Scammers hit with $19M penalty over bogus loan modifications

A federal court judge in California has penalized four home modification scammers with approximately $19 million in fines and restitution in the first joint case brought by state and Federal Trade Commission officials. 

Michael Nabati, Armando Solis Barron, Dominic Ahiga (also known as Michael Grinnell) and Roger S. Dyer were found liable in a summary judgment in this case; several corporate entities headed by Home Matters USA, based in Los Angeles, were jointly penalized in a separate default judgment.

All of the individual defendants, except Barron, did not oppose the motion or otherwise challenge the allegations raised by the FTC and the California Department of Financial Protection and Innovation.

Although Barron did file a response, "the sole evidence submitted in support of his cursory opposition brief — a self-serving declaration — is inadequate to present any dispute of fact and is not executed in compliance with federal law," a footnote in Judge Fernando Aenlle-Rocha's ruling said.

Regulators alleged the scam impacted over 3,000 people nationwide, many of whom were elderly and/or veterans. The victims paid for loan modification services that were never rendered, the ruling noted. It stated the defendants "falsely represented that the consumers' homes could not be foreclosed while they were paying for the fraudulent services, the homeowners need not and should not make their regular mortgage payments or communicate with their mortgage providers, and that the services were associated with a government program related to COVID-19 relief."

The penalties include nearly $15.9 million jointly and severally against all of the defendants as monetary relief. A separate $50,900 fine was levied against "relief defendant" MostCap Enterprises, which admitted to receiving money from the corporate entities named in the suit.Judge Aenlle-Rocha also instituted $3.1 million in civil penalties against all of the parties. A court-appointed receiver has already recovered $3.5 million.

This is the first time the California DFPI teamed up with the FTC in a civil matter, and it resulted in the highest penalties issued to date under expanded authority granted by California's consumer protection law.

"Our win in this case sends a clear message to scammers who target consumers facing financial hardship: the FTC and our law enforcement partners are focused on fighting fraud and halting it," said Samuel Levine, director of the FTC's Bureau of Consumer Protection, in a press release. "We look forward to more opportunities to partner with the California DFPI on behalf of consumers."

When the case was initially filed in September 2022, California officials pointed out the accused were the subject of prior law enforcement actions in Ohio, Washington, Oregon, Connecticut, and North Carolina, as well as action by the State Bar of California.

A Google search found a Washington State Department of Financial Institutions consumer alert from March 2023 against a Los Angeles-based company named HomeMatters USA for an unlicensed loan modification scam. None of the individuals named in the alert were defendants in the California matter.

A Better Business Bureau page lists multiple complaints against Home Matters USA between 2021 and 2023.

"Fraudsters everywhere should take note – DFPI will find you, expose you, and hold you accountable. Victims of fraud should likewise take heart. The DFPI has your back," said Commissioner Clothilde Hewlett.