FACTS
Federal agents are investigating homebuyers in Arizona who are illegally taking advantage of the dip in home prices. Bob Bemiss leads the Arizona MLS, utilized by 30,000 Realtors in the state. He's been juggling stacks of subpoenas from FBI agents. Bemiss said recently they have been coming to town in waves, asking for piles of documents from real estate transactions. Federal investigators are looking at a home's sale history; whether a homebuyer, or seller, lied on their application; and whether a short sale or foreclosure was the only way out for a homeowner. "They have announced a number of indictments and for sure are continuing to pursue that kind of activity," Bemiss said. The FBI agents are sifting through mortgage documents filed over the past several years, where the owners may wrongly believe they've gotten away with the crime. Kbshnews55611)
MORAL
Anyone want to bet the FBI is looking at the mortgage loan officers more than the borrowers. We have seen some FBI subpoenas in our cases and in most cases it has been the broker they are looking into more than the borrower.
IN ORDER FOR THE CALIFORNIA DRE TO DISCIPLINE YOUR LICENSE IT NEEDS CLEAR AND CONVINCING EVIDENCE AND A CIVIL JUDGMENT AGAINST YOU IS JUST NOT ENOUGH
FACTS
An employee of The Grubb Company Inc., a licensed real estate brokerage, represented both parties in negotiations for the sale of a residence. The sale fell through, and the sellers, against Grubb's advice, declined to return the buyers' deposit. The buyers sued Grubb, several of its employees, and the sellers. The JURY FOUND THAT GRUBB AND ONE OF ITS EMPLOYEES HAD MADE MISREPRESENTATIONS AND BREACHED THEIR FIDUCIARY DUTY. The jury also found, however, that the buyers had not shown by clear and convincing evidence that Grubb or its employee acted with malice, fraud, or oppression.
The California Real Estate Commissioner initiated administrative disciplinary proceedings against Grubb under a statute, Business and Professions Code section 10177.5., authorizing discipline based a civil judgment against a real estate licensee for misrepresentation, fraud, or deceit in connection with a transaction for which a license is required. After a hearing, an administrative law judge recommended that no discipline be imposed, but the Commissioner rejected the recommendation and imposed discipline. The trial court denied Grubb's petition for a writ of mandate. Grubb appealed.
The 1st District Court of Appeal said reversed. Notwithstanding the terms of the authorizing statute, the Commissioner cannot constitutionally discipline a real estate licensee based on a judgment procured by proof by a preponderance of the evidence rather than on clear and convincing evidence.
MORAL
The point is that to take away your license as a real estate licensee, the DRE Commissioner must prove the violations to the administrative law judge by clear and convincing evidence, not just by a preponderance. Freely stated, the Commissioner’s proof must be better than it is more likely than not you did it.
CALIFORNIA ATTORNEY ON TRIAL FOR MORTGAGE FRAUD
FACTS
On April 26, the trial started in the matter of the U.S. vs. Gerald L. Wolfe. It is alleged he pocketed $2 million by buying 30 homes suing falsified mortgage documents. Wolfe is allegedly using a defense by blaming the bank’s own shoddy lending practices in his defense to the criminal charges. Many people, including state attorneys general and federal investigators have said that banks and Wall Street share blame for the real estate meltdown by making mortgages too easy to obtain.
Federal prosecutors accuse Wolfe and others of falsely obtaining 100% financing to buy homes in Riverside and Orange Counties for between $30,000 and $188,000 over the asking price. It is alleged Wolfe then had the sellers funnel the excess to him or his companies according to the indictment.
The allegations in the indictment go on that Wolfe and his co-conspirators would knowingly provide false and fictitious information on loan applications including inflated income statements and promises that the homes would be owner-occupied. The indictment contains one count of conspiracy to commit wire fraud based on 35 overt acts involving the 30 homes.
The court through U.S. District Judge Andrew H. Guilford ruled Wolfe could, at least for the time being, put on evidence showing that lenders were negligent in accepting the phony loan applications. In a motion filed earlier in the month of April, Assistant U.S. Attorneys Brett A. Sagel and Joseph T. McNally argued that Wolfe should not be allowed to blame the victim of his crimes. The focus of the criminal trial should be on the defendant's misconduct, not on whether his victims should or even could have done more to avoid losing a tremendous amount of money. Defense counsel however wrote he has no quarrel with this principle but the defense can use the lenders’ negligence to rebut elements of the crime of mortgage fraud including materiality and intent to defraud. Further that the government is not entitled to a one-sided trial in which only evidence supporting its theory of the case is admitted.
For mortgage fraud purposes, a false statement is classified as material if it “would reasonably influence a [lender] to part with money or property.” Citing two other decisions in Los Angeles, defense counsel of Wolfe stated evidence of lender negligence could come in because there may be evidence which has multiple uses in both negligence and materiality. However, the judge in that case [Dean D. Pregerson] also wrote defendants were not entitled to make erroneous legal argument regarding negligence, the argument in Babajian being that the lender, a Lehman Bros. Unit, was handing out mortgage money willy-nilly and was not concerned about false documentation. In fact, loans under $1.5 million needed no documentation at all. Any allegedly false statements in loan documents weren’t material because they did not influence the lender to make the loan said the judge. Babajian was acquitted of 13 counts and hung on eight others while two of his co-defendants were convicted of multiple felony counts and sent to prison. However, unlike Babajian, Wolfe appears to be the principal figure in the mortgage conspiracy according to the prosecution. Wolfe would allegedly pay two colleagues $10,000 per transaction to act as “straw man” purchasers of the homes. His companies would allegedly act as the mortgage broker or the loan originator according to the indictment. The seller would pay the excess purchase price to Wolfe’s home-design company according to the papers in court.
