FOUR ARIZONA VALLEY BUSINESSMEN SENTENCED FOR ROLE IN MORTGAGE FRAUD PONZI SCHEME. ORDERED TO PAY $2,889,402 IN RESTITUTION
FACTS
On Sept. 29, Lawrence William Dunning, 78 of Highland Beach, Fla., was sentenced to 24 months in federal prison and ordered to pay restitution of $2,889,492 followed by three years of supervised release for mail fraud. Additionally, three individuals have been sentenced for their roles in the multi-million-dollar Ponzi scheme or other related offenses, and two more individuals await sentencing.
Phillip Eugene Vigarino of Anthem, Ariz., was sentenced to 60 days in federal prison, to be followed by three years of supervised release for misprision of a felony. James Marshall Boyce, 62 of Scottsdale, Ariz., was sentenced to three years' probation for false certification of checks. Robert Kenneth Rehm, 63, of Scottsdale, was sentenced to three years' probation for misprision of a felony.
Co-defendants Eric Jon Strasser and Paul Jeffrey Meka are scheduled to be sentenced in the near future.
The Arizona Corporation Commission had previously obtained civil judgments against Dunning and Vigarino for American National Mortgage Partners' failure, including a $22,000,000 judgment against Dunning. Boyce and Rehm also had previously settled civil claims against them.
The scheme was implemented in the following manner: Dunning established Creative Financial Funding to solicit investors to fund hard money lending. Dunning indicated he hired Vigarino and Meka for CFF. He later assisted Frank Caspare in forming ANMP, but when Frank Caspare's health made him unable to control the daily business of ANMP, Dunning continued to assist with daily operations. The nature of CFF's, and later ANMP's business was making and negotiating loans secured by Arizona real property.
These businesses would identify individuals who sought a loan but were unable to obtain a conventional loan due to credit problems. These borrowers were willing to pay an interest rate as high as 36 percent and ANMP would locate investors to fund the loans. The investors' funds would be pooled into one specific loan package and then member-managed limited liability companies would be formed and investors would be members of the LLC. The investors' funds would be secured by liens on the borrowers' Arizona real property through an "Illinois Land Trust." ANMP would then create an "Illinois Land Trust," whereby the borrower transferred his personal interest in the property to a trust. ANMP would become the trustee of the trust and investors became the beneficiaries of the trust.
If the borrower made scheduled payments on the loan funded by the investor, ANMP would make monthly payments to the investor. If the borrower defaulted on the loan funded by the investor, ANMP would foreclose on the borrower's real estate, sell the real estate, and refund the investor's funds. During the course of ANMP's operations, when borrowers defaulted on their loans, ANMP was unable to repay its investors. As a consequence, ANMP paid new investors with old investors' funds to create the illusion of performing loans. Additionally, in an attempt to salvage ANMP's operations, ANMP paid its overhead expenses with new ANMP investors' funds. The Arizona Corporation Commission issued a Temporary Cease and Desist Order to CFF and ANMP. (usattyaz93010)
MORAL
Rule 1: Do not pay old investor money with new investor funds or you may go to prison for a Ponzi scheme.
Rule 2. Look at Rule 1.
ARIZONA MAN SENTENCED TO NINE YEARS IN PRISON IN OHIO COURT FOR MORTGAGE FRAUD
FACTS
On Sept. 27, after pleading guilty, John J. Wanek of Phoenix responsible for one of the largest mortgage-fraud cases in Franklin County history was sentenced to nine years in prison. The sentence was for four counts of money laundering, two counts of theft and one count each of engaging in a pattern of corrupt activity and falsification in a theft offense.
The judge ordered him to pay more than $35 million in restitution, with the first $650,000 going to contractors, vendors and employees. The remainder is owed to lenders. Wanek was indicted in 2008 on charges of providing false and inflated financial and occupancy rates to Merrill Lynch Mortgage Lending to obtain a $15.5 million loan. After that indictment, other lenders came forward with similar allegations. He eventually was indicted on 33 counts.
