Mortgage Companies hire private investigators to investigate mortgage fraud April 10, 2011
Posted by jefhenninger in Articles.Tags: Mortgage Fraud
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Law enforcement is permitted to lie to you to secure a confession. However, there are restrictions in what they could lie about. However, private citizens including private investigators can lie to you. Thus, if you get contacted by an investigator that is looking into your loan application, you may want to speak to an attorney before you say or do anything. I would be especially concerned if the investigator actually shows up at your house. To illustrate this point, consider this example from a recent case I had:
My client (who denied any wrong doing) was visited by a local investigator who was working on behalf of a company called Armitage & Associates based out of Milwaukee, Wisconsin. The letter indicates that “Armitage & Associates and Investigative Solutions, LLC have been retained by Mortgage Guaranty Insurance Corporation (MGIC) to reverify, as part of an internal control process, the facts and circumstances surrounding the mortgage loan application by ….”. The letter goes on to say that “a quality control audit is in effect for the above mortgage loan transaction. This is NOT an attempt to collect a debt or legal issues; this is strictly an attempt to confirm information on your original loan application, which is required as part of a routine quality control audit. Your interview is necessary in order to finalize and close this file. Your prompt attention and cooperation is appreciated”.
OK, let’s break this down. This company is going through some type of quality control audit for a mortgage that was written some time ago. Oddly enough, the property in question went into foreclosure. If there is a quality control audit going on, couldn’t they just call you and ask you some questions? Or, couldn’t they just mail you some information to fill out? Instead, MGIC would rather hire one company that would then hire another company to come to your house and speak with you. Of course, instead of just sending anyone to you, they hire and send out “investigators”. Why are private investigators involved in a quality control audit? Why are they spending so much money just to look into quality control for an application from several years ago? None of it adds up does it?
Looking at Armitage’s website, one will see that they have a big focus on mortgage fraud. They say that: ”Our mortgage fraud investigation team is comprised of former mortgage insurance industry insiders – loan originators, underwriters and loan processors. Along with our unique blend of innovative and traditional investigative techniques, we have the knowledge and insights to know exactly what information is needed and how to obtain it. You can rely on our mortgage fraud investigation team for reliable research, detailed reports and prompt turnaround time.”
Their website also includes testimonials, such as this one “Over the past 4 years we have used Rico Garcia and Armitage & Associates to investigate mortgage fraud involving lenders, brokers, mortgage loan originators, processors, realtors, appraisers, and borrowers. The success of each of our lawsuits against any of the above named “fraudsters” was the direct result of the investigative work of Armitage & Associates.” Doesn’t sound like an audit to me. While Armitage does indicate that they offer quality control services, mortgage fraud does seem to be a major focus for them.
Why would MGIC be looking into old mortgage applications? When a bank forecloses on a home with an insured mortgage, companies such as MGIC are on the hook for the payments. If they can prove that there was fraud, they may be able to get out of paying up. For example, in one California case involving a dispute with Countrywide, MGIC indicated that they performed an investigation and “first, contrary to Countrywide’s insurance application, [the borrower] was never an account executive at GNG Investments. There is no such enterprise operating in Santa Clara or anywhere else in California. Nor did she earn $13,494 per month, as Countrywide represented. Instead, she earned $3,901.58 per month as a janitor for Santa Clara Valley Medical Center. … she never had a bank account at Wells Fargo, let alone one worth $45,000. Nor did she put a $30,000 down payment—or a down payment of any amount—on her house”.
How do you think they found out all of that information?
Woman Charged in Multi-Million Dollar Scheme to Obtain Mortgage Loans June 17, 2010
Posted by jefhenninger in News.Tags: Mortgage Fraud
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Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor today announced charges against a Kearny woman who allegedly orchestrated a scheme to steal millions of dollars by obtaining mortgage loans using false identities and counterfeit documents.
According to Director Taylor, Genilza R. Nunes, 36, of Kearny, was arrested on March 9 by detectives of the Division of Criminal Justice Major Crimes Bureau as a result of an ongoing investigation into the conspiracy. She was charged by complaint with first-degree conspiracy, first-degree money laundering, second-degree securities fraud and second-degree theft by deception. She has been held in state custody since that time with bail set at $2 million.
Because the investigation by the Division of Criminal Justice is ongoing, the charges were not announced until today. Nunes was charged today with other defendants in a federal investigation into related activities announced by the U.S. Attorney’s Office and FBI in Newark.
The state investigation by the Division of Criminal Justice Major Crimes Bureau determined that Nunes and a number of co-conspirators allegedly were involved in a sophisticated, multi-million dollar mortgage loan fraud scheme operating in northern New Jersey, including Morris, Hudson, Union and Essex Counties. The fraudulent enterprise allegedly included licensed and unlicensed professionals, including real estate agents, mortgage loan brokers, real estate appraisers, notaries, lawyers, straw buyers and counterfeit document makers.
