MORTGAGE FRAUD JUST GOT TOUGHER - NEW FEDERAL LAW MEANS STOP DOING IT AND GET A DAMN GOOD LAWYER IF YOU HAVE COMMITTED MORTGAGE FRAUD
FACTS
In May 2009 President Obama signed the Fraud Enforcement and Recovery Act of 2009. This new law provides government agencies with increased funding and additional tools to combat financial and mortgage fraud. The act makes a number of changes to fraud and money laundering statutes.
One purpose for these changes is to ensure THAT PRIVATE MORTGAGE BROKERS AND COMPANIES ARE HELD FULLY ACCOUNTABLE UNDER FEDERAL FRAUD STATUTES.
FERA AMENDS THE DEFINITION OF "FINANCIAL INSTITUTION" IN THE CRIMINAL CODE TO INCLUDE MORTGAGE LENDING BUSINESSES. This extends federal fraud laws to cover mortgage lending businesses not directly regulated or insured by the federal government. Thus private mortgage lenders will be subject to the same oversight and enforcement as other financial institutions.
FERA also AMENDS THE FEDERAL MONEY LAUNDERING STATUTE TO EXTEND THE DEFINITION OF "PROCEEDS" TO INCLUDE GROSS RECEIPTS OF ILLEGAL ACTIVITY, RATHER THAN JUST PROFITS DERIVED FROM IT. THIS MAKES PROOF OF MONEY LAUNDERING EASIER TO ESTABLISH. Additionally, money laundering convictions have a mandatory minimum sentence to be served in federal prison.
Amends the following sections of Title 18 of the United States Criminal Code among others: Sections 20, 27 (includes mortgage brokers making false statements for loans secured by real property), 1014 (adding false statements by mortgage lending institutions instead of just those that are federal related mortgage loans), 1031, 1956 (money laundering now includes gross proceeds as opposed to profits) and 1957.
There are other changes in FERA but these are the critical ones to be aware of. The government has allocated $175 million to fighting mortgage fraud and financial crimes of which $78 million is for the FBI.
If you operate a mortgage lending or money services business, it is imperative that you stay abreast of changes in laws that may impact your business. If you are in need of a business compliance plan or involved in an investigation, contact an attorney to protect your legal rights.
MORAL
If you are being investigated or even think you are being investigated for mortgage fraud or any other crime it is important you seek legal counsel then. Do not wait until people are knocking on the door. Remember, the federal law enforcement agencies now have an additional $175 million to catch you with if you are involved in mortgage fraud. If you are unsure consult legal counsel now.
ALASKA RESIDENT LAST OF 9 TO BE SENTENCED IN LARGEST MORTGAGE FRAUD CASE THE STATE HAS EVER HAD. HE GETS OVER FIVE YEARS IN FEDERAL PRISON
FACTS
On Aug. 21, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme. Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska's history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year-long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1.7 million in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14.5 years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million.
The defendants convicted as a result of the scheme are Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Co. Inc. of Anchorage.
Lockard, a licensed real estate investor and the lead defendant pleaded to 64 counts and was sentenced to 70 months and ordered to pay $2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name.
Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2.3 million.
Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.
Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.
Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.
Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day.
Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066,390.
Gary Paterna. Mr. Lockard's father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.
Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.
The defendants pleaded to a total of 64 counts charging conspiracy, wire fraud, bank fraud and false statements to a financial institution.
Between on or about Dec. 23, 2003 and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudulent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified downpayments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved.
According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no downpayments had been made.
The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Co. as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.
The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA.
Finally, the indictment alleges that Lockard engaged in a "bust out" scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.
Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million. Judge Beistline commented that Mr. Lockard's crimes were motivated by greed and had an impact on our community.
MORAL
All the individuals are sentence to time in prison. It gets mighty cold in Alaska. All must serve at least 85% of their time because there is no parole in the federal criminal justice system. The loans went back six years to 2003. Did you do any overly creative loans in the last six years? Were there any losses?
CASHCALL INC. OF ANAHEIM, CALIFORNIA, ORDERED TO PAY $1 MILLION FINE AND STOP USING "LOAN SHARK" TACTICS
FACTS
CashCall Inc., an Anaheim-based fast-money lender, was ordered to stop using "loan shark tactics" in collecting debt, including abusive calls at all hours of the day and night and empty threats of law enforcement action. The court-ordered judgment also forces CashCall to stop misleading consumers with deceptive advertising and pay $1 million in civil penalties and legal expenses.
