Fraud and Prevention

Stories on this page:

• Two Office of Tax and Revenue Employees Plead Guilty to Mortgage Fraud

• Fair Isaac Introduces Augmented Fraud Network Forum

• Final Defendant in First Rate Mortgage Scheme Sentenced

More related stories

Two Office of Tax and Revenue Employees Plead Guilty to Mortgage Fraud

By James Comtois
August 20, 2008

Two employees of the D.C. Office of Tax and Revenue have pleaded guilty in Federal Court to one count of making a false statement to HUD, according to the U.S. attorneys for the District of Columbia and Maryland.

Sheila Jones and Temika Ganae Gustus, both of District Heights, Md., each pleaded in the U.S. District Court for the District of Columbia before Judge Emmet G. Sullivan.

According to the information presented by the government in court, Jones and Gustus, both employees of the D.C. OTR, each submitted loan applications to HUD in 2006 that listed fictitious second jobs and bank balances that were inflated by $20,000.

Using a scanner and a computer, their real estate agent, Alethia Olivia Grooms, created bogus pay stubs and W-2 forms and forged bank statements to support their false claims. These fraudulent documents were included in their loan applications.

The maximum sentence for making a false statement to HUD is one year of incarceration, one year of supervised release and a fine of $100,000. Jones is scheduled for sentencing on Nov. 5. Gustus is scheduled for sentencing on Nov. 13.

Fair Isaac Introduces Augmented Fraud Network Forum

By James Comtois
August 20, 2008

From straw purchasing and shotgunning scams to data and identity theft, financial crimes have become highly inventive and the perpetrators better organized. In order to properly combat mortgage fraud, industry professionals need to open the lines of communication.

In order to facilitate collaboration among financial institutions to fight fraud, analytics and decision management technology provider Fair Isaac Corp. has introduced an expanded online forum in which mortgage professionals can share tips, techniques and experiences in dealing with increasingly sophisticated fraud schemes.

Fair Isaac created the Fraud Alert Network Forum to help financial institutions and law enforcement officials counter these trends through collaboration. It provides a secure environment in which members can discuss specific criminal attacks with the intent of learning from their peers how they manage similar incidents. Members can also alert each other to emerging fraud trends and share ways to mitigate losses.

"Financial institutions generally don’t discuss their inner workings with competitors, but in the case of fraud and crime, communication and collaboration are invaluable," said Doug Clare, vice president, fraud solutions product management, Fair Isaac. "We see members of the Fraud Alert Network posting comments like ‘I have been through this and here’s how to fix it.’ The level of dialogue is refreshing and absolutely necessary in the face of mounting fraud activity."

The Fraud Alert Network Forum, located online at http://www.fraudalertnetwork.com, was previously known as the CardAlert Fraud Forum, which was originally launched in 2002.

The Fraud Alert Network Forum requires registration. Fair Isaac submits every applicant to a validation process to authenticate his or her identity prior to granting access. Membership is free for banking, credit union and law enforcement professionals.

Final Defendant in First Rate Mortgage Scheme Sentenced

By James Comtois
August 20, 2008

The last defendant involved in a fraudulent mortgage brokering business known as First Rate Mortgage Group that resulted in a loss to area banks of more than $2.3 million was sentenced in Federal Court, according to the U.S. attorney’s office for the District of Minnesota.

U.S. District Court Judge Joan Ericksen sentenced Christopher Erik Septon of Big Lake, to two years in prison. Judge Ericksen also sentenced him to three years supervised release and ordered him to pay more than $2.3 million in joint restitution with the other defendants.

The co-defendants in the case are Sean Brian Leaf, who was sentenced on May 9 to 18 months in prison and three years probation; Joddilee Margaret Lindberg, who was sentenced on May 9 to four years probation and eight months of community confinement with work release; Micah Daniel Thormodsgaard, who was sentenced on April 3 to three years probation; Edward Arnold Septon, who was sentenced on May 28 to 70 months in prison and five years supervised release; and Christopher Adam Horton, who was sentenced on May 12 to 24 months in prison and three years supervised release.

All six defendants pleaded guilty last fall to one count of conspiracy to commit mail fraud and bank fraud. Edward Septon also pleaded guilty to one count of bank fraud on Sept. 21, 2007. All six were charged on Aug. 8, 2007.

According to their respective plea agreements, they admitted that between 2000 and August 2004 they conspired to use the U.S. Mail to execute a scheme to defraud financial institutions and private mortgage lenders of funds. Specifically, through their business, First Rate Mortgage Group, they represented that, for a fee, they could help people obtain financing for the purchase of real estate. In furtherance of their scheme, they mailed false and fraudulent loan applications to banks and mortgage lending companies, which concealed that First Rate Mortgage had loaned the money for the downpayment to the borrower. The applications also inflated the borrower’s income and assets, falsely described the borrower’s employment, contained forged signatures and attached false documents, including pay stubs, gift letters, bank statements and bank notes.

In January 2004, the six defendants caused false loan applications to be submitted to Washington Mutual Bank in the amount of $1.33 million and Associated Bank in the amount of $378,555 on behalf of a borrower purchasing property in Wayzata. The applications falsely stated the source of the downpayment, which had been loaned by the conspirators, and included other falsified information.

This case is the result of an investigation by the FBI and the U.S. Postal Inspection Service. Assistant U.S. attorney John R. Marti is prosecuting.