PENNSYLVANIA PASTOR AND MORTGAGE BROKER CONVICTED OF MORTGAGE FRAUD

FACTS

On Feb. 26, Michael Wilkerson and Denise Haines were convicted of engaging in a scheme to defraud JP Morgan Chase’s predecessor, Chase Manhattan Bank, by fraudulently obtaining home loans valued at more than $6 million for properties located in Schwenksville and Glenmoore, Montgomery County, Pa.

Wilkerson, pastor of New Millennium Life Restoration Fellowship, with locations in Phoenixville and Spring City, recruited several of his congregants and the congregants’ families and friends to participate in a number of real estate transactions. If they had good credit and acted as straw purchasers, he would pay them $15,000. Wilkerson paid the recruits another $5,000 if they referred other straw purchasers to him. Wilkerson recruited at least six individuals who agreed to be straw purchasers of homes.

Haines, a mortgage broker with American Group Mortgage Corp., submitted fraudulent loan applications in the transactions to Chase Manhattan Bank. These fraudulent loan applications falsely represented the appraised value of the homes, the identification of the “straws,” the source of funds, the borrower’s income and assets and their intent to take possession of the homes as their primary residence. Based on the representations made in the loan documents, Haines knew she could get Chase Manhattan Bank to approve the loans with little verification of the information on the loan applications.

Wilkerson’s wife Joyce, who pleaded guilty, assisted in the scheme by writing out the checks to the “straws” and also pretended to be a co-purchaser of each of the homes at the time of settlement. Lee Garell, a real estate broker who also pleaded guilty, prepared the sales paperwork for each of the homes that was sold to the “straws” and, along with Michael Wilkerson, dictated the fraudulent terms set out in the settlement sheets.

When the loans were funded at the time of settlement, the defendants manipulated the documents prepared at settlement and, later, forwarded the settlement documents to Chase Manhattan Bank to make it appear to the bank that the “straws” brought considerable cash to the closings. In fact, all of the money involved at the settlement actually came from Chase Manhattan Bank. The defendants shared in the profits from the fraudulent sales.

After settlement on the homes, Michael Wilkerson took possession of all of the homes, rented at least two of them and lived in another. He paid the mortgages with the proceeds from the fraudulent mortgage transactions and with rental income for approximately six months and then told the “straw” purchasers that they had to pay the mortgages. This last act led to the loans falling into default and then foreclosure, resulting in a loss of approximately $3 million.

U.S. District Court Judge Mitchell S. Goldberg scheduled a sentencing hearing for June 3 for Michael Wilkerson and for June 17 for Haines. Each faces a maximum possible sentence of 180 years in prison, five years’ supervised release, a fine of up to $6 million, and a $600 special assessment. Sentencing hearings are scheduled for Garrell and Joyce Wilkerson on April 30 and May 6 respectively.  (usattyedpa22613)

MORAL

Have you noticed that the mortgage fraud prosecutions go on and on and on and on? It makes for good statistics to the prosecutors and bad news for those caught. It is not likely to end soon. So if you have any suspicions of an investigation then you might want to consult with legal counsel now as opposed to waiting until someone visits you and hands you a business card with language that makes your heart skip a couple of beats.

ALL WAYS FINANCIAL SERVICES OWNER/CEO SENTENCED TO 18 MONTHS FOR MORTGAGE FRAUD AND TAX EVASION INVOLVING 2006-2007 LOANS

FACTS

On Feb. 25, Cynthia Suratos Lorica was sentenced to 18 months in prison and ordered to pay more than $1 million in restitution for bank fraud and tax evasion. Lorica, of Hayward, Calif., waived indictment and pleaded guilty to information charging her with bank fraud and tax evasion.

Lorica admitted to participating in a fraudulent scheme to obtain money from Washington Mutual Bank in 2006 and 2007 by making false statements in loan applications secured by real property. During that time period, she was the owner and CEI of All Ways Financial Services Inc., and an officer of Absolute Value Financial Inc. Absolute Value was licensed by the state of California to originate mortgage loans and to engage in real estate transactions. Lorica was involved in the preparation and submission of loan applications to various federally insured financial institutions and other lending institutions.