In attorney general Jerry Brown's press release, there is a quote stating, "CashCall preyed on consumers desperate for cash, charging triple-digit interest rates and using loan shark tactics to collect on their debts," Brown said. "This judgment forces CashCall to stop harassing its customers and should serve as a warning to consumers to be wary of fast-money lenders."
CashCall, owned by Paul Reddam, founder and former owner of DiTech mortgage company, currently charges 139.34% annual interest on the $2,600 loan it offers to consumers. This means that consumers who make the required $298.94 monthly payment over 36 months pay $10,761.84 over the life of the loan. That adds more than $8,000 in interest to the loan.
Brown contends that CashCall used illegal and abusive debt collection practices when customers were unable to make on-time payments, in violation of California Business and Professions Code Section 17200. These practices included:
* Making excessive and verbally abusive telephone calls at all hours of the day and night.
* Causing borrowers to incur bank fees by repeatedly trying to collect payments despite knowing there were insufficient funds in the borrowers' accounts.
* Threatening to initiate law enforcement and wage garnishment proceedings against borrowers without any basis for doing so.
* Improperly discussing private financial information with borrowers' friends, colleagues and neighbors.
* Failing to honor borrowers' requests to cancel automatic withdrawals from checking accounts.
* Continuing to contact borrowers by phone after receiving requests to only contact them in writing.
Brown also contends that CashCall misled customers with deceptive television, radio and online advertising in violation of Business and Professions Code Section 17500.
CashCall's advertisements falsely suggested that low interest rate loans were available to all borrowers, when in reality, the rates advertised were only offered to some borrowers, usually members of the military. CashCall offered lower interest rates because federal law limits the interest it can charge on loans to active duty service members and their families.
The settlement also requires CashCall to:
* Stop making excessive and verbally abusive telephone calls at all hours of the day and night.
* Pay $1 million in civil penalties and expenses related to the investigation and resolution of this case.
* Train its employees within 30 days and not fewer than four times per year thereafter to ensure compliance with the judgment.
* Terminate any officer, director or employee who violates the terms of the judgment.
* Record all telephone calls made to, or received from, prospective and current borrowers.
* Maintain a detailed log of all consumer complaints.
MORAL
Let me see: The founder and former owner of DiTech, a multimillion-dollar company, may not like paying $1 million out of CashCall funds but do you think he will really miss it? Do you think that CashCall makes more than $1 million in profit in one year? Do you think the settlement made CashCall yell ouch? Do you really think CashCall will stop its practices?
LEAVING A VOICEMAIL MESSAGE IN FLORIDA THAT MAY BE OVERHEARD BY A THIRD PERSON MAY VIOLATE FAIR DEBT COLLECTION PRACTICES ACT
FACTS
A consumer can state a claim under the federal FDCPA where the debt collector left a voicemail message at the consumer's home, notwithstanding the messages contained a warning directing anyone other than the consumer to disconnect.
MORAL
Now you might say why am I putting debt collection cases here. Well, the answer might be that quite a few mortgage brokers and loan officers are in severe financial trouble due to the mortgage market crash and collectors are "harassing" them about consumer debts. The threat of a lawsuit against the collector for violating the FDCPA may assist them in removing stress and the debt collector because of the violation by the debt collector. It is worth thinking about. If someone you know is having problems we do have a full-time bankruptcy attorney on staff to assist them.
REMEMBER AS A CONSUMER YOU HAVE THE RIGHT TO DEMAND VALIDATION OF ANY CONSUMER DEBT IF YOU DO IT WITHIN THE 30 DAYS STATED IN A DEMAND LETTER TO PAY THE DEBT
LAW FIRM ATTEMPTING TO COLLECT HOMEOWNER ASSOCIATION DUES IS NOT DEBT COLLECTION IN MINNESOTA WITHIN MEANING OF FAIR DEBT COLLECTION PRACTICES ACT
FACTS
Enforcement of a security interest including lien foreclosure is not debt collection activity within the meaning of the federal FDCPA. A law firm's letter attempting to collect delinquent homeowners association dues is not enforcement of a security interest under the federal FDCPA when the letter makes no mention of the security interest created by the delinquency.
MORAL
Again, remember it is a trial court decision so if attempting to collect a debt for any reason check and make sure you are not subject to the FDCPA or you may wind up paying the debt to money and the attorney fees as well.
