White Collar Crime News

Mortgage Broker and Real Estate Developer Indicted in $19.6M Mortgage Fraud February 13, 2010

A federal grand jury in San Francisco indicted Michael Ohayon and David Papera with conspiracy to commit bank fraud, bank fraud, and money laundering.

According to the indictment, Ohayon and Papera are alleged to have recruited thirteen straw buyers who used their good credit scores to obtain more than $19.6 million in fraudulent residential mortgage loans from Washington Mutual Bank, with no intention of making either down payments or mortgage payments on the properties. The indictment further alleges that Ohayon, with Papera’s knowledge, told the straw buyers that an entity controlled by Ohayon and Papera would use the loan proceeds to make the down payments and mortgage payments. Ohayon and Papera created and submitted to Washington Mutual Bank loan applications with numerous misstatements as to the straw buyers’ income and assets.

Father and Son indicted for mortgage fraud December 16, 2009

This is yet another example of a case that starts as a civil case that eventually turns into a criminal case.  As a result, it is important that any civil case such as this is either handled by a criminal defense attorney or one is brought on as a consultant.

Attorney General Anne Milgram announced that a father and son were indicted with their real estate firms for allegedly stealing approximately $4.5 million from mortgage lenders by providing false information in home loan applications.

The state grand jury indictment charges Martin Gendel, 64, of Montville, Seth Gendel, 35, of Long Island, N.Y., and the real estate firms they owned and operated, Casey Properties LLC, Lee Alan LLP and Andrea Management LLC, all based in Totowa. Each defendant is charged with conspiracy, theft by deception and two counts of money laundering, all in the second degree. The charges stem from an investigation by the Division of Criminal Justice Major Crimes Bureau.

The indictment was returned on Tuesday (Dec. 15) but was sealed until today, when the Gendels were arrested on the charges by Division of Criminal Justice detectives, assisted by local authorities. Martin Gendel was arrested at home in Montville and is being held in the Morris County Jail. Seth Gendel was arrested at home on Long Island and is being held in New York State pending extradition to New Jersey.

Between December 2005 and September 2007, the defendants allegedly deceived seven mortgage lenders into providing approximately $4.5 million in loans for purchases of 14 homes. Six homes were in Paterson, six in Newark and two in East Orange.

“We charge that these defendants falsified applications so unqualified home buyers could obtain $4.5 million in loans,” said Attorney General Milgram. “As detailed in a civil fraud complaint we filed earlier this year, the loans drove a scheme in which the defendants recruited investors to buy overpriced urban properties, then diverted loan funds for their own enrichment, leaving behind run-down homes and investors facing foreclosure.”

It is alleged that the defendants submitted fabricated information about employment and earnings in loan applications and on HUD settlement forms so that buyers could obtain loans for which they were not qualified. In some instances, they included false information about rental agreements and income from the properties. Nine buyers purchased the 14 homes.

In addition, the defendants allegedly deceived lenders by representing that expenses listed on HUD forms and ultimately paid out were legitimate expenses for home repairs when, in fact, no repairs were authorized or made. Some of the applications were checked off as though the homes would be the primary residence of the buyer, when the defendants knew they were being purchased solely as rental investment properties. Other false information submitted with the applications included false savings account balances and false occupancy letters.

Since June 2008, the Attorney General’s Office has filed a total of 11 civil mortgage fraud lawsuits naming 102 individual and corporate defendants whose actions have affected more than 950 victims, as well as property worth more than $29.1 million. The Attorney General has obtained indictments or guilty pleas in eight criminal mortgage fraud cases involving a total of 15 defendants. These defendants have been charged with victimizing more than 60 individuals and banks in connection with loans worth more than $15 million. In addition, the Attorney General has filed notices of violation against nine New Jersey-based companies for offering mortgage loan modification services without a debt adjustment license. They were assessed $45,000 in civil penalties ($5,000 each) and directed to pay consumer restitution.

The civil complaint filed by the Attorney General’s Office in March charges Martin Gendel, Seth Gendel, Casey Properties and Lee Alan LLP with violating New Jersey’s Civil Racketeer Influenced and Corrupt Organizations (RICO) statute. It charges the Gendels and six other defendants with using deception – and the credit information of their victims – to obtain fraudulent mortgage loans for the purchase of urban properties at grossly inflated prices. They convinced victims to buy homes in Newark, Paterson, Irvington and East Orange that were the subject of bogus appraisals, then profited by taking fees out at closing from the inflated equity.

The defendants told investors that Casey Properties would take care of all aspects of the sale and property management, including finding tenants, collecting rents, paying the mortgages and making needed repairs. However, Casey Properties never did maintain the homes or keep up the mortgage payments. In the end, victims had their credit ruined and were left responsible for dilapidated homes that had been foreclosed on and abandoned.

