New Delhi: Delhi Police on Saturday arrested three officials of a private company for allegedly duping investors, officials said. A case in this regard has been
Examples of Mortgage and Real Estate Fraud Investigations – Fiscal Year 2014
The following examples of mortgage and real estate fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Wisconsin Man Sentenced in Mortgage Fraud Scheme
On June 25, 2014, in Milwaukee, Wisconsin, Billy Cannon, Sr. was sentenced to 48 months in prison for wire fraud and money laundering. His incarceration will be concurrent to a 16 year sentence he received earlier this year in state court for drug and firearm offenses. According to court documents, from at least June 2006 through July 2007, Cannon worked as a mortgage broker and used straw buyers to fraudulently obtain mortgages for numerous properties. Loan applications submitted to lenders by Cannon contained material misrepresentations which made the straw buyers more appealing candidates for a mortgage. The straw buyers almost uniformly defaulted on the loans. In all, nearly a million dollars was lost by lenders as a result of the scheme. Cannon has been ordered to pay restitution to the lenders for the losses incurred.
Washington State Man Sentenced for Participation in a Mortgage Fraud Scheme
On June 6, 2014, in Seattle, Washington, William Beard was sentenced to 16 months in prison, three years of supervised release and ordered to pay $1,343,618 in restitution to the IRS and victim banks. Beard pleaded guilty in February 2014 to evading taxes on his 2005 tax return by failing to report as income the proceeds of a mortgage-elimination scheme. According to court documents, after falling behind on his mortgage payments for his Los Angeles home in 2005, Beard enrolled in a mortgage-elimination program. That scheme, run by Jeff McGrue, Ronald Morgan, and another defendant, involved a series of false documents, including a fraudulent Full Reconveyance purportedly authorized by the lender that was instead signed by Beard’s two roommates. The purpose of the Reconveyance was to make it appear as if Beard had paid off his mortgage. In June 2005, the co-schemer obtained an $800,000 loan and purchased Beard’s Los Angeles home. Beard caused a payoff demand to be sent from McGrue’s company, North West Capital, for the false loan. Based on that payoff demand, the escrow company sent $800,000 to North West Capital’s bank account in Washington. No proceeds were paid to the true holder of the mortgage lien because the title company did recognize the Reconveyance and treated the true mortgage lien as having been satisfied. The $800,000 was divided among the co-schemers with Beard receiving $400,000. Beard filed his 2005 tax return failing to report the $400,000 of scheme proceeds, causing a tax loss to the government of at least $117,905. In addition, Beard participated in a second mortgage-elimination scheme and received just over $40,000, again failing to report the proceeds of the scheme as income on his individual income tax return. In 2011, Jeff McGrue, the mastermind of the scheme that involved duping 300 homeowners to pay thousands of dollars for mortgage elimination, was sentenced to 300 months in prison. Gerald Guidry and Ronald Morgan were sentenced to 36 months and 33 months in prison, respectively.
Real Estate Broker Sentenced for Role in Mortgage Fraud Scheme
On May 21, 2014, in Raleigh, North Carolina, Mark Henry Tkac was sentenced to 42 months in prison, five years of supervised release and ordered to pay $1,612,612 in restitution. On May 24, 2012, Tkac pleaded guilty to conspiracy to commit mail, wire, and bank fraud. Between August 2006 and May 2008, Tkac was a licensed real estate broker who worked in the Wake County area. Tkac participated with others, including developer David Lewis Johnson, developer Arthur Lee Barnes, mortgage broker Mark Thomas Bowe, and attorney Jeffrey Scott Taggart, in a real estate flipping scheme which defrauded various banks and lenders. Johnson, Barnes, Taggart, and Bowe were previously sentenced to prison for their roles in the scheme. Tkac participated in the conspiracy first by acting as a straw buyer, and later recruiting others to serve as straw buyers for Johnson and Barnes. Tkac, Johnson, and Barnes arranged for straw buyers to execute a contract to purchase a home for an inflated price. Tkac, Johnson, and Barnes then directed the straw buyers to attorney Taggart to close the transactions. Taggart prepared false HUD-1 settlement statements for execution by the straw buyers as a part of the real estate closing and loan funding process. Taggart then caused the false HUD-1 settlement statements to be transmitted via mail and wire to banks and mortgage lenders, including FDIC regulated financial institutions, under the pretense that they reflected the economic truth of the underlying transaction. However, the HUD-1 settlement statements prepared by Taggart as a part of the scheme routinely contained false statements that were material to the lenders’ funding decisions including the existence and degree of the buyer’s down payment, as well as kickbacks to the buyers and other conspirators. Tkac and other conspirators generally received several thousand dollars in kickbacks from each fraudulent transaction closed by Taggart. Ultimately, borrowers defaulted on many of the transactions brokered by Tkac, resulting in substantial losses to various banks and lenders.
