FACTS
In the first part of May, a prominent Realtor, her son and daughter-in-law pleaded guilty to an expanding mortgage fraud that enabled them to buy expensive vacation homes at Alabama’s Gulf Shores using “straw borrowers” to qualify for credit union loans. Lenders victimized by the scheme were First Tennessee Bank, U.S. Bank and First Choice Funding.
Joan Teeters, who owned Joan T. Realty in Mobile, Ala., along with her son Jonathon Marc Nattier and daughter-in-law Christina Nattier, pleaded guilty to conspiracy to commit mail fraud in a scheme that qualified dozens of borrowers for loans from First Educators Credit Union in Hoover and other lenders.
A fourth member of the conspiracy, Benelle Land, has agreed to plea guilty the week of May 17, in her home state of New Jersey. Charges are still pending against several alleged co-conspirators.
Teeters and other members of the conspiracy would arrange for a traditional mortgage while at the same time persuading owners of condominiums near the beach to extend special second mortgages, in which buyers would eventually pay a portion of the sales price directly to the seller, according to prosecutors. Under the scheme, Jonathan Nattier and other straw buyers agreed to tender offers for the property and then used money provided by other members of the conspiracy for down payments. Straw buyers were promised a portion of the proceeds from subsequent sales, prosecutors said.
Credit unions and other lenders specifically forbid such “seller-financed second mortgages,” but Teeters admitted that the conspirators would direct the title company to prepare two different settlement statements using falsified HUD documents to conceal that fact. Straw borrowers would qualify for the loans using falsified loan documents that overstated income and listed assets they did not own. (nmn51811)
MORAL
A somewhat more novel approach. But remember, the family that commits fraud together, stays together in a federal prison.
CALIFORNIA FORMS STATE MORTGAGE FRAUD TASK FORCE CONSISTING OF 17 ATTORNEYS AND EIGHT SPECIAL AGENTS
FACTS
California Atty. Gen. Kamala Harris, saying that years of unscrupulous lending still haunts the state, is creating a 25-person task force to target mortgage fraud of any size, from small operations that preyed on troubled borrowers to corporations that sold risky loans as safe investments.
The team of 17 lawyers and eight special agents from the state Department of Justice will pursue three major areas, Harris said in an interview with a California publication.
• Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses. Harris said her office plans to prosecute some cases under California's False Claims Act, which she described as "one of those very powerful tools that California uniquely has…to pursue, in essence, what are false claims that are submitted to the state."
• Scams, including instances in which consultants, lawyers and others took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.
• Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldn't afford the terms.
Harris said the mortgage fraud that ultimately led to the housing crash continues to be a drag on the state, causing huge losses in jobs, property values and state revenues.
"We are looking at a situation of up to $640 billion in wealth having been lost because of this wave of foreclosures that has hit the state," Harris said, referring to the decline in homeowner equity. "There is a direct connection" between mortgage fraud "and the issue that we are challenged with in terms of our state budget crisis.
Creation of the state's Mortgage Fraud Strike Force comes as other states turn up the heat on the lending industry.
New York Atty. Gen. Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis. Also, a months-long investigation by all 50 state attorneys general into the foreclosure practices of the nation's five largest mortgage servicers is continuing.
Harris said her initiative was distinct from the multistate investigation because it would go after all aspects of the mortgage-lending business. Harris, formerly San Francisco's district attorney, made a campaign promise last year when running for attorney general that she would crack down on mortgage fraud.
Angelo R. Mozilo, whose Calabasas-based Countrywide Financial Corp. was a major underwriter of risky subprime loans, agreed to a $67.5-million civil settlement with federal regulators but was not prosecuted criminally, despite a nearly three-year investigation by the Justice Department. Countrywide was acquired by Bank of America Corp. in 2008.
Harris' office reached a $6.5-million settlement this year with Mozilo and another former executive of Countrywide who the state had accused of predatory lending. Consumer advocates decried that settlement as far too small to be meaningful.
"The burden of proof in a criminal case is very high," Los Angeles defense attorney Jan Handzlik said. "It would be necessary for the AG to prove beyond a reasonable doubt that the mortgage executives had knowledge of the fraud and acted with a criminal intent."
