FACTS
On Aug. 9, 2010 in San Francisco, Wells Fargo & Co. agreed to pay $20 million to settle a nationwide lawsuit brought by mortgage consultants who alleged they were misclassified as exempt by the bank so they would not have to be paid overtime.
Approximately 5,250 people who have or had worked for the San Francisco bank since 2001 consented to joining the class with claims under the Fair Labor Standards Act. The class was allowed to pursue its action under the California Unfair Competition Laws and the fair Labor Standards Act. (ladj81010p10, In re Wells Fargo Home Mortgage Overtime Pay Litigation, 06-1770
MORAL
The loan officers will receive anywhere from $100 to $4,350 depending on hours overtime and months worked.
BROKER CAUSED HOME TO BE OVER-APPRAISED IN CALIFORNIA MAY COST THE BROKER $686,022
FACTS
In 2005 plaintiff Joel Klutch purchased a house in Oakland for $615,000 with a brokerage fee of $16,760. Klutch said he made the purchase based on the assurances of defendants Scott Kinney aka Karim Akil and Amy Schloemann aka Amy Kinney for whom he had been working as a notary, that the price was fair. Klutch later discovered the price was allegedly inflated and that the Kinneys benefited from the purchase. He then sued the Kinneys, HiddenBrooke Mortgage & Realty Inc., GLO Enterprise, Gregory Orr and Wanda Kidd for fraud.
Kidd and Financial settled out for $5,000.
Klutch claimed the actual value of the property was $455,000 with $160,000, the amount inflated going to GLO. Had he known of the inflated price he would not have purchased the property. Klutch also claimed that Scott Kinney assured him his monthly payment would not increase and if it did, Scott would pay the difference for one year. Klutch contended he received $46,000 to assist from Scott for nine or 10 months but not the entire 12 month period per the agreement.
Defendants Orr and GLO denied doing anything wrong and that Klutch admitted in his deposition as a notary he had been complicit in several previous fraudulent schemes with the Kinneys.
Kinney asked for $114,000 and punitive damages and costs.
The Alameda Superior Court said Kinneys, Orr, GLO and HiddenBrooke committed fraud and found them jointly and severally liable for $114,000 in compensatory damages, $70,836 in prejudgment interest, $1,186 in costs and $500,000 in punitive damages. Total $686,022. (v&s8810p8, Klutch v. Kinney, et al, RG07318277. 52410)
MORAL
Note that the prior conduct of Klutch did not affect his outcome. Note that fraud is not dischargeable in bankruptcy. Note that this can affect the ability of defendants to qualify for an MLD license and a unique identifier from NMLS and finally note that if the judgment is sent to DRE Sacramento as a complaint against the licensees, it is grounds for an accusation to be filed that could cause revocation of their respective real estate licenses depending on who has fraud found against them in the judgment.
EIGHT ARRESTED IN CALIFORNIA FOR REAL ESTATE INVESTMENT FRAUD
FACTS
On Aug. 12, 2010 a federal grand jury in Sacramento returned an indictment charging eight persons in a real estate investment fraud scheme operated under the name of Heaven Investments.
The following individuals are charged in the indictment:
AKBAR BHAMANI OF CARMICHAEL, CEO, HEAVEN INVESTMENTS; ALY KHAN BHAMANI OF CARMICHAEL, Vice President, Heaven Investments; ZAINULABIDIN AKBAR BHAMANI OF SHERMAN OAKS, Vice President, Heaven Investments; Laila BHAMANI OF TRACY, Finance Department, Heaven Investments FEROZA BHAMANI OF CARMICHAEL, Finance Department, Heaven Investments; KEN SARNA OF VALLEJO, Director of Operations, Heaven Investments; JOHN PIERRE QUINTANA OF DIXON, Director of Marketing, Heaven Investments; and SHAUN BHAMANI OF VALENCIA, Loan Officer, GLOBAL FINANCIAL & ASSETS INC.
The first seven defendants are charged with 15 counts of mail fraud and wire fraud in connection with the scheme to defraud investors of over $11.4 million through a company called HEAVEN INVESTMENTS HOLDING CO. HIHC was a family-run real estate development company in Sacramento that offered investors two principal types of investments. The first was called the Planned Income Program that promised to use investor money to acquire residential single-family dwellings that would be renovated and resold for a profit. The second was the Tenants in Common program that promised to use investor money to develop four pieces of property known as Mission Manor, Alder Heights, Walnut Acres, and the Hegenberger Hotel. Investors were promised a 12 – 15% annual return.