ATTEMPTING COLLECTION OF OVERPAYMENT OF SALARY IN NEW YORK DOES NOT VIOLATE THE FAIR DEBT COLLECTION PRACTICES ACT
FACTS
Acting on behalf of it client, the City of New York, the defendant law firm sent a letter to the plaintiff informing her that the city believed it had overpaid salary to her in the amount of $2,042. The letter stated that the plaintiff was required to repay this amount by check or money order made payable to the City of New York. The letter also noted that it was from a "debt collector ... attempting to collect a debt," and recited language required by the FDCPA apprising the plaintiff of her ability to dispute the debt. Further, the letter requested that the plaintiff contact the defendant "at once" if she intended to dispute the debt.
The plaintiff disputed and sought verification of the debt by contacting the defendant in writing within the 30-day time period specified in the letter. The defendant responded by letter on May 5, 2008 requesting that the plaintiff contact them to discuss the matter. However, 15 days later, the plaintiff commenced this lawsuit asserting, in addition to various state law claims, that the defendant violated the FDCPA by requesting that she contact them "at once" before having provided her with some verification of the overpaid salary.
The purpose of the FDCPA is to protect consumers from abusive, harassing, threatening, misleading and otherwise unscrupulous debt collection practice. The defendant argues that the plaintiff's complaint fails to state a claim because the overpaid salary at issue is not a debt within the meaning of the FDCPA.
The FDCPA statute defines a "debt" as any obligation ... of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes ... at a minimum, the statute contemplates that the debt has arisen as a result of the rendition of a service or purchase of property or other item of value.
There was no consumer transaction that gave rise to the debt. The plaintiff's debt arose, apparently, out of an accounting error when her former employer allegedly overpaid her $2,042 in salary. This is not the type of debt contemplated by the FDCPA because the overpayment of salary was not a "transaction" within the meaning of the statute. Accordingly, the plaintiff's FDCPA claim must be dismissed.
MORAL
Do not try this elsewhere. The FDCPA is a liberal statute and this is a trial court decision. If you say you are attempting to collect under the FDCPA then comply with it because the FDCPA will then be use to your detriment. The law firm proved it did not violate the FDCPA but it had to pay for the privilege of doing so.
FBI SETS INDICTMENTS FOR 45 PEOPLE IN CLEVELAND FOR MORTGAGE FRAUD
FACTS
Special agent in charge Frank Figliuzzi spoke at a press conference held by Cuyahoga County Prosecutor Bill Mason to announce the indictments of 45 individuals in a mortgage fraud investigation conducted by the FBI along with state and local law enforcement agencies in the Cleveland area.
The investigation showed that these individuals were involved in over 500 real estate transactions totaling $50 million, 453 houses purchased with $44 million in fraudulent loans, and a profit of approximately $31 million.
MORAL
The 45 were busy little beavers, weren't they? There will be more to follow but I trust they have knowledgeable attorneys in mortgage fraud. Remember above where I stated the government gave the FBI $75 million of the $165 million allocated to fight mortgage fraud. Looks like they are making use of the money effectively.
OHIO MORTGAGE IS VALID EVEN IF ONLY CONTAINS THE STREET ADDRESS AND NOT THE LEGAL DESCRIPTION
FACTS
A recorded mortgage that contains the street address of residential property -- but not the legal description of the parcel of land -- is sufficient to preclude the setting aside of the otherwise-valid mortgage in bankruptcy court. If such a recorded mortgage would give constructive notice to third parties under Ohio law, then the bankruptcy trustee cannot set aside the mortgage. The district court correctly concluded that the recorded mortgage gives sufficient notice, so the trustee may not set aside the mortgage.
MORAL
Even the bankruptcy trustee loses when you can figure out who owns the property and what property is mortgage. But it is better to do it right the first time because it did cost the mortgage holder legal fees to protect the right to the lien. Be careful the first time or pay legal fees when you go back the second time.
OREGON REQUIRES FORECLOSURE NOTICES TO CONTAIN LOAN MODIFICATION REQUEST FORM
FACTS
Effective Sept. 28, Oregon requires the content of the foreclosure notice required for properties subject to a residential trust deed be accompanied by a loan modification request form. In addition, a foreclosure sale may not occur until after the beneficiary timely responds to a grantor who requests a loan modification. Furthermore, the trustee is required to record an affidavit from the beneficiary stating that the beneficiary has complied with the foreclosure notice requirements. The law contains a sunset date of Jan. 2, 2012, at which time it will be repealed.
MORAL
So much for the old foreclosure timetables. It will now take much longer to foreclose.