Handzlik added that such proof is difficult "when those executives are relying on the representation of numerous other institutions such as the ratings agencies, the lenders who gave out the mortgages in the first place, the insurance companies that backed these securities and so forth."
William K. Black, a University of Missouri-Kansas City law professor and an aggressive regulator of the savings and loan industry after its crisis in the 1980s, said the state prosecutors could be successful if they carefully chose their targets.
Black asserted that the federal government has the means to pursue these cases but hasn't shown the will.
"The success rate in the savings and loan cases, despite the fact that they were more complex…was 90%, and this was against the best criminal defense attorneys in America," Black said
CALIFORNIA WOMAN ARRESTED FOR TAX FRAUD, MORTGAGE FRAUD AND IDENTITY THEFT
FACTS
On May 16, Imelda Sanchez, of Nipomo, Calif., was arrested at her place of business and arraigned on charges of orchestrating a tax scheme involving stolen identities, as well as a loan fraud scheme in which she allegedly submitted false income tax returns that overstated her income in an effort to obtain a $1.6 million loan.
Sanchez pleaded not guilty to eight counts of making false claims to the Internal Revenue Service charges contained in an 18-count indictment. The indictment charges Sanchez with, three counts of aggravated identity theft, five counts of making false statements on loan applications, and two counts of making false statements to the FBI.
In the indictment Sanchez is accused of preparing false and fraudulent tax returns in the names of several taxpayers in order to fraudulently obtain tax refunds from the IRS. The indictment alleges that Sanchez stole the identities of several people, using their names and Social Security numbers without their authorization.
Sanchez is further charged with making false statements to Santa Lucia Bank by submitting false personal and corporate income tax returns in applications for a $1.6 million loan.
Sanchez is also charged with having lied to the Federal Bureau of Investigation on two separate occasions in 2007 when asked about her role in creating false tax documents and employment verifications in collaboration with various loan officers.
If convicted of all 18 counts in the indictment, Sanchez would face a statutory maximum sentence of 206 years in federal prison, as well as up to $7.5 million in fines. During arraignment, a United States Magistrate Judge set bond at $65,000 and Sanchez was released. After Sanchez pleaded not guilty to the charges, her case was assigned to United States District Philip S. Gutierrez, who scheduled a trial for July 12.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court. (usattycdca5`7``)
MORAL
First I wonder if she ever heard of a 4506? Second you do not lie to federal agents, in and of itself a federal criminal offense. You just tell them you want your attorney present and call us. They respect that and do not push. Now she allegedly lied twice and faces two counts of lying. The attorney would have been a lot cheaper and much more protective.
EIGHT PEOPLE IN SACRAMENTO ARE ARRAIGNED IN FEDERAL COURT FOR MORTGAGE FRAUD
FACTS
On May 16, an indictment by a Sacramento federal grand jury charged eight people with mortgage fraud involving losses that allegedly exceed $9 million. The eight were charged under the federal wire and mail fraud federal laws with the mortgage scheme that operated in the Sacramento area from 2006-2007.
The indictment alleges that the defendants were responsible for originating more than $16.3 million in residential mortgage loans on 14 homes purchased through so-called straw buyers. All of the homes went into foreclosure, causing losses of approximately $9.6 million, according to a federal Department of Justice news release.
According to the court documents, defendant Vera Kuzmenko and her sister Nadia were licensed real sales agents who allegedly recruited straw buyers with the assistance of Vanik Atoyan and other defendants. Defendant Aaron New was a licensed real estate broker.
According to the indictment, the Kuzmenko sisters and others prepared loan applications containing materially false information about the straw buyers' income, employment, assets and liabilities and intent to occupy the residences, and New presented the fraudulent applications to lending institutions.
Defendants Veniamin Markevich, Edward Shevtsov, Peter Kuzmenko and Sergey Blizenko allegedly created shell companies, or used companies that had no connection with the properties, for use in submitting invoices to falsely claim that they had made repairs to the properties. They then received payments from escrow to which they were not entitled, officials said.
Defendants Vera and Peter Kuzmenko, New, Blizenko, Markevich and Shevtsov are also charged with money laundering. Vera and Nadia Kuzmenko are also charged with witness tampering.
