The Final Rules for Adjudicative Proceedings Before the CFPB
FACTS
A hearing officer will issue a recommended decision in each administrative adjudication. The final rule provides any party the right to contest the recommended decisionby filing a notice of appeal and perfecting the appeal by later filing an opening brief. In the event a party fails to timely file a notice of appeal or perfect an appeal, the director may either adopt the recommended decision as the Consumer Financial Protection Bureau’s final decision or order further briefing with respect to any findings of fact or conclusions of law contained in the recommended decision.
The hearing officer will decide dispositive motions in the first instance, subject to the same right of review provided for recommended decisions in the event that the ruling upon such a motion disposes of the case.
The final rule sets deadlines for both the recommended decision of the hearing officer and the final decision of the director. The hearing officer is permitted 300 days from service of the notice of charges or 90 days after briefing is complete to issue a recommended decision. The hearing officer to convene a scheduling conference soon after the respondent files its answer to craft a schedule appropriate to the particular proceeding. The hearing officer may request an extension of the 300-day deadline, but the Bureau’s intent is that such extensions will be requested by hearing officers and granted by the Director only in rare circumstances.
DIRECTOR APPEAL OF HEARING OFFICER RECOMMENDED DECISION
If a recommended decision is appealed to the director, or the director orders additional briefing regarding the recommended decision, the Office of Administrative Adjudication must notify the parties that the case has been submitted for final CFPB decision at the expiration of the time permitted for filing reply briefs with the director. The director must issue his or her final decision within 90 days.
DISCOVERY
The Office of Enforcement will provide any party in an adjudication proceeding an opportunity to inspect and copy certain categories of documents obtained by the Office of Enforcement from persons not employed by the Bureau in connection with the investigation leading to the institution of the proceedings, and certain categories of documents created by the Bureau, provided such material is not privileged or otherwise protected from disclosure. The Office of Enforcement’s obligation relates only to documents obtained by the Office of Enforcement; documents located only in the files of other divisions or offices of the Bureau are beyond the scope of the affirmative disclosure obligation.
Traditional forms of pretrial discovery, such as interrogatories and discovery depositions are not allowed. However, the deposition of witnesses unavailable for trial, the use of subpoenas to compel the production of documentary or tangible evidence, and in appropriate cases, expert discovery depositions are allowed. (12cfr1081)
MORAL
The rules and commentary for holding hearings where the CFPB files an accusation are quite extensive consisting of 96 pages. If you are concerned or believe you may be the subject of a CFPB investigation you should contact us immediately before the accusation is filed preferably. If a state brings an action under Dodd-Frank, the state must notify the CFPB so that it can intervene in the action should it desire to do so.
CALIFORNIA MAN GETS OVER FOUR YEARS IN STATE PRISON FOR COLLECTING MONEY AS A FORECLOSURE CONSULTANT
FACTS
On June 12, Rudy J. Calderon of Fresno was sentenced to serve four years and eight months in state prison for posing as a foreclosure consultant and collecting more than $300,000 from distressed homeowners who never received help. He was ordered by Judge Jonathan Conklin to begin serving his sentence immediately.
Between 2008 and 2010, Calderon promised to help dozens of homeowners with loan modifications that would lower their monthly mortgage payments, principal and interest rates. On several occasions, he visited victims in their homes and persuaded them to deed their properties to him. Calderon performed no services and was never licensed to conduct such transactions. (fnobee61212)
MORAL
Believe it or not, this is still going on to this day. I have given and still give free seminars on the foreclosure process and how consumers can protect themselves. Yet they still pay others when it is in fact illegal to collect money as a foreclosure consultant or as a person doing loan modifications until the services are totally completed.
THREE INDICTED IN LOS ANGELES, FOR SHORT SALE FRAUD
FACTS
Agents with the FBI and U.S. Secret Service arrested three men—Atiqullah Nabizada, Kenneth Moore and Ahmed Tariq Asghari—who were named in federal indictments that allege they defrauded homeowners, financial institutions and real estate investors in schemes that targeted the distressed homeowner market and allegedly caused more than $10 million in losses. A federal grand jury in Los Angeles returned two indictments on June 1, that charge the three defendants with fraud violations and identity theft in connection with a variety of schemes utilizing real or purported short sale real estate transactions and home loans.
According to court documents, the defendants used a variety of schemes, at least two of which centered on fraudulent short sale approval letters purportedly issued by a bank. Many of the properties utilized in the schemes were distressed homes. In some cases, the defendants claimed to have insiders working at the bank that, in exchange for cash, would authorize short sales for far less than the fair market value. This allowed the defendants to “flip” the house for a significant profit.
In some cases, the defendants used short sale approval letters that had been entirely fabricated to carry out their schemes. As a result, home-buyers and investors purchased homes they thought had a clear title but were actually devalued and subject to hundreds of thousands of dollars worth of liens. In some instances, individuals would assume the identities of property owners and then sell or refinance the relevant properties without authority. In one case, a home owned by individuals who reside in Saudi Arabia was transferred multiple times and resulted in more than $1 million in losses.