ALABAMA SAYS DO NOT FORECLOSE ON HOMES WHERE SPOUSE OF A DECEASED MILITARY PERSON LIVES
FACTS
Effective as of Aug. 1, Alabama established protections for surviving spouses of military service members facing foreclosure. A foreclosure proceeding may not be initiated against the surviving spouse or the estate of a service member who dies while deployed overseas on active duty for at least 180 days following the death of the service member. The surviving spouse or the estate gives the mortgagee written notice in order to receive this protection.
MORAL
Six months reprieve which is kind of nice for a grieving widow or widower as the case may be.
A WARNING ABOUT OBTAINING RELEASES FROM EMPLOYEES CONCERNING COMMISSIONS, WAGES AND OVERTIME IN CALIFORNIA
FACTS
A release from an employee can be valid and enforceable if it is done correctly (Chindarali v. Pick Up Stix). This is true as long as the employee has been paid and undisputed monies due and the release relates to disputed amounts allegedly due. Wages that are due or to become due must be paid if undisputed. The dispute over the wages must be in good faith. The wages that are concededly due must be first paid before the release is signed over the disputed sums. While the Fair Labor Standards Act requires prior approval of settlement and release over disputed claims, California law does not.
MORAL
This hyper technicality if you will, is the reason you have your attorney.
FORGED DEEDS OF TRUST IN CALIFORNIA DO NOT REQUIRE YOU TO DISCLAIM THEM IMMEDIATELY BUT THERE ARE EXCEPTIONS
FACTS
In December 2005 criminals placed forged deeds of trust for the benefit of a nonexistent entity on two properties belonging to a probate estate. The defense counsel alleged the estate failed for more than 20 years to change the name of the owner of title from the deceased testator to the estate or the beneficiary.
In March 2006 a forged deed transferred one of the properties to Korey D. Martin, one of the criminals, who secured a refinance loan to "pay off" the December 2005 encumbrance and allow the criminals to divide $495,000.
In August 2006 Korey D. Martin transferred the refinanced property to Johnny Baker and Angela Baker for consideration per the testimony.
The plaintiff as executor of the estate sued to cancel the forged instruments and all other documents based upon the forged instruments and sought attorney fees from the criminal defendants because they caused the necessity of the executor bringing the lawsuit. The initial lender, Capital Loan Specialists filed a cross-complaint against Fidelity National who had insured U.S. Bank. U.S. Bank cross-complained against Capital Loan Specialists, Korey Martin and Patricia Winters.
Plaintiffs contended the deeds were forged and therefore void even as to a good-faith purchaser who did not know of the forgery. Further that plaintiff had no legal duty to notify the Bakers who were making improvements to the property but they were informed of the issues early in their possession of the property.
Defendants contended that plaintiff should be refused title due to laches (waiting too long after the forgery to do something) and estoppels (the waiting and allowing Bakers to improve property should stop plaintiff from pleading forgery and getting the property back).
The Judge of the Los Angeles Superior Court said...
Cancel the deeds of trust. Cancel the grant deed on the two pieces of property and give the plaintiff $75,999 from the criminal defendants who caused the initial problem. Give U.S. Bank NA $250,000 from the Capital Loan Specialists the initial lender that sold it the mortgage and give U.S. Bank $495,000 from the criminal defendant Korey Martin and the notary public Patricia Winters along with punitive damages against Korey Martin of $50,000. Winters was dismissed as a defendant and represented herself as a cross-defendant. The case turned on recovery of title to the two houses rather than on the recovery of money.
MORAL
The surety bond on the notary must have paid off. She should have purchased the deluxe package which has insurance in addition to the bond. The judgments may be worthless since the appearance is both parties appear to have no money and may shortly filed bankruptcy.
CALIFORNIA ARBITRATION IN CONTRACTS AND THE LAW
FACTS
For reasons I have discussed with most of you that are clients of our firm, every contract you sign with a borrower, or a vendor should have a paragraph on mediation, then voluntary arbitration and then litigation. The reasons I have given you are not repeated here because they are sensitive in protecting you from litigation and to mitigation in the event you may be found liable or there is exposure to liability. As I have stated to you we do not update the contracts routinely and only validate them as of the date written because the law literally changes daily. Therefore, if you would like contracts reviewed you should submit them annually for that basis. By way of example, there were independent contractor agreements for HUD/FHA loan officers that were valid and that we had approved by HUD/FHA/HOC at one time. Those contracts became invalid when HUD changed the Mortgagee Approval Handbook to Revision 2.
There is a change that should be put in all contracts that have arbitration clauses in this one lawyer's opinion. That change is that arbitrators shall not have the power to commit errors of law or legal reasoning and the courts shall have the power to vacate any award or correct the award on appeal to a court of competent jurisdiction for such error. This is not the exact language but to change it correctly gives you the opportunity to appeal a bad decision by an arbitrator.