On May 17, Vera and Nadia Kuzmenko and Atoyan were arraigned before U.S. Magistrate Judge Dale A. Drozd. The other defendants were arraigned earlier. Shevtsov and Vera and Peter Kuzmenko have been ordered detained pending further proceedings according to a news release. The other defendants have been released on bail. (sacrobe51711)
MORAL
The federal agents are still pursuing the mortgage fraud aggressively and there are more to follow. I guarantee there ate at least two more in California and that is a very low-ball estimate.
SIX PEOPLE IN CA INDICTED FOR MORTGAGE FRAUD
FACTS
On May 18, a Silicon Valley mortgage fraud investigation has netted six more targets who've been charged in San Jose federal court with orchestrating a multimillion-dollar mortgage and real estate scam.
In a 32-count indictment federal prosecutors accuse the defendants of duping banks into extending loans to unqualified homebuyers, siphoning off more than $1 million in illicit commissions for themselves. The indictment was handed down by a federal grand jury in early May but made public now.
Three of the defendants appeared before U.S. Magistrate Judge Howard Lloyd and pleaded not guilty to the charges, which include bank fraud and money laundering. Norma and Claudia Valdovinos, of San Jose, and Elaine "Queenie" Ly, also of San Jose, were released on bonds ranging from $50,000 to $125,000. Linda Dung Tran and Pablo Curiel, of San Jose, and Jesus Chavez of Gilroy, are slated to make their first court appearances on May 26. Federal prosecutors say the indictment is the fifth connected to the same probe into South Bay mortgage fraud activity.
The indictment alleges that between 2004 and 2007, Norma Valdovinos and Chavez solicited low-income homebuyers to purchase homes typically priced more than $500,000, even though they did not have the financial clout to qualify for the home loans. At the time, they were both working as real estate agents for CENTURY 21 Golden Hills Real Estate.
The real estate agents would then refer clients to Linda Tran's mortgage firm, which would inflate the prospective homebuyers' assets. Tran, Ly and Claudia Valdovinos reportedly took part in this part of the scheme, which the indictment alleges wound up coaxing more than $40 million in bad loans from banks.
The defendants face a maximum penalty of 30 years in prison. (sjcercnws519110
TWO MEN IN CONNECTICUT INDICTED FOR FRAUD
FACTS
On May 11, an indictment was unsealed disclosing a federal grand jury had returned an indictment charging Domingos Dias and Hector Natera with conspiracy, wire fraud, and bank fraud offenses stemming from their alleged involvement in a mortgage fraud scheme that has caused more than $3 million in losses to lenders. The indictment alleges that from approximately January 2006 to April 2008, Dias, Natera, and others conspired to obtain millions of dollars of fraudulent real estate loans from banks and real estate lenders for properties that were purchased in Bridgeport and New Haven. Dias and Natera held themselves out as real estate agents and mortgage brokers and recruited “straw buyers,” found sellers, and orchestrated and directed the creation and flow of fictitious documentation and information that were needed to obtain the fraudulent loans from lenders. After a loan for a property had been fraudulently obtained and a closing had occurred, Dias and Natera kept some of the fraud proceeds and distributed proceeds to other members of the conspiracy. It is alleged that losses to mortgage lenders from this scheme total in excess of $3 million.
The indictment charges Dias and Natera with one count of conspiracy to commit wire fraud and bank fraud and one count of bank fraud. The indictment also charges Dias with six counts and Natera with four counts of wire fraud. Each of the charges carries a maximum term of imprisonment of 30 years and a fine of up to $1 million.
Dias was arrested on Nov. 23, 2010. He had been released on bond until May 11 when U.S. Magistrate Judge Holly B. Fitzsimmons found that Dias had violated the terms and conditions of his release and ordered the bond revoked and Dias detained. Natera is currently being sought by law enforcement. (usattyct61311)
MORAL
The federal prosecutors went back to fraud that occurred five years ago to get them and they are chasing frauds that occurred in 2010.
FORMER OWNER OF DC TITLE AND ESCROW COMPANY INDICTED ON MORTGAGE FRAUD
FACTS
On May 17, a federal indictment was released charging Ronald Johannes Sneijder, a former owner of a title and escrow company based in the District of Columbia, with charges relating to mortgage fraud. The total amount of loans was approximately $1,829,000.
