Yahoo! News carries this AP story by Don Thompson on mortgage fraud as a booming business for federal prosecutors. Although the article focuses on the rising number of mortgage fraud prosecutions at the federal level, an important subtext is that most of the criminal cases are being brought against relative pikers. Thanks to my friend Michael Clark of Hamel Bowers & Clark for sending this piece to me.
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John Mohan of Delray Beach, Florida on Friday pleaded guilty to a one-count information charging him with wire fraud in connection with the theft of $1.2 million in client funds held in escrow. Mohan worked as a mortgage broker and closing agent. Among the funds collected were amounts to be used to pay off existing mortgages. Mohan allegedly diverted these funds for his personal use, sometimes making payments on the original mortgages in an effort to hide the fraud and prevent foreclosure. He faces a stautory maximum of 20 years in prison. Sentencing is scheduled for December 19 before US District Judge James Cohn in Fort Lauderdale (Bizjournal, DOJ).
Leib Pinter, one of two principals of now-defunct Olympia Mortgage indicted in separate fraud schemes (earlier), on Thursday pleaded guilty in US District Court in Brooklyn to one count of conspiracy in connection with the theft of $44 million from Fannie Mae. Pinter was indicted in May on conspiracy and wire fraud counts. He allegedly diverted the payoff proceeds for 257 refinanced home mortgage loans funded by Fannie Mae and serviced by Olympia by wiring the funds to a bank account controlled by Olympia instread of to Fannie Mae. Pinter’s sentencing is scheduled for December 19; guidelines call for a sentence of about ten years. In any event, it’s far too late to help Fannie Mae (Reuters).
The case of Pinter’s former partner Barry Goldstein is still pending. He was charged with conspiracy and bank fraud in connection with Olympia’s sale of a portfolio of 12 nonperforming mortgage loans to Credit Suisse using falsified loan histories.
Staten Island dentist Terrance Stradford was sentenced on July 21 to 10 years in prison by US District Judge Freda Wolfson in Trenton, New Jersey in connection with loan frauds totaling $2.76 million. A jury convicted Stradford in September 2007 on 24 counts including conspiracy, tax evasion, wire fraud and money laundering. Stradford obtained mortgages from two lenders totaling $1.36 million on a property in Berlin Township, New Jersey worth about 25% of that amount and already encumbered by first and second mortgages, by falsifying deed records to show that there were no other mortgages and having the proceeds wired to a title company he had established to carry out the scheme. He was assisted by Christina Hachadoorian, who pleaded guilty and testified against him; she is to be sentenced in November. The defendants spent the proceeds on themselves, including the purchase of a 46 foot yacht. Judge Wolfson also held Stradford responsible for $1.4 million in other fraudulent loan transactions (Courier-Post, DOJ).
Joy Jackson of Fort Washington, Maryland, owner of the Metropolitan Money Store of Lanham, Maryland, was indicted on Thursday along with seven others on 25 counts including conspiracy, mail fraud and money laundering. The others include Jennifer McCall, said to be the architect of the scheme, her husband Clifford McCall and Jackson’s husband Kirk Fordham. The charges stem from a so-called foreclosure rescue scheme operated by the defendants which allegedly defrauded homeowners and lenders out of $35 million. In such a scheme, homeowners are persuaded to temporarily turn over titles to their homes so their credit can be repaired. Prosecutors say that the defendants used paid straw buyers with falsified credit histories to to obtain fraudulent new mortgages based on inflated appraisals, borrowed against the equities and never paid the mortgages. The proceeds were allegedly diverted to fund the defendants’ lavish lifestyles (Baltimore Sun, DOJ).