There are cases where you may in fact want it deleted. This depends on the demographics of the other side with whom you are contracting.
MORAL
Review your contracts and have them updated. Some contracts may not want mediation and arbitration. It depends on the circumstances. Those that warrant mediation and arbitration should have the clause added.
ANAHEIM MAN PLEADS GUILTY TO MORTGAGE FRAUD IN MISSOURI FEDERAL COURT
FACTS
Jerome Shade Howard, 40, of Anaheim, pleaded guilty in federal court today to his role in a $12.6 million mortgage fraud conspiracy that involved 25 upscale residential properties in Lee's Summit, Mo., and Raymore, Mo. Howard admitted that he received more than $900,000 in illegal kickbacks as part of nearly $8.5 million in fraudulent mortgage loans.
Howard is among 12 defendants who have pleaded guilty in the scheme to buy and sell new homes all built by Jerry R. Emerick, 39, of Raymore. Buyers purchased the homes at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then kept the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from Emerick, with kickbacks of up to $125,000 on each house.
Emerick owned and operated Ty Construction and Residential Contracting LLC, which was engaged in the business of residential construction. He pleaded guilty on April 9, 2009, to conspiracy to commit mortgage fraud and wire fraud and to transfer funds obtained by fraud across state lines.
In total during the course of the conspiracy from June 2005 to May 2007, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders' knowledge.
Howard admitted that he obtained false Social Security numbers for two buyers to use in obtaining loans for the purchase of properties, solicited and obtained five buyers who fraudulently purchased properties, prepared and submitted false information and documents in connection with mortgage loans, dealt with co-conspirators, personally purchased two properties during and as part of the conspiracy, and obtained funds from the mortgages on his own purchases as well as on the purchases of others.
Howard was involved in fraudulent mortgage loans that totaled $8,499,790, from which he received a total of $900,731. By pleading guilty on Aug. 20, Howard also agreed to forfeit to the government $900,731, representing the amount of proceeds he obtained during the scheme.
Under federal statutes, Howard is subject to a sentence of up to 15 years in federal prison without parole, plus a fine up to $500,000 and an order of restitution.
MORAL
He made a lot of money but now he has to forfeit it all and then some for things he did over four years ago. I suggest if anyone out there did something over four years ago or closer in time, that they should see their attorney.
MILL VALLEY, CALIFORNIA, REAL ESTATE PROPERTY BROKER PLEADS GUILTY TO 8 FELONIES
FACTS
Kirtikumar Menon, 41, admitted to eight felony counts on Aug. 24 in Marin Superior Court, including embezzlement from elders, forgery, preparing false documentary evidence and writing a check against insufficient funds. Menon pleaded guilty to all the charges after Judge Kelly Simmons agreed not to send him to state prison.
Menon could still receive up to eight years in county jail, said Deputy District Attorney Tom McCallister. Menon also faces restitution payments and ongoing civil litigation.
Menon is free on $1.5 million bail pending sentencing on Sept. 23.
According to court documents, Menon became entangled in a complicated web of real estate and financial transactions dating back to 2006. Authorities said Menon developed an investment strategy for a 73-year-old retiree in Walnut Creek and arranged to invest the man's savings in a series of mortgage deals for clients in Marin County. Menon used the funds to broker loans for a distressed Mill Valley couple facing foreclosure on their $2 million home on East Strawberry Drive, and for a couple who owned rental properties in San Rafael, investigators said.
Questions arose over the lack of documentation, and it emerged that regular payments from the borrowers were not actually making it back to the retiree in Walnut Creek, authorities said. As lawyers and investigators became involved, a trail of forged checks, diverted payments and flawed documents began to surface, according to court documents. The East Strawberry Drive home was eventually foreclosed upon.
In May 2008 Mill Valley police opened a separate investigation into a real estate deal in San Rafael that Menon brokered for a Mill Valley couple. Police discovered that Menon forged a series of documents that resulted in the couple paying an extra $90,000 and that the funds were apparently used to pay off other loans, authorities said.
Investigators also learned of another alleged victim who had sued Menon in Marin Superior Court, claiming he had convinced her to make a pair of loans for a total of $25,000, then wrote her a bad check as repayment and stole another check for a tuition payment at his child's school in San Francisco.
The district attorney's office has estimated the overall losses at $208,000 to $1.39 million.