Court documents detail the fact that many co-conspirators knowingly played roles in the schemes, including escrow officers and others who would fabricate and/or conceal documents to further the frauds. In addition, identities of innocent parties were stolen to conceal the involvement of individuals carrying out the scheme, according to court papers. Investigators believe the defendants may have victimized others, and anyone with information is urged to contact investigators.
Nabizada and Moore were charged with conspiracy to commit wire fraud and aggravated identity theft. If convicted of all charges, Nabizada and Moore face a statutory maximum penalty of 22 years in prison. Asghari is charged with attempted bank fraud, aggravated identity theft, and causing an act to be done. If convicted, Asghari faces a statutory maximum penalty of 32 years in prison.
Nabizada and Moore were arrested on June 14at their places of residence and had an initial appearance in federal court on Thursday. Moore was denied bail and remains in federal custody. Asghari was arrested June 15 June in Miami Beach.
Federal search warrants were also executed at residential and business locations in Los Angeles and Orange Counties to seek evidence related to the fraud allegations. Investigators estimate losses to be in excess of $10 million. During the service of the warrants, agents seized items alleged to be proceeds of the fraudulent schemes, including more than $1.7 million held in bank accounts and $548,937 in cash. Luxury vehicles that were either seized or impounded include two Bentleys and a Mercedes. Various jewels were also seized, including diamond-encrusted watches.
This case is being prosecuted by the United States Attorney’s Office in Los Angeles. (usattycdca61512)
MORAL
Now innocent until proven guilty but where are they going to get the money to prove they are innocent since the assets were seized.
EX-MODESTO REAL ESTATE AGENT ARRESTED FOR MORTGAGE AND SOCIAL SECURITY FRAUD
FACTS
On June 14, Kenneth Manuel Martin, a former Modesto real estate agent, was arrested on suspicion of wire fraud and the theft of Social Security benefits as he tried to board a plane in Houston, the U.S. attorney's office in Sacramento announced. Customs and Border Protection agents found a warrant for him as they processed him Thursday at the airport.
Martin is charged with wire fraud in connection with a Guatemalan real estate investment in which investors lost at least $250,000, according to a U.S. attorney's office news release.
The news release says Martin also is charged with stealing more than $108,000 in Social Security disability benefits. The release states Martin told the Social Security Administration that he had not been working since he became disabled in December 2005, but he operated the Guatemalan real estate investment scheme from December 2005 until August 2008.
Martin was taken into custody and is in jail awaiting an appearance today in U.S. District Court in Houston.
According to the news release, Martin persuaded investors to give him money to fund mortgages for homebuyers in Guatemala. He then falsely represented to investors the longevity of the Guatemalan real estate venture, and falsely promised a high rate of return and consistent monthly interest payments.
The release says he claimed that once the mortgages matured, investors would have the option to pull out their principal or continue lending the money to other Guatemalan homebuyers.
When investors failed to receive consistent interest payments or could not pull out their investment principal, Martin gave varying and conflicting explanations, the release says. (modb61512)
MORAL
You have to admit this is somewhat novel. Instead of U. S. real estate he is using Guatemalan real estate. That is presuming he is committing fraud since he is innocent until proven guilty. I wonder if anyone ever told him that federal agents use computers to check for fugitives or those with outstanding arrest warrants when leaving as well as entering the country. Oh well, he will have the knowledge for next time.
NEVADA MAN PLEADS GUILTY IN RIVERSIDE COUNTY, CALIFORNIA TO MORTGAGE FRAUD
FACTS
On June 13, Lemuel Thornton of Las Vegas admitted to conspiring to defrauding mortgage lenders by fabricating loan documents to buy and improve two homes in Riverside County, according to a statement released by the Internal Revenue Service.
Thornton, who previously pleaded guilty before U.S. District Judge Dolly M. Gee to wire fraud and money laundering, was accused of making false claims about his income, assets and employment on loan applications to acquire and improve two homes in Canyon Lake.
The properties, located on Gray Fox and Continental drives, were a conduit to defraud residential mortgage lenders in early 2006 out of "hundreds of thousands of dollars" for personal gain, IRS Special Agent Linda Lowery said.
Thornton was arrested in Las Vegas in April 2011. The indictment accused Thornton of working with unnamed co-conspirators to include funds in the mortgage loan to improve each of the two houses. The loan documents instructed the seller to credit an amount for upgrades, repairs and landscaping to "sham" companies, including Johnson Construction and Thornton’s Property Development. (present615120
MORAL
This is a case out of the Central District of California. I would suggest you note two things about it. One is the fraud occurred six years ago and the feds chased and indicted him five years after the fraud. Two is the unnamed co-conspirators may be named shortly because there is an excellent chance Thornton is cooperating with the government and the unindicted people should get legal counsel immediately if they have not done so already. We have quite a bit of experience in these matters and it is better to get counsel before the government knocks on your door rather than afterwards.
