AUG 2, 2012
Compliance Matters

Arizona Man Gets Five Years for Mortgage Fraud

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ARIZONA MAN GETS FIVE YEARS FOR MORTGAGE FRAUD

FACTS

On July 25, U.S. District Judge Paul G. Rosenblatt sentenced Clint Bryson Rogers of Scottsdale to five years in federal prison for his role in a mortgage fraud conspiracy. Rogers pleaded guilty on Jan. 18 to conspiracy to commit the crimes of false loan application, wire fraud and money laundering.

Rogers admitted as part of his guilty plea that he conspired with Shannon Kato a real estate investor; Ernest Babbini, a loan originator; and Drew Hull, an escrow officer; to get mortgage loans to buy at least 15 homes in a short period of time by lying about his income and assets. Rogers also admitted that, in addition to purchasing homes with the loan proceeds, he artificially inflated the sales prices in order to divert more than $2.5 million of the proceeds to himself or entities under his control. Evidence presented at sentencing showed that Rogers spent these additional proceeds on, among other things, international travel, luxury cars, and transfers to his investment accounts.

Judge Rosenblatt found at sentencing that at least 10 banks fell victim to the scheme and that their losses exceeded $2.5 million. Kato and Hull are scheduled to be sentenced on Aug. 22 and Babbini’s sentencing is scheduled for Oct. 1. (usattyaz72512)

MORAL

The fraud goes on, the sentencing goes on and more to follow. Who will be next?

A REMINDER THAT ALL EMPLOYERS PAYING CALIFORNIANS A COMMISSION MUST HAVE A SIGNED WRITTEN CONTRACT WITH THE EMPLOYEE BY JAN. 1, 2013 AND GET A SIGNED RECEIPT FROM THE COMMISSIONED EMPLOYEE

FACTS

By Jan. 1, 2013, whenever an employer (in or out of California) enters into a contract of employment with an employee for services to be rendered within California and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.

The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or either party terminates employment. (ab1396, Lab. C. §2751)

MORAL

The law became effective this past Jan. 1, but is not enforceable until Jan. 1, 2013. The key part to remember is to get the written receipt from the employee. This means if you pay any commission. It not only includes 100% commission employees but any employee that receives any commission at all.

CALIFORNIA LAW FIRM SHUT DOWN IN CIVIL LAWSUIT BY CFPB FOR DEFRAUDING HOMEOWNERS SEEKING MORTGAGE HELP

FACTS

The new Consumer Financial Protection is now exercising its muscles on those deceiving consumers. It has shut down the offices of Los Angeles attorney Chance Edward Gordon by accusing him of defrauding homeowners seeking mortgage help. The CFPB filed a complaint “under seal.” It then obtained a temporary restraining order against Gordon and froze his assets. The seal was lifted the week of July 24. Gordon’s office number is now answered by a recording from a receiver appointed by U.S. District Judge Ronald S. W. Lew.

The CFPB complaint alleges that Gordon and a non-lawyer associate, working through at least 11 businesses, engaged in an ongoing, unlawful mortgage relief scheme that preyed on financial distressed homeowners nationwide. (Consumer Financial Protection Bureau v. Gordon, 2:12-cv-6147 (C.D. Cal., filed July 17, 2012.

FEDERAL JUDGE IN FLORIDA SENTENCES EX-TITLE COMPANY OWNER TO 18 MONTHS IN FEDERAL PRISON

FACTS

On July 25, U.S. District Judge Henry Lee Adams, Jr. sentenced Cynthia Darlene Strickland to 18 months in federal prison following her guilty plea to a mortgage fraud scheme. As part of the sentence, the court ordered Strickland to pay restitution to victims in the amount of $531,356. The court also entered a judgment against Strickland for $178,625, which was the amount of money she received as a result of the scheme. Strickland had pled guilty. She was a licensed title agent and the owner of Premier Title Group Inc., a title agency in Jacksonville, Fla.

According to court documents, the orchestrator of the scheme was Juan Carlos Gonzalez. Gonzalez entered into contracts to buy residential real estate properties and retained a retained a licensed real estate appraiser, Barry Westergom, to appraise the properties. Westergom fraudulently appraised the properties at values that were significantly inflated above the agreed purchase price.

Gonzalez recruited third-party buyers to enter into a second contract that listed the fraudulently inflated appraised value as the purchase price. Gonzalez applied for mortgage loans in the name of the third-party buyers, and in support of the applications he submitted the second contract, the fraudulent appraisal, and false financial information about the buyers. Based upon this information, banks and other mortgage lenders approved the loans.

Gonzalez recruited Strickland to be the closing agent for the transactions. Strickland’s plea agreement describes a transaction that was funded by first and second mortgage loans that Gonzalez fraudulently obtained from Lehman Brothers Bank. As part of her responsibilities as closing agent, Strickland prepared a standard settlement statement that identified various expenses, payments, and disbursements related to the transaction.

On the settlement statement, Strickland represented that the purchase price of the property was $725,000, the inflated appraised value, when, in fact, the purchase price was $570,000, the price Gonzalez had negotiated with the sellers. Although Strickland knew that two contracts existed, one for the lower price negotiated with the sellers and one for the higher price based on the inflated appraisal, she did not inform the bank of these facts.

Comments (4)
I guess the bank didn't do their do dillegence to source and season downpayment funds. I agree that what the parties involved did is wrong but I also feel that at that time some lenders were just too greedy to institute some common sense underwriting standards. Which is why we have a housing crisis. Greed, greed, greed!!! Oh wait..... let's blame the mortgage brokers!
Posted by Keith Durand | Friday, August 03 2012 at 2:43PM ET
So why hasn't Babbini been sentenced? And did Babbini break his Federal Probation orders by committing another act before sentencing on this fraud. Suzanne Kensington-Like was owner of Global Mortgage LLC and some plaintiffs filed $100,000.00 against Global and $50,000 against Babbini but looks like both filed bankruptcy to avoid paying the judgments. Drew Hull, Escrow Agent received 5 years probation in this indictment this week.
Posted by AzCO | Saturday, November 10 2012 at 10:43AM ET
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