Menon was arrested in February and posted bail. At the time, he was working as a senior auditor in the Marin County Auditor-Controller's Office, which administers the county's budget, payroll and assets.
MORAL
With a bail of $1.5 million and where a practice is for bondsmen to charge 10% of the bond as a fee which in this case it would be $150,000 and where he is to make restitution, I wonder if the "victims" will be made whole? I wonder why he did not think of the feelings of his family before he did it considering how they must feel now around their friends that know about it. Did you do business with Mr. Menon?
TWO CONNECTICUT MEN INDICTED AND THE THIRD, AN ATTORNEY PLED GUILTY FOR MORTGAGE FRAUD
FACTS
A federal grand jury n Hartford has returned a nine-count indictment charging George Hajati, also known as Gjergji Hajati, 30, of Westerly Terrace, Rocky Hill, and Justin Williams, 31, of Newington, with conspiracy and wire fraud offenses stemming from an alleged Hartford-area mortgage fraud scheme.
Hajati was extradited from Albania and entered a plea of not guilty to the charges against him in Bridgeport. The indictment alleges that, between September 2003 and November 2007, Hajati, using his company Connecticut Partners Mortgage, conspired with Williams, a CPM employee, and Douglas Sheehan, 38, an attorney, and others to deceive mortgage lending financial institutions into providing falsely inflated mortgage loans to real estate buyers for the purchase of property that was worth less than the amount of the loans. The indictment alleges that CPM provided fraudulent financial statements to the lending institutions that inflated the sales prices of the properties, the downpayments made by purchasers and the amount due to sellers, as well as other fraudulent information, in order to induce the institutions to provide the funds.
The investigation is ongoing and, at this time, it is believed that the various lenders have suffered a loss of more than $1 million.
Hajati and Williams are charged with one count of conspiracy to commit wire fraud and eight counts of wire fraud. Each charge carries a maximum term of imprisonment of 30 years and a fine of up to $1 million.
Following his arraignment Hajati was released under electronic monitoring after posting a bond in the amount of $250,000, cosigned by family members and partially secured by property.
Williams was previously arraigned following his voluntary return from Albania. He is released on a non-surety bond in the amount of $25,000.
On Nov. 20, 2008, Sheehan waived his right to indictment and pleaded guilty before United States District Judge Mark R. Kravitz in New Haven to one count of conspiracy to commit wire fraud and four counts of wire fraud. He awaits sentencing.
An indictment is only a charge and is not evidence of guilt. The defendant is entitled to a fair trial at which it is the government's burden to prove guilt beyond a reasonable doubt.
MORAL
One voluntarily appears and low bond and signature release. One has to be arrested, high bond and electronic release. Guess who was smarter? The lawyer pleaded guilty so guess who is cooperating with the FBI? See your lawyer now if you have been overly creative. As you can see they went back six years for these fraud loans.
FEDERAL TRADE COMMISSIONS GETS "STOP ORDER" AND STIPULATED $1.4 MILLION JUDGMENT IN FLORIDA AGAINST A "FORECLOSURE RESCUE" SCAM
FACTS
The Federal Trade Commission has put a stop to a deceptive foreclosure "rescue" operation that charged homeowners $1,200 based on the false promise by Stephanie Dietschy, Darin Dietschy and United Home Savers LLC, all based in Florida that it could save them from losing their homes.
The operators of the business are barred from any further deceptive practices under a settlement with the FTC. The agency charged them with violating the FTC Act by falsely claiming that they would prevent homes from being foreclosed in virtually all instances or refund most of the $1,200 fee. In most cases the defendants neither stopped foreclosure nor provided promised refunds.
The settlement prohibits the defendants from misrepresenting any fact material to a consumer's decision to purchase a foreclosure rescue service, including that they can prevent or postpone any foreclosure; the likelihood that their foreclosure rescue will succeed; the degree of past success of any foreclosure rescue efforts; the likelihood that a consumer will get a refund if the rescue effort fails; that they can help all consumers, regardless of their individual circumstances; the number of satisfied customers or customer complaints; the terms of any refund or guarantee; any endorsement or rating by the Better Business Bureau or any other consumer association.
The order imposes a $4.1 million judgment, which will be suspended upon transfer of $21,694 in bank account funds that were frozen by the court. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. The settlement bars them from selling or otherwise disclosing personal information about anyone whose information they obtained during their operation. The settlement also contains record-keeping and reporting provisions to monitor their compliance.
The document was filed in the U.S. District Court for the Middle District of Florida, and was entered by the court on Aug. 19.
NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.