Nunes allegedly was one of the people responsible for creating phony documents, including false identification cards, fraudulent financial documents, inflated real estate appraisals, altered real estate transfer documents, and fraudulent government documents, including U.S. passports and numerous state motor vehicle licenses. Nunes and others involved in the scheme used false names and the fraudulent documents to disguise their true identities.
Nunes and her co-conspirators allegedly defrauded numerous lending institutions of millions of dollars through what is known as a “short sale mortgage loan property flip scheme.” A “short sale” is a type of pre-foreclosure sale of real estate where the lender holding the mortgage agrees to permit the property to be sold for a price less then the amount due on the mortgage loan. Short sales have become more prevalent due to the recent economic downturn.
In this case, individuals involved in the scheme were purchasing the properties as straw buyers, using false identities supported by counterfeit driver’s licenses, false financial records, and fictitious credit histories. Through a series of fraudulent transactions, the short sale properties were then sold or “flipped” at inflated values derived from fraudulent appraiser reports. A second straw buyer applied for a mortgage loan on the inflated property and obtained the loan under a false identity. The short sale property was then purchased with the loan proceeds, and, by design, the straw buyer made no payments on the loan, causing a loan default.
Because the straw buyer used a false identity, the lending institution was unable to locate the borrower. The difference between the sales price for the short sale transaction and the inflated loan obtained represented the net proceeds of the fraudulent scheme. Typically Nunes and her co-conspirators obtained $100,000 to $300,000 per transaction.
The state alleges Nunes was responsible for cultivating and creating straw buyers, including real and fake persons, for the purpose of engaging in the scheme. The state has specifically alleged that Nunes engaged in fraudulent transactions involving five properties, with a total fraud of $2,152,800. However, it is believed that the scheme is much larger. The investigation is continuing and additional charges are anticipated.
Twenty-Eight Charged in Coordinated Mortgage Fraud Takedown in Northern New Jersey June 16, 2010
Posted by jefhenninger in News.Tags: Mortgage Fraud
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Nine criminal complaints unsealed today charged 28 individuals with participating in various mortgage fraud scams that collectively sought to defraud lenders out of more than $5.5 million and involved more than 17 New Jersey properties.
The charged defendants include 12 real estate agents, four investors, four mortgage consultants, three fraudulent document makers, two accountants, an appraiser, a bank employee, and a mortgage broker. Twenty-three of the defendants were arrested this morning as a result of a coordinated law enforcement investigation into mortgage fraud in northern New Jersey. Of the remaining defendants, one is in state custody on related charges, one is scheduled to self-surrender, and three remain at large.
A 29th defendant, a fraudulent document maker involved in several of the charged scams, was previously charged by complaint with conspiracy to commit wire fraud and arrested on March 9, 2010. He has been in federal custody since his arrest.
According to the complaints filed in these cases, the defendants sought to obtain fraudulent mortgages for real estate transactions involving prospective purchasers who were not qualified to obtain the loans they were seeking To do so, the defendants made, obtained and presented to mortgage lenders documents that falsified the purported borrowers’ employment, inflated their income and assets, and provided other fraudulent information. In some cases, those documents included fraudulent W-2 forms; pay stubs; employment verification letters; bank account statements; tax returns; addresses and telephone numbers for borrowers and purported employers; and identification documents such as driver’s licenses and social security cards.
The 29 defendants, listed on the attached chart by complaint, range in age from 27 to 77 and live in eight of New Jersey’s 21 counties—Essex, Bergen, Union, Hudson, Burlington, Monmouth, Morris and Passaic. Some of the fraudulent schemes alleged in the complaints involve loans issued in connection with the Federal Housing Administration (FHA), which is a division of the U.S. Department of Housing and Urban Development (HUD). The FHA encourages designated lenders to make mortgage loans to qualified borrowers by protecting against loan defaults through a government-backed payment guarantee. Other loans involved in the scheme are what is known as “conventional” mortgage loans, which lenders underwrite and fund using their own funds and credit lines. After funding the conventional mortgage loans, the lenders can either service the loans themselves during the mortgage loan period or sell the loans to institutional investors in the secondary market.
Each of the 28 defendants is charged with one count of conspiring to commit wire fraud affecting a financial institution and one count of conspiring to commit bank fraud. Each count carries a maximum sentence of 30 years in prison and a maximum fine of $1 million. One defendant, Roberta Ferreira is charged in two complaints and faces an additional count each of wire fraud and bank fraud conspiracy.