The fraudulent loans allowed him or his companies to buy several apartment complexes. All of the properties were foreclosed and have new owners. (coldisp92810)
MORAL
Please note the indictment came down two years ago. This is the usual course of events because it takes about two years to gather all the documents in evidence in order to indict. You will note I have informed you of this from time to time in numerous federal cases. If you feel you are being investigated or might be investigated it is very important you seek legal counsel now.
LOS ANGELES COUNTY DUBBED THE EPICENTER OF MORTGAGE FRAUD
FACTS
As more Americans lost their homes to foreclosure in August 2010, than at any time in history, LOS ANGELES COUNTY HAS BECOME THE "NATIONAL EPICENTER OF MORTGAGE FRAUD," FEDERAL OFFICIALS SAID on Sept. 30. THE LOS ANGELES AREA NOW RANKS NO. 1 IN THE NATION IN THE NUMBER OF MORTGAGE FRAUD REPORTS MADE SINCE 2008, OFFICIALS SAID DURING LOS ANGELES MORTGAGE FRAUD SUMMIT.
Tony West, assistant attorney general at the U.S. Department of Justice, said 1.7 million American homeowners received foreclosure notices in the first half of this year and the number of properties banks have taken back hit an all-time high last month. "The situation in California has been particularly dire and by any measure California is among the two or three states most affected by mortgage fraud," West said.
In the state, banks filed nearly 350,000 foreclosure notices from January to early August, West said. In the county, more than 400,000 homeowners have negative equity.
The Los Angeles region is now a national epicenter of mortgage fraud, said André Birotte Jr., the U.S. attorney for California's Central District. "IN THE LAST MONTH ALONE, MY OFFICE HAS INDICTED TWO DOZEN DEFENDANTS FOR THEIR INVOLVEMENT IN MORTGAGE AND REAL ESTATE FRAUD, AND HAS PURSUED CIVIL REMEDIES IN OTHER MORTGAGE FRAUD CASES."
On Sept. 30, the U.S. Attorney's Office announced a federal grand jury INDICTED DOWNEY RESIDENT JUAN RANGEL on a series of fraud charges for allegedly running a Ponzi scheme that took more than $11 million from more than 300 victims, and a mortgage fraud scheme that preyed on homeowners by stealing the equity from their homes and secretly taking title to their properties.
HIS CO-DEFENDANT, JAVIER JUANCHI OF SHERMAN OAKS, a VICE PRESIDENT AT COMMERCE-BASED FINANCIAL PLUS INVESTMENTS, was arrested and charged only in relation to the mortgage fraud part of the scheme, prosecutors said.
"The homeowner victims were facing foreclosure and were promised help, but instead Rangel and his associates took control of the victims' homes and sold the properties without their knowledge," Birotte said. (contcsttns93010)
MORAL
Some of you have wondered what has kept four attorneys in my office busy. Now you know.
FOLLOW-UP TO RANGEL INDICTMENT
FACTS
ON OCT. 1, it was announced that JUAN RANGEL had allegedly been using Spanish-language TV, radio and newspaper ads for advertising his business. Rangel who is already in custody was convicted last year of bribing a Bank of America bank manager. He faces up to 95 years in prison for last years’ conviction and up to 222 years in prison if convicted of running the alleged Ponzi and mortgage scams along with two others.
The two others allegedly arrested are JAVIER JUNACHI, who was vice-president at Financial Plus who was denied bail on Sept. 30, and PABLO ARAQUE, DOWNEY, who owns A ONE TAX PROS in Downey who was arrested on Sept. 29.
A federal grand jury indictment alleges that Rangel and his company FINANCIAL PLUS INVESTMENTS promised investors annual returns of 60% or more from the profits from real estate and lending transactions. It is alleged Financial Investments made no profits in recent years and that Rangel used the new investor money to pay old investors. It is further alleged he used investor money to make payments on his $3 million home, Lamborghini sports car and a limousine and to buy cocaine.