MORAL
I would say they were lucky there was no more money in the bank account. The FTC loves a forfeiture. If you are in foreclosure rescue or loan modifications I suggest you take a hard look at what you are doing and consult an attorney forthwith. We are representing people and companies now that have these issues. Thus far we are OK but are you? I think maybe you should see your legal counsel if you are doing either of the above and make sure you are 100% compliant with all laws including but not limited to state licensing laws and regulations, FTC Section 5 regarding misleading advertising and any state and federal penal code sections that involve these issues.
TWO INDICTED IN INDIANA FOR $12.5 MILLION MORTGAGE FRAUD
FACTS
On Aug. 17 Robert Andrew Penn, age 44, formerly of Indianapolis and currently a resident of Naples, Fla., and Keven M. Lafavers, age 45, formerly of Indianapolis and currently a resident of Lagrange, Ky., were indicted by a federal grand jury for mortgage fraud in the Southern District of Indiana. The indictment charges both men with conspiracy to commit wire fraud and wire fraud, relating to mortgage fraud activities in which they allegedly participated between 2003 and 2005. Penn is also charged with conspiracy to commit money laundering.
According to the indictment, between November 2003 and August 2005, at least 112 fraudulent loans, totaling $12,621,500, were allegedly obtained by Penn and his numerous business entities, assisted by Lafavers and others. The loans were obtained from Argent Mortgage Co., The MoneyStation and People's Choice Mortgage/Countrywide Home Loans.
Seven other individuals were charged in April 2009 with participating with Penn and Lafavers in their mortgage fraud crimes. The investigation is continuing as to other individuals and other loans obtained by Penn and his businesses.
According to the indictment Penn owned and operated numerous business entities, which were created and used to illegally obtain loans on residential real estate properties. The indictment charges that Penn was essentially in charge of the fraud schemes and controlled and directed the activities of all of the other people involved in the illegal activities. Lafavers was employed by Penn to locate properties for sale, negotiate the purchases of those properties, and enter into option agreements and land contracts with the sellers on behalf of Penn and his businesses.
The mortgage fraud schemes charged in the indictment were accomplished as follows. Participants in the schemes (generally Lafavers) located properties and arranged to purchase them at a fair market value generally by means of an option agreement or unrecorded land contract. Penn, with the assistance of his relatives in Virginia, located straw purchasers who invested their good credit, but no money, to be the purchasers of these properties at a much higher price than that negotiated with the seller. Most of these straw purchasers were unwitting participants in the scheme. The majority were located in Virginia and were friends and relatives of Penn and his family. The straw purchasers generally never saw the properties they were purchasing. They were told, by Penn and others, that they were joining an investment club, that they would not have to make any payments on the properties, and that the properties would be managed for them by scheme participants (including renting the properties and paying all bills).
These straw purchasers received money for participating in the investment club, generally $3,000 to $4,000 for each property purchased in their name. Mortgage brokers participating in the schemes prepared fraudulent loan applications, containing false statements, including that the straw purchasers owned bank accounts, stock (in Penn's companies) and other assets which they did not own; that the straw purchasers had income which they did not actually have; and that the straw purchasers were making the downpayments on the properties from their own funds. In reality, other participants in the schemes actually provided the downpayments for the properties, and were paid a fee of $1,000 to $3,000.00 for doing so. Appraisers were employed by Penn and his co-conspirators to prepare appraisals, which vastly overstated the values of the properties, in order to support the sales price, which was ultimately shown on the closing documents. The false loan applications, appraisals and other fraudulent documents were then submitted to the lenders. The lenders, relying upon the false statements in the loan packages, issued the loans. The loans were funded via wire transfers of money from the lenders to a title company, which the scheme participants used to assist them in preparing false closing documents and issuing title company checks. At the time the loans closed, the properties sold for the fraudulently inflated sales price, and the fraudulently obtained loan proceeds were shared by scheme participants. The sellers were paid the amount they had negotiated to receive, and the co-conspirators shared the excess proceeds. Lafavers, who had located the properties and negotiated their purchase, generally received $1,000 per property located. The loan processors were generally paid $500 for assisting in obtaining the loan. The scheme participant funding the downpayment was paid $1,000 to $3,000 for each downpayment they loaned. The co-conspirators (relatives of Penn) who recruited the investors and assisted them in signing the loans papers were paid $1,000 per loan. The remaining amounts were split between Penn and his other coconspirators, and also used to pay existing mortgages on earlier purchased properties to keep the scheme from being detected by the lenders.