United States v. Rodrigo Molina, et al., Mag. No. 10-3127 (PS)
This complaint charges four individuals: Rodrigo Molina, a licensed real estate agent; Domingo Fuentes, an investor who owned multiple companies he used to purchase real estate properties; Manuel Salgado, an accountant with a purported tax-filing service; and Vilma Dacruz, a bank employee. The defendants provided a loan officer with false W-2 Forms, tax returns, utilities statements, and bank statements, as well as a fraudulent driver’s license and social security card. Among other things, Molina and Fuentes provided fraudulent employment and wage documents, Salgado provided false tax returns, and Dacruz provided a false letter purportedly issued by her employer, a major bank, with false balance information on an account that did not exist.
United States v. Eugenio Mendes, Mag. No. 10-3128 (PS)
Eugenio Mendes, a licensed real estate agent, obtained fraudulent documents, including W-2s, pay stubs, bank statements, and copies of a driver’s license and social security card, all of which he used in an effort to obtain mortgages to which he was not entitled. Mendes procured these documents from co-conspirator Jairo Nunes, a document maker previously charged in a separate complaint (Mag. No. 10-8033), from whom Mendes had obtained fraudulent documents for approximately five years. One of the purported borrowers whose identity Mendes used to obtain a mortgage loan was an illegal alien. A search of Nunes’ home on March 9, 2010, revealed a thumb drive that contained a folder labeled “DOCUMENTOS EUGENIO,” which contained some of the fraudulent documents that Mendes had provided to obtain mortgage loans.
United States v. Lucilene Guido, Mag. No. 10-3124 (PS)
This complaint charges three individuals: Lucilene Guido, a real estate agent and former loan officer at a northern New Jersey mortgage company; Roberta Ferreira, a licensed real estate agent registered with a Riverside, N.J., realty company; and Genilza Nunes, a licensed real estate agent registered with the same realty company, but working out of a Newark, N.J. office. The defendants obtained false bank statements and identification documents from Jairo Nunes, who produced the documents at their request. Genilza Nunes produced additional fraudulent documents, including W-2s, tax returns, and false pay stubs purportedly from a New Jersey trucking company, and verified a prospective borrower’s employment via telephone. Defendants sent Jairo Nunes detailed instructions regarding changes to the fraudulent bank statements he had created so they could ensure the loan would proceed without a snag. During a search of Genilza Nunes’ office, law enforcement officers found a telephone labeled with the name of the fictitious trucking company, as well as other telephones labeled with the names of other non-existent companies.
United States v. Rogerio Silva, et al., Mag. No. 10-3130 (PS)
Rogerio Silva and Rui Talaia were licensed real estate agents and brokers of record at separate realty companies located in Riverside and Kearny, New Jersey, respectively. These individuals worked with Jairo Nunes to obtain documents that he created at their request, including false employment and income verification and bank account documents. The fraudulent documents, in the name of a purported buyer of real estate, included W-2s, pay stubs, a fraudulent bank verification letter, and bank statements. Relying on these documents, the victim bank transferred approximately $455,534 to New Jersey for the defendants’ benefit. Only one mortgage payment was made on a mortgage now in default. The defendants used additional false documents in an effort to obtain more loans. The search of Jairo Nunes’ home revealed a thumb drive that contained a folder labeled “ROGERIO” and included some of the fraudulent documents that Silva and Talaia had provided in an attempt to get the fraudulent loans.
United States v. Joelma Graca, Mag. No. 10-3129 (PS)
Joelma Graca, a real estate agent in Newark, and John Malheiro, a mortgage loan officer for two different New Jersey mortgage companies, sought mortgage loans via fraudulent bank statements, pay stubs, W-2s, and a loan application. For example, one buyer worked at a paint company, but was not earning enough to qualify for a mortgage loan so they instead claimed he worked at a consulting firm. Per their respective roles in the scheme, Graca identified the prospective borrowers and Malheiro located the properties to be purchased.
United States v. Viviane Bernardim, Mag. No. 10-3126 (PS)
This complaint charges eight individuals: Viviane Bernardim, a mortgage consultant; Theresa Dattalo, a mortgage loan officer, real estate agent and owner of a title company; Matthew DiBenedetto, a licensed appraiser and broker of record for a Newark real estate agency; Genady Macedo, a real estate agent; Sarah Santos, a mortgage consultant; Ioneides Sousa, a real estate investor; Iodete Pereira, who assisted in transactions; and Jorge Toledo, a real estate agent. The defendants obtained false documents from Jairo Nunes and used false W-2s, pay stubs and bank statements, as well as tax returns, to fraudulently obtain mortgage loans. A co-conspirator described one document maker involved in the scheme as a “broker of identities” for more than 30 years, who bought identities from people who were leaving the U.S. and sold them to others. The complaint also alleges that another co-conspirator described some of their current loan transactions as having been “put together with spit.”
