FORMER MORTGAGE BROKER FROM CALIFORNIA SENTENCED TO PRISON FOR TAX FRAUD AND PAYING KICKBACKS
FOUR OTHERS INVOLVED
FACTS
On April 19, 2010, William T. Bridge of Cambria, Calif., was sentenced to 21 months in prison, to be followed by one year of supervised release, $1,057,700.90 in restitution to the Internal Revenue Service, and a $60,000 fine for multiple counts of filing false tax returns and paying kickbacks in connection with real estate loan transactions.
Bridge admitted that on his 2003 through 2006 federal tax returns, he willfully failed to report more than $3.8 million he had earned as a licensed real estate mortgage broker doing business as The Loan Center in San Francisco. In completing his tax returns, Bridge reported only the compensation he earned as part of the yield-spread premium that was reported by the lending institutions themselves to the IRS, and did not report his full commission, which involved substantially more money.
During the same time, Bridge was paying thousands of dollars in kickbacks to John Ngo, an employee of Long Beach Mortgage (formerly a subsidiary of Washington Mutual Bank) to process what he knew were fraudulent loans application packages to be secured by residential properties located in the Sacramento and Stockton areas. Ngo pleaded guilty on Dec. 17, 2007 to perjury, admitting that he had falsely denied to the Grand Jury that he had received these kickbacks. He is scheduled for sentencing on Aug. 9, 2010.
William's brother Paul Bridge was also a loan broker at The Loan Center and was charged with paying kickbacks. He pleaded guilty on June 16, 2008 and is scheduled for sentencing on Aug. 26, 2010.
A trial is scheduled to begin on June 15, 2010 in the case against Joel Blanford, a former account executive at Long Beach Mortgage, who is charged in this investigation with mail fraud in connection with the submission of fraudulent loan applications. (usattyedca41910)
MORAL
If you will notice California is picking up on arrests and indictments for mortgage fraud. The federal prosecutors have worked their way from the east coast to the west coast and are now concentrating on California.
OWNER OF SEVERAL SAN DIEGO TELEMARKETING COMPANIES SENTENCED IN REAL ESTATE INVESTMENT FRAUD SCAM
FACTS
On April 19, 2010 Michael Alexander, the owner of several San Diego telemarketing companies involved in a real estate investment fraud scheme, was sentenced in federal court in San Diego to serve 30 months in prison and three years of supervised release based on his previous convictions for mail and tax fraud. U.S. District Court Judge Roger T. Benitez also ordered Alexander to pay restitution in the amount of $1,799,580.78 to the victims of the fraud scheme and to the Internal Revenue Service for unpaid taxes.
Alexander pled guilty on April 24, 2008, to charges of mail fraud and filing a false tax return. In his plea, he admitted that he formed the Rose Fund LLC, to solicit investor money to fund loans secured by real property and that he formed TRF Holdings Inc., a related entity, to provide "seed money" to capitalize the Rose Fund. Alexander hired a convicted felon, William Wright, to be his lead salesman.
Alexander further admitted that, in order to make sales, they misrepresented to investors, among other things, that investor funds were safe and would be used to make loans secured by real estate; they would receive a 5% sales commission; and that the businesses were well-established, successful, and operated by experienced real estate professionals. They also intentionally misled TRF Holdings, Inc. investors into believing that their investments would be used to fund real estate loans rather than provide seed money for the Rose Fund. In addition, they concealed from investors that Wright had been previously convicted of mail and wire fraud and that the Securities and Exchange Commission had begun an investigation of the Rose Fund in April 2003. After learning of the April 2003 SEC investigation, Alexander solicited more than $2 million from new and existing investors by concealing the existence of the SEC investigation.
In pleading guilty, Alexander admitted that he fraudulently obtained more than $4 million from more than 100 investors during the one year that the fraud scheme operated between October 2002 and October 2003. Although investors were promised that their investments would be used to make secured real estate loans, Alexander funded only 16 loans totaling $1.8 million. By contrast, Alexander fraudulently diverted more than $1.4 million of investor funds to himself and $665,000 to Wright.
In May 2008, Wright was indicted in San Diego on federal fraud charges stemming from his involvement in the Rose Fund/TRF fraud scheme. In February 2010, Wright pled guilty in a federal court in New York to conspiracy to commit mail and wire fraud and is scheduled to be sentenced on May 25, 2010. (usattysdca41910 case number: 07cr1237ben)
MORAL
I trust you noticed that the federal prosecutors went back to acts that occurred eight years ago! Do you know anyone that was overly creative with stated income loans in the last eight years? For your information the statute of limitations for prosecution is 10 years!
