JAN 31, 2013

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Compliance Matters

Fidelity Settles California Kickback Case

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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.

According to the affidavit in support of the criminal complaint, between August 2009 and April 2011, Mawhinney obtained four loans from Comerica Bank totaling approximately $6.25 million. Mawhinney defaulted on the loans, causing Comerica to suffer losses of approximately $6 million.   Mawhinney allegedly told bank officials that he needed the money to fund his music business and to purchase recording equipment. According to investigators, Mawhinney used the money from the Comerica loans and loans from other banks to pay for travel, entertainment and a luxury tour bus that cost well over $750,000.  The other banks that issued loans to Mawhinney and suffered losses were JP Morgan Chase, Zions Bank and Bank of America, according to court documents.

Mawhinney is charged with making a false statement in a loan application. If he is convicted of the charge in the criminal complaint, Mawhinney would face a maximum statutory penalty of 30 years in federal prison. Mawhinney is scheduled to be arraigned in this case on Feb. 11.

In a related case that was unsealed on Jan. 24, two former Mawhinney associates were charged with conspiracy to commit loan fraud. Matt Salazar and his brother Jason have agreed to plead guilty.

The Salazar brothers, who are co-owners of the Burbank-based Matt Salazar Recording Productions and part-owners of LA Sound Gallery, also based in Burbank, admitted in court documents that they provided false documents to Bank of America, Greystone Bank and Huntington National Bank to obtain about $1.7 million in loans for their music business.

Mawhinney also used the Salazars’ studio to bolster his own fraudulent loan applications. Mawhinney met with a Comerica loan officer at their recording studio and falsely claimed to be an owner of the studio.

The case against the Salazars has been assigned to United States District Judge Cormac J. Carney, who will schedule a hearing for the brothers to enter their guilty pleas. Once they plead guilty, each of the Salazar brothers will face a statutory maximum penalty of five years in federal prison.  (usattycdca12513)

MORAL

I do not think this is the type of publicity a rock band is looking for. I bet you can guess who is going to testify against Mawhinney. 

CALIFORNIA AG ARRESTS SIX PEOPLE FOR USING WEBSITES TO FURTHER MORTGAGE FRAUD SCHEME

FACTS

On Jan. 28, Attorney General Kamala D. Harris announced the arrest of three suspects who have been charged in a mortgage fraud scheme targeting struggling Northern California homeowners. Six websites allegedly used by the suspects to advertise their scheme have been intercepted and redirected to a resource page on the California Attorney General’s website.

The felony complaint alleges that Ronald Vernon Cupp deceived homeowners by falsely advertising a way to “kill” their mortgage debt on six websites including www.wekillyourmortgage.com. Cupp was assisted by Randall Gilbert Heyden and Angelle Wertz, a public notary who allegedly certified phony legal documents. Cupp allegedly recorded fraudulent documents, which would only delay a foreclosure, not actually satisfy the preexisting mortgage debt.

Cupp, Heyden and Wertz are charged in a 57-count complaint alleging theft, forgery, notary fraud and recording of false documents. They were booked at the Sonoma County Jail on Jan. 23. Cupp and Heyden are being held with bail set at $500,000 and $75,000 respectively.

Through Cupp’s business, North Bay Trust Services, homeowners would often allegedly pay upfront fees of between $1,000 and $10,000 and sign a promissory note or new mortgage for a phony offer to eliminate their mortgage debt. Requiring up-front fees is illegal in California. The suspects would then allegedly record fraudulent documentation purporting to be the attorney for the homeowner’s actual lender and then relinquish the mortgage and record a new deed of trust in favor of North Bay Trust Services. The debt to the original lender was never actually satisfied.

The following six websites have had their service suspended pursuant to a court order at the request of the Attorney General Harris’s Crime Unit:

http://www.northbaytrustservices.com/

http://wekillyourmortgage.com/

http://santarosatrustandtitle.com/

http://sonomafidelitytitle.com/

http://cortemaderafidelityandtitle.com/

http://marintrustandtitle.com/

These pages have been redirected to the California Attorney General’s website (http://oag.ca.gov/ecrime/doj-investigation) where individuals are able to file an online complaint form if they believe they may have been the victim of the scheme.  (caag12813)

MORAL

It would have been a lot cheaper to have the homeowner call a HUD Counselor or an attorney for one hour legal advice

CALIFORNIA WOMAN GETS 10 YEARS IN FEDERAL PRISON FROM FLORIDA FEDERAL COURT

FACTS

On Jan. 23, Lonett Rochell Williams was sentenced to 10 years in prison for conspiracy to commit mail fraud, conspiracy to commit money laundering, and six substantive counts of mail fraud.

In October 2012 Williams pled guilty to an eight-count indictment alleging that she participated in a conspiracy to defraud multiple lenders as part of a scheme to fraudulently purchase 37 properties located in Texas, Georgia, and California as well as in Navarre, Panama City Beach and Sarasota, Fla. Approximately $20,448,767 in loans were issued by the lenders in connection with the real estate deals. Williams and her company received more than $4.5 million in kickbacks as a result of the scheme.

In September 2011, Williams’ son, Raysean K. Richardson was separately indicted on charges of conspiracy to commit mail fraud, mail fraud, and conspiracy to commit money laundering based on his role in the scheme. Richardson was convicted following a jury trial held before Chief United States District Judge M. Casey Rodgers in September 2012. He is scheduled to be sentenced on Feb. 19. Richardson faces up to 20 years in prison on each of the three counts he was convicted on.  (usattyndfl12413)

MORAL

The next 10 years of her life is now shot. Was she the cause of her son getting involved? If so, some way to bring up a son. Since he gets sentenced after his mother, the chances are he offered testimony against her, I believe.

FLORIDA MAN PLEADS GUILTY AND GETS FIVE YEARS IN PRISON

FACTS

On Jan. 24, 2013 U.S. District Judge Steven D. Merryday sentenced Arthur R. Seaborne, 70, to five years in a federal prison for conspiring to commit bank fraud. In addition, Seaborne was ordered to forfeit $4,269,886.55 in proceeds from the offense. Restitution will be addressed at a later date. Seaborne pleaded guilty on Nov. 6, 2012.

From as early as March 2003 through July 2008, Seaborne and others conspired to commit bank fraud. Throughout that time, Seaborne used several corporate entities to perpetuate the fraud scheme, including Southeast Capital Advisors LLC. Through this entity, Seaborne marketed a “no money down” residential purchase program that operated by making loans to Seaborne’s clients, so that those clients could make down payments in connection with their purchases of residential properties.

Seaborne and his co-conspirators prepared and submitted mortgage loan applications to lenders for these same clients. The applications were fraudulent in that they omitted the fact that the clients’ down payments had been loaned to them. Further, the applications usually overstated the clients’ assets and understated their liabilities. Some apps also included a fraudulent misrepresentation that the borrower intended to make the property the primary residence, when in fact they were investment properties. Over the course of the fraud scheme, some of the loans on the residential properties went into default. Although the total loss amount has not yet been definitively determined, the losses incurred by the lenders amount to approximately $4 million. (usattymdfl12413)

MORAL

Federal prosecutors indicted him for loans that occurred 10 years ago and now he gets to spend five years in federal prison with no parole.  How lucky can you get?

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

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