United States v. Simone Fernandes, Mag. No. 10-3131 (PS)
Simone Fernandes obtained fraudulent documents created by Jairo Nunes—including pay stubs, W-2s, bank statements, tax returns, and copies of a driver’s license and social security card—and submitted these documents in support of a fraudulent loan application. When the loan officer expressed amazement at the quality and thoroughness of the documents Fernandes and Jairo Nunes had provided, they both told the loan officer that they once had spent an entire day at the computer thinking of all aspects of a real estate transaction for which they could create false documents. The search of Jairo Nunes’ home revealed a thumb drive that contained a folder labeled “SIMONE,” which contained numerous false documents that Jairo Nunes had created for Fernandes. Fraudulent documents were found in the “SIMONE” folder pertaining to at least 14 additional individuals.
United States v. Edivaldo dos Santos, Mag. No. 10-3125 (PS)
This complaint charges six defendants: Edivaldo Dos Santos, a former loan officer holding himself out as a mortgage consultant; Roberta Ferreira (also charged in the U.S. v. Lucilene Guido et al. complaint); Ricardo Muniz, employed in the construction industry; Faye Cargill-Flores, a certified public accountant in Morristown, N.J.; Maria Lourdes Sousa, who worked in the healthcare industry and lived in Paterson, N.J.; and Rosa Damasceno, the owner of a Newark company that provided tax services and driver education in Belleville. Muniz sought to obtain property and cash back at closing, and the co-conspirators provided falsely inflated income information regarding Muniz to help him get the loan. Sousa made false pay stubs and her sister, Damasceno, made falseW-2s and tax returns. The defendants provided the false documents to a loan officer in an effort to obtain a mortgage to which they were not entitled.
United States v. Raquel Berger, Mag. No. 10-3132 (PS)
Raquel Berger, a real estate agent and the broker of record and franchise owner of a realty company in Hillside, N.J., and Cesar DeSouza, who operated an accounting and tax preparation business in Newark, obtained fraudulent documents made by Damasceno (DeSouza’s wife) in support of unqualified borrowers in order to obtain mortgage loans to which they were not entitled. To increase their chance of getting a loan approved, they prepared amended, false tax returns that fraudulently inflated the borrower’s stated earnings.
This case was prosecuted as part of the District of New Jersey’s Mortgage Fraud Task Force (MFTF), which was formally started in 2008, and was among the first such FBI-funded task forces in the country. This case was also brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
U.S. Attorney Fishman praised agents of the FBI, under the direction of Special Agent in Charge Ward in Newark, and the Hudson County Prosecutors Office, under the direction of Prosecutor Edward J. De Fazio, for their work leading the investigation of this case. He also credited the other members of the MFTF, including the U.S. Department of Housing and Urban Development Office of Inspector General, the Internal Revenue Service, the U.S. Secret Service, and U.S. Postal Inspection Service for their important contributions to the investigation. Fishman also thanked the Department of Homeland Security’s Customs and Border Protection and U.S. Citizenship and Immigration Services; the U.S. Social Security Administration; and the New Jersey Attorney General’s Office for their assistance.
The cases are being prosecuted by Assistant U.S. Attorneys Mark Coyne, Christine Magdo and Robert Marasco of the U.S. Attorney’s Office Economic Crimes Unit.
The charges and allegations contained in the complaints are merely accusations, and the defendants are considered innocent unless and until proven guilty.
| DEFENDANT (by complaint) |
AGE | RESIDENCE | ROLE |
| Mag. No. 10-3127 | |||
| Rodrigo Molina | 56 | Belleville, NJ | Real Estate Agent |
| Domingo Fuentes | 77 | Bloomfield, NJ | Investor |
| Manuel Salgado | 73 | Newark, NJ | Document Maker |
| Vilma Dacruz | 45 | North Arlington, NJ | Bank Employee |
| Mag. No. 10-3128 | |||
| Eugenio Mendes | 49 | Cranford, NJ | Real Estate Agent |
| Mag. No. 10-3124 | |||
| Lucilene Guido, a/k/a Lucilene Da Silva Rios, a/k/a Lucy Guido | 31 | Kearny, NJ | Real Estate Agent (and former loan officer) |
| Roberta Ferreira | 27 | Kearny, NJ | Real Estate Agent |
| Genilza Nunes, a/k/a Geane Nunes | 36 | Kearny, NJ | Real Estate Agent/Document Maker |
| Mag. No. 10-3130 | |||
| Rogerio Silva | 44 | Riverside, NJ | Real Estate Agent/Document Maker |
| Rui Talaia | 46 | Rutherford, NJ | Real Estate Agent |
| Mag. No. 10-3129 | |||
| Joelma Graca | 43 | Newark, NJ | Real Estate Agent |
| John Malheiro | 35 | Little Ferry, NJ | Mortgage Broker |
| Mag. No. 10-3126 | |||
| Viviane Bernardim, a/k/a Viviane Bernardin, a/k/a Viviane Pereira | 33 | Aberdeen, NJ | Mortgage Consultant |