Sneijder, of Herndon, Va., was indicted on charges of bank fraud, wire fraud, first-degree fraud, and theft. The indictment also includes a forfeiture count seeking all proceeds from the defendant’s crimes. If convicted, under the federal sentencing guidelines, he faces a potential sentence of between 46 and 57 months of incarceration. According to the indictment, Sneijder was the manager and majority owner of a title and escrow company known as Red Box Settlements, located in the 1600 block of U Street NW, Washington, D.C.
On about January 13, 2004, Sneijder purchased a residence at 1325 Independence Avenue SE. About a month later, he refinanced the loan through Wells Fargo Bank, obtaining a home equity line of credit with a maximum credit limit of up to $575,000.
In February 2005, the defendant sought a $581,000 refinance loan from First Savings Mortgage Corp., using as collateral his house at 1325 Independence Avenue SE, which was already encumbered with the home equity line of credit from Wells Fargo. First Savings Mortgage approved the loan on the condition that the Wells Fargo line of credit would be paid off and closed and the lien in the public record be “released” so that no additional money could be borrowed on the Wells Fargo line of credit, and so that there would be no other loans that would take precedence over the First Savings Mortgage loan.
After settlement, Sneijder paid off the Wells Fargo line of credit but did not close it. Thereafter, from March 2005 to November 2006, he again borrowed money against the Wells Fargo line of credit. He obtained cash advances up to approximately $558,000 by the end of November 2006. The indictment further alleges that in November 2006, Sneijder sought a $675,000 loan from Wachovia Bank using as collateral 1325 Independence Avenue SE, which was already encumbered with the Wells Fargo home equity line of credit and the First Savings Mortgage loan. Wachovia approved the loan on the condition that the Wells Fargo line of credit would be paid, closed, and the Recorder of Deeds be notified of the closure so that no additional money could be borrowed on the Wells Fargo line of credit. The defendant paid down less than half of the line of credit, and again failed to close the Wells Fargo account. From January to August 2007, Sneijder again continued to borrow money against the Wells Fargo line of credit for a total amount due and owing of approximately $573,000.
According to the indictment, Sneijder failed to repay the approximate $573,000 Wells Fargo line of credit, the $581,000 First Savings Mortgage loan, and the $675,000 Wachovia loan, resulting in foreclosure of 1325 Independence Avenue SE, the proceeds of which were insufficient in value to repay the approximate $1,829,000 loaned to the defendant. The indictment further alleges that the defendant took about $216,000 from client escrowed money from May to November 2006. (usattydc51711)
MORAL
This one is unique when compared to most of the others but nevertheless it does leave a paper trail as I have said before. It leads back to the alleged person in charge, who is now looking at a lot of time in federal prison if convicted.
TEXAN PLEADS GUILTY IN NEW HAMPSHIRE TO MORTGAGE FRAUD
FACTS
Former Nashua resident Walter Bressler, now of Frisco, Texas, pled guilty in U.S. District Court to operating a mortgage fraud and equity stripping scheme involving numerous New Hampshire properties. At a hearing before Senior U.S. District Judge Joseph DiClerico, Bressler admitted to violating the federal mail fraud statute in connection with the scheme.
Between March 2005 through October 2006, he participated with other individuals in a scheme to obtain title to the homes of dozens of distressed homeowners who were facing foreclosures on their homes due to financial difficulties. Bressler and others induced the transfer of titles by promising that the homeowners could avoid foreclosure, remain in their homes while paying rent, and later re-purchase the homes. However, after obtaining title to the homes, the scheme participants arranged re-sales of the properties to straw buyers and obtained new mortgage financing in the names of the straws in amounts that exceeded the original homeowners’ loans. The scheme participants used some of the funds from the larger loans to pay off the original loans and kept the rest of the funds for themselves. For a time, scheme participants made payments on the new mortgages using rent monies paid by the original homeowners, but later defaulted on the loans. The distressed homeowners, who were given to believe that they could re-purchase the homes in two years, in fact had no such realistic opportunities because the defendant and his cohorts stripped the equity from the homes, left the properties encumbered with larger mortgage liens, and then defaulted on them.