California Woman Sentenced for Mortgage Fraud Scheme
On May 14, 2014, Pensacola, Florida, Andrea Lorraine Avery, of Los Angeles, California, was sentenced to 84 months in prison and ordered to pay $10,323,369 in restitution to the FDIC as Receiver for Washington Mutual, GMAC Mortgage, SunTrust Mortgage, Wells Fargo Bank, USBank, and others. Avery pleaded guilty in December 2013 to conspiracy to commit fraud, mail fraud affecting a financial institution, and conspiracy to commit money laundering. According to court documents, beginning in 2005 and continuing through 2008, Avery and others entered into contracts to purchase 24 residences located in Florida, Georgia, Louisiana, Texas, and California. Thereafter, fraudulent loan applications were submitted to financial institutions to fund the purchases. In the loan applications, Avery and other borrowers made false statements to the lenders, which included providing false names and social security numbers; overstating the borrower’s income and assets; and falsely stating the earnest money deposit was not borrowed. In support of the loans, Avery and other borrowers submitted fraudulent supporting documents to the lenders. Approximately $16 million in loans were issued by the lenders in connection with the fraudulent scheme. Avery and her company received more than $3.5 million in kickbacks as a result of the scheme.
Michigan Man Sentenced for Mortgage Fraud
On May 14, 2014, in Grand Rapids, Michigan, Seamus Dillon, of Ada, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $755,693 in restitution. Dillon pleaded guilty to conspiracy to commit mortgage fraud. According to court documents, during 2007, Dillon and others defrauded a bank in connection with a mortgage using a series of false statements. Dillon and his cohorts obtained approximately $850,000 which they used for their own purposes.
Real Estate Agent and Others Sentenced in Mortgage Fraud Scheme
On May 12, 2014, in Kansas City, Missouri, Leann Raejeana Turner, of Blue Springs, was sentenced to 36 months in prison and ordered to pay $4,912,040 in restitution. Turner pleaded guilty on May 30, 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. Turner is one of nine defendants who participated in an $11 million mortgage fraud scheme from early 2005 to Aug. 4, 2006. According to court documents, Turner was a real estate agent working for a series of real estate companies. Mortgage lenders made loans of approximately $11,092,886 on 16 residential properties in Missouri. From that total, buyers received approximately $2,006,845 from the loan proceeds in illegal secret kickbacks. The scheme resulted in a financial loss to mortgage lenders of nearly $5 million. The scheme involved buying and selling homes at inflated prices, obtaining mortgage loans at the inflated prices, then kicking back $100,000 of the excess loan proceeds to each of the home buyers without the lenders’ knowledge. Carole L. Colson, a real estate agent, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $2,291,110 in restitution. Bruce Q. Williams, a loan officer, was sentenced to 12 months and one day in prison and ordered to pay $3,443,123 in restitution. Anthony E. Hicks, a loan officer, was sentenced to 10 months in prison and ordered to pay $953,958 in restitution. Linda Joyce Henry Johnson, of Corona, California, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $228,744 in restitution. Several others in this scheme await sentencing.
California Man Sentenced for Mortgage Fraud Scheme
On May 12, 2014, in Fresno, California, Antonio Perez-Marcial, of Bakersfield, was sentenced to 46 months in prison and ordered to pay $3,455,250 in restitution. According to court documents, from 2007 to 2010, Perez-Marcial conspired with others to use straw buyers to purchase residential properties in Bakersfield. The loan applications the conspirators submitted to lenders frequently contained false statements concerning the straw buyers’ employment status, income, assets, intent to occupy the properties as their personal residences, and source of down payments for the purchase of the properties. They also submitted false supporting documentation to lenders such as false bank account statements, rent verifications, pay stubs, and employment verifications.
California Man Sentenced for Mortgage Fraud Scheme
On April 22, 2014, in Sacramento, Calif., Johnny Eugene Grivette, Jr., of Magalia, was sentenced to 54 months in prison for his participation in a mortgage fraud scheme. Grivette pleaded guilty on July 10, 2012, to conspiracy to commit mail fraud and money laundering. According to the plea agreement, Grivette was manager of Advantage Financial Partners (AFP) of California, a company that bought residential properties at market prices and then sold them to straw buyers who were investors in a purported investment program. Once AFP bought the properties, it paid commissions to an appraiser who would appraise them for significantly higher than the true market value. This allowed the homes to be financed for the straw buyers at loan-to-value ratios significantly higher than the limits lenders authorized. If the straw buyers had to make down payments on the properties sold by AFP, the money was quickly reimbursed to them by AFP without the lenders’ knowledge.