HOUSTON MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On April 20, 2010, Melvin Lendall Brown, a Houston area resident, pleaded guilty to one count of wire fraud. Brown appeared for a re-arraignment hearing on April 20, 2010 at which time he admitted to engaging in a scheme to induce lenders to fund residential mortgage loans under false and fraudulent pretenses.
Brown used an unincorporated business he formed under the assumed name of Brownstone Construction, which was supposedly in the business of home improvement. People he associated with located residential real estate properties in the Houston area. Brown and others recruited and solicited individuals with good credit to act as borrowers in applications for residential mortgage loans to purchase one or more of those properties, even though the borrowers had no intention of making payments on the mortgage loans. Brown, aided and abetted by at least one other person, made representations to each borrower, including that he would buy the home in the borrower's name, make any monthly mortgage payments, find others to live in the home and pay monthly rent, take the home out of the borrower's name after a period of time as well as compensate the borrower. (Sound familiar?)
Brown and others caused Uniform Residential Loan Applications to be made in the names of the borrowers that overstated their employment income and other assets, understated or omitted their debts and other liabilities, falsely represented that the borrowers leased the homes in which they resided and received income from the rent, and falsely claimed that the borrowers intended to occupy the newly purchased homes. The lenders made decisions to approve the applications and fund the loans. In support of those fraudulent loan applications, false and fraudulent documents were submitted, including sham lease agreements and bogus employment information. Brown also provided funds to the borrowers to use for deposits toward the purchases of those homes and for closing fees, and he often appeared with the borrowers at the closings.
At or near the closings, Brown caused title companies to disburse the fraudulently induced loan proceeds to various individuals and entities, including Brownstone Construction. He represented to the title companies that Brownstone Construction had been hired for projects to improve those properties, when in fact he did not perform or arrange for others to complete the projects. Brown received, often via interstate wire transfer, more than $500,000 of approximately $5 million in fraudulently induced loan proceeds, sent via interstate wire from lenders to title companies. Brown used the funds he received for expenditures unrelated to the properties that were purchased.
Brown faces a maximum penalty of 20 years in prison and a fine up to $250,000. Brown is scheduled for sentencing on July 15, 2010. (usatytsdtx42010)
MORAL
Everybody leaves a paper trail including paper money that leads right back to him or her. I trust he has a good attorney to see that he does not do 20 years in a federal penitentiary.
FTC OBTAINS COURT JUDGMENT TO BAN MARKETERS FROM SELLING CREDIT REPAIR AND MORTGAGE RELIEF SERVICES AND TO PAY $7.5 MILLION
FACTS
At the Federal Trade Commission's request, a federal court has banned eight companies and their principals from selling credit repair and mortgage relief services, and ordered them to pay more than $7.5 million for deceiving consumers throughout the United States.
In February 2009, the FTC charged seven of the companies and three officers with making false promises that they would improve consumers' credit scores by removing negative information such as late payments, charge-offs, collections, inquiries, delinquencies, judgments, and accounts discharged in bankruptcy. According to the FTC's complaint, the defendants charged consumers up to $2,000, including illegally charging an advance payment of $300, and failed to provide written contracts and other materials required by law. In August 2009, the FTC added defendants to the case, alleging that they and one of the original defendants falsely claimed they would help consumers get mortgage loan modifications or stop foreclosure in all or virtually all instances. The court entered default judgments against all of the defendants except Gerald Serino, also known as Jerry Serino, after they failed to respond to the lawsuit.
The credit repair defendants are UNITED CREDIT ADJUSTERS, INC., DOING BUSINESS AS UNITED CREDIT ADJUSTORS AND UCA; UNITED CREDIT ADJUSTORS, INC., D/B/A UNITED CREDIT ADJUSTERS AND UCA; UNITED COUNSELING ASSOCIATION, INC., D/B/A UCA; BANKRUPTCY MASTERS CORP., NATIONAL BANKRUPTCY SERVICES CORP., FEDERAL DEBT SOLUTIONS, LTD., UNITED MONEY TREE, INC., AHRON E. HENOCH, EZRA RISHTY, AND GERALD SERINO. THE LOAN MODIFICATION DEFENDANTS ARE THE LOAN MODIFICATION SHOP, LTD., CASEY LYNN COHEN, A/K/A CASEY LYNN COLLINS, AND RISHTY.