It is alleged Rangel and others targeted Latino homeowners who were at risk of losing their homes. Instead of helping them as promised, Rangel allegedly took the titles of the homes and drained the equity, in part by selling the properties to straw buyers and then falsifying documents to take out loans. (lataaa210110)
OWNER OF, CALIFORNIA COMPANY INDICTED FOR $228 MILLION PONZI SCHEME INVOLVING SCRATCH AND DENT REAL ESTATE LOANS
FACTS
On Sept. 30, BRUCE FRED FRIEDMAN, operator of DIVERSIFIED LENDING GROUP, INC., that promised investors healthy returns with claims of a successful business based on the rehabilitation of “scratch and dent” real estate was indicted on federal fraud charges that allege he operated a Ponzi scheme that took in nearly a quarter billion dollars.
The indictment charges Friedman with 15 counts of mail fraud, one count of wire fraud and seven counts of money laundering in the scheme that collected approximately $228 million.
The indictment and a related criminal complaint filed earlier this month allege that Friedman obtained funds from investors who were falsely told that DLG had a healthy stream of income from thousands of rental properties across the United States that DLG had purchased, rehabilitated and rented out. Through personal solicitations and outside marketers, Friedman offered “secured investment notes” that promised annual returns of either 9% or 12% compounded monthly.
The indictment alleges, however, that the claims made by Friedman were fictitious. Friedman allegedly spent a substantial amount of investors’ funds on other business ventures, investments, and other purposes, such as a charitable foundation and companies affiliated with his family members and friends.
In an affidavit in support of a criminal complaint filed in this case on Sept. 3, a special agent with the FBI estimated that Friedman’s victims have suffered losses of approximately $191 million.
Friedman was arrested on Sept. 13 outside a hotel where he was staying in Cannes, France. Friedman is in custody in France pending extradition proceedings.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty.
If he is convicted of the 23 charges contained in the indictment, Friedman would face a statutory maximum sentence of 390 years in federal prison.
MIAMI MAN BUSTED ON MORTGAGE FRAUD CHARGES
FACTS
Florida Department of Law Enforcement agents arrested GILBERTO LUNA OF MIAMI, ON MORTGAGE FRAUD CHARGES. The investigation dates back to 2009 when agents were tipped off by a lender who suspected Luna of engaging in fraudulent transactions.
Luna is accused of providing false information on loan applications to purchase five properties in located Brevard, Orange, and Miami-Dade.
Those properties were valued at over $1 million total. The investigation also found that Luna was paid more $95,000 in compensation from wire transfers and checks from companies involving a closing agent.
In 2008 all of those properties went into foreclosure and Luna filed for bankruptcy. He was booked into Miami-Dade's Turner Guilford Knight Correctional Center. (sfltms10110)
MORAL
Collects $95,000, goes bankrupt the same year. Not a very good money manager.
MARRIED GEORGIA COUPLE SENTENCED TO FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Sept. 27, BRIAN STEPTOE and NATASHA STEPTOE, both from Emanuel County, Georgia, were sentenced in federal district court for mortgage fraud that occurred in Swainsboro, Georgia.
The Steptoes, with the assistance of others, knowingly submitted a false loan application and other documentation to Bank of America with regard to a $400,000 home loan. The Steptoes’ scheme was to defraud Bank of America in order to pocket sizeable sums of money for themselves and others. The property went into foreclosure soon after it was sold and remains on the market as of Sept. 28.
BRIAN STEPTOE was sentenced to 54 months, $410,236.59 in restitution to be paid jointly and severally with his co-defendants, and five years of supervised release. NATASHA STEPTOE was sentenced to 20 months, $340,297.54 in restitution to be paid jointly and severally with her co-defendants, and three years of supervised release. (usattysdga92810)
MORAL
One house, one fraud, over four years in a federal prison. Hardly seems worth it.
MARYLAND MAN PLEADS GUILTY TO MORTGAGE FRAUD INVOLVING A FORECLOSURE SCAM
FACTS
On Oct. 1, JAMES WILLIAM FOX II, OF CROFTON, Md., pleaded guilty to conspiracy to commit wire fraud in connection with a mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.
FOX MET JAMES HOOPER DAN OF ANNAPOLIS, Md., when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress. Fox, and sometimes Fox and Dan, told potential victims that they could "rescue" them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would "repair" their credit, refinance the property and reacquire it. During this six-month or one-year period, the individual was to continue living in the house.