Florida Woman Sentenced for Role in Real Estate Investment Scheme
On April 11, 2014, in Hartford, Conn., Loretta Seneca, of Boynton Beach, Fla., was sentenced to 27 months in prison, three years of supervised release (the first six months to be served in home confinement) and ordered to pay $5 million in restitution. On Feb. 25, 2013, Seneca pleaded guilty to one count of conspiracy and one count of wire fraud. According to court documents, between approximately November 2006 and December 2007, Robert Rivernider, Robert Ponte and Seneca engaged in a real estate investment conspiracy that defrauded both lenders and individuals they recruited. As part of the scheme, Rivernider, Ponte and others recruited victim borrowers to take out financing to purchase various investment properties with financing from victim lenders. The co-conspirators made false representations to the victim borrowers that Rivernider and Ponte would arrange for the purchase of the properties by the borrowers at markedly discounted values, instead, the purchase price of the properties were frequently marked up, often by as much as 25 percent. Rivernider, Ponte and others also falsely represented that the investment properties would return to the victim borrowers sufficient monies to cover the carrying costs, as well as reduce the borrowers’ other debt burden. Rivernider, Ponte, Seneca and others victimized lenders by making multiple false representations in loan applications and other documents provided to the victim lenders. Seneca, a trained mortgage broker, was actively involved in the real estate transactions, including organizing and gathering many of the materials and performing a range of other background tasks necessary for the lenders to make the loans. This scheme involved at least 100 properties, and the victim lending institutions suffered more than $21 million in losses. Rivernider and Ponte pleaded guilty to multiple charges stemming from both this scheme and a separate scheme that defrauded investors out of approximately $2.2 million. They are currently serving prison terms of 144 months and 90 months, respectively.
Former Massachusetts Attorney Sentenced for Mortgage Fraud
On April 9, 2014, in Boston, Mass., Charles R. Sammon, of West Pittston, Pa., was sentenced to 33 months in prison, three years of supervised release and ordered to pay $977,042 in restitution to defrauded lenders. In November 2013, Sammon pleaded guilty to wire fraud, mail fraud and unlawful monetary transactions. According to court documents, Sammon, a former attorney practicing in Boston, participated in at least 13 fraudulent real estate transactions involving triple-decker apartment buildings in various sections of Boston. For eight of those transactions, Sammon served as the real estate closing attorney representing the mortgage lender. For the other five, Sammon participated as the seller of real property himself. The basic scheme involved recruiting people to buy properties by promising to pay them as much as $40,000 per transaction, which was not disclosed to the lenders. Many of the buyers were also promised that the seller would pay the mortgage for upwards of a year. Also central to the scheme was telling the lenders that each borrower intended to occupy the property as their primary residence, which was not true. Many of the payments to buyers were made directly from Sammon’s law firm bank account on transactions for which he was the closing attorney, but he failed to disclose those payments to the mortgage lenders that he represented. Sammon also received some of the loan proceeds in addition to his legal fees for doing so, which was also not disclosed to the lender. In one transaction, he received more than $50,000. Each of the loans given for these 13 transactions went into default, usually 12-18 months after the transaction, and all the properties were sold at foreclosure or through a short sale, resulting in combined losses to the lenders of more than $2.5 million.
Former Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On March 31, 2014, in Raleigh, N.C., Mark Thomas Bowe, Jr., of Jonesboro, Ga., was sentenced to a 42 months in prison, five years of supervised release and ordered to pay $604,550 in restitution. On Aug. 26, 2013, Bowe pleaded guilty to conspiracy to commit bank and wire fraud. According to the indictment, between 2003 and 2008, Bowe, a licensed mortgage broker, participated with others in a real estate flipping scheme which defrauded various banks and lenders. Bowe participated in the scheme by, among other things, falsifying various aspects of loan applications that were submitted to banks and lenders to qualify buyers for mortgages related to properties sold by a co-defendants real estate company. Bowe falsified the amount and source of the borrower’s income and assets, the existing debts of the borrower, and the borrower’s intent to occupy the property as a primary residence. In some instances, Bowe completed loan applications which falsely represented that the information contained within the application had been obtained from a telephonic interview when, in truth and fact, the borrower never spoke to him in a telephonic interview or provided the information in the loan application. The scheme further promoted by deceiving lenders into believing that some borrowers held assets at an investment company, known as Mutual Southern Investments. Bowe and another conspirator supplied false verifications of deposit and false account statements purporting to show that borrowers held, in some instances, millions of dollars in assets, when in truth and fact, Mutual Southern Investments did not exist and the assets and asset statements were entirely fictitious. Bowe and other participants in the scheme benefited by receiving kickbacks or payments out of the loan proceeds at the time of the loan closing. Ultimately, the borrowers defaulted on the loans brokered by Bowe, resulting in substantial losses to various banks and lenders.