The court order prohibits the credit repair companies and their owners from selling credit repair services, and it bans the loan modification companies and their individual owners from selling mortgage loan modification and foreclosure relief services. The order bars the defendants from trying to collect payment from their customers, and from selling or otherwise disclosing their customers' personal or financial information.
The order imposes a $7,500,334 judgment against the credit repair defendants, and a $32,710 judgment against the loan modification defendants. Litigation will continue against Serino. The default order was entered in the U.S. District Court for the District of New Jersey on Feb. 4, 2010. (ftcpr42210)
MORAL
Please check the names against the Better Business Bureau and in particular licensing agencies. Most states require credit repair companies and loan modification companies and individuals doing them to be licensed. Remember this, it is a lot cheaper to pay a competent attorney for one hour of their time to check the people out than it is to get back the money people like the above charge you. This does not even include the jeopardy you place yourself in by waiting them out and further jeopardizing your credit, your assets and especially your home.
TWO SAN DIEGO BROKERS PLEAD GUILTY TO FORECLOSURE SCAM. A THIRD PERSON IS SENTENCED TO FOUR YEARS
FACTS
On Monday, April 19, 2010, two San Diego brokers admitted in Superior Court that they took part in a foreclosure-rescue scam and will relinquish their real estate licenses and serve three years' probation.
BENJAMIN AND GLORIA HEBRON BOTH PLEADED GUILTY TO FIVE FELONY COUNTS, INCLUDING FORECLOSURE CONSULTING FRAUD and rent skimming. The Hebrons' business practices were exposed in March 2009. They were part of a foursome, including a former felon, charged in January 2010 with persuading 22 people to sign over 34 houses to fraudulent trusts.
Distressed homeowners, including Filipinos living in the South Bay, said they signed over their houses after being told the group would help negotiate loan modifications to avoid foreclosure. The group did business under the names APOCALYPSE TRUST AND AMERISIAN TRUST.
IT IS ILLEGAL FOR CONSULTANTS TO ACQUIRE DISTRESSED PROPERTIES from clients or to charge upfront fees without fulfilling state requirements. Besides serving probation, the couple will perform 25 days of public service work. If they violate probation, they will have to spend a year in jail.
One business associate, JOSEPH ENCARNACION, entered a plea agreement April 1, 2010 and admitted to recruiting investors for the schemes and lying to them. Encarnacion was sentenced to four years in prison.
Criminal proceedings against the alleged mastermind of the scheme, EDMUNDO RUBI, have been suspended because his lawyer has questioned his mental competence. Rubi pleaded guilty in 2005 to operating a pyramid scheme that swindled $24 million from 425 victims, mostly South Bay Filipinos. (sdtrib42010)
MORAL
If you are going to deal with property in foreclosure (by definition the notice of default has been recorded), I very strongly suggest you see your attorney first, or like the above, you may find yourself charged with criminal conduct.
SANTA CLARA COUNTY GRAND JURY INDICTS TRIO FOR DEFRAUDING 47 HOMEOWNERS IN "PRINCIPAL REDUCTION PROGRAM."
FACTS
The Santa Clara County criminal grand jury has indicted RENE ALVAREZ AND MARIANO ORTEGA, BOTH FROM SAN JOSE, ALONG WITH CYDNEY SANCHEZ OF LOS ANGELES on 83 counts of defrauding 45 homeowners in eight Northern California counties.
The indictment states that from 2008 to 2009, Alvarez and Ortega owned and operated M AND R CONTEMPORARY SOLUTIONS, a Campbell-based foreclosure consulting firm with offices at 1845 S. Winchester Blvd. and 1262 E. Hamilton Ave. Sanchez owned and operated WEST COAST MORTGAGE AND HORIZON PROPERTY HOLDINGS in Beverly Hills.
The companies ALLEGEDLY STOLE MORE THAN $2 MILLION FROM MORE THAN 400 HOMEOWNERS IN SEVEN DIFFERENT STATES, MOST OF WHO WERE FROM CALIFORNIA, according to the Santa Clara County District Attorney's Office.
M and R Contemporary Solutions RECRUITED MORE THAN 400 HOMEOWNERS, MOST OF THEM HISPANIC AND IN VARIOUS STAGES OF THE FORECLOSURE PROCESS, by PITCHING A "PRINCIPAL REDUCTION" PROGRAM. The homeowners were told that the company could save their residences from foreclosure by facilitating the purchase of their existing lender's loan by a third party at a discounted price.