CEO accused of $11 million mortgage fraud scheme September 8, 2009

This company does not seem like a one man operation.  However, the FBI only arrested Findel.  The underlying charge is not too difficult to find as it is easy to get in touch with the lenders.  The issue I have is why is no one else charged here?  I understand the buck stops here, etc, etc, but his attorney needs to determine if anyone else has made a statement.  I would interview everyone at the company and lock them into a statement now.  The problem will likely be with employees that were let go in the last two years.  They could be the leak here.  Regardless, its better to find out now instead of later.

NEWARK, NJ— Today, Special Agent In Charge Weysan Dun announced the surrender of Findel, the 44 year old President and CEO of Worldwide Financial Resources, on a single charge of wire fraud.

A criminal complaint filed today in Newark charges Findel, of Colts Neck, New Jersey, with submitting false documents to financial institutions in a mortgage reselling scheme. Findel’s actions caused those institutions to wire money to Findel’s company, Worldwide Financial Resources (herein referred to as “WFR”) located at 50 Route 9 North, Morganville, New Jersey. Originally started as a financial planning company, WFR had been expanded by Findel to include a variety of home mortgage services, to include mortgage origination and banking. This allowed WFR to both initiate and fund mortgages for its clients by borrowing money from a “warehouse lender”. To repay the lender, WFR would resell each home mortgage it originated in the secondary mortgage market at a profit.

Because of the housing crisis, WFR experienced a liquidity crisis in January 2008. That is when Findel perpetrated a scheme to defraud mortgage banks by reselling the same mortgages to multiple financial institutions, according to the criminal complaint. It is important to note that once WFR sold a mortgage, it relinquished any and all financial interest in that mortgage. But Findel would then create a second set of fraudulent mortgage documents (loan applications, promissory notes, closing sheets, settlement forms, etc.) and resell –for a second time, the same mortgage to a different secondary lender. Funds from the secondary lender’s account were wired through an escrow company to the account of WFR. Findel allegedly used those funds to pay corporate and personal expenses. The complaint alleges that Findel obtained more than $11 million from secondary lenders through his fraudulent mortgage transactions.

Findel had an initial appearance this afternoon before Honorable Mark Falk, United States Magistrate Judge. Falk released Findel on $1 million secured bond. If convicted, Findel faces a maximum prison sentence of 20 years and $250,000 in fines.

Defendants accused of organizing Alaska’s largest mortgage fraud scheme sentenced August 25, 2009

White collar crime attorneys need to keep an eye on these cases to see how Judges are handling the sentences.  If Lockard’s attorney made any arguments in mitigation of the sentence, they fell on deaf ears:

At Friday’s sentencing hearing, Judge Beistline concluded that Lockard was an organizer and leader of the criminal activity, that he had fraudeulently obtained more than $1 million in gross proceeds from the First National Bank of Alaska, and that his crimes caused total losses of approximately $2.5 million dollars. Judge Beistline commented that Mr. Lockard’s crimes were motivated by greed and had an impact on our community. In addition to the financial institutions that were defrauded, one of the individual victims testified at setencing about his personal financial losses, and his struggles to pay the mortgages on three duplexes he had unwittingly purchased for grossly inflated prices. Judge Besitline admonished that there was “no excuse for lying and deception, and no excuse for breaking the law,” and that Mr. Lockard was going to have to “face the consequences of the very poor choices he made.”

The rest of the press release reads as follows:

ANCHORAGE, AK—United States Attorney Karen L. Loeffler announced that on August 21, 2009, lead defendant Lance Lockard was sentenced to 70 months in prison for his leadership of a large-scale mortgage fraud scheme.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortgage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted the forfeiture allegation in an additional count, forfeiting his interest in $116,000 held in an investment account under his name. Charles Carlson, a licensed real estate appraiser, was sentenced on July 11, 2009, to 24 months and to pay restitution of $2,360,185. Holli Stroud, a title company loan closer, was sentenced on June 25, 2009, to 18 months and to pay restitution of $403,733.60. Keith Facer, a licensed real estate agent, was sentenced on May 29, 2009, to 16 months and to pay restitution of $221,065.24. Don Murray, a licensed real estate agent, was sentenced on May 19, 2009, to 21 months and pay restitution of $493,868.77. Cerise Sanders, a loan originator, was sentenced on May 19, 2009, to 12 months and one day. Jonathan Ruf, was sentenced on May 28, 2009, to 12 months and one day and to pay restitution of $1,066.390. Gary Paterna. Mr. Lockard’s father-in-law, was sentenced on May 18, 2009, to three days in jail and pay restitution of $1,162,884.86. Alaska State Mortgage, a local mortgage company, was sentenced on May 13, 2009, to a fine of $91,478.53. The defendants pled to a total of 64 counts charging conspiracy, wire fraud, bank fraud, and false statements to a financial institution.

