FACTS
On Aug. 29, two men suspected of scamming homeowners struggling to avoid foreclosure will be arraigned in San Bernardino Superior Court on a 45-count criminal complaint.
Prosecutors say Stephan Andrew Easterly and Emanuel Percival defrauded at least 25 people with their Fontana business and affected more than $17 million in home loans. "Basically, they were getting people to try to redo their loans," Deputy District Attorney Michael Fermin said. The people were on the verge of foreclosure or wanted a lower payment, he said.
The alleged victims reportedly paid between $3,500 and $7,000 to participate in a process they believed would pay off their home loans and save them from foreclosure, according to a news release from the San Bernardino County District Attorney's Office.
In the end, they would end up with two outstanding home loans and the houses went into foreclosure, prosecutors said. Easterly and Percival were arrested on Aug. 26, when investigators served a search warrant at Fidelity Group Realty, on Cherry Avenue in Fontana. Both men were being held at West Valley Detention Center in Rancho Cucamonga. Bail for Easterly was set at $1 million. Percival's bail was set at $500,000, prosecutors said.
The search warrant was the result of an investigation into fraudulent Substitution of Trustee and Full Reconveyance and Release of Lien documents, which are usually recorded by a bank when a mortgage is paid in full, with the county Recorder's Office. In this case, Easterly and Percival purportedly signed documents as "authorized representatives" of various banks, according to prosecutors. Between the pair, more than 70 fraudulent documents are alleged to have been recorded.
Prosecutors said Easterly also created fictitious checks, mailed them to banking institutions and told victims he was paying off their loans.
Easterly faces 21 counts of forgery and 16 counts of procuring or offering a false or forged document from Oct. 25, 2010, to June 29, according to the criminal complaint.
Percival faces four counts each of forgery and procuring or offering a false or forged document between March 23, 2010, and Nov. 24. (sbcosun82911)
MORAL
I trust they have retained excellent attorneys.
FORMER B OF A EMPLOYEE GETS 15 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD SCHEME
FACTS
On Aug. 29, Venedic Roberto Valencia a North Hollywood man who worked at Bank of America at the time of his offense was sentenced to 15 months in federal prison for his role in a mortgage fraud scheme in which the schemers used stolen identities to “purchase” homes that were not for sale. In addition to the prison term, Judge Fischer ordered Valencia to pay $51,688 in restitution.
Previously in this investigation, two of the Valencia's co-conspirators were convicted and sentenced to prison. Felix Pichardo was sentenced to eight years in federal prison in 2009 and Latrice Shaunte Borders was given two years in 2010 for their part in the scheme.
Pichardo, who had been a licensed real estate agent, and Borders participated in two separate fraudulent real estate sales transactions. Pichardo, using identities appropriated from other people, caused loan applications to be submitted to AmTrust without the property owner's knowledge for real estate which was not for sale.
During the Aug, 29 hearing, Judge Fischer said that Valencia was an “essential part” of the scheme and that Valencia abused his position at the bank. By pleading guilty, Valencia admitted that he forged a document related to non-existent bank accounts. (usattycdca82911)
MORAL
Mortgage fraud always leaves a paper trail and the federal law enforcement people follow the paper to the person they are looking for. What is more, they have 10 years to find the person.
MAKE SURE THE POWER OF ATTORNEY YOU GET TO SIGN A MORTGAGE IS DATED PROPERLY OR YOU MAY FIND YOU DO NOT HAVE THE SECURITY OF THE MORTGAGE, AT LEAST IN MASSACHUSETTS
FACTS
This case was removed from the Superior Court of Massachusetts to federal court. The plaintiff, Patricia Coffill, seeks to rescind two mortgages ostensibly encumbering titles to her residence in Andover, Mass., and a retreat in Maine, and she asks for further equitable relief against foreclosure as well as for damages. Defendants include (without limitation) her husband and his business partner; the original mortgagee, Bank of Ann Arbor, Inc.; its nominee of record, Mortgage Electronic Registration System, Inc.; the supposed current assignee of the mortgage interest, CitiMortgage, Inc.; and a lawyer claimed to have acted for both the husband and the mortgagee, Sherrill R. Gould. The U.S. District Court dismissed the case on the defendants' motion stating the wrong year on the power of attorney was a scrivener error. The plaintiff appealed.