| Theresa Dattalo | 53 | Randolph, NJ | Real Estate Agent/Mortgage Broker/Title Agent |
| Matthew DiBenedetto | 66 | Freehold, NJ | Appraiser |
| Genady Macedo | 40 | Newark, NJ | Real Estate Agent |
| Iodete Pereira | 51 | Elizabeth, NJ | Investor |
| Sarah Santos | 29 | Newark, NJ | Mortgage Consultant |
| Ioneides Sousa | 49 | Newark, NJ | Investor |
| Jorge Toledo, a/k/a Vinny Toledo | 29 | Aberdeen, NJ | Real Estate Agent |
| Mag. No. 10-3131 | |||
| Simone Fernandes | 32 | Hillside, NJ | Mortgage Consultant |
| Mag. No. 10-3125 | |||
| Edivaldo dos Santos, a/k/a Eddie Dos Santos | 52 | Harrison, NJ | Mortgage Consultant |
| Roberta Ferreira | 27 | Kearny, NJ | Real Estate Agent |
| Ricardo Muniz | 39 | Newark, NJ | Investor |
| Faye B. Cargill-Flores, a/k/a Faye Flores | 48 | Morristown, NJ | Certified Public Accountant/ Document Maker |
| Maria Lourdes Sousa, a/k/a Lourdes Sousa | 57 | Paterson, NJ | Document Maker |
| Rosa Damasceno | 59 | Belleville, NJ | Accountant/Document Maker |
| Mag. No. 10-3132 | |||
| Raquel Berger | 41 | Union, NJ | Real Estate Agent |
| Cesar DeSouza, a/k/a Geraldo DeSouza | 55 | Belleville, NJ | Document Maker |
| Mag. No. 10-8033 | |||
| Jairo Nunes (arrested 3/9/10) |
34 | Newark, NJ | Document Maker |
Man Charged with Participating in Mortgage Fraud Scheme June 2, 2010
Posted by jefhenninger in News.Tags: Mortgage Fraud
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RAB NAWAZ, of Harbor View Avenue, Waterford, Connecticut, has been charged by federal criminal complaint with conspiracy to commit wire fraud and with obstruction of justice. NAWAZ was arrested this morning at his residence. He was released on a $100,000 bond secured by property.
According to statements made in court, NAWAZ is alleged to have conspired with Syed A. Babar and others in a mortgage fraud scheme involving real estate throughout Connecticut. As part of the scheme, it is alleged that NAWAZ purchased homes in New London and sold them to straw buyers at artificially inflated prices that, typically, were supported by fraudulent appraisals. Although the straw buyers would represent that they intended to occupy the homes as their primary residence, they had no intention of doing so, defaulted on the loans and allowed the homes to go into foreclosure. The co-conspirators are alleged to have profited from the proceeds of the fraudulently inflated loans.
According to statements previously made in court, it is alleged that members of the conspiracy conducted this scheme on more than 25 properties in New London, New Haven, and other locations in Connecticut. As a result, it is alleged that various lenders suffered a loss of at least $2.5 million.
Babar was indicted on related charges on April 27, 2010, and was arrested on May 14. On May 20, it is alleged that NAWAZ met with a co-conspirator in the case and advised him about certain evidence that the government had presented during Babar’s detention hearing. During their meeting, it is alleged that NAWAZ instructed the co-conspirator as to what he should and should not admit knowing to government investigators. Bad move.
Two Denver Men Indicted for Mortgage Fraud March 18, 2010
Posted by jefhenninger in News.Tags: money laundering, Mortgage Fraud
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Shawn R. Tieskotter, age 36, of Greenwood Village, Colorado, and Craig D. Patterson, age 30, of Littleton, Colorado, were indicted by a federal grand jury in Denver on March 10, 2010, on charges of money laundering, wire and mail fraud. Patterson was arrested by federal agents without incident. He appeared in U.S. District Court in Denver on March 12, 2010, for an initial appearance where he was advised of the charges pending against him.
According to the indictment, between March 26, 2005, and continuing through June 30, 2005, in Colorado and elsewhere, Shawn Tieskotter and Craig Patterson knowingly executed and attempted to execute a scheme to defraud various financial institutions as well as commercial mortgage lenders. The scheme was executed in connection with residential mortgage loan applications relating to 13 properties in the Denver, Colorado metropolitan area. The neighborhoods included Aurora, Centennial, Littleton, Parker and Castle Rock.
As part of the scheme, Tieskotter and Patterson prepared, submitted and caused to prepare and submit applications for residential mortgage loans and related documents in Tieskotter’s name. The applications included a first mortgage and second mortgage for each of the 13 properties. Each of these applications contained materially false and fraudulent representations that Tieskotter intended to use the property as his primary residence and most of the applications contained materially false and fraudulent representations about the extent of Tieskotter’s liabilities related to the other residential mortgage loans.