According to the indictment, the defendants claimed that the investment was safe because it would be secured by a deed of trust on the property in which the investor would be in no worse than second or third position and that the indebtedness on the property would never exceed 70% of the value of the property. In fact, the indictment alleges, HIHC had acquired the properties through 100% financing from private lenders. Further, the defendants’ promise was illusory because either HIHC failed to actually place the investor on the deed as promised or on those occasions when HIHC did put an investor’s name on the deed, the property frequently had multiple investor names and was leveraged by as much 300 to 400%.
The indictment also charges that the defendants led investors to believe that HIHC was more efficient than other development companies of its kind because it had its own in-house architectural staff and construction company. As a consequence, the defendants would routinely make promises that a particular property such as Mission Manor or Alder Heights would be completed within a few months. In fact, HIHC did not have a team of architects or a construction company and, after nearly three years of soliciting investors’ money, HIHC had not moved beyond the permit stage on any of the TIC properties.
The indictment also alleges that HIHC operated like a Ponzi scheme in that the source of the funds used to make interest payments to investors was not from profits but rather from money obtained from new investors. Because of this, a recurring problem at HIHC was a scramble for money with which to pay investors. The defendants would use various devices to stall investors including intentionally failing to sign the check and telling the investor that the check had been lost in the mail.
The indictment charges that in an attempt to raise money for HIHC, three of the defendants—Zain Bhamani, Aly Bhamani and Shaun Bhamani—engaged in a separate mortgage fraud scheme. They are charged with eight counts of mail fraud in connection with that scheme. Zain Bhamani is alleged to have recruited two straw buyers to purchase eight properties owned by HIHC. SHAUN BHAMANI, who is a mortgage broker in Los Angeles and a cousin of Zain and Aly Bhamani, handled all the transactions. Seven of the eight properties involved in the scheme went into foreclosure resulting in losses to the lenders of approximately $775,000. The remaining property is currently in foreclosure. Zain Bhamani and Aly Bhamani are also charged with seven counts of money laundering.
The maximum statutory penalty for the indicted charges is as follows: 20 years for each count of wire fraud, 20 years for each count of mail fraud, and 20 years for each count of money laundering. (usattyedca81210)
MORAL
Read the two schemes carefully. That way you area familiar with the in case someone asks you to invest.
CALIFORNIA DRE REVOKES A RECORD NUMBER OF REAL ESTATE LICENSES FOR THE FISCAL YEAR ENDING JUNE 30, 2010
FACTS
The California Department of Real Estate, through enforcement of the Real Estate Law, revoked a record number of licenses for cause in the fiscal year ending June 30th, 2010. The DRE also accepted another record number of license surrenders from licensees facing disciplinary action. All told, over 886 licensees had their license revoked, suspended or they simply surrendered their licenses while facing accusations. (drepr72810)
13 HAWAII RESIDENTS INDICTED FOR MORTGAGE FRAUD
FACTS
On Aug. 12, 2010 two indictments of 13 Oahu residents and one from the state of Washington on mortgage fraud related charges were unsealed with the arrests of 10 of the 14 defendants. One indictment charged 10 defendants in 56 counts of conspiracy, wire fraud, and false statements on loan applications, while the other named four defendants in 33 counts of the same nature.
The 14 named defendants are:
ESTRELITA "ESTHER" GARO MIGUEL (58)
JENNIFER GARIN MIGUEL (29)
YOLIE CASTILLO TIBURCIO (36)
VINAH CERIALES MORALES (45)
GERALDINE GARIN MIGUEL LUKELA (33)
TERESITA "TESSIE" FAELDONEA SORINO (33)
MARY ANN LAPENIA (57)
STEPHEN ELMER CALLO (59)
FELICIDAD "FELICIA" TABALBAG CORPUZ (60) (Washington)
ALBERT LONOIKAUAKINI JOY (45)
ATLANTICA KAHAUNANI "NANI" TANUVASA (37)
LENE TANUVASA, JR. (40)
SAMANTHA MICHEL (37)
MICHELLE LEE MALULANI KAMA (39)
According to the indictments, the purposes of the conspiracies and fraud schemes were to defraud lending institutions and others by submitting loan documents containing false information. The two indictments allege that certain defendants recruited individuals to apply for mortgage loans and to sign loan documents containing false representations, and that some defendants were loan officers who submitted fraudulent loan applications. In reliance on the false statements, the lending institutions funded the loans, and some of the defendants then distributed the loan proceeds, as well as collected their standard fees and commissions.