ONGOING SAGA CONTINUES AS FORMER TBW CFO GETS 60 MONTHS IN FEDERAL PRISON FROM VIRGINIA FEDERAL JUDGE
FACTS
On June 15, former Taylor, Bean & Whitaker Mortgage Corp. chief financial officer Delton De Armas was sentenced to 60 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW.
U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia sentenced De Armas after he pled guilty rather than go to trial.
According to court documents, de Armas joined TBW in 2000 as its CFO and reported directly to its chairman, Lee Bentley Farkas, and later to its chief executive Paul Allen. He previously admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly owned lending facility called Ocala Funding. Ocala Funding obtained funds for mortgage lending for TBW from the sale of asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas. The facility was managed by TBW and had no employees of its own.
According to court records, shortly after Ocala Funding was established, de Armas learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. De Armas knew that the hole grew over time to more than $700 million. He learned from the CEO that the hole was more than $1.5 billion at the time of TBW’s collapse. De Armas admitted he was aware that, in an effort to cover up the hole and mislead investors, a subordinate who reported to him had falsified Ocala Funding collateral reports and periodically sent the falsified reports to financial institution investors in Ocala Funding and to other third parties. De Armas acknowledged that he and the CEO also deceived investors by providing them with a false explanation for the hole in Ocala Funding.
De Armas also previously admitted in court that he directed a subordinate to inflate an account receivable balance for loan participations in TBW’s financial statements. De Armas acknowledged that he knew that the falsified financial statements were subsequently provided to Ginnie Mae and Freddie Mac for their determination on the renewal of TBW’s authority to sell and service securities issued by them.
In addition, de Armas admitted in court to aiding and abetting false statements in a letter the CEO sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. De Armas reviewed and edited the letter, knowing it contained material omissions. The letter omitted that the delay in submitting the financial data was caused by concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank and its request that TBW retain a law firm to conduct an internal investigation. Instead, the letter falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
In April 2011, a jury in the Eastern District of Virginia found Lee Bentley Farkas, the chairman of TBW, guilty of 14 counts of conspiracy, bank, securities, and wire fraud. On June 30, 2011, Judge Brinkema sentenced Farkas to 30 years in prison. In addition, six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW, who was sentenced to 40 months in prison; Raymond Bowman, former president of TBW, who was sentenced to 30 months in prison; Desiree Brown, former treasurer of TBW, who was sentenced to six years in prison; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division, who was sentenced to eight years in prison; Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD, who was sentenced to three months in prison; and Sean Ragland, a former senior financial analyst at TBW, who was sentenced to three months in prison. (usattywashdc61512)
MORAL
Did you notice the one person that drew 30 years in prison?
CONNECTICUT PARALEGAL GETS 33 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On June 12, Senior United States District Judge Alfred V. Covello in Hartford sentenced Louise Lampo-Diglio of East Haven to 33 months of imprisonment, followed by two years of supervised release, for her role in a mortgage fraud scheme.
In 2006 and 2007, Lampo-Diglio participated in a mortgage fraud conspiracy by serving as a paralegal in connection with fraudulent real estate transactions in New London County. As part of the scheme, Lampo-Diglio served as the paralegal for attorney David Kinney to prepare and submit fraudulent paperwork to lenders, including materially false HUD-l settlement statements.
In connection with the August 2006 sale of a house at 5 Coit Street in New London, Lampo-Diglio prepared and submitted a HUD-1 form for a sham sale that never occurred. She also prepared a HUD-1 form in connection with a subsequent refinance of 5 Coit Street. Although that HUD-1 form indicated that certain private mortgages were being paid out of the refinance proceeds, Lampo-Diglio knew that the refinance proceeds were being used to pay off her co-conspirators Jose Guzman and Stacey Petro.
From approximately 2004 to 2007, in connection with numerous real estate transactions for various licensed attorneys, Lampo-Diglio prepared and sent materially false closing documents to lenders. One or more of these mortgage loans were insured by the U.S. Department of Housing and Urban Development’s insurance program. Among the false statements mate to the lenders were claims that the buyers of certain properties were planning to use those as their primary residences when, as Lampo-Diglio knew, the buyers were straw purchasers who did not intend to make the properties their primary residences.
On Dec. 14, 2011, Lampo-Diglio pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. Judge Covello ordered Lampo-Diglio to pay restitution of $6,348,403.15, jointly and severally with her co-defendants.
Sixteen individuals, including Kinney, Guzman, and Petro, have been charged as a result of this mortgage fraud investigation. On May 1, Judge Covello sentenced Petro to 41 months in prison. Kinney and Guzman await sentencing. (usattyct61312)
MORAL
Notice how the federal prosecutors went back to a mortgage that occurred eight years ago?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