The 3rd Circuit U.S. Court of Appeals said reversed. This appeal is brought from the dismissal under Federal Rule of Civil Procedure 12(b)(6) of those counts upon which removal was predicated. Coffill's husband asked her to sign documents he described as attesting to her clear title to the Andover and Maine properties and certifying a clean family credit record generally. She was never given a chance to read the pair of two-page instruments, but was requested to sign and acknowledge them in some haste before a notary public on Aug. 13, 2008. In fact, the documents were powers of attorney purporting to authorize the husband to mortgage the two properties, and each included the following provision governing the duration of the authority granted: "This power of attorney and the powers herein granted shall terminate upon the earliest occurrence of [various events or] the expiration of a period of time ending May 31, 2008. (Note: the power of attorney is expiring BEFORE it is even signed and notarized.)"
Despite the fact that each of the powers on its face had expired prior to its execution date, five days after their execution the husband tendered them at the loan closing where he executed mortgages of the two properties, on the strength of which the Bank of Ann Arbor gave him $695,000.
Coffill's prayer for rescission rests on provisions of the federal Truth In Lending Act, which has a state counterpart in the Massachusetts Consumer Credit Cost Disclosure Act.
Both TILA and the Massachusetts equivalent require a lender to provide a borrower with specific information about the terms of credit, as well as notice that a borrower assailed by second thoughts may call things off by rescinding the transaction within a limited time. If no such notice is given to the borrower, however, the rescission period is generally three years after the transaction under TILA and four years under the Massachusetts law. Coffill alleges that she never received notice of terms and cancellation rights, which would have revealed her husband's fraud and led her to rescind the transactions, and so she claims a statutory right to rescind now.
CitiMortgage moved to dismiss. They rely on the admitted fact that the husband received timely statutory disclosures, which are said to have sufficed as notices to Coffill by virtue of the powers of attorney. She, in turn, responds that the powers of attorney conveyed no authority to act on her behalf in August 2008, given their stated expirations on May 31, 2008.
At the District Court's hearing on the motion to dismiss, the sole issue was the efficacy of the two powers at the August loan closing. No evidence was taken at the brief courtroom proceeding, and the court resolved the issue of authority at the closing by drawing “a natural inference” that “it's supposed to terminate May of 2009,” that the May expiration date was “a scrivener's error as a matter of law...She signed the document. The document's effective.” Following this finding, the court proceeded to rule on the motion to dismiss, which it granted as to the several counts mentioned.
Patricia Coffill preserved her position that the effectiveness of the powers turned on her intent, that her signatures were induced by fraud, that the original mortgagee and its assignee are charged with knowledge owing to Gould's notice of the circumstances, and that she “was entitled to pursue” these claims in support of her challenge. The Court of Appeals looked to the controlling local law of Massachusetts to review the soundness of concluding without evidence that the powers were effective as judicially corrected for what the court saw as apparent scrivener's error. The appellate court believed that the ruling as a matter of law without evidentiary hearing and evidentiary basis was error. Whether there was or was not a scrivener's error is dependent on a finding of fact which requires a trial on that issue. (Coffill vs. Coffill. No. 10-1976, U.S.Ct App. 1st Cir. 8-31-11)
MORAL
If you use a power of attorney read it first carefully. Read it again after signed and acknowledged. I have had this happen a couple of times in my career used to my client's advantage. In one case the lender recorded the deed of trust six months after the borrower filed bankruptcy. This meant the lender had no security and the mortgage was discharged as an unsecured debt.