Three Texans Sentenced in Multi-Million Dollar Mortgage Fraud Scheme
On March 28, 2014, in Houston, Texas, Walter Ryan Macapaz, Tony David Maldonado and Buffy Marie Lawrence were sentenced for their roles in a scheme to defraud residential mortgage lenders of more than $22 million in loans. Macapaz was sentenced to 108 months in prison. Maldonado and Lawrence were sentenced to 24 months and 12 months in prison, respectively. All three defendants will also serve three years of supervised release. A fourth defendant, Lisa Carol Ross, was sentenced to 13 months in prison on May 17, 2013. According to court documents, the conspirators used fraudulent documents to help borrowers qualify for mortgage loans to purchase condominium units in the Commerce Towers building as well as residential homes in the Houston area. The documents had false and misleading information about the borrowers’ income, assets, liabilities, employment status, bank deposits, rental payments, intent to use properties as a primary residence and source of funds used to close the real estate transactions. Macapaz and Lawrence arranged for borrowers to submit the false documents to mortgage lenders in order to obtain loans, while Maldonado created some of the false documentation.
Oklahoma Realty Owner Sentenced Prison for Mortgage Fraud
On March 27 2014, in Oklahoma City, Okla., Trina Tahir was sentenced to 24 months in prison, three years of supervised release and ordered to pay $382,290 in restitution for her role in fraudulently obtaining mortgage loans. In July 2010, a grand jury indicted Tahir along with two co-defendants, Derrick Reuben Smith and Michael Gipson. According to the indictment, Smith recruited two individuals to buy two new homes in Edmond in mid-2006 and early 2007. The builder of both homes agreed that Tahir’s real estate brokerage, T&T Realty, would receive large commissions and bonuses for the sale. After the closings, Tahir caused T&T Realty to write checks to Gipson, an agent at T&T Realty. Gipson then bought cashier’s checks in those same amounts payable to “MP Services,” a business that Smith operated. Smith paid $20,000 to the person who served as the buyer of the first house and used the rest of the money for his own purposes. The indictment also charged Gipson and Tahir with fraudulently misrepresenting the source of funds used as a down payment on a house that Gipson bought in Oklahoma City and charged Tahir with fraudulently disguising the payment of $9,295 to a buyer of a house in Midwest City as a real estate bonus. On April 6, 2011, Tahir pleaded guilty to laundering the proceeds of a fraudulent mortgage on the house purchased by Gipson. Smith was sentenced on Aug. 30, 2011 to 40 months in prison and ordered to pay $369,355 in restitution. Gipson was sentenced to four months and ordered to pay $335,070 in restitution.
Two Sentenced in Mortgage Fraud Scheme
On March 24, 2014, in Pensacola, Fla., Jason Andrew Vitulano, of West Palm Beach, Fla. and Marc A. Gross, of Boca Raton, Fla. were sentenced for their roles in a mortgage fraud scheme. Vitulano was sentenced to 77 months in prison and ordered to pay $4,047,140 in restitution and a $1,404,447 monetary judgment. Gross was sentenced to five years of probation and ordered to pay $3,507,187 in restitution and to forfeited his personal residence valued at approximately $340,000 and his retirement accounts valued at approximately $253,000. In August 2013, both Vitulano and Gross pleaded guilty to several counts that included: conspiracy to commit mail fraud and wire fraud, mail fraud, and conspiracy to commit money laundering. Gross also pleaded guilty to making false statements to a federal agent and perjury. According to court documents, between June 2007 and February 2008, they were involved in the purchase of six townhomes in Temple Terrace, Florida, and two homes in Santa Rosa Beach, Florida. All purchases were in the names of straw buyers. In order to finance each of these purchases, Vitulano and Gross caused loan applications containing false information to be submitted to various mortgage lenders and financial institutions. The false information included fraudulent employers and an overstatement of income and assets. The fraudulently obtained loans were foreclosed upon causing harm to the lenders.
