FEDERAL MORTGAGE FRAUD CRIMINAL PENALTIES AND TIME TO PROSECUTE HAVE BEEN INCREASED
FACTS
The Federal Fraud Enforcement and Recovery Act of 2009 became effective as of May 29, 2009. Previously, mortgage lenders not regulated or insured by the federal government were not subject to prosecution under federal fraud laws. Now the federal government decided to enhance its enforcement power and make these laws applicable to the entire mortgage industry.
Some of the new laws include:
* Amending the definition of financial institution in Title 18 of the US Code (i.e. the federal fraud laws) to include mortgage lending businesses, which are defined as organizations "which finances or refinances any debt secured by an interest in real estate, including private mortgage companies and any subsidiaries of such organizations, and whose activities affect interstate or foreign commerce."
* The definition of what is a mortgage fraud statement (§1014) now includes material false statements and willful property overvaluations used to influence any action by a mortgage lending business.
* The federal criminal money-laundering statute (18 USC §1856) changed the definition of "proceeds" to include not only the profits from the illegal activity, but also the gross receipts.
By extending the federal fraud laws to cover mortgage fraud, FERA also increases the penalties faced by those charged for violating the law. Previously, a conviction for mortgage fraud may have resulted in no more than probation. Now, someone charged with mortgage fraud may face a maximum of 30 years in prison and up to $1 million fine.
Federal mortgage fraud charges may now be brought against anyone that has committed mortgage fraud within 10 years from the date of indictment. The statute of limitations for bringing a mortgage fraud claim has been extended from five years to 10 years, giving the DOJ a much greater opportunity to build a successful case against someone accused of committing the crime.
Conclusion: As the federal government continues to take action to further criminalize mortgage fraud under federal law, it is more important now than ever before for those facing mortgage fraud charges to seek guidance from an experienced attorney. Charges that previously would have resulted in probation now carry up to 30 years in a federal prison. Do not underestimate the seriousness of these charges and contact an attorney today.
MORAL
I have repeated it time and again. See your attorney before the government sees you. This way he may be able to assist you in reducing the problem. Seeing the attorney after you are indicted means you may have spoken out of turn and you lose opportunity the attorney can use with your consent to reduce probabilities of long sentences. (24/7prrel7109)
FLORIDA MAN DRAWS 22 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On June 30, 2009 U.S. District John Steele today sentenced Ronald Luczak of Cape Coral to 22 years in federal prison for his role in a large mortgage fraud scheme. Luczak must also pay approximately $5.9 million in restitution to his victims. He had pleaded guilty to wire fraud and money laundering charges.
Between September 2005 and December 2006, Luczak and his company, Cape Coral Equity and Development, obtained more than $30 million worth of mortgages on at least 37 Cape Coral properties. Despite that CCEDG was responsible for making the mortgage payments, CCEDG recruited 33 "straw buyers" and reported on the mortgage applications that the straw buyers were purchasing the properties. CCEDG also falsely inflated the properties' values, fraudulently reported the purported buyers' incomes, provided false schedules of real estate and assets supposedly owned by the buyers, falsely reported the buyers' occupations and employment, and falsely stated that the buyers intended to use the properties for their primary residences. Luczak paid the straw buyers' mortgage obligations with other straw buyers' mortgage proceeds in a Ponzi-type arrangement.
Luczak and CCEDG personally received more than $5.8 million from the scheme. Luczak's wife, Lisa Luczak, and Sandra Mainardi, a New Jersey loan processor, previously were sentenced to 46 months each for their part in the scheme. (usattymdfl63009)
MORAL
Notice that here there is $30 million in fraud and he gets 22 years for what he did four years ago. Wife and loan processor get almost four years in prison BUT Beazer below with $50 million in restitution and presumed loss pays back $10 million and $40 million more, maybe? And no one is going to prison. Interesting sentencing, yes?
NEW JERSEY ATTORNEY GENERAL INDICTS SIX FOR MORTGAGE FRAUD AND IDENTITY THEFT
FACTS
On June 30, 2009 the New Jersey Attorney General's Office announced the indictments of six people in three separate mortgage fraud cases including two women charged with spearheading a conspiracy to use stolen identities to obtain more than $1 million in unauthorized mortgages, lines of credit and credit cards.