TWO MINNESOTA BROTHERS SENTENCED TO PRISON FOR A $4 MILLION MORTGAGE SCAM
FACTS
On Sept. 1, in federal court, Baretta Dean Bork was the second of two brothers was sentenced for orchestrating a $4 million mortgage fraud scheme that defrauded 24 area lenders. United States District Court Judge Ann D. Montgomery sentenced Bork to 60 months in prison on one count of conspiracy to commit mortgage fraud through the use of wires and income tax refund fraud. Bork was charged on Jan. 31, along with his brother Xavier Willis Bork. Both pleaded guilty on March 9.
On Aug. 26, Xavier Bork was sentenced to 60 months, on one count of conspiracy to commit mortgage fraud through the use of wires and income tax refund fraud.
The defendants admitted that between December of 2003 and March of 2008, they engaged in a scheme that resulted in more than $4 million in losses to mortgage lenders. The brothers worked as loan officers through several mortgage brokerage companies located primarily in the Mankato. Through their work, they recruited straw buyers to purchase 33 properties.
Through the straw buyers, the Borks exaggerated income figures and lied about the employment status of those straw buyers. They also omitted from the loan applications information regarding other loan obligations the straw buyers already had incurred. As part of the scheme, the properties were purchased at inflated prices, and upon receipt of the mortgage loans, the loan proceeds were distributed to the straw buyers and the defendants.
The Borks admittedly recruited 26 people to file false U.S. Individual Income Tax Returns, claiming refunds totaling more than $154,000. The defendants provided those filers with false W-2 forms that indicated they worked for the Borks. To facilitate their tax scheme, the Borks also established two shell companies. (usattymn9111)
MORAL
Notice how the prosecutors went back to prosecute on loans that funded eight years ago. The federal government has 10 years to file a criminal action for mortgage fraud.
OVER 12 PEOPLE INVOLVED IN BUST IN OHIO $20 MILLION MORTGAGE FRAUD WHERE 10 OF THEM ARE ALLEGED TO BE STRAW BUYERS
FACTS
A three-count superseding information was filed against Jason A. Herceg, charging him with two counts of conspiracy to commit bank fraud and false statements to influence a bank to make a loan and one count of filing a false tax return in connection with mortgage and bank fraud schemes that led to a total loss in excess of $20 million, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.
Herceg's schemes defrauded various banks and, in a separate transaction, two elderly investors, according to court documents. The first conspiracy count of the information charges that Herceg as well as his business partner Andrew Norman, who was charged with similar offenses previously, conspired with a co-conspirator known as J.C. (not charged) in procuring straw buyers and submitting false loan documents to banks to purchase J.C.'s lots in Florida (which had already been inflated in value as part of a land flip) in a mortgage fraud scheme.
J.C., with assistance from Herceg and Norman, perpetrated a large mortgage fraud scheme involving numerous straw buyers, who essentially sold their good credit score to J.C. in order for J.C. to secure loans, through straw buyers' names, for property in Florida, according to court documents. J.C. promised the straw buyers that if they signed the loan application and paperwork, J.C. would pay them an inducement amount. J.C. then promised them that J.C. would make all the mortgage payments for these straw buyers and would make any down payments that were necessary, and that, once the property was developed, it would be sold and that they would split the profits half and half, according to court documents. On the face of it, the straw buyers would receive money up front from J.C., make no payments out of pocket and receive 50% of the profit from the sale of the property at the tail end of the transaction, according to court documents.
Herceg and Norman were mentored by J.C. in how to recruit and use straw buyers. They assisted J.C. in using their brokerage company, V.P. Equity, located in the Akron, Ohio area, to prepare and submit falsified loan documents to the banks, which fraudulently inflated the income and assets of the straw buyers to qualify them for these loans. Ultimately, J.C. failed to make the mortgage payments on these loans, resulting in a loss of approximately $13.1 million, according to court documents.