Defendant Sentenced in Mortgage Fraud Scheme
On March 4, 2014, in Denver, Colo., Dale Johnson was sentenced to 34 months in prison and three years of supervised release. Johnson pleaded guilty on Sept. 10, 2013 to wire fraud and money laundering. According to court documents, in early 2006, Johnson was the president and chief executive officer of a business group based out of Culver City, Calif., called Synergy. Johnson began to present Synergy members with a number of properties available for purchase in Colorado. Johnson and other Synergy members traveled to Colorado where they started purchasing multiple residential properties. The homes were typically purchased in the individual member’s own name, using the member’s personal credit history to qualify for the purchases. As part of the scheme, Synergy members submitted “uniform residential loan applications” to lenders in connection with qualifying for home loans. In a number of loan applications, Synergy members and other buyers provided, or assisted in providing, materially false statements, representations, and omissions to real estate lenders, or the lenders’ agents. False information included income, assets, debts, employment history and/or intent to occupy the home as a primary residence. Furthermore, a portion of lender funds from home purchases were paid to Synergy members as “kickbacks.” Such kickbacks were often concealed from lenders through a series of false statements and material omissions made in connection with closings for properties or in connection with the loan documents submitted to the lenders. To further conceal the kickbacks from lenders, they routed payments through third parties posing as property management companies.
Arizona Man Sentenced for Role in Mortgage Fraud Scheme
On Feb. 27, 2014, in Tucson, Ariz., Mariano Vincente Cano was sentenced to 14 months in prison, three years of supervised release and ordered to pay $350,140 in restitution. Cano pleaded guilty on Nov. 8, 2013 to one count of conspiracy to commit wire fraud. According to court documents, from late 2006 through early 2007, Cano and others recruited or assisted in recruiting straw buyers to purchase real estate in Arizona. As part of the loan approval process, Cano and others submitted fraudulent loan applications or other documents to various lenders in order to qualify the straw buyers for financing. Relying on the fraudulent loan applications, the lenders funded each of the loans. Portions of the fraudulently obtained loan proceeds were generally converted by Cano and others into cash, money orders or deposited into bank accounts controlled by a co-conspirator. Each of the properties charged in the indictment went into foreclosure because of the failure to make payments on the loans. The estimated loss relating to four mortgage fraud properties was approximately $745,942.
Colorado Man Sentenced in Mortgage Fraud Scheme
On Feb. 11, 2013 in Denver, Colo., Roger Keith Howard was sentenced to 108 months in prison and three years of supervised release. Howard pleaded guilty in June 2013 to three counts of wire fraud and one count of money laundering. According to court documents, in 2006 and 2007, Howard devised and participated in three similar but separate mortgage fraud schemes. Howard operated under the business names of Spring Creek Mortgage Real Estate Services and Open Range Development LLC. Howard’s co-defendant Oai Quang Luong worked for a company that processed mortgage loan applications on behalf of potential home buyers. In August 2006, Howard asked Luong to obtain the $250,000, and Luong did so, using funds loaned by another individual. Howard persuaded seventeen individuals, his so-called investors, to purchase the town homes at a development known as Oliveglen Villas in Aurora, Colo. Howard arranged for the individuals to obtain the mortgage loans by causing the applications to include false or misleading information or omit material information. As part of the mortgage application process, a borrower obtained from his or her bank a form known as a Request for Verification of Deposit (VOD), which verified the balance of an account. In this case, VODs were misleading because Howard and others working at his direction arranged for bank account balances to be inflated temporarily by depositing money into the accounts and, after the balances were verified and the VODs were completed, the money was withdrawn. All of the town-home sales prices were supported by appraisals, most of which were done by an associate of Howard’s which he told the appraiser the amount he wanted. For each closing, the closing agent prepared a settlement statement, reflecting that the disbursements of loan proceeds included a payment “from Seller’s Funds at Settlement” to Open Range Development. These payments were the “service fees” mentioned in the contract with the developer; they ranged from $85,700 to $117,204. After the closings, Howard used some of that money to make payments to all but one of the buyers, but those payments were not disclosed to the lenders or their underwriters. Howard for a time wrote checks payable to the borrowers to cover the differences between rental incomes and mortgage payments, but he stopped doing so on April 19, 2007. A few borrowers thereafter used their own money to make mortgage payments, but eventually all of the mortgages went into default and the lenders foreclosed. At that point, there were about twelve different lenders holding the mortgages on the town homes, and they lost approximately $7,609,729. Luong was sentenced in August 2013 to 18 months in prison.