The pleas and sentencing bring to a close the largest mortgage fraud scheme ever prosecuted in the District of Alaska. The fraud was perpetrated by professionals in all areas of the real estate industry. Between on or about December 23, 2003, and May 31, 2006, Lockard and his co-defendants arranged to purchase and sell real estate in Alaska, and to obtain mortgage loans for the purchase and sale of that real estate, through a series of fraudlent schemes that relied upon false and fraudulent statements, inflated appraisals, falsified down payments, nominee borrowers and purchasers, hidden cash-back payments and other improper practices that concealed the true details of the financial transactions from the mortgage lenders involved. The effect and result of this conduct was to transfer the investment risk from Lockard and the other co-conspirators to the mortgage lenders and to provide inflated profit and fraudulently obtained loan funds to Lockard and the other co-conspirators. The charges in the indictment to which the defendants pled guilty outlined a total of five separate schemes, involving properties in numerous Anchorage subdivisions, and two large undeveloped properties in the Talkeetna area.

According to the indictment, in the first scheme, Lockard, Paterna, his father-in-law, Carlson, the appraiser and Stroud, the loan closer, arranged for fraudulent loan documentation on the purchase of 10 properties. The indictment alleges that Lockard arranged for the simultaneous purchase and sale of the properties using Paterna as a nominee purchaser and that Carlson inflated the appraisals of the properties with Stroud falsifying the closing documents to conceal the fact that no down payments had been made.

The second scheme in the indictment charges that Lockard and Ruf with the aid of Carlson, Stroud and Cerise Sanders, and Alaska State Mortgage Company as loan originators arranged for Ruf, acting as a nominee for Lockard, to purchase13 separate properties on the same day, with all purchases fraudulently listed as purchases of his primary residence by Sanders and McCready acting for Alaska State Mortgage. According to the indictment, Carlson and Stroud, as in scheme one, inflated the appraisals and falsified loan closing paperwork. The indictment further alleges that the defendants, acting on behalf of Lockard sold the properties obtained through the fraudulent loans listed in schemes one and two to third-party buyers using further inflated appraisals provided by Carlson and illegal cash-back payments to the buyers aided by real estate agents Keith Facer and Don Murray to induce them to purchase the overpriced properties.

The indictment further alleges that Lockard, Stroud, Carlson, Ruf and Paterna engaged in similar fraud involving two other property purchases. It charges that Stroud and Lockard with the aid of an inflated appraisal provided by Carlson, arranged for Stroud to purchase a property with a falsified down payment. It further charges that Lockard, Paterna, Carlson, Stroud and Ruf again used nominees and falsified loan paperwork in a purchase financed by FNBA. Finally, the indictment alleges that Lockard engaged in a “bust out” scheme by purchasing properties with the aid of Paterna, Ruf and Carlson, at inflated prices with the purpose of taking the loan proceeds and defaulting immediately on the loans.

Foreclosure fraud: the natural next step in mortgage fraud August 9, 2009

Mortgage scams from 2005 to 2008 are just being uncovered today.  With all of the foreclosures going on last year and this year, I am sure we will see a wave of foreclosure fraud arrests in the next several years.  However, it seems like Garth Celestine of 535 Dean Street, Apartment 515, Brooklyn, New York and Phil Simon of Brooklyn – both better known collectively as “Home Savers Consulting Corporation” were ahead of the game. 

NEWARK, NJ—It’s the type of  story that is becoming increasingly more common: FBI Special Agent In Charge Weysan Dun announced today the arrests of GARTH CELESTINE, age 44, of 535 Dean Street, Apartment 515, Brooklyn, New York; and PHIL A. SIMON, age, 34, of Brooklyn – both better known collectively as “Home Savers Consulting Corporation”.  Both were arrested this morning at their residences without incident and charged with attempt and conspiracy to commit wire fraud in connection with a home foreclosure scheme. 

Celestine and Simon owned and operated Home Savers, which held itself out as a foreclosure rescue company, at 946 Fulton Street, Brooklyn, New York and 350 North Main Street, Freeport, New York.  The company conducted business in both New York and New Jersey.  According to the complaint, Celestine and Simon allegedly conspired with each other to defraud both homeowners facing foreclosure and mortgage lenders by making materially false representations and promises and causing wire transfers to perpetuate the scheme.  A key aspect of the scheme was the targeted victims:  homeowners with substantial equity in their homes who were facing foreclosure because of an inability to make the monthly payments.   The criminal complaint specifically alleges five incidents of fraudulent mortgage loan applications generated by the defendants in August and September of 2005 for properties located in Bergenfield, Paterson and Elizabeth, New Jersey.   The defendants are suspected of additional incidents in New York, but have not been charged in those matters.

Based on the complaint, there were three separate groups of victims.  First, there were the defrauded homeowners. Celestine and Simon would promise to help the homeowners keep their homes by avoiding foreclosure and repairing their damaged credit.    The homeowners would be required to allow the title of the homes to be put in the names of “straw buyers” (third party purchasers) for one year –all with the promise of