Two of Wolfe’a co-conspirators have pleaded guilty and are expected to testify in the trial expected to take eight days. (L.A.D.J. 4-26-11, p.1, 4, U.S. vs. Gerald L. Wolfe, 8:10 CR -0191 (C.D. Cal. FILED Oct. 6, 2010))
MORAL
Defendant Wolfe allegedly conspired to present false documents to lenders and argues it does not matter since lenders did not rely on the information because they did not read it and therefore the information is not material. It is a very interesting argument. I am following the trial so there will be more to follow. Trial is due to end week of May 2. But who knows how long the jury will be out to decide the verdict. It will be interesting to see how this defense argument worked.
TWO PLEAD GUILTY IN SACRAMENTO IN MULTIMILLION DOLLAR MORTGAGE FRAUD SCHEME
FACTS
On May 5, two of the principal players in a multimillion-dollar "builder bailout" mortgage fraud scheme in Chico, Calif., pleaded guilty in federal district court in Sacramento. GARRET GRIFFITH GILILLAND III AND NICOLE MAGPUSAO, both formerly of Chico and now in federal custody, entered the pleas before Judge Edward J. Garcia. Gililland pleaded guilty to one count of mail fraud and one count of money laundering. Magpusao pleaded guilty to one count of mail fraud.
They were originally charged in 2008, and were successfully extradited back to the United States following their flight to Spain.
In the May 5 hearing, Gililland admitted he and others originated approximately $21 million in fraudulent loans, causing losses to lenders of more than $4 million. The scheme recruited buyers to buy homes at artificially inflated prices. Documents were falsified to qualify the buyers for the loans.
Chico builders TONY SYMMES and others participated in the fraud scheme. Gililland implicated WILLIAM BAKER AND LEONARD WILLIAMS, a licensed real estate agent, in his guilty pleas.
Symmes has already entered a guilty plea in the case. Others who have pleaded include SHANE BURRESON, THE PRESIDENT OF NOR CAL INNOVATIVE INVESTMENTS INC.; CARLOS CHAMORRO, AN UNLICENSED MORTGAGE BROKER; AND CHRISTOPHER CHIAVOLA.
In addition to Baker and Williams, cases are still pending against BRANDON RESENDEZ; KESHA HAYNIE, A LICENSED REAL ESTATE PROFESSIONAL; AND REMY HENG. Trial for the remaining defendants is scheduled for Sept. 12.
Sentencing for Gililland is scheduled for Oct. 28. Sentencing for Magpusao is scheduled for July 22. Both remain in federal custody pending sentencing. The maximum statutory penalty for mail fraud is 20 years in prison, a $250,000 fine, and three years of supervised release. The maximum statutory penalty for money laundering is 10 years in prison, a $250,000 fine, and three years of supervised release. (chicoentrec5611)
MORAL
Even going to Spain did not let him escape the indictment. The federal prosecutors brought him back.
IDAHO MAN SENTENCED FOR MORTGAGE FRAUD ON ONE HOME
FACTS
On May 4, PAUL REDONDO OF MERIDIAN, IDAHO, was sentenced in federal court to three years’ probation, three months of home detention, and 80 hours of community service for MISDEMEANOR theft from a financial institution. REDONDO was also ordered to pay $101,459 in restitution. Redondo pleaded guilty to the charge on Feb. 15.
Redondo admitted to providing false financial information to obtain a home equity loan from Washington Trust Bank. PAUL REDONDO'S WIFE MELODY PLED GUILTY IN FEBRUARY TO MAKING A FALSE STATEMENT TO A FINANCIAL INSTITUTION, A FELONY. She is scheduled to be sentenced by Chief United States District Judge B. Lynn Winmill on June 13. (usattyid5511)
MORAL
He gets a misdemeanor and retains his civil rights. She gets a felony and loses her civil rights. It would seem he had the better attorney or there may be part of the story missing.
INDIANA MAN NEVER BEEN INVOLVED IN ANY CRIMINAL ACTIVITY BEFORE GETS 21 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
A mortgage broker that has no prior criminal record will spend nearly two years in prison for his role in a mortgage fraud scheme led by a former South Bend police officer. U.S. District Judge Robert L. Miller Jr. sentenced STEVEN D. KRONEWITTER to 21 months in prison and ordered him to pay more than $352,000 in restitution to Wells Fargo Bank.
Kronewitter admitted to falsifying loan documents in a scheme led by former cop ROBERT CULP, who in March 2009 began serving a four-and-one-half year prison term. The mortgage fraud scheme, which ran from 2003 to 2007, involved the purchase of 194 inexpensive houses in the South Bend area, many of which needed substantial repairs. The houses were then resold for substantially more than their values, sometimes at prices that were two to three times the houses’ actual worth, according to court documents. Buyers’ incomes and assets were artificially inflated.
Kronewitter had argued for a sentence of less than a year, noting that he had learned his lesson, lost his livelihood and been humiliated, and others in the mortgage business have been deterred from similar conduct by what has happened to him. But the judge said he deserved more punishment than that. "Mortgage fraud was an essential part of the combination of events that led to the economic collapse of the United States in 2008," the judge wrote in his sentencing memorandum, "and, though less directly, to the collapse of several European economies." Miller allowed Kronewitter, who had no prior criminal record, to self-surrender in July to begin serving his prison time. (sobndtrib.com5411)
MORAL
Note the government went back to 2003 to get him and now he does time for a first offense with no prior criminal record. Remember how I have been saying the government can go back 10 years to indict you? Well here is eight of those 10.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
