remodeling to the properties. With respect to particular transactions, Samuel herself made misrepresentations to the effect that the property buyers had disabled family members and needed to remodel the properties to make them wheelchair accessible. 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.

Eight of Samuel’s associates pleaded guilty prior to her trial and are awaiting sentencing.

“Mortgage fraud schemes of the sort perpetrated by Hoda Samuel and her co-defendants wreaked havoc in this region,” U.S. Attorney for the Eastern District of California Benjamin Wagner said. “As a result of this prosecution, she and her co-defendants are facing significant prison terms. Taking fraudsters out of the residential real estate industry and sending them to prison has been one of this office’s top priorities. Last year, we indicted more mortgage fraud defendants than any other office in the country and we are not done yet.” Samuels is scheduled to be sentenced by United States District Judge John A. Mendez on April 30. She faces a maximum of 20 years in prison for each count of mail fraud. (usattyedca12213)

MORAL

It is probable she will get at least five years in federal prison. I would like you to note that there are nine people involved here. One went to trial as you see and lost. The other eight pleaded guilty. Now you know why persons being investigated need an attorney early on. Sometimes it can prevent indictments if you see your attorney before the investigator sees you.

SINGER IN LOS ANGELES ROCK BAND CHARGED IN MULTI-MILLION DOLLAR LOAN FRAUD

FACTS

 

On Jan. 25, Robert Brandon Mawhinney, the frontman of a Los Angeles-based band called Lights Over Paris, has been charged with submitting false documents to banks to fraudulently obtain millions of dollars worth of loans, money that he allegedly used to fund his band and his lavish lifestyle.

Mawhinney, who authorities believe currently resides in the luxury WaterMarke Tower in downtown Los Angeles, was ordered detained on Jan. 24 by a federal judge.

During the hearing, United States Magistrate Judge Charles F. Eick ordered Mawhinney held without bond after determining that he posed a flight risk, given Mawhinney’s frequent travel abroad, conflicting information about his finances and the fact that he had sent hundreds of thousands of dollars to Cyprus.

Mawhinney, who uses the stage name Robb “TaLLLLL” University, was arrested at Miami International Airport earlier in January after he returned from a trip to Buenos Aires. He was subsequently transported to Los Angeles by the United States Marshals Service. Mawhinney was arrested pursuant to a criminal complaint that alleges he applied for loans by submitting phony brokerage statements that falsely showed that he had almost $8 million in assets. The phony statements were altered versions of real statements that showed less than $10,000 in the brokerage accounts.

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