Charged in a 17-count state grand jury indictment with conspiracy, eight counts of theft by deception, seven counts of identity theft and one count of money laundering are Yi Feng Reid of Closter and Yu Jane Chen, whose last known address was Philadelphia. Charged in the same indictment with one count each of conspiracy, theft by deception and identity theft are George Liu and Ji Gang Chen. Both men once lived in New York, and now reside in China.
According to Division of Criminal Justice Director Deborah Gramiccioni, defendants Reid and Yu Jane Chen both were involved in the mortgage and small business loan industry in the Bergen County area, and allegedly unlawfully used the identities of other people to obtain mortgages, other types of loans and unauthorized credit card accounts from 2004 through mid-2007.
Gramiccioni said some victims of the alleged identity theft gave Reid and Yu Jane Chen their personal and financial information in the process of seeking, and ultimately obtaining, a loan. In other cases, victims provided their personal information while beginning the loan process, then changed their minds and elected not to seek a loan.
Those who provided Reid and Yu Jane Chen with identifying information later learned their names had been used to secure unauthorized mortgages, loans and credit cards. Reid and Yu Jane Chen are accused of being the principal co-conspirators. With their help, co-defendant George Liu allegedly obtained two mortgages on a family member's house totaling $314,000 by using that relative's identity, along with false tax returns and phony employment information. Co-defendant Ji Gang Chen, also assisted by Reid and Yu Jane Chen, allegedly obtained four mortgages on a family member's house totaling $446,000 by using the family member's identity, as well as false employment and wage information.
The four defendants are charged with obtaining seven mortgages totaling $850,000 by using stolen identities and false information. In addition, 13 bank-approved loans and credit accounts worth a total of more than $300,000 were opened using stolen identities. Among other things, Reid and Yu Jane Chen allegedly used checks, credit card transactions and cash proceeds from their unlawfully-obtained accounts to make ATM withdrawals, and to buy goods at supermarkets, gas stations, toy stores, jewelry stores and other retail outlets. Other credit and cash proceeds were allegedly used to pay for ponies to entertain Reid's child, to pay Reid's nanny, to pay for the EZ Pass account of a Reid family member and to pay the expenses of Reid-operated businesses.
In an unrelated indictment, commercial loan broker Ramon Coscolluela of Union, was charged by a state grand jury with one count each of theft by deception (second degree) and attempted theft by deception.
Coscolluela, owner of Templar Group LLC of Newark, allegedly falsified five loan applications submitted to Commerce Bank in 2007 and 2008 on behalf clients who paid him fees ranging from $1,000 to $6,000.
In a third mortgage fraud indictment, Terrance Givens of East Orange was charged with one count of theft by deception. According to Criminal Justice Director Grammicioni, Givens lied about his employment history on a mortgage application in 2005. Specifically, he falsely listed his employer as Wall Designs Inc. of Newark, a business founded by a relative that, for all intents and purposes, never existed. In addition to misrepresenting his employment history to the New Century Mortgage Co., Givens allegedly submitted false W-2 forms for the years 2002, 2003 and 2004 showing annual wages of between $67,000 and $72,000. On the basis of the false information he provided, Givens was approved for, and received, a $200,000 mortgage loan which subsequently went into foreclosure.
An indictment is merely an accusation. All defendants are presumed innocent until proven guilty. The crimes carry a penalty of between five-and-10 years in prison and fines ranging from $150,000-to-$500,000 per offense. (njattygenl63009)
MORAL
There are three: 1-Identity theft was allegedly done by allegedly picking on their own family members; 2-Givens, if the charge is true (remember everyone is innocent until proven guilty, but boy the expense of proving innocence!) learned probably by reading on how others do it from the newspapers; 3-Identity theft is the responsibility of the mortgage broker who is liable if it occurs and more so if the broker does not have the RED FLAGS IDENTITY THEFT Manual in place by Aug. 1, 2009. Do you have yours?
BEAZER HOMES REACHES $50 MILLION SETTLEMENT OF MORTGAGE AND ACCOUNTING FRAUD WITH NORTH CAROLINA U.S. ATTORNEY
FACTS
A federal bill of information and a deferred prosecution agreement relating to Beazer Homes USA Inc. were filed July 1, 2009 in U.S. District Court for the Western District of North Carolina. The criminal charges and accompanying agreement relate to Beazer's participation in a fraudulent scheme designed to increase Beazer Mortgage's profit margin and sell Beazer homes, as well as an accounting fraud scheme designed to "smooth earnings." Under the deferred prosecution agreement, Beazer accepts responsibility for several fraudulent mortgage origination and accounting practices.