Sanchez was apparently responsible for providing investors to purchase the loans, the district attorney's office said. The homeowners were then to be offered a new reduced principal loan that would have significantly lower monthly payments.
But no homeowners were ever helped in this manner, according to the homeowners and ex-employees of M and R Contemporary Solutions who testified before the grand jury. In many cases, homeowners paid $10,000 for the loan-buying scheme even though they had already lost title to their homes through trustee sales.
M and R Contemporary Solutions collected thousands of dollars in upfront fees from each homeowner in foreclosure, which is a felony under state law.
"As far as we know, the whole case came to light by ex-employees whistleblowers that left the company because they had concerns about its legality," deputy district attorney Mike Fitzsimmons said in September, when his office filed a felony complaint against Alvarez and Ortega.
A search of the M and R Contemporary Solutions offices found documents indicating that the number of victims could approach 1,000, including those with addresses in Nevada and Hawaii. The company's bank accounts have been frozen via court order for possible payment of restitution and fines pending further court action. A trial date has not yet been set. (sjmercnws42210)
MORAL
If you are doing principal reduction in California and especially if the homes have already had a Notice of Default recorded and you are collecting an advance fee in these cases I highly recommend you see your lawyer now because it is almost certain you will see prosecutors later.
CALIFORNIA WOMAN SWINDLES BRAIN DAMAGED
SAN JOSE WOMAN OUT OF HER HOME
FACTS
On Thursday, April 22, 2010, DIANE MARKS of San Leandro, Calif., who was accused of swindling a woman into turning over the deed to her San Jose home, pleaded guilty to felony charges of grand theft, recording false instruments, perjury and creating false financial documents. She is scheduled to be sentenced on Sept. 23, 2010.
Prosecutors say the San Leandro woman took advantage of the victim, who had suffered brain injuries and did not realize she was transferring ownership of her home. According to prosecutors, Marks then stripped the house of $336,000 in equity and spent the money on her own family. The home eventually went into foreclosure after Marks failed to pay the mortgage. As a condition of her guilty plea, prosecutors say Marks will be ordered to pay restitution to the victim. Marks faces four years in state prison. (ap42310)
MORAL
Fat chance of the woman getting paid back notwithstanding a court order. I would like to know how Marks is going to pay the restitution if she is in prison.
COLORADO UPDATES MORTGAGE LOAN ORIGINATOR DISCLOSURES
FACTS
Section 12-61-914, C.R.S. requires mortgage loan originators, WITHIN THREE BUSINESS DAYS AFTER RECEIPT OF A LOAN APPLICATION OR ANY MONEYS FROM A BORROWER, to disclose specific details of a loan transaction to the borrower. These details include, but are not limited to: the annual percentage rate; finance charge; amount financed; total amount of all payments; third party costs; and terms of a lock-in agreement. The Director has learned that uncertainty exists in the mortgage industry regarding how and when to provide such disclosures.
The purpose of this rule is to ensure that disclosures, set forth in § 12-61-914, C.R.S., are met and that borrowers are provided with accurate and clear disclosures regarding their mortgage loan transaction.
You must and should read the complete details of the new rule.
MORAL
This rule is quite detailed consisting of some seven pages.
MINNESOTA MAN INDICTED IN A $43 MILLION MORTGAGE FRAUD SCHEME
FACTS
On April 22, 2010, a federal indictment was unsealed alleging that Troy David Chaika was the broker involved in a $43 million mortgage fraud scheme. CHAIKA IS ACCUSED OF WORKING WITH DUSTIN LEE LAFAVRE to profit from the fraudulent bulk purchases of more than 180 residential properties. At least 15 mortgage companies were swindled in the scheme between 2005 and 2008, authorities said.
LaFavre of Webster, Minn., pleaded guilty in December 2009 to one count of conspiracy to commit mail and wire fraud in connection with the case and has been cooperating with authorities. In his plea agreement, LaFavre admitted working with a real estate broker.
CHAIKA AND LAFAVRE RAN SUPERIOR INVESTMENT GROUP INC. and marketed discounted properties to brokers and investors. In exchange, the company would receive fees as part of the deal, according to e-mails they sent potential buyers. In reality, according to the U.S. attorney's office, LaFavre and another were committing mortgage and wire fraud.
According to the indictment, Chaika and LaFavre negotiated with property owners and the builders of new properties to buy large numbers of homes at greatly reduced prices. Then Chaika and LaFavre allegedly recruited buyers for those properties by promising them they would pay nothing for the properties they bought.