Lorica also admitted to evading taxes on income she received in 2006 and 2007. She admitted to substantially under-reporting her gains from the sale of real estate as well as under-reporting her income from All Ways Financial and claiming a mortgage interest deduction that she was not entitle to receive.

The sentence was handed down by Chief U.S. District Court Judge Claudia Wilken following a guilty plea on one count in violation of 18 U.S.C. § 1344(2) and one count in violation of 26 U.S.C. § 7201. Judge Wilken also sentenced the defendant to a three year period of supervised release. The defendant will begin serving the sentence on March 27.  (usattyndca22613)

MORAL

Notice the prosecutors are still chasing loans that funded in 2006 and coming forward.  They have 10 years to file a criminal indictment. So they can go back to 2003 at this time and come forward. And they are very busy at it according to some of our clients. If you have reason to be concerned do not wait until a federal agent hands you a business card.

WHAT TYPE OF INSURANCE SHOULD CONSUMERS HAVE WHEN THEY PURCHASE OR OWN A RESIDENCE THEY INTEND TO OR ALREADY OCCUPY TO PROTECT THEMSELVES

FACTS

  1. If you intend to have the property title in the name of a revocable trust, be certain to inform your insurance agent to add the trust as an additional insured to your homeowners’ policy if it is your principal residence. If it is a rental unit check with your agent what is acceptable.
  2. If you are purchasing a condo, you need separate insurance because the homeowners association’s insurance does not protect you. It only protects the common area. Check with your insurance agent and with your lender as to the type of policy. Ask your insurance agent about adding loss assessment coverage whenever there is an HOA. If you do not have an agent you can call us for a recommendation.
  3. If you have non-relatives living with you check for endorsements necessary in case they are injured. 
  4. Ask about an endorsement if you have business visitors and they get hurt. The endorsement is very reasonable and business visitors getting injured usually do not have your insurance defending you as opposed to casual visitors as family friends.
  5. If you are buying the property and it is not new you might want to ask the seller for a CLUE report to see if there were prior losses on the property to determine what type of claim was made and why.

MORAL
These are but a few of the questions to ask your insurance agent. You should also ask both for the home and your vehicle insurance what type of endorsements are available to purchase and the cost usually the cost is nominal. You can pick and chose. Ask about umbrella policies for the home that also cover the car. This is especially true if you have substantial assets. As an aside, it certainly is a lot cheaper than health insurance. (MLO’s think about this! Discussing it with your borrower makes you look good, further cementing your relationship to the borrower and thereby stopping other MLO’s from taking the borrower away!)

A REMINDER THAT EMPLOYERS MUST GIVE ALL CALIFORNIA EMPLOYEES PAID IN PART OR IN WHOLE BY COMMISSION A SIGNED COPY OF THE COMMISSION AGREEMENT THE EMPLOYER MUST OBTAIN A SIGNED RECEIPT

FACTS

 (a) Whenever an employer enters into a contract of employment with an employee for services to be rendered within this state (California) and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.

   (b) The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

   (c) As used in this section, "commissions" has the meaning set forth in Section 204.1. For purposes of this section only, "commission" does not include any of the following:

   (1) Short-term productivity bonuses such as are paid to retail clerks.

   (2) Temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.

   (3) Bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.  (Lab.C. §2751)

MORAL

If you have any doubt, do it anyway. Give them a copy and get the receipt. This includes all employees including but not limited to “at will” employees.

CALIFORNIA ACCOUNT EXECUTIVE AND OTHERS CONVICTED OF MORTGAGE FRAUD

FACTS

On Feb. 25, Joel Blanford was sentenced to two and one half years in a federal prison for paying a fellow employee to approve a half-dozen false loan documents for unqualified real estate buyers.

He was convicted by a Sacramento jury of six counts of mail fraud in the Danville office of Long Beach Mortgage, a subprime lender and subsidiary of Washington Mutual.

Six others have pleaded guilty to related charges, which involved loans arranged by a San Francisco mortgage broker called the Loan Center for properties in the Stockton area.

Blanford was an account executive who worked with mortgage brokers on loans to the brokers' clients. He made more than $1 million a year in commissions from 2003 through 2005, the period covered by the charges, prosecutors said.