In order to obtain the mortgage loans in their names, Fox and Dan made materially false and fraudulent loan applications including FALSIFICATION OF THEIR INTENT TO OCCUPY THE PROPERTY, annual income, savings, other properties owned, and source of the borrower’s funds for closing. Fox was typically the loan officer for Dan’s loans and was aware of Dan’s material misrepresentations.
From April 20, 2006 through July 5, 2007, Fox and Dan transferred eight properties from financially distressed homeowners to themselves or straw purchasers they recruited. The properties were located in Maryland and Virginia. The settlement statements (sometimes called HUD-1s) used at the settlements were false. In each instance, Fox, Dan, or the straw purchaser was supposed to produce the buyer's funds to close at settlement from their own resources. These funds actually came from the seller's proceeds, or from money borrowed from others, so that Fox invested no funds of his own in any transaction. Although Fox and Dan were the buyers of the properties, they obtained proceeds from the equity in the properties by making material false representations to financial institutions making the loans. In addition, the sellers paid over to Fox and Dan, or one of their companies, monies that were identified on the HUD-1 as the sellers' proceeds of the property sales. Fox and Dan shared some of these proceeds with the sellers either directly or by paying off sellers' debts, but put the remainder in their own bank accounts. Although Fox and Dan made some mortgage payments on each of the properties, they eventually defaulted on the mortgage loans, and all eight properties went into default. None of the victims is in title of their homes.
The government contends that the loss is between $1 million and $2.5 million, with the exact amount to be determined at sentencing. As part of his plea agreement, Fox will be required to pay restitution in the full amount of the loss.
Fox faces a maximum sentence of 20 YEARS IN PRISON followed by three years of supervised release and a fine of $250,000. U.S. District Judge J. Frederick Motz scheduled his sentencing for Dec. 16, at 9:00 a.m. Dan previously pleaded guilty to the same charge. No sentencing date has been scheduled. (usattymd10110)
MORAL
Note that these loans start in 2006, four years ago. Folks, these are federal felonies. Unlike state convictions they cannot be changed to misdemeanors and those convicted for the most part must serve 85% of their time in a federal prison. We have done well for quite a few when played straight with us. The important thing to remember is, that if you or someone you know is or was involved in “creative” loans, especially “stated income” in the last 10 years, they should speak with their attorneys now. I am sure they will sleep better at night after they do, instead of having nightmares or upset stomachs.
THREE PLEAD NOT GUILTY TO MORTGAGE FRAUD IN BOSTON COURTROOM
FACTS
On Sept. 27, Dorchester developer MICHAEL DAVID SCOTT OF MANSFIELD, JERROLD FOWLER AND THURSA RAETZ BOTH OF NORFOLK, Va., were accused of recruiting straw buyers to purchase condominiums even though the borrowers did not plan to live in the properties and could not afford the mortgages. They pleaded not guilty in federal court yesterday to charges of wire fraud and bank fraud in connection with an alleged mortgage scheme that led to a string of abandoned and foreclosed properties in some of Boston’s poorest neighborhoods.
Scott also pleaded not guilty to 22 counts of money laundering related to the case that involved at least 12 buildings and 42 condos.
The three were summoned to the Boston court to respond to a second, superseding indictment that added Fowler and Raetz as codefendants. Scott was originally indicted in August and separate charges were filed against Fowler. A former Bank of America branch manager and a Stoneham attorney have also been separately charged in the alleged scheme between 2006 and 2008.
The new indictment alleges that Scott, Fowler, and Raetz, among others, defrauded lenders by obtaining funds through false pretenses. Scott allegedly found the buildings and he, Fowler, and Raetz recruited borrowers, promising them they would not have to make mortgage payments, but would share in profits when condos were later sold. The trio helped prepare mortgage information that incorrectly showed that the borrowers would live in the properties and had substantial assets, prosecutors said.
