DEC 20, 2012
Compliance Matters

Hard Money Lender Indicted

DEC 20, 2012 4:17pm ET
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FORMER OWNER, CEO AND PRESIDENT OF COMMERCIAL MORTGAGE AND FINANCE CO INDICTED FOR MAIL FRAUD, WIRE FRAUD AND SECURITIES FRAUD

HARD MONEY LENDERS TAKE HEED OF WHAT FOLLOWS AND LEARN FROM READING RATHER THAN THE HARD WAY

FACTS

On Dec. 11, Anthony F. D’Agostino, 77, the former owner, CEO and president of Commercial Mortgage and Finance Co. in Rockford, was indicted by a federal grand jury in Rockford, Ill. He was charged with 17 counts of mail fraud, one count of wire fraud, and one count of securities fraud, in connection with a scheme to defraud investors in Commercial Mortgage.

According to the indictment, D’Agostino raised capital for his business by selling installments known as Promissory Notes and Certificates of Participation to investors. The indictment alleges that D’Agostino concealed from the investors the fact that Commercial Mortgage had a negative net worth that steadily increased during the years that D’Agostino owned the company. The indictment also charges that D’Agostino concealed from the investors the fact that Commercial Mortgage was operated as a Ponzi scheme, with money received from the sales of new Promissory Notes being used to pay principal and interest owed on older Promissory Notes. According to the indictment, this fraud scheme took place from August of 1997 through Oct. 8, 2008, and exposed the investors to losses of $20 million.

The indictment also charges that D’Agostino made specific false statements to several of the investors. For example, the indictment alleges that D’Agostino told some investors that the financial condition of Commercial Mortgage was strong and that the company was doing well. In addition, the indictment alleges that D’Agostino told some investors that investments with Commercial Mortgage were safe and secure.

Each count of mail fraud and wire fraud carries a maximum penalty of 20 years in prison and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain derived from the offense, whichever is greater. Securities fraud carries a maximum penalty of up to five years in prison and fine of up to $250,000. (usattndil121112)

MORAL

Notice the fact that he is 77 and that age did not stop the indictment. Notice also the language “Certificates of Participation and installments on promissory notes.” I trust the hard money lenders and investors are reading this well.  If you need assistance, give me a call.

TWO ALABAMA REAL ESTATE INVESTORS PLEAD GUILTY TO BID RIGGING AT PUBLIC FORECLOSURE SALES

FACTS

On Dec. 12, two Alabama real estate investors and their company pleaded guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama. The Department of Justice announced Robert M. Brannon and his son Jason R. Brannon, as well as their company,  J&R Properties LLC pleaded guilty to an indictment in the U.S. District Court for the Southern District of Alabama charging each of them with one count of bid rigging and one count of conspiracy to commit mail fraud.

According to court documents, the Brannons and their company conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.

The Brannons and their company were also charged with conspiring to use the U.S. mail to carry out a fraudulent scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners, and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. The Brannons and their company are charged with participating in the bid-rigging and mail fraud conspiracies from as early as October 2004 until at least August 2007.

So far, eight individuals and two companies have admitted guilt in the U.S. District Court for the Southern District of Alabama in connection with this ongoing investigation.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators. (usattsdal121212)

MORAL

Notice that the federal prosecutors went back eight years! As I have been saying a lot have stopped illegal acts because of the heat. But that does not stop the federal prosecutors from going back 10 years to prosecute what was already done, as was done here by going back eight years.

CALIFORNIA WOMAN TO BE CHARGED WITH FORECLOSURE AND

LOAN MODIFICATION FRAUD

FACTS

Evelyn Rodriguez, also known as Eblin Balver, is charged with 17 criminal counts of a false foreclosure rescue and loan modification scam that targeted Spanish-speaking homeowners. Rodriguez was allegedly purporting to do business on behalf of the L.A. County Justice Center and Time Legal Services. She is accused of enticing at least eight homeowners to pay her large advance fees and monthly fees ranging from $5,000 to $16,000 in order to save their homes from foreclosure, according to the City Attorney's Office. The alleged victims are from Los Angeles, Long Beach, Montebello and Riverside County.