Attorney Sentenced for Mortgage Fraud Scheme
On Feb. 6, 2014, in Pittsburgh, Pa., Lisa Gerideau-Williams, of New Kensington, Pa., was sentenced to 135 months in prison, three years of supervised release and ordered to pay $934,910 in restitution. In January 2013, Gerideau-Williams pleaded guilty to 13 counts of wire fraud, one count of filing a false tax return and two counts of failing to file a tax return. According to court documents, Gerideau-Williams was an attorney who operated a mortgage broker business and two companies specializing in closing real estate transactions. Gerideau-Williams operated a complex and multi-faceted fraud scheme through these companies. One aspect of the scheme involved the submission of loan applications to lenders, submitting fake documents and forging signatures. In the operation of her business related to closing real estate transactions, Gerideau-Williams fraudulently used trust account money from lenders to support her lavish lifestyle. She defrauded borrowers by collecting fees without performing services. She victimized title insurance companies by issuing title insurance without the authority of the title insurance companies. Finally, for the 2004 tax year, Gerideau-Williams, who took taxation classes toward an advanced degree in tax law, filed tax returns that drastically understated her income because she failed to include the more than millions dollars earned in the course of her fraud schemes. For the 2005 and 2006 tax years, she did not file her income tax returns.
New York Couple Sentenced for Involvement in Mortgage Fraud Scheme
On January 28, 2014, in Hartford, Conn., Winston Shillingford, of Nesconset, N.Y., was sentenced to 48 months in prison and three years of supervised release. His wife, Marleen Shillingford, also of Nesconset, was sentenced to 36 months in prison and three years of supervised release. In October 2011, Winston and Marleen Shillingford each pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. According to court documents, the Shillingfords were involved in the operation of Waikele Properties Corp., a real estate company with offices in Connecticut and New York. From approximately 2001 to August 2011, the Shillingfords and others conspired to obtain fraudulent mortgages for the purchase of more than 40 multi-family properties. As part of the scheme, the Shillingfords and their co-conspirators purchased existing multi-family houses, and vacant parcels of land and erected new houses on them to sell. The co-conspirators recruited individuals to purchase the properties, acted as the buyers’ real estate agent and assisted the buyers in applying for residential mortgage loans to purchase the houses. They then prepared loan applications for the buyers that included fraudulent information concerning, among other things, the buyers’ employment, income, assets and liabilities, previous property ownership and intention to make the properties their primary residences. They also provided fraudulent supporting documentation with the loan applications, including false letters from fictitious employers, false earnings statements and fraudulent bank records. After the loans were approved, the illicit proceeds of the scheme were wired into the Waikele Properties bank account and then transferred to members of the conspiracy. Some of the proceeds also were used to continue the mortgage fraud scheme. The parties have agreed that victim financial institutions suffered losses of between $2.5 million and $7 million as a result of this scheme.
Woman Sentenced in Connection with Mortgage Fraud Investigation
On January 27, 2014, in Raleigh, N.C., Liliana Delia Deiac, of Jamaica, N.Y., was sentenced to 18 months in prison, three years of supervised release and ordered to pay $674,856 in restitution to a bank. Deiac pleaded guilty on August 6, 2013 to making material false statements. According to court documents, on May 18, 2010, Deiac was questioned by special agents with the IRS and the FBI investigating a fraudulent property flipping scheme. Deiac was questioned because evidence showed that she was involved in the purchase of a $2 million property in Raleigh using her husband’s name and credit, and without the husband’s knowledge or consent. Participants in the scheme failed to make mortgage payments on the property, resulting in foreclosure and losses to a bank. When questioned, Deiac lied about the circumstances of her involvement in the transaction. The investigation established that Deiac participated in the transaction based upon promises of cash kickbacks from others who orchestrated the deal.
Developer Sentenced for Role in Mortgage Fraud Scheme
On January 14, 2014, in Raleigh, N.C., David Lewis Johnson, Jr., of Cary, N.C., was sentenced to a 96 months in prison, five years of supervised release and ordered to pay $2,413,605 to 11 banks and lenders who were victims of the fraud. Johnson was sentenced on conspiracy to commit mail, wire, and bank fraud. According to court records, Johnson, operating through E-Z N Homes, engaged in a real estate “flipping” scheme. Johnson and others utilized various schemes to fraudulently obtain more than 100 properties with total mortgage loans in excess of $20,000,000. The defendant used straw buyers to purchase properties in exchange for a kickback from the loan proceeds. Johnson also fabricated investment statements to make it appear that straw buyers had, in some instances, one million dollars in assets. In fact, the straw buyers recruited by Johnson did not possess the income or assets to support the loans obtained in their names. As a result of the scheme and Johnson’s conduct, banks and lenders issued loans to the conspirators in the amount of approximately $9.1 million, which resulted in $3.4 million in actual losses to the banks and lenders.