Fowler and Raetz, who are both pursuing college degrees and are engaged, were released on $100,000 unsecured bond and required to turn in their passports. Scott remains free as well, pending a ruling by Judge Marianne B. Bowler on his bail. (boston.com92810)
TEXAS BROKER PLEADS GUILTY TO MORTGAGE FRAUD AND MONEY LAUNDERING
FACTS
On Sept. 30, LEDALE LASHETTE COLES, a San Antonio mortgage broker who was part of a $50 million mortgage fraud case pleaded guilty to money laundering. Coles RAN SUPREME MORTGAGE GROUP LLC, one of several entities used in a scheme blamed primarily on ROBERT BROOKS OF DALLAS. Coles signed a plea deal in 2008 and entered the guilty plea at a hearing Thursday before U.S. Magistrate Judge John Primomo.
Coles faces up to 10 years in prison at sentencing Dec. 1 before U.S. District Judge Xavier Rodriguez. Brooks and his wife Cheryl are among 22 people indicted in San Antonio in June on charges that they conspired in a “flipping” scheme that CAUSED $50 MILLION IN LOANS TO GO INTO DEFAULT.
The defendants also include MCKINNEY LAWYER RICHARD HOWARD, FORMER BEXAR COUNTY SHERIFF'S DEPUTY GEORGE AUTOBEE, A SAN ANTONIO REAL ESTATE AGENT, MORTGAGE PROCESSORS AND ESCROW AND TITLE OFFICERS.
The indictment said that from May 17, 2005, through Feb. 21, 2008, Brooks obtained properties at or about market value, then offered people $10,000 to $25,000 each to act as straw buyers for the homes at inflated prices. Using falsified documents, Brooks obtained mortgage loans for the straw buyers and then let the mortgages go into default a year later, the indictment alleges. Brooks' scheme, the indictment alleges, was aided by appraisers, title officers, escrow officers, mortgage processors and others who helped submit false documentation and information to lenders. Coles helped with more than $1 million in fraudulent loans, records show. (sanantnws10110)
MORAL
Learn three things that are very important here, if you learn nothing else. 1: The investigation goes back to loans that occurred five years ago in 2005. So if you have loans going back that far, especially, stated income, you should really see a knowledgeable attorney now before people with badges start knocking on your door.
2: Cole entered a plea agreement in 2008. Over two years ago and just now pleads guilty two years later when 22 others are indicted? Do you wonder what she has been doing for the last two years?
3: Notice how lawyers and deputy sheriffs are not immune from prosecution. Like I said, if you have stated income loans you know were inflated, you had best see a knowledgeable attorney now.
WASHINGTON DEVELOPER HAS OFFICE RAIDED AND SERVED WITH SEARCH WARRANT BY FBI
FACTS
During September 2009 federal search warrants were unsealed where investigators with the Puget Sound Mortgage Fraud Task Force assert developer WADE M. ENTEZAR, HIS WIFE and an associate falsified loan applications as a part of a "builder bailout" scam aimed at driving up home prices in a housing development built by Entezar's firm.
Writing the court, U.S. Postal Inspector Joseph Stephenson went on to claim that Entezar and business PARTNER CARL VAN DER MERWE worked with disgraced mortgage broker VLADISLAV BAYDOVSKIV, a former University of Washington student currently serving a five-year prison term for mortgage fraud and other offenses related to the $47 million fraud.
According to the affidavit, Entezar, his wife Geneva Entezar and Van der Merwe are suspected of obtaining home loans through a mortgage brokerage operated by Baydovskiy and several of his associates. Baydovskiy and six others involved in two companies, NATIONWIDE HOME LENDING LLC, AND KOBAY FINANCIAL CORP., previously admitted to falsifying applications to obtain large loans for unqualified homeowners.
To do so, officers with the companies took advantage of loans offered by various banks in which the borrower's income was not independently verified. Baydovskiy and others obtained at dozens of such loans—referred to as "liar's loans" in the industry, according to court documents—simply by grossly overstating clients' incomes on mortgage applications.
According to court documents, those involved used the affiliated businesses as fronts to take out exorbitant loans of behalf of so-called "straw buyers." They augmented the good credit of those buyers with falsified income documents to obtain the loans, which they then siphoned money off of before attempting to resell the homes.