For the conspiracy count, the defendants face a maximum period of imprisonment of five years and a maximum fine of $250,000. For the wire fraud counts, the defendants face a maximum period of imprisonment of 20 years and a maximum fine of $250,000. For the false statement on loan application charges, the defendants face a maximum period of imprisonment of 30 years and a maximum fine of $1,000,000. (usattyhi81210)
MORAL
Aloha Hawaii defendants. Welcome to the party.
IN MINNESOTA, TWO PLEAD GUILTY
FACTS
On Aug. 9, 2010 BEAU WESLEY GENSMER AND CHRISTOPHER GLENN KENNEDY, both of Two Prior Lake, Minnesota pleaded guilty in federal court in Minneapolis for their roles in a scheme that defrauded mortgage lenders out of more than $2.5 million by causing them to make loans based on false information. Gensmer pleaded guilty to one count of wire fraud and one count of money laundering in connection to that crime. Kennedy pleaded guilty to the same charges on August 6, 2010. Gensmer and Kennedy were indicted on April 21, 2010. A third co-defendant pleaded guilty earlier in the case.
In their respective plea agreements, Gensmer and Kennedy admitted that from July of 2007 to September of 2008, they executed the mortgage-fraud scheme. They admitted that in April of 2007, a multi-unit condominium building was built in Prior Lake by a development company owned by one of Gensmer’s relatives. The units were listed for sale but were removed from the market after only a couple of units were successfully sold. Later during the summer of 2007, Gensmer and Kennedy admittedly solicited three individuals to purchase multiple condominium units as “investments.” Gensmer and Kennedy assured the “investors” that they would pay nothing to buy the properties because the down payments and monthly mortgage payments would be provided to them by Gensmer and Kennedy. Moreover, Gensmer and Kennedy admitted they recruited the investors by telling them that the condos would be rented for a time but ultimately sold at a profit, and that the investors would share in that profit.
Gensmer and Kennedy caused accountants to prepare tax returns that reflected inflated income. Those returns and other fraudulent documents were then knowingly submitted to potential mortgage lenders by the defendants. Gensmer and Kennedy also TEMPORARILY DEPOSITED MONEY INTO THE BANK ACCOUNTS OF SOME OF THE INVESTORS TO MAKE IT APPEAR TO POTENTIAL LENDERS THAT THE INVESTORS HAD MORE CASH ON HAND THAN THEY ACTUALLY DID. As a result of those actions, ten mortgage lenders funded the purchase of 18 condominium units by the three investors. Eventually, Gensmer and Kennedy stopped supplying the property purchasers with monthly mortgage payments, causing the loans to go into default and then into foreclosure.
The defendants admitted that due to their actions, mortgage loan lenders wire transferred funds on 15 different occasions. The men also admitted that on two occasions, they used some of those fraudulently obtained funds as down payments to a title company for additional condo purchases, and that the title company was owned in part by individuals with an ownership interest in the entity that originally constructed the condo building.
The defendants face a potential maximum penalty of 20 years in federal prison on the wire fraud charge and 10 years on the money laundering charge. (usattymn8910)
MORAL
Notice the felony committed by putting the down payment in the bank accounts of the buyers! Do you know anyone that temporarily loaned or gave the buyer money, putting it in the account to make it appear the buyer had the down payment funds? It is a felony.
FORMER PRESIDENT OF GUYAMERICAN FUNDING CORP. OF PLEADS GUILTY TO BANK AND WIRE FRAUD
FACTS
On Aug. 6, 2010 DAVID RAMNAUTH, the former President of GuyAmerican Funding Corp., a mortgage brokerage firm in Queens, N.Y., pled guilty in Manhattan federal court to conspiracy to commit bank and wire fraud. RAMNAUTH WAS CHARGED IN A SUPERSEDING INDICTMENT ALONG WITH EIGHT OTHER DEFENDANTS for their participation in a scheme that DEFRAUDED BANKS OUT OF MORE THAN $23 MILLION in home mortgage loans.