Developer Sentenced for Orchestrating Massive Mortgage Fraud Scheme
On December 19, 2013, in Boston, Mass., Sirewl R. Cox was sentenced to 150 months in prison and three years of supervised release. On November 15, 2013, Cox was convicted of wire fraud, bank fraud and conducting an unlawful monetary transaction. According to court documents, in 2006 and 2007, Cox identified multiple-family buildings for sale and recruited straw buyers to purchase the buildings. Cox and others then recruited straw buyers to purchase individual units in buildings that Cox controlled. The straw buyers’ financing for the purchases was obtained by submitting mortgage loan applications and other documents that falsely represented key information. Deals were closed with HUD-1 settlement statements that falsely represented that straw buyers had made down payments and paid other funds in connection with the property transactions, and falsely represented how the proceeds of the mortgage loans were disbursed.
Leader of Mortgage Company Sentenced for Role in Fraud Scheme
On December 16, 2013, in San Diego, Calif., Brian Nels Peterson, the head of a mortgage company called Terra Finance, was sentenced to 41 months in prison and ordered to pay $542,075 in restitution. According to court documents, Peterson obtained mortgage funds through deceptive means, including falsifying income on applications to qualify borrowers for loans. Peterson, who held a broker’s license with the California Department of Real Estate, personally signed most of the fraudulent loan applications containing false income, employment, asset, and liability information submitted under his license number. Peterson orchestrated the fraudulent conduct of employees, borrowers, and industry professionals as the head of Terra Finance. He recruited a cadre of loan officers, loan processors, office staff, real estate “investors” and other industry professionals to participate in his scheme, including appraisers, tax preparers, and lender representatives. These knowing participants included people who made up job titles and income figures so borrowers would appear to qualify for a loan, added borrowers to another person’s bank account and then had the borrowers falsely claim the funds in the account as assets, fabricated false “verifications” of phony information in the loan applications, and prepared appraisals “to order” based on the property value Peterson sought. Borrowers used a succession of fake loan applications to purchase multiple properties that they could not afford. Peterson earned over $1 million from his fraudulent loan business through broker’s fees, kickbacks from cash-out refinances, and other sources in 2006 alone. He failed to report his over $1 million income in 2006 and he evaded paying taxes by arranging to be paid in cash, and other means.
Former Real Estate Investor Sentenced for Bank Fraud and Money Laundering
On December 9, 2013, in Orlando, Fla., James Olivos, of Lake Mary, Fla., was sentenced to 60 months in prison and ordered to pay a $2,866,121 money judgment. Olivos pleaded guilty on September 18, 2013 to bank fraud and money laundering. According to court documents, between March 2003 and November 2007, Olivos engaged in a scheme wherein he recruited “straw purchasers” to purchase expensive homes, which they could not afford. Olivos prepared loan applications for these straw purchasers, which grossly overstated their incomes and gave false employment histories. Additionally, these applications stated that these homes would be used as primary residences, but Olivos had actually told these buyers that the homes would be investments and that he would find renters to cover the mortgage payments. Further, in order to increase his profits, Olivos convinced the sellers of the homes to inflate the sales prices by stating additional money would be necessary for home improvement. Olivos would then split the proceeds of the sales with the sellers. As a result of this fraud, Olivos caused a total loss to the lenders of approximately $3.2 million dollars.
Two California Men Sentenced for Mortgage Fraud
On December 4, 2013, in Sacramento, Calif., Vadim Vilchitsa was sentenced to 15 months in prison and Yevgeniy Y. Zazhitskiy, of North Highlands, was sentenced to 20 months in prison. Restitution will be determined at a later date. According to court documents, in and before 2007, Vilchitsa and a business partner solicited funds from investors to buy residential properties, renovate them, and flip them. They operated successfully prior to the financial crisis, but when real estate values plummeted, the business was unable to sell its inventory of homes. Vilchitsa and his business partner convinced their investors to purchase the inventory of properties at inflated prices, and used the excess funds as working capital to continue their business. They coordinated the purchases of 24 of their or their company’s residential properties, although they knew the purchasing investors did not have the income or assets to support the loans for the properties. Loans were obtained for the investors through Zazhitskiy, a licensed real estate agent and broker, who worked as a loan officer. Although he knew he had not interviewed the loan applicants, and he knew the loan applicants’ income and assets were faked for purposes of the loan applications, he nonetheless obtained the loans for 23 properties.