Fifteen loans related to the purchase of properties from individual sellers, generally individuals who either did not have their homes listed to sell, or had them listed as "for sale by owner." These loans totaled over $3 million and were all issued by Argent Mortgage Co.
The remaining 97 fraudulent loan transactions were all owned by one person, through various land trusts. Penn negotiated with this individual to purchase all of the duplexes at a price of $50,000 each (the last group of these properties actually sold for $60,000). Straw purchasers were recruited to purchase each of these duplexes for $120,000 each. Inflated appraisals were obtained showing that the properties were worth $120,000 each. Immediately prior to the closing of the sale, the original owner transferred the properties via quitclaim deeds to Land Economics LLC, one of Penn's companies. Land Economics LLC was then shown as the seller of the properties on the closing documents and straw purchasers recruited by Penn and his relatives were shown as the buyers. Fraudulent loan packages had been prepared and submitted to the lenders. Co-conspirators (including Penn) funded the downpayments. Lenders funded a loan in the amount of $96,000 on each of the 97 properties (a total of $9,312,000 in loan proceeds). After the properties closed, the original owner was paid his negotiated price (less any appropriate closing costs) and Penn's companies received the remaining proceeds (generally in excess of $70,000 for each property).
All of the loans involved in the schemes went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties.
Penn faces a maximum possible prison sentence of 35 years and a maximum possible fine of $750,000. Lafavers faces a maximum possible prison sentence of 25 years and a maximum possible fine of $500,000.
Penn was arrested on the charges in Naples on Aug. 7 and is being transported to Indiana by the United States Marshals. He will have an initial appearance before a United States Magistrate Judge when he arrives in Indianapolis. Lafavers was arrested on the charges in Lagrange on Aug. 12 and had an initial appearance before United States Magistrate Judge Kennard P. Foster in Indianapolis. Lafavers is currently in the Marion County Jail. Trial is currently set for both defendants before United States District Court Judge David F. Hamilton on Sept. 21, 2009.
Remember, they are innocent until proven guilty. But in the past ten years I have only read of one case where the U.S. attorney lost and only one other where the conviction was overturned on appeal.
MORAL
Pay close attention because there are several things of interest in these cases.
1. The loans all occurred between 2003 and 2005. Thus if you were "overly creative" in those years then you are at risk.
2. The investigation is still ongoing. This means that people that knew the two indicted individuals should review that relationship with an attorney now or they may be reviewing it with the FBI later.
3. The family members were allegedly brought into it and now there may very well be no family.
4. I trust all have good attorneys because if not, they may be looking at "time" and there is no parole in the federal criminal system
5. So if you know someone indicted or under investigation, I suggest you contact your lawyer now and go over the facts with the attorney before anything happens so you can mitigate or rest easier as the case may be.
CENTERVILLE, VIRGINIA, LOAN OFFICER PLEADS GUILTY TO MULTIPLE MORTGAGE FRAUD CHARGES
FACTS
Hayung Peter Jin, age 46, of Centerville, Va., pleaded guilty on Aug. 17 to multiple fraud charges. Jin was indicted on June 11 on multiple fraud charges, including aggravated identity theft. Sentencing has been set for Nov. 13. Jin faces a maximum penalty of 30 years in prison.
Jin admitted that he operated a loan brokerage business, known as Business Capital and Investments Inc., located in Annandale, Va., that served primarily Korean-Americans in the Washington metropolitan area. Jin was involved in two separate fraud schemes. In October 2005, Jin convinced a former client to sell his Loudoun County home to another person, a South Carolina businessman named Han, when in fact Han had never agreed to purchase the home. Jin then used Han's name and Social Security number to obtain financing for the apparent purchase of the home, plus additional home equity loans on the home in the name of Han. The total amount of fraudulently obtained financing was $620,000.
In connection with the second scheme, in January 2007 Jin convinced a local businesswoman that he had obtained four borrowers who wanted to borrow funds from her in the total amount of $360,000, when in fact the alleged borrowers had never agreed to such an arrangement. Jin forged four promissory notes and gave them to the businesswoman in order to induce her to transfer the $360,000 to him, with the intent that he (Jin) would transfer the funds to the four "borrowers." In reality Jin kept the funds for himself.
MORAL
Notice the government went back to 2005 to find one fraud. Remember what I have been saying about the "Mortgage Fraud Task Force" made up of multiple agencies including federal and state law enforcement, IRS, state licensing agencies and local police. They are out there with almost a vengeance because of the fallout economically and because of the pressure from all the politicians. So if you hear anything, I suggest you see your attorney now rather than later.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
