Five Charged in $14MM Mortgage Fraud Scheme

Five people have been indicted in connection with a $14 million mortgage fraud scheme in Wisconsin. According to the U.S. attorney's office for the Eastern District of Wisconsin, Paul J. Zaleski and Robert Farrell, both formerly of Richmond, Ill.; Michael Pembroke of Twin Lakes, Wisc.; John F. Hochrek, Jr., of Spring Grove, Ill.; and Patricia Lynn Kay of Kenosha, Wisc., have been charged in a 24-count indictment, accused of wire fraud and money laundering. The indictment alleges that Mr. Zaleski orchestrated the purchase of at least 40 real estate properties by straw buyers who were led to believe that they were members of an investment group. In order to secure mortgage loans, Messrs. Zaleski and Farrell, working as loan originators in Kenosha, Wisc., allegedly prepared fraudulent loan applications containing inflated appraisals in the names of the buyers. Mortgage lenders advanced more than $14 million in loans. The mortgages subsequently went into default and then foreclosure. An initial appearance for Mr. Pembroke, Mr. Hochrek and Ms. Kay has been scheduled for May 14 before Judge William E. Callahan. Mr. Zaleski and Mr. Farrell have been arrested in California and are awaiting return to Wisconsin.