Federal agents seized 1,500 escrow files during the investigation into Kobay and Nationwide. Investigators now contend several of those fraudulently obtained loans were brokered on the Entezars' behalf.
Writing the court in support of search warrants since served on the Entezars' Kirkland home and Bellevue office, Stephenson argued Wade Entezar used Baydovskiy's companies to obtain loans for homes built in a Quincy development constructed by Entezar and Van der Merwe.
The loans were issued to associates of Entezar and Van der Merwe, the postal inspector continued, alleging that Baydovskiy assists the developers in making it appear as though down payments had been made on the homes. Their aim, Stephenson told the court, was to set prices high on the first homes sold at the development so that additional funds from construction loans would be forthcoming. The homes were expected to be sold at $450,000; during the years in question, 2005 to 2008, houses in the Quincy area were selling on average for $107,000 to $170,000.
"Potential buyers were told by Entezar and Van der Merwe that Microsoft and other high tech companies were planning on building new facilities in the area and that these homes would be in demand by high-income employees relocating to Quincy to work," Stephenson said in court documents.
Only 10 of the 132 homes were purchased, according to the search warrant statement. Half of those sold are alleged to have been bought by associates of Wade Entezar, Baydovskiy and Van der Merwe. According to the search warrant, four of those homes have either been foreclosed or been placed on the market for months.
The development was ultimately sold to another developer, who was told the homes were sold near the $485,000 list price. According to the search warrant statement, a consultant hired by the man reported that several of those who'd bought homes had been promised they would not have to pay their mortgages and that Van der Merwe and Entezar had let the loans slip.
Investigators also assert that the Entezars falsified income information to acquire home loans for themselves in order to purchase a $4.4 million home in Kirkland. To do so, Stephenson asserted, Wade Entezar helped falsify a loan application claiming his wife, a homemaker, ran a computer company at which she was earning up to $58,860 a month. No charges have been filed in the case. Attempts to reach a representative at Wade Entezar's Bellevue office were unsuccessful. (seattle.com92010)
MORAL
People are innocent until proven guilty but with all that said and done, based on the search warrant does anyone want to bet whether or not or when an indictment will issue. My bet is about two years based upon my past and current experience.
DFI IN WASHINGTON STATE OBTAINS PRELIMINARY INJUNCTION AGAINST AND THE APPOINTMENT OF RECEIVER FOR CHESTERFIELD MORTGAGE INVESTORS, INC.
FACTS
State examiners find misuse of investor funds and significant violations of Securities Act of Washington. On Sept. 29, 2010, the Washington State Department of Financial Institutions Division of Securities obtained a Preliminary Injunction in King County Superior Court against the Seattle-based Chesterfield Mortgage Investors Inc. A receiver, Mel R. Codd, was appointed for CMI. CMI and its president, Charles Chesterfield, entered into a consent order with DFI in which, among other things, CMI agreed to the revocation of its mortgage broker-dealer registration and Chesterfield agreed to the revocation of his securities salesperson registration.
DFI’s action was based on an examination of Chesterfield Mortgage Investors in August 2010, during which DFI examiners found that CMI had misused investor funds. The company’s president, Charles M. Chesterfield, told DFI examiners CMI had taken funds from early loan payoffs and had used the funds for other purposes, instead of repaying the investors who had purchased participation investments in those loans.
DFI also found that CMI had reconveyed the real property that secured at least four of those loans totaling more than $1 million. CMI continued to send investors monthly account statements with regular interest payments, without notifying the investors that the underlying loans had already been repaid and that the real property interest securing some of the loans had been released.
Starting Oct. 5, investors who have questions about the receivership may call the receiver, Mel Codd, at CMI’s telephone number: 206.464.8770. Investors who have questions about their CMI investments may call DFI at 1-800-372-8303, press “0” for the operator and ask to speak to someone about Chesterfield Mortgage Investors Inc. (dfiprrel93010)
MORAL
If you know anyone that invested here you might suggest they see their attorney.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