Chaika and LaFavre allegedly promised the buyers would receive big money payouts that they could use to improve the properties and increase their profits when the homes were resold. Actually, investigators say, Chaika and LaFavre took out inflated mortgages, paying the buyers' kickbacks but keeping substantial amounts of money for themselves and others.
According to the indictment, once a buyer was recruited, Chaika and LaFavre drafted a purchase agreement that reflected only the inflated sale price and failed to show the planned kickback.
In several instances, investigators allege, LaFavre and Chaika worked with buyers and mortgage loan officers to prepare false documents for use on loan applications. They sometimes lent buyers money for down payments or padded buyers' bank balances to mislead lenders into approving the larger mortgages, investigators say.
Chaika was charged with seven counts of wire fraud, three counts of mail fraud, one count of conspiracy to commit wire fraud and mail fraud. LAFAVRE faces up to 20 years in federal prison. If found guilty, Chaika faces a similar sentence. (strtrib.com42310)
MORAL
It is always a paper trail and the federal prosecutors follow the paper. If you have been involved seek legal counsel now.
TWO MISSOURI MEN PLEAD GUILTY TO $23 MILLION MORTGAGE FRAUD
FACTS
On April 22, 2010, a Lee's Summit, Mo., man and a Grain Valley, Mo., man pleaded guilty in federal court to charges related to a $23 million mortgage fraud scheme that involved 350 residential properties. NATHAN N. ANDERSON OF GRAIN VALLEY, AND KYLE J. WINE OF LEE'S SUMMIT, each waived his right to a grand jury and pleaded guilty before U.S. District Judge Gary A. Fenner to a two-count federal information that charges both men with participating in a conspiracy to transport money obtained by fraud across state lines and with money laundering. KYLE WINE IS THE BROTHER OF JEFFREY TYLER WINE OF KANSAS CITY, WHO PLEADED GUILTY TO A RELATED MORTGAGE FRAUD SCHEME AND WAS SENTENCED IN MAY 2007 TO FIVE YEARS IN FEDERAL PRISON WITHOUT PAROLE.
Anderson and Kyle Wine admitted that, from February 2002 to November 2005, they defrauded mortgage lenders by inducing them to loan investors a total of $23,324,114 to purchase 350 residential properties. Anderson was involved with 264 properties totaling $18,918,542; Kyle Wine was involved with 86 properties totaling $4,405,572.
Anderson and Wine were in the business of purchasing, rehabilitating, managing and selling residential properties in the metropolitan area. Both ANDERSON AND KYLE WINE WORKED AT SUNRISE EQUITIES, INC., which was operated by Jeffrey Wine. ANDERSON LEFT TO WORK AS CO-OWNER OF AMIC AND REAL ESTATE HOLDINGS, INC., AT WHICH POINT KYLE WINE BEGAN WORKING AT SUNRISE EQUITIES AND TOOK OVER ANDERSON'S DUTIES. KYLE WINE LIKEWISE WORKED WITH AMIC, AND HE ALSO DID BUSINESS AS ROCKHILL REALTY LLC, selling residential real estate.
Anderson and Kyle Wine acquired residential properties at reduced rates. After rehabbing the properties (at times, they admitted, doing poor quality work), they were advertised for sale as investment properties with no money down. Anderson and Kyle Wine told investors that they would provide the down payment and closing costs for the sale, secure renters for the property and ensure that mortgage payments were paid even if the properties were not rented. Anderson and Wine guaranteed a positive cash flow from the properties.
Anderson and Wine, along with their co-conspirators, prepared false and fraudulent loan applications and supporting documents to submit to mortgage lenders in the names of investors.
Anderson and Kyle Wine, along with their co-conspirators, managed the rental properties for the investors for one year after purchase. During that time, they submitted false monthly reports to investors of rent received, expenses incurred, and income earned, and paid to the investors the amount of income reflected. This induced victim-investors to purchase additional properties.
Under federal statutes, Anderson and Kyle Wine are each subject to a sentence of up to 15 years in federal prison without parole, plus a fine up to $500,000. (usattywdmo42210)
MORAL
Again, when you read the full article, the U. S. Attorney quotes following the "paper trail." Note how the U. S. Attorney went back eight years to loans that occurred in 2002? The statute of limitations for mortgage fraud using the wire fraud and mail fraud statutes to charge with is 10 years.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