Rodriguez is also accused of telling the homeowners to stop communicating with their lenders and to stop making their credit card and mortgage payments and of promising some customers that she would obtain a loan modification for them, according to the City Attorney's Office.  (bldwnpkptch121612)

MORAL

Usually at the City Attorney level it is a misdemeanor. If so, she can be extremely lucky. 

CALIFORNIA LOAN MOD COMPANY CLOSED BY CFPB

FACTS

The Consumer Financial Protection Bureau has accused a Santa Ana loan modification shop of fraud and obtained a court order shutting it down.  The agency said the defendants, Najia Jalan and Richard Nelson, and their company National Legal Help Center charged advance fees of $1,000 to $3,000, and in some cases close to $10,000, for loan modification services.  This is a violation of both federal and state law. 

A federal judge issued a temporary restraining order and appointed a temporary receiver the week of Dec. 3.  The bureau said it believes the loan modification shop advertised in all 50 states.

The defendants operated 165 Web addresses, many of which mimicked federal housing relief programs. For example, the defendants operated a site at makinghomeaffordable.ca that was, until it was shut down by the recent court order, virtually identical to the government site at makinghomeaffordabl.gov, according to the lawsuit.

Early in 2012 they plastered the logo of the Office of Comptroller of Currency, one of the nation's top two banking regulators, on a mailer and stated that it was sent "at the direction of federal bank regulators."  This prompted the OCC to issue a warning on its website on March 16 saying that National Legal Help "does not appear to be legitimate and is likely an 'up-front-fee' scam."

In some instances, the bureau said, the defendants told clients to stop talking with their lenders and to ignore foreclosure notices. Result: The clients were tossed from their homes while the loan modification experts did nothing. They also told consumers to stop paying their mortgage, the bureau said, without making the legally required disclosure that doing so could cost consumers their home and damage their credit rating.

The bureau is seeking a permanent court order as well as fines and restitution. (ocreg12412)

MORAL

What is surprising and lucky for the defendants is that the case did not go criminal. Falsely displaying a government symbol as your own is a federal offense. You will also note that CFPB is chasing mortgage brokers now quite actively. 

THREE FROM CALIFORNIA SENTENCED FOR MORTGAGE FRAUD

FACTS

On Dec. 17, three men who participated in a complex mortgage fraud scheme operated out of Santa Maria, Calif., were sentenced to federal prison terms and ordered to pay $2.4 million in restitution to various lenders that suffered losses as a result of having funded loans procured through fraud.

Brian Armet was sentenced to one year and one day in prison after pleading guilty in July 2011 to conspiring to defraud lenders by preparing loans packages that contained false information about prospective borrowers’ employment and assets.

Rigoberto Hernandez got eight months and Julio Tamayo got six months.

The three men were sentenced by United States District Judge John F. Walter, who ordered the defendants to pay $2,412,294 in restitution to four lending victims.

The fraudulent mortgage fraud scheme operated through Custom House Home Loans, a Santa Maria real estate mortgage company that Armet started in early 2006. Armet was a licensed mortgage broker and the main loan officer at CHHL, where he prepared and submitted loan application packages. Hernandez and Tamayo worked at CHHL and helped prepare loans applications by obtaining information from clients.

In instances where the information was insufficient to ensure that a client would qualify for a loan, Armet, Tamayo, and Hernandez arranged with employers in the Santa Maria area to verify that they employed the applicant. Armet included the false and fraudulent employment information in loan applications that were submitted to lenders, including Homecoming Financial, Freddie Mac, Bank of America, and Carrington Mortgage Company. Lenders relied on these fraudulent loan applications that contained false information to fund loans. As a result of this fraud, approximately 19 loans went into default, causing lenders to suffer approximately $2.4 million in losses.  (usattycacd121712)

MORAL

California seems to be rather busy with mortgage fraud.  Anyone need an attorney?

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

Comments (2)
Notice all small potatoes

When are All the Major 20% of Bankers -Gov't Officals-Utilities Top 20%

& top 20 of Fotune 500 & Non -Profits & Top 20% of Universities

going to Gillotines ?

Posted by Smiley Friends | Wednesday, December 26 2012 at 6:40PM ET
Anyone found guilty of fraud should be punish to the fullest extent. Though, I find it very interesting that Chase, Wells, BAC just to state a few, created more than 10,000 times the amount of fraud, and not one individual is prisoned.
Posted by Adolfo | Thursday, December 27 2012 at 10:28AM ET
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