It was further part of the scheme for Tieskotter and Patterson to hide from lenders the extent of Tieskotter’s liabilities for the other mortgages, before such liabilities would appear on Tieskotter’s credit reports. At the time of closing, Tieskotter and Patterson caused additional disbursements of monies to PK Design Group, LLC, an entity controlled by Patterson, or Dream Design, a trade name for an entity controlled by Tieskotter. Tieskotter and Patterson concealed from the lenders and other parties associated with the transactions their control of these entities.
Upon conviction of the alleged offenses, Tieskotter and Patterson shall forfeit to the United States all property constituting or derived from proceeds traceable to the commission of the offense, including but not limited to a sum of money equal to $219,566 for money laundering and $4,710,666.86 for wire and mail fraud charges.
Forty Indicted in Major East Texas Mortgage Fraud Scheme March 16, 2010
Posted by jefhenninger in News.Tags: Mortgage Fraud
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Around the country, mortgage fraud cases continue to be indicted. What is amazing about these cases is the amount of people involved and that was so widespread. I think many people are starting to realize that this mortgage fraud problem was one of the key factors that brought this economy down.
U.S. Attorney John M. Bales announced today that 40 individuals have been arrested and charged in connection with a major mortgage fraud scheme in the Eastern District of Texas.
The 16-count indictment was returned by a federal grand jury on March 10, 2010, and includes one count of conspiracy to commit mail and wire fraud, 12 counts of mail fraud, and three counts of money laundering. All 40 defendants, from Texas, Florida, Massachusetts, Tennessee, and Georgia, are charged with one count of conspiracy to commit mail and wire fraud. Many of the defendants are also charged with various counts of mail fraud and money laundering.
According to the indictment, beginning in 2004, John Barry, 41, of Windemere, Fla., owned and operated, TKI Group, Inc. and JAB Consulting, businesses out of Florida through which he solicited real estate agents, property finders, mortgage brokers, title company attorneys or escrow officers, property appraisers, and straw buyers to facilitate this scheme. The purpose of the scheme was to defraud lending institutions by convincing them to approve mortgage loans for residential properties for which the property values had been fraudulently inflated. The indictment specifically lists 114 residential properties located in Texas.
In announcing the indictment, U.S. Attorney Bales specifically noted the breadth of the financial scheme, “This indictment brings to light a criminal scheme that is quite breathtaking in its scope and beyond disturbing as far as the boldness of the fraud.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Senior Loan Officer with Metropolitan Money Store Indicted in Mortgage Fraud Scheme March 9, 2010
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A federal grand jury has indicted Rolando Alonzo Cousins, a/k/a “Junior,” age 31, of Bowie, Maryland, for conspiracy to commit mail fraud, mail fraud, and money laundering, in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. Although the indictment was returned on March 8, 2010, Cousins was arrested today.
According to the 11-count indictment, Cousins was a Senior Loan Officer with the Metropolitan Money Store (MMS), located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Cousins also owned and operated Prosper Investments LLC. In 2005, Joy Jackson and Jennifer McCall incorporated Metropolitan Money Store. Also at that time, Jackson, Jennifer McCall, Jackson’s husband, Kurt Forham, McCall’s husband, Clifford McCall, and others incorporated Fordham & Fordham Investment Group, Ltd. (F&F) and Burroughs & Smythe Financial Services, Inc. (B&S), based in Lanham and Greenbelt, Maryland, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.
The indictment alleges that from September 2004 through June, 2007, Cousins, Jackson, McCall, and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes, and repair their damaged credit by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one-year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall, and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit.
In fact, the indictment alleges that Cousins, Jackson, McCall, and others paid approximately $10,000 to each of the straw buyers to participate in the scheme; fraudulently bolstered the credit of the straw buyers so they could qualify for more favorable mortgages; obtained fraudulently inflated loans on the properties in the straw buyers names; served as straw buyers themselves; stripped away the bulk of the homeowners equity proceeds and converted that money to their own personal use; and stopped making the mortgage payments on the homes, resulting in the homes being foreclosed upon.
The indictment also seeks the forfeiture of $1.5 million, alleged to be Cousins’ proceeds from the scheme.
Understanding Mortgage Fraud for Lawyers March 7, 2010
Posted by jefhenninger in Articles.Tags: Mortgage Fraud
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I have been involved in a number of mortgage fraud related cases. In some cases, my client was clearly guilty while in others, my client was innocent. As a lawyer, you need to evaluate your client’s criminal liability and the evidence against them right away in order to provide effective advice. This is especially important in white collar crimes for two reasons. First, your client may either be in denial about his guilt or may not be aware that his activity is really illegal. Second, clients under investigation for a white collar crime often come to you long before an arrest is made. A lawyer should use this time start preparing for trial. Unfortunately, many lawyers allow the file to collect dust while the Government continues to build their case.