Connecticut Man Sentenced for Mortgage Fraud
On November 18, 2013, in Hartford, Conn., Juan Velez, of Waterford, was sentenced to 12 months and one day in prison, five years of supervised release and ordered to pay $908,695 in restitution to four victim financial institutions. Velez was also ordered to spend the first six months of his supervised release in home confinement. On June 20, 2013, Velez pleaded guilty to one count of bank fraud for his role in a mortgage fraud scheme. According to court documents, in 2006 and 2007, Velez and others engaged in a mortgage fraud scheme involving multiple properties in New London, Conn. As part of the scheme, Velez acquired properties from a co-defendant and other individuals and then sold the properties to another co-defendant at inflated prices using fraudulently obtained mortgage loans. When Velez sold the property to his co-defendant, the loan paperwork contained multiple false statements, including information related to income, intention to occupy the property as a primary residence, and the amount of money provided to purchase the property. Based on these false statements, a co-defendant obtained a mortgage loan in the amount of $492,699 from the bank. Velez and others shared the profits of this and other fraudulently obtained residential mortgage loans, which totaled more than $1.2 million.
Mortgage Loan Officer Sentenced for Role in $1.8 Million Fraud Scheme
On November 8, 2013, in Dallas, Texas, David Joe Cano, of Arlington, Texas, was sentenced to 87 months in prison and ordered to pay $1,795,125 in restitution. Cano pleaded guilty in November 2012 to one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity. According to court documents, Cano was a mortgage loan officer at an investment company located in Richardson, Texas. From January 2006 to November 2007, Cano, along with other co-conspirators, operated a scheme to obtain fraudulent loans from several banks and mortgage lenders. Cano and others selected newly constructed or distressed properties whose value could be inflated without raising lenders’ suspicions. They recruited individuals with good credit scores to act as loan applicants for the purchase of the properties and paid them to apply for loans using applications that falsely inflated the applicant’s income and assets. The applicants were deceitfully promised that the properties would be leased until they were sold at a profit and that the applicants would receive regular payments from the rental income that would be sufficient to repay their loans until the properties sold. In reality, the applicants were left with unpaid loans that ruined their credit scores. Cano and his conspirators laundered the money from those loans back to themselves using shell corporations.
Ohio Couple Sentenced for Mortgage Fraud Schemes
On November 6, 2013, in Columbus, Ohio, Deborah L. Kistner was sentenced to 66 months in prison, five years of supervised release and ordered to pay $9,644,601 to victims. Her husband, Mark A. Kistner, was sentenced to five years of probation, ordered to forfeit his retirement account worth about $300,000 and to pay $381,764 in restitution. Deborah Kistner pleaded guilty to three counts of conspiracy to commit bank fraud, three counts of conspiracy to commit money laundering and one count of bank fraud. Mark Kistner pleaded guilty to one count of conspiracy to commit money laundering. According to court documents, Deborah Kistner operated Premiere Title Company in Hilliard, Ohio. She deceived lenders while securing fraudulent real estate loans between July 2006 and July 2010. She conspired with others to secure inflated loans for real estate and kept the excess proceeds or used them to pay others involved in the conspiracy. Deborah Kistner intentionally failed to provide lenders with critical purchase contract language and accurate settlement statements. Deborah and Mark Kistner also schemed to defraud lenders and launder the money they received through simultaneous “short sale” closings where the lenders would agree to absorb losses on existing mortgage loans while Deborah Kistner actually sold those properties on the same day for a profit and laundered the profits through bank accounts controlled by Mark Kistner.
Man Sentenced in Mortgage Fraud Scheme
On October 23, 2013, in Los Angeles, Calif., Lemuel David Thornton, of Las Vegas, was sentenced to 24 months in prison and ordered to pay $232,000 in restitution to a victim bank. Thornton pleaded guilty in June 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. According to his plea agreement, Thornton engaged in an illegal scheme to defraud lenders who made residential mortgage loans. In early 2006, Thornton and his co-conspirators obtained financing to purchase residential properties by preparing Uniform Residential Loan applications for lenders which contained false and misleading statements about income and employment. Thornton and his co-conspirator submitted to the escrow companies fraudulent demand letters from sham companies, directing that specified funds be disbursed to the sham companies to be used for upgrades, construction, repairs, and landscaping for the property to be purchased. Thornton and his co-conspirator would cause the money paid to the sham third-party company at the close of escrow to be wired from the escrow company into an account over which Thornton or his co-conspirator had control. The money would then be used for a purpose other than the improvements specified in the demand letters and the term of the loan.
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