An essential part of the scheme involved the use of straw borrowers, who were induced to allow their names and credit to be used on loan applications in connection with the scheme. In typical transactions, straws were paid $5,000 each time they attended a closing and signed the relevant paperwork. None of the straws had any stake in the properties or any intention of repaying the loans obtained in their names. The loan applications contained many false statements regarding items such as income, assets, liabilities, and the intention to occupy the properties as their residences. In a dozen transactions, various relatives of Bressler acted as straws. Bressler admitted in his plea agreement that the scheme caused losses to lenders of more than $2.5 million. His sentencing is scheduled for Aug. 11 at 10:00 a.m. (usattynh51311)
MORAL
Now Bressler will have a home after Aug. 11, federal housing but with strict time curfews for all events.
NEW JERSEY MAN PLEADS GUILTY TO $10 MILLION MORTGAGE FRAUD
FACTS
On May 16, Ronald Harris Jr. of Piscataway, N.J., a man who owned and operated multiple foreclosure rescue companies admitted today to his role in a mortgage fraud scheme that defrauded numerous mortgage lenders of over $10 million. Mr. Harris pleaded guilty before U.S. Magistrate Judge Patty Shwartz to an information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. Judge Shwartz recommended to U.S. District Judge Faith S. Hochberg that his plea of guilty be accepted and entered.
Harris owned and operated Harris Capital and Skyline Capital Group, both of which held themselves out as foreclosure rescue companies and operated out of offices in Newark and later, Maplewood, N.J. Harris admitted that he and other individuals, including Harris Capital employee Sterling Bruce, fraudulently promised to help homeowners avoid foreclosure, keep their homes, and repair their damaged credit by directing the homeowners to allow title to their homes to be put in the names of third party purchasers, or straw buyers, for approximately six month to one year. Harris told the homeowners that during that time period, he and others would help them obtain more favorable mortgages and improve their credit ratings. The homeowners were told that the titles to their homes would be returned to them.
After the homeowners were signed up, Harris, Bruce, and others recruited individuals with good credit scores to act as straw buyers of the distressed properties. The straw buyers were told that they were helping someone save his or her home and that they would make money when they sold the property back to the current owner after approximately one year.
Once the distressed homeowners and straw buyers were in place, Harris, Bruce, Pia Perkinson—a mortgage loan officer at a number of different mortgage loan companies—and others caused loan applications to be sent in the straw buyers’ names to mortgage lenders. To increase the credit-worthiness of the straw buyers and to ensure that they would be approved for the loans, Harris, Bruce, Perkinson and others submitted loan applications containing material false personal and financial information about the straw buyers, such as misstating their employment, income, and assets. For example, many of the straw buyers’ loan applications falsely stated that they worked for one of Harris’ companies making a substantial salary. Harris would also regularly submit fraudulent supporting documents with the loan applications to support the false statements, such as fake employment records and fake investment account statements.
Prior to the closings of these fraudulent transactions, Harris and Bruce regularly filed fraudulent liens for tens of thousands of dollars on the properties. At the closings of the transactions, the liens would be paid off with the proceeds of the fraudulently obtained loans and Harris and Bruce would enrich themselves. Harris admitted that he regularly laundered these loan proceeds through various bank accounts he controlled.
In total, Harris and his co-conspirators caused lenders to fund dozens of fraudulent loans that totaled more than $10 million. Of that amount, Harris received approximately $1,145,993.
The wire fraud conspiracy count to which Harris pleaded guilty carries a maximum potential penalty of 30 years in prison and a fine of up to $1 million. The money laundering conspiracy count carries a maximum potential penalty of 20 years in prison and a fine of up to $250,000. Sentencing is currently scheduled for Sept. 13.
Bruce previously pleaded guilty before Judge Shwartz to one count of wire fraud conspiracy relating to his role in the mortgage foreclosure rescue scheme. He is currently scheduled to be sentenced by Judge Hochberg on Sept. 12. Perkinson also previously pleaded guilty before Judge Shwartz to one count of wire fraud conspiracy. During her guilty plea, Perkinson admitted to submitting fraudulent loan applications to various lenders, as well as taking out at least two fraudulent loans herself. A sentencing date has not yet been determined.
Sabir Muhammad was charged along with Harris in the initial complaint, and the charges against him remain pending. (usattynj51611)
MORAL
No one wants to learn that the federal people follow the money to the person. However, we do appreciate the client referrals.
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