After working with a broker at the Loan Center to fabricate prospective borrowers' qualifications, Blanford paid more than $50,000 in kickbacks to a Long Beach Mortgage loan coordinator to approve the applications, prosecutors said. They said another participant in the scheme recruited straw buyers to receive the loans. Blanford denied taking part in the fraud. His first trial, in May, ended in a hung jury.  (sfchron22613)

MORAL

Now he spends the next two and one-half years in a federal prison without parole for loans that were done eight to 10 years ago. Like I have been saying the federal prosecutors can go back to loans that occurred 10 years ago and file criminal charges now.  Reminds me of the story of the tortoise and the hare, the hare being the loan officers and borrowers involved and the turtle being the FBI, IRS and U.S. Attorney. Slowly but surely they are working their way through the fraud loans. My sense would be they are going through a lot of the failed bank loans since we are defending quite a few civil accusations where the FDIC has sent the loans to outside counsel to chase the brokers and loan officers for the losses. And lest I forget so are Chase, Flagstar and Bank of America.

NEW JERSEY COMPANY OWNER PLEADS GUILTY TO

$15 MILLION MORTGAGE FRAUD 

FACTS

On Feb. 20, Timothy D. Ricks, the owner of EZ Go Financial Corp. and  the alleged mastermind of a $15 million mortgage fraud scheme in New Jersey admitted conspiring to defraud financial institutions and launder stolen funds by pleading guilty.

The arrests made in July 2012 included Seth A. Fuscellaro, an attorney who was serving as Lower Township’s public defender at the time; Angela L. Celli, a former real estate agent; and Nancy Wolf-Fels, a real estate broker.

Ricks and Orlando Allen, who provided real estate investors for the scam, have pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering.
Allen pleaded guilty to the charges on Feb. 20. They both face a maximum prison term of 30 years for wire fraud along with a $1 million fine and 10 years for money laundering with a $250,000 fine. Sentencing for Ricks is scheduled for Nov. 8 while Allen will be sentenced on Aug. 8.
The case involved condominium units in Wildwood Crest and North Wildwood as well as other locations in New Jersey and Florida. Beginning in 2006, Ricks was the mastermind for locating oceanfront condominiums in a real estate market that was saturated with too many units and not enough buyers. They would negotiate a buyout price with the developers that was much lower than what they listed as the sale price to ensure large proceeds.

Ricks and Allen both recruited "straw buyers" to purchase the properties, which on paper were at the inflated sales prices. The straw buyers, who had good credit ratings but did not have the financial resources to make such purchases, were paid up to $17,000 for the use of their name.
False documents, including fake W-2 forms, pay stubs, bank statements, HUD-1 settlement statements and other false investment statements, allegedly were created to bolster the buyer's credit and convince lenders to make the loan.  The scheme included mortgage applications that the brokers involved in the scam knew were fraudulent. Once mortgages were approved, Ricks and the alleged accomplices had the lenders send or wire the money.  Ricks and his conspirators took a portion of the proceeds, having funds wired or with checks deposited into various accounts they controlled. They also distributed a portion of the proceeds to other members of the conspiracy for their respective roles.

The scam began in 2006 and continued into 2008. There are numerous other co-conspirators who were not indicted and are merely listed in court documents by their initials, according to court records. The indictment of Fuscellaro and Celli alleges they helped negotiate condominium deals and concealed the true sales price of the properties. Both were charged with wire fraud.

Defendant Kinard J. Henson, of Alabama, was charged with attempted murder after hiring someone who was identified in court papers by the initials R.S. to shoot one of the straw buyers, identified as L.B., to prevent L.B. from testifying. The plot was allegedly hatched in Ocean County. The straw purchaser was shot multiple times in a wooded area near Mobile, Ala., but survived.  (pressatlcty3113)

MORAL

I think the attorney that was a public defender now needs a public defender. Notice that the investigation has been going on for five years. Remember how I keep telling you the federal prosecutors have 10 years to file criminal charges? Well, 2006 to 2013 is only seven years. This is why when you have some form of notice of a criminal investigation (especially federal), you should consult your attorney immediately so that steps as may be available can be taken on your behalf to mitigate the problem. 

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.