The Players
A mortgage fraud case may involve dozens of people. It is important to trace the transaction from beginning to end to identify everyone involved and where your client fits into the picture. In very complex cases, the primary victim is the lender. A builder/seller may recruit realtors, who, in turn, recruit straw buyers. In order to defraud the lender, the mortgage broker, closing attorney, appraiser and title company may also be in on the scheme or may be willing to look the other way. In addition, there may be “specialists” who provide fake Ids, false pay stubs and false bank statements. If the straw buyers are unemployed, other people may provide a phone number to verify the fake employment. Once everyone associated with the case is identified, everyone should be interviewed to lock them into a story. Due to cost issues, this is rarely done; but it should be done as soon as possible.
The Records
At some point, there is a good chance that the Government is going to take every piece of paper in your client’s office and home. If your lucky, you may see some of it some day. So why risk that? Get copies of everything now and review it for red flags. In addition, get all of your client’s bank records and tax returns to look for evidence of kick backs, tax evasion and money laundering.
The many faces of Mortgage Fraud
Mortgage fraud is really an umbrella term that covers a number of schemes.
Fraudulent Property Flipping – Fraudulent flipping often occurs when the suspect purchases property falsely appraised at a higher value and then quickly sells it, profiting from the false appraisal. In fact, sometimes the suspect may own the property for less than 48 hours.
Silent Second – Silent Second fraud occurs when a buyer borrows the down payment from the seller through the issuance of a non-disclosed second mortgage which leads the primary lender to believe that the borrower has invested his own money in the down payment. The second mortgage may not be recorded to further conceal it from the primary lender. Another variation of this involves the builder/seller fronting all closing costs including the down payment. This is made easier when the down payment is less than 20%. Again, this is not disclosed to the lender.
Nominee Loans/Straw Buyers – Straw buyer fraud occurs when a person conceals his identity through the use of a nominee with that nominee’s consent, often relying on the nominee’s better credit history, to apply for a loan the person otherwise could not have obtained.
Fictitious/Stolen Identity – the suspect uses a fictitious or stolen identity to apply for a loan or to co-sign for the loan. With these cases, the lender will attempt to go after the victim who may have an uphill battle to prove that their identity was stolen.
Foreclosure Rescue Schemes – In rescue scheme fraud, the suspect identifies homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. He then misleads the homeowners into believing that they can save their homes if they transfer to the suspect the home’s deed and up-front fees or purchase loans through the suspect. The suspect profits by remortgaging the property or pocketing fees paid by the homeowner.
Equity Skimming – In equity-skimming fraud, the suspect may use a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyer’s name. After closing, the straw buyer signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and often rents the property for additional profit until the inevitable foreclosure on the property.
Air Loans – Perpetrators of Air Loan fraud obtain property loans for which there is no property or other collateral. The perpetrator may invent borrowers and properties, establish accounts for payments, and maintain custodial accounts for escrows. He may even set up telephone numbers for the “employer,” “appraiser,” etc., to provide the lender with “verification” of the false information. Ponzi Schemes – The suspect solicits money from investors, selling interest in the same property to multiple investors or simply pocketing money and providing false documentation for the transactions.
Combination of the above – Some complex fraud schemes may involve a combination of the above schemes for maximum profit.
Signs of Mortgage Fraud
When reviewing documents from your client, it is important that you carefully scrutinize everything to see if there are any problems that need to be handled at some point. Common issues to look out for include:
Kick backs – while bonuses may not be illegal, they may be a sign of mortgage fraud. Why is your client getting these payments, how they are paid and whether they are disclosed are important questions to ask.
Exclusive use of the same company – Use of the same appraiser, title company, etc by a real estate agent is not uncommon. However, the exclusive use of one company by a builder, mortgage company, etc may be a sign that there is a fraud occurring and that this other person/company is in on it.
Unexplained payments to third parties – “Specialists” often provide fake pay stubs, bank records, etc. Unexplained payments to the same person or consistent withdraws may be evidence that a specialist is involved in providing false information.
Higher than normal fees – In order to entice people to get involved in illegal activity, a higher payment or commission is offered. There is so much competition in the real estate market that there is rarely a need for higher than normal payments.
Non-local buyers – Straw buyers or buyers that have no intent on paying a mortgage may have to be recruited from hours away. The chances of one person consistently dealing with buyers who don’t live anywhere near the properties in question shows that they may have been recruited.
False information on applications – while false information is likely mortgage fraud itself, some false information on minor issues may not cause that much of an alarm. However, it is important to look for patterns of false information and to understand why that information is important.
Conclusion – A passive lawyer lets a file collect dust and relies upon hope that the Government’s investigation will not turn up evidence against the client. An aggressive lawyer starts to prep for trial from day one. This includes investigating other people and your client. Of course, this cannot be done if you don’t understand mortgage fraud. Hopefully, this article will allow you to better represent your client.