In Tampa on Wednesday, US District Judge Steven Merryday sentenced Luis Uribe to 102 months in prison for his role in a $6 million “equity stripping” mortgage fraud scheme that included identity theft. Uribe, a licensed mortgage broker, pleaded guilty on March 27 to one count of wire fraud and one count of aggravated identity theft. He was accused of obtaining 32 mortgage loans under false pretenses through a shell contracting company, using stolen identities, on the premise of additional construction work to be done, but no work was ever performed by the contracting company (earlier, DOJ, Tampa Tribune). On March 28, licensed title agent Andrea Batronie was sentenced to 30 months in prison for her role in the same scheme. In January, Uribe was sentenced to 34 months in prison in US District Court in Chicago for his role in a similar scheme.
Two former principals of now-defunct Brooklyn-based Olympia Mortgage Corporation were indicted on Thursday by a federal grand jury in Brooklyn in two separate mortgage fraud schemes. In one, Leib Pinter was charged with conspiracy and wire fraud in connection with the theft of $44 million of payoff proceeds for 257 refinanced home mortgage loans funded by Fannie Mae and serviced by Olympia; he allegedly misappropriated the funds that were to be used to pay off the original loans. In the second, Barry Goldstein was charged with conspiracy and bank fraud in connection with Olympia’s sale of a portfolio of 12 nonperforming mortgage loans to Credit Suisse using falsified loan histories; the amount of loss was not specified. Each count carries a possible maximum sentence of 30 years in prison. Both Pinter and Goldstein pleaded not guilty at their arraignment before US Magistrate Judge Joan Azrack and were released on bond (Newsday, Reuters).
Two Roseville, Minnesota men entered guilty pleas in Minneapolis on Thursday before US District Judge Joan Ericksen in connection with a mortgage flipping scheme that involved 162 properties and approximately $35 million in fraudulently obtained mortgage funds. Jonathan E. Helgason and Thomas J. Balko , co-owners of TJ Waconia, pleaded guilty to charges of real estate and mortgage fraud. From 2005 to 2007, they bought the properties, many of them in a three-block area in north Minneapolis, and quickly flipped them for $20,000 to $60,000 more to straw “investors” who were lending their name and credit in exchange for kickbacks and a promise to pay the mortgages. The scheme collapsed in 2007, the investors were left upside down and most of the properties are in foreclosure. Sentencing has not been scheduled. Each man could receive up to 20 years in prison but Helgason faces a recommended sentence of about 12 1/2 years and Balko faces a sentence of about 10 years (Star Tribune, DOJ).
Andrea Batronie, a licensed title agent from Land O’Lakes, Florida, was sentenced on Friday to 30 months in prison by US District Judge Richard Lazzara in Tampa for her part in a $6 million “equity stripping” mortgage fraud scheme that included identity theft. Batronie was found guilty of conspiring to commit mail, bank and wire fraud last October. A day earlier, licensed mortgage broker Luis Uribe pleaded guilty to single counts of wire fraud and aggravated identity theft in the same scheme. Uribe is said to have obtained 32 mortgage loans under false pretenses through a shell contracting company using stolen identities, apparently on the premise of additional construction work to be done. However, no work was ever performed by the contracting company. At closing Batronie would divert the funds into bank accounts under their control. Tampa Tribune, Tampa Bay Business Journal.
KPMG either initiated or tolerated accounting fraud at New Century Financial Corp., according to a 581 page report by Michael Missal, the bankruptcy court’s independent examiner appointed at the request of the Department of Justice to investigate New Century’s 2007 plunge into bankruptcy. The report also blames New Century’s management, and details significant departures from generally accepted accounting practice. New Century was once the nation’s second largest subprime lender. Reuters has an excellent piece here by Amanda Beck. The Washington Post’s Carrie Johnson has a story as well. KPMG, the financial industry’s poster child for abandoning your employees in the face of a federal investigation, vigorously denies the report’s conclusions.