RAMNAUTH facilitated a massive mortgage fraud scheme that was being conducted through a GuyAmerican branch office located on Liberty Avenue, in Jamaica, N.Y. Three of the defendants charged in the scheme, PEGGY PERSAUD, ORETTE KILLIKELLY, and GEORGE ESSO, were loan officers at GuyAmerican, and received thousands of dollars in commissions based on fraudulent loan applications submitted to lenders.
Three other defendants ELTON LORD, RAFICK BAKSH, and MAHAMOOD HUSSAIN, worked with GuyAmerican loan officers to recruit homeowners in financial distress who were willing to sell their homes. They used straw buyers—persons who posed as homebuyers in exchange for a fee, but WHO HAD NO INTENTION OF LIVING IN THE MORTGAGED PROPERTIES—to perpetrate the scheme. The defendants arranged home sales between these distressed sellers and these straw buyers, and obtained mortgage loans using fraudulent representations, including about the supposed purchasers' net worth, employment, and income. The defendants re-sold, or flipped, properties multiple times between different straw buyers, stripping the equity from those properties as they were resold with inflated market values. For example, a property purchased by a straw buyer in December 2006 in Queens, for $355,000 was resold to another straw buyer in April 2007—only four months later—for $680,000, with the profit going to the defendants and their co-conspirators. In addition, the defendants often arranged for a single straw buyer to purchase multiple properties within days or weeks of each other, without disclosing the prior purchases on the subsequent loan applications.
The loan applications submitted to the lenders contained numerous false statements about the straw buyers, who often had little or no assets and modest or no incomes. The loan applications contained false statements about the supposed borrowers' employment, income, assets, and existing debt. In addition, the LOAN APPLICATIONS FALSELY REPRESENTED THAT THE STRAW BUYERS INTENDED TO RESIDE IN THE PROPERTIES, WHEN IN FACT THEY DID NOT.
Two others acted as the closing attorneys for most of the transactions and facilitated the fraud by disbursing illicit payments to co-conspirators.
After becoming aware that fraudulent loans were being submitted under the GuyAmerican license, RAMNAUTH directed through a loan officer at GuyAmerican to have the closing attorneys set aside six months' worth of mortgage payments from the closing proceeds, so that the lenders would not discover the scheme. RAMNAUTH was also aware that LORD, BAKSH, and HUSSAIN were engaging in equity stripping in the sham real estate transactions, but permitted them to originate additional fraudulent loans under the GuyAmerican license, and continued to make commission payments to loan officers in connection with the fraudulent loans.
RAMNAUTH of Levittown, N.Y., faces a maximum penalty of 30 years in prison. He will also be required to forfeit the proceeds of his offenses.
PEGGY PERSAUD, ORETTE KILLIKELLY, and ELTON LORD previously pled guilty. Defendants RAFICK BAKSH and MAHAMOOD HUSSAIN remain at large. (usattysdny86100)
MORAL
Did you note that checking the box “Primary Residence” when the borrower did not intend to live in the property is a felony? So is signing the loan application as the interviewer when in fact you did not interview the borrower, especially on a HUD/FHA loan.
WISCONSIN MORTGAGE BROKER SENTENCED TO 51 MONTHS FOR MORTGAGE FRAUD
FACTS
On Aug. 12, 2010 BRIAN K. BOWLING OF SUN PRAIRIE, WIS., was sentenced to 51 months in prison, with a five-year term of supervised release. Bowling was also ordered to pay $377,271 in restitution. Bowling was convicted of two counts of wire fraud on May 28, 2010.
Bowling pled guilty to engaging in a mortgage fraud scheme using his mortgage brokerage company called PLATINUM CONCEPTS. Bowling defrauded banks and other mortgage lenders by submitting false loan applications to obtain home loans. The LOAN APPLICATIONS INCLUDED INFLATED INCOME amounts, exaggerated assets, falsified employment information, BOGUS DOWNPAYMENTS, and SILENT SECOND MORTGAGES. To date, five individuals have pleaded guilty to participating in this scheme.
The Judge stated in sentencing that this involved over $1.7 million in intended losses. (usattywewi81210)
MORAL
Did you notice the inflated income? I think inflated rhymes with stated? Notice bogus down payments, like brokers loaning the borrower money temporarily or putting it in a bank account temporarily under the buyer/borrowers’ name. Notice silent seconds, like the broker taking back his commission or the seller taking balance in a mortgage and recording it sometime after the new loan went down?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