In the second conspiracy scheme, Herceg, as well as Norman conspired with J.C. (not charged herein), and others, to defraud two elderly individuals by selling them a piece of Florida property for $7 million, according to court documents. Moments before the sale, Herceg and Norman, with J.C.'s help, bought the property, through their partnership, 104 Investments, from the original seller and inflated its value by approximately $2.55 million. They then sold this property to these elderly individuals, who were told that they were buying the property from the original seller. These elderly victims were never told of the last-minute flip and that they were actually buying the land from Herceg, Norman, and 104 Investments, according to court documents.
Herceg and Norman, and their 104 Investments business partner, Robert Jason Workman, received approximately $2.55 million from this gain, and funneled portions out to themselves and paid $690,000 to J.C. as a kick-back for setting up this fraudulent scheme, which they fraudulently deducted as a business expense, according to court documents
Herceg is charged in a third count of the superseding information with filing a false individual tax return for 2006 because he underreported his portion of the income he received from this transaction because he took a fraudulent business deduction for the funds paid to J.C. as a kick back for setting up this scheme. Herceg's business partner Workman, has previously been charged with filing a false individual tax return for 2006 for underreporting his portion of the $690,000 received by the 104 Investments partnership, which was used to then pay J.C., because he took a fraudulent business deduction for his share of these proceeds, according to court documents.
At the time Workman received the proceeds from this transaction in 2006, he was not charged with being involved in the fraudulent scheme to defraud the elderly victims. However, by the time he had filed his 2006 tax return in 2007, Workman was aware that funds paid out to J.C. were not business expenses, according to court documents. Workman's case has been assigned to the Honorable John Adams, U.S. District Court for the Northern District of Ohio, in Akron, Ohio, and is pending sentencing.
A series of straw buyers have been charged to date and seven entered guilty pleas to a one-count information charging conspiracy to commit loan fraud and bank fraud. They are also pending sentencing before Judge Adams. These defendants include two doctors. Four others are awaiting arraignment. (usattyndoh83011)
MORAL
Two doctors? I thought they already made a lot of money. Did you notice the federal people are going hard and fast now against the straw buyers? The federal prosecutors do not consider them innocent dupes. Who had the best lawyer? Obviously J.C. He received according to the above $690,000 and was not even indicted! It would be interesting to know what brought that about.
FORMER OWNER OF PENNSYLVANIA MORTGAGE FIRM GETS OVER FOUR YEARS IN PRISON FOR MORTGAGE FRAUD
FACTS
On Aug. 26, Alex Gambini, the former owner of First Advantage Financial Services, was sentenced by Senior U.S. District Court Judge Edwin M. Kosik to spend more than four years in prison for participating in a scheme to fraudulently inflate mortgages during 1999-2002. Gambini previously pleaded guilty to mail fraud as an aider and abettor.
Gambini was indicted by a federal grand jury as a result of an investigation conducted by the Federal Bureau of Investigation. The Indictment outlined a scheme whereby operators and employees of First Advantage Financial, which was based in Lake Ariel and later Hamlin, and had an office in Old Forge, used false appraisals and false documents, including false W-2 forms, false real estate appraisals, and false employment records, to qualify customers for inflated mortgages and loans. Some of those customers subsequently defaulted on the mortgages and loans resulting in losses to banks and other financial institutions. The amount of money involved in the fraudulent scheme was between $1 million and $2.5 million, and involved between 10 and 50 victims.
Gambini is the first of four defendants connected to the scheme to be sentenced in federal court. Guillermo Laureiro, Richard Woods and Benjamin Haughney previously pleaded guilty to mail fraud for their participation in the illegal scheme. All are awaiting sentencing.
Judge Kosik also ordered Gambini to serve three years on supervised release following his prison sentence, and to pay a $100 special assessment. The court deferred ruling on restitution in the matter for 90 days. In his plea agreement, Gambini agreed to pay restitution for losses resulting from his conduct. (usattymdpa82611)
MORAL
Notice the federal prosecutors are using loans that closed from 1999 over 12 years ago. Notice also that this sentence was pursuant to a guilty plea.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
