DEC 12, 2013

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Compliance Matters

Three Arrested for Loan Mod Fraud

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The California Bureau of Real Estate has filed an accusation in Case No. H-39155 LA against Point Center Financial Inc., a corporate real estate broker; National Financial Lending Inc. a corporate real estate broker; Calcomm Capital Inc., a corporate real estate broker and Dan Joe Harkey, the designated officer-broker of all three corporations. The accusation is dated Nov. 14, and consists of 53 paragraphs. If you would like to read the accusation in its entirety go to the BRE website and check the license and then go to the hyperlink H-39155LA .

This is in addition to a $12.5 million breach of fiduciary duty judgment against Harkey by investors and the bankruptcy of his company Point Center Financial. Harkey’s attorney is alleged to have said that the state accusation is based on patently false allegations by Harkey antagonists that have already been dismissed in the court. He also is quoted as saying the accusation would be dropped one the BRE gets the evidence of the prior court proceedings. The accusation is similar to claims pending in a fraud lawsuit against Harkey in front of Bankruptcy Judge Theodor Albert. (bre h-39155la and ocrlocal page 1)

MORAL

In a recent Supreme Court case the court has held that a finding of “Breach of Fiduciary Duty” is not sufficient to stop the dischargeabilty of a debt owed by a fiduciary. It must be “defalcation.” If you are interested we can give you the citation.

NORTHERN CALIFORNIA MAN SENTENCED TO 10 MONTHS IN FEDERAL PRISON FOR USING BANKRUPTCY COURT TO STOP FORECLOSURES

FACTS

In December Walter Harrell was sentenced by a federal judge to 10 months in prison for using the bankruptcy process in an attempt to conduct a mortgage fraud scheme. Harrell allegedly offered his services to Bay Area homeowners in danger of foreclosure. For a monthly fee, he and his associates stalled bank efforts to collect by splitting off ownership and filing for bankruptcy in an attempt to outmaneuver bank attorneys. Harrell later admitted that he made about $30,000 for his endeavors.

The scheme involved six Bay Area properties, including Harrell's home in Montara and a residence on Roosevelt Boulevard in Half Moon Bay.

The U.S. Attorney's Office successfully prosecuted Harrell in bankruptcy court for paying one of his associates to lie about her income, stating that she was making a six-figure salary. He pleaded guilty to charges of defrauding and making false statements. 

Harrell is scheduled to surrender to U.S. marshals on Jan. 31, 2014. (hlfmnbby12513)

MORAL

Putting fraudulent information on bankruptcy papers for filing is a federal felony. When our attorney goes with a client to the legally required “creditors meeting” there is an exceedingly large poster on the wall that has a white background and large black bold capital letters that informs you that lying on the bankruptcy papers is a felony. There are ways to forestall foreclosure legally such as loam modification requests, etc. If you have questions about filing bankruptcy in any form contact Jozef Magyar of our firm for the answers.

THREE GUILTY VERDICTS IN NATIONWIDE FORECLOSURE RESCUE SCAM THAT CAUSED OVER $15 MILLION IN LOSSES

FACTS

On Dec. 2, after a five-week trial, a federal jury in Sacramento returned guilty verdicts against Charles Head, Benjamin Budoff and Domonic McCarns. All three were convicted of conspiracy to commit mail fraud in connection with a nationwide “foreclosure rescue” scam. Charles Head was convicted of three additional counts of mail fraud. For Charles Head, the trial conviction is his second this year in this district stemming from a major mortgage fraud investigation. McCarns was remanded into custody immediately after the verdict. Charles Head remains in custody following a violation of the terms of his release after his conviction in May 2013 in the first trial.

Charles Head was the leader of a scam that operated from Orange County between March 2005 and June 2006. (Notice the prosecutors went back to offenses that took place eight years ago) The defendants used several entities to extract more than $5.7 million in equity from the homes of their victims, many of whom were in California. Evidence in the two trials established that he and his co-conspirators were responsible for at least $15 million in losses to homeowners.

In March 2008, a federal grand jury indicted Head, Budoff McCarns and others alleging violations of conspiracy to commit mail fraud, mail fraud, and other charges in a separate case related to the Head Financial Services equity-skimming scheme. The defendants found homeowners facing foreclosure and claimed that they could help the homeowners avoid foreclosure and repair their credit. Instead, through misrepresentations, fraud and forgery, the defendants led the victims to complete transactions that substituted straw buyers for the victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants or were solicited on the Internet. Once the straw buyers were on title to the homes, the defendants applied for mortgages to extract the maximum available equity from the homes. The defendants then split the equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left with no home, no equity, and with damaged credit ratings.

This investigation has already yielding 16 convictions and the U.S. Attorney’s office said it is not finished yet.

Two other defendants pleaded guilty in this case before the trial: Keith Brotemarkle and Lisa Vang. (usattyedca12213)

MORAL

Can you imagine federal agents and prosecutors chasing you for over eight years through the federal criminal court system?

TWO SENTENCED IN SACRAMENTO FOR MORTGAGE FRAUD

FACTS

On Dec. 5, 2013 Vadim Vilchitsa and Yevgeniy Zazhitskiy were sentenced in federal court in Sacramento, Calif., in two related mail fraud cases involving the purchase and sale of 24 Sacramento-area homes in 2007 and 2008.

U.S. District Judge Kimberly J. Mueller sentenced Vilchitsa to 15 months and Zazhitskiy to 20 months in prison.

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