The announcement was made by Acting U. S. Attorney Edward R. Ryan of the Western District of N.C., along with Secretary of Housing and Urban Development Shaun Donovan; Owen D. Harris, Special Agent in Charge of Federal Bureau of Investigation Operations in North Carolina; Jeannine A. Hammett, Special Agent in Charge, Internal Revenue Service, Criminal Investigative Division; Keith Fixel, Inspector in Charge, United States Postal Inspection Service; Fernando Ramos, Special Agent in Charge, Office of the Inspector General, Department of Housing and Urban Development, Joseph A. Smith, Jr., Commissioner of Banks for North Carolina, and the North Carolina Real Estate Commission. (Do you notice eight agencies participated in this?)
Beazer agrees to pay $10 million immediately toward restitution for victimized home-buyers, and additional money as Beazer recovers financially, up to $50 million. This $10 million includes the $2.5 million Beazer paid to the North Carolina Commissioner of Banks in May 2009 to provide restitution to North Carolina victim homebuyers, and the remaining $7.5 million will be paid into a national restitution fund. Any additional payments, up to $50 million, will be paid into the national restitution fund. Any monies in the national restitution fund that are unclaimed by victimized home-buyers after the expiration of the agreement will revert to the Federal Housing Administration, subject to the terms and limitations in a separate civil agreement between Beazer and the Civil Division of the U.S. Department of Justice and the U.S. Department of Housing and Urban Development.
Beazer and its subsidiary, Beazer Mortgage Corp., admitted to engaging in several fraudulent mortgage origination practices, including (1) fraudulently retaining so-called "discount points" that should have been used to provide some home-buyers with a decreased interest rate; (2) fraudulently informing some homebuyers that they were receiving a "gift" from a charity to cover their down payment when, in truth, the price of the home was increased to offset the supposed "gift;" (3) fraudulently circumventing the "Neighborhood Watch" and "Credit Watch" programs of the Department of Housing and Urban Development to avoid action from HUD in response to the high foreclosure rate of some Beazer Mortgage offices; and (4) instituting a strategy of willful blindness with regard to some stated income loans.
Beazer also admits to having engaged in a scheme to commit securities fraud by practicing a form of what is commonly known as "cookie jar accounting." When Beazer's financial performance was stronger than needed, Beazer decreased its net income through the manipulation of a variety of "reserve" accounts. This manipulation left Beazer with excess reserves and excess balances, which it then was able to use to "smooth earnings" as needed.
The deferred prosecution agreement recognizes several important factors considered by the United States in reaching this agreement. These include (a) the efforts undertaken by Beazer's audit committee to investigate and report to the United States, regarding the fraudulent mortgage and accounting practices; (b) Beazer's cessation of the business activities of Beazer Mortgage and the consequent elimination of any risk of further fraudulent mortgage practices; (c) Beazer's adoption of remedial measures, including the termination of executives and employees it identified as responsible for the misconduct; (d) Beazer's commitment to continue to cooperate with the United States in its ongoing investigation; (e) Beazer's commitment to provide appropriate restitution to buyers in cooperation with the North Carolina Commissioner of Banks and through the establishment of a national restitution fund; (f) the chief executive and chief operating officer's voluntary contribution of the funds they received from their 2008 year-end bonuses to the restitution fund; (g) Beazer's commitment to provide appropriate restitution to the Federal Housing Administration as part of a separate civil agreement; and (h) the recognition that the imposition of additional criminal penalties or the requirement of additional payment at this time would jeopardize the solvency of Beazer and put at risk the employment of approximately 15,000 employees and full-time contractors not involved in the criminal wrongdoing.(usattywdnc7109)
MORAL
Did you notice not one human being was indicted? Did you notice that Beazer was not closed down because over 15,000 innocent people would be put out of a job? Very interesting when you consider the other convictions and indictments that have come down with over $40 million in fraud loans. Notice that collecting discount points and not giving the discount is criminal. Notice also that the gift of down payment and increasing the price of the house to cover it is criminal. I have lost count of the number of people indicted for false gifts but I guess if you are putting a lot of people out of jobs that individuals that do it do not get indicted? It will be interesting to see further if any of the individuals involved are indicted since Beazer is cooperating with the government in its ongoing criminal investigation. Stay tuned for more on Beazer!
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