Charles Head of La Habra, California, alleged leader of a nationwide mortgage fraud scheme, and 18 others have been charged in two separate indictments unsealed on Monday by the US Attorney’s Office in Sacramento; charges include mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering, bank fraud and identity theft. In the first, Head and 15 others were indicted on 13 counts These charges arise from an alleged “foreclosure rescue” scam involving $6.7 million taken from 47 homeowners, mostly in California. Homeowners in distress were convinced to add the name of an investor to their titles for purposes of repairing their credit while paying less than their mortgage amounts in rent to the investor, but Head and his associates allegedly switched the titles to their own names, refinanced and took the equity. In the second, Head and 6 others (including two also charged in the first scheme) were indicted on 5 counts in connection with a similar “equity stripping” scheme in which $5.9 million in equity was allegedly stolen from 68 homeowners nationally, recruited with the help of mortgage brokers. Prosecutors indicated that more indictments are likely. San Francisco Chronicle, DOJ.
Prosecutors announced last Monday that Beverly Ross and Donella Locke of Indianapolis had been indicted on January 30 by a federal grand jury on charges of wire fraud and conspiracy in connection with an alleged mortgage fraud scheme involving $23.5 million in loans on 36 high value homes in the greater Indianapolis area. Both women were taken into custody pending a hearing. The indictment alleges that Ross and Locke conspired in connection with mortgage brokers, title companies and appraisers to sell overvalued properties to straw buyers they had recruited to lend their names for credit purposes. Ross was also indicted separately on six counts of bankruptcy fraud. The Indianapolis Star has the story here.
A US District Court jury in Atlanta on Monday convicted four defendants on charges of conspiracy to commit mortgage fraud and wire fraud, arising from a scheme whereby they obtained $6 million in fraudulent mortgage loans from SunTrust Mortgage over a ten-week period in 2006. Convicted were Keith Garner, his daughter Latesha Garner, Gregg Savage and Shalonda Harris. A fifth defendant, Susan Khodadad, had previously pleaded guilty to one conspiracy count and testified against her co-defendants. Latesha Garner was a loan processor with SunTrust Mortgage and was responsible for verifying borrower employment and asset information and approving closing documentation. According to evidence presented at trial, Keith Garner recruited his daughter and paid her to handle fraudulent loan applications submitted on behalf of straw borrowers he recruited with Savage and Harris to buy houses in high end Atlanta area subdivisions. Savage was the seller of some of the properties and Harris was a realtor who located straw buyers. Khodadad was a closing paralegal working with several Atlanta realtors and worked to include payoffs out of the loan proceeds to the co-conspirators from the spread between the market value and the inflated appraisal value. Each defendant faces up to 20 years on the conspiracy count and up to 20 years on each wire fraud count. A sentencing date has not been set. Atlanta Business Chronicle here, DOJ here.
Tax accountant Kalil Khalil of Dearborn Heights, Michigan was sentenced to 60 months in prison on Thursday by US District Judge David Lawson in Detroit. Khalil had pleaded guilty in May 2007 to one count of wire fraud for his part in a mortgage fraud scheme he operated with co-defendant Tariq Hamad which caused lenders to suffer $21 million in losses from 2001 to 2003. He admitted preparing fraudulent loan applications and loan documents with fake borrowers, fake employment histories and forged or inflated appraisals, and not using loan proceeds for their intended purposes. Hamad was sentenced in September 2007 to nine years in prison; Khalil’s sentence was reduced for cooperation. The Detroit Free Press story is here.
Larry Stallings of Watauga, Texas was sentenced to 160 months in prison in US District Court in Concord, New Hampshire on Monday. On June 28, 2007, a jury convicted Stallings on two counts of wire fraud and one count of conspiracy in connection with an advance fee fraud; Stallings and other defendants represented themselves as brokers for subprime mortgages and required a 10% advance fee; prosecutors said they collected over $2 million in advance payments, most of which was spent on living expenses. Two other convicted defendants are awaiting sentencing, including Stallings’ son Christopher Stallings, whose sentencing hearing is scheduled for February 21, 2008. AP here, DOJ Press Release here.