Three Defendants Charged in Multi-Million-Dollar Mortgage Fraud Scheme February 26, 2010
Posted by jefhenninger in News.Tags: Mortgage Fraud
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These mortgage fraud cases just keep coming and like many of these cases, the allegations stem from incidents that happened years ago. While a bulk of the mortgage fraud took place during the “housing boom” a few years ago, it takes time for these cases to be investigated. In a few years, I’m sure we’ll see the flip side of this which is foreclosure fraud. The latest case of mortgage fraud is:
the arrests of SHAHEID BILAL, RHONDA PAYNE, and RICHARD BRITT on charges stemming from a subprime mortgage fraud scheme involving $3 million worth of mortgages on residential properties in and around Orange and East Orange, New Jersey.
According to the five-count Indictment filed in Manhattan federal court:
From 2005 through 2007, the defendants targeted residential properties in Orange and East Orange, New Jersey. To purchase the properties, the three defendants submitted mortgage loan applications, in the name of straw purchasers, that contained false information regarding the applicant’s creditworthiness and intention to live in the residence. They recruited such straw purchasers by, among other things, paying them thousands of dollars in fees. The defendants told several of these straw purchasers that they would not have to pay the mortgages because the defendants would make payments for several months, and/or that the defendants would make money to pay the mortgages by renting out the properties. They distributed the proceeds from the fraudulently obtained home mortgage loans among themselves and their co-conspirators for their personal gain. It is assumed that these co-conspirators will not be charged or will have deals worked out.
They further profited by renting out the fraudulently mortgaged properties to tenants while failing to make mortgage payments on behalf of the straw purchasers. Certain affected straw purchasers have gone into default on their mortgages, and mortgage lenders have foreclosed on certain properties. I have several cases where I represent either an identity theft victim or a straw purchaser. Sometimes its tough to figure out what role your client really has.
BILAL of Lawrenceville, Georgia, is alleged to have supervised and coordinated the recruitment of straw purchasers and the preparation of fraudulent loan applications and other documents for submission to the lenders.
PAYNE of Queens, New York, allegedly recruited straw purchasers to participate in the fraudulent scheme and assisted in the preparation of fraudulent paperwork for submission to the lenders.
BRITT of McDonough, Georgia, allegedly assisted in the preparation of fraudulent paperwork for submission to the lenders.
New York Lawyer Charged with Multi-Million-Dollar Mortgage Fraud, Money Laundering and Obstruction of Justice February 17, 2010
Posted by jefhenninger in News.Tags: money laundering, Mortgage Fraud
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LOUIS CHERICO, a lawyer who practiced in New York City and Westchester County, has been indicted for participating in a wide-ranging scheme to commit mortgage fraud, obstruction of justice, and money laundering.
According to the Indictment filed in Manhattan federal court:
From July through December of 2002, CHERICO participated in a fraudulent real estate investment scheme which had, as its primary objective, the purchase of multi-million dollar residential properties in various communities in Westchester County, New York, including Purchase, Eastchester, and Rye, with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were equal to or in excess of one hundred percent of a property’s actual sale price, so that the defendant and his coconspirators did not have to put any of their own money at risk in the transaction.
CHERICO served as the attorney for various coconspirators in negotiating and closing the fraudulent purchases that were part of the scheme. CHERICO and his co-conspirators submitted to numerous federally-insured banks various documents, including loan applications, contracts of sale, deeds, real estate transfer documents, and title reports. Those documents contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home, as well as the borrower’s intent to reside in the property as a primary residence, when, in fact, the properties were typically purchased for investment purposes. As a result of the scheme to defraud, CHERICO and his co-conspirators obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance.
The Indictment also charges CHERICO with laundering the illegal proceeds obtained from the sale of one of the properties used in the mortgage fraud scheme by transferring the proceeds from a bank account controlled by CHERICO to an account that was controlled by one of his co-conspirators, DOMINICK DeVITO. The transaction was designed to conceal and disguise the nature, location, source, ownership, and control of the illegal proceeds.
The Indictment further charges CHERICO with obstruction of justice, and conspiracy to obstruct justice, in connection with the 2003 sentencing of DOMINICK DeVITO, following DeVITO’s conviction in United States v. Pasquale Parello, et al.,(01 Cr. 1120) in United States District Court for the Southern District of New York on charges of racketeering and mortgage fraud. Specifically, CHERICO assisted DeVITO in concealing profits that DeVITO earned from the sale of a property located in Purchase, New York, and in submitting an affidavit containing false and misleading information about the sale to the United States Probation Office.
CHERICO, 69, of Eastchester, New York, was arrested this morning. His age will make plea negotiations difficult because his will age much faster in prison thus cutting his life expectancy dramatically. I would want a doctor to evaluate his health to see if he can survive prison. If he is looking at 10 years or more with a plea and he cannot survive that, then a plea may not be a great option especially if the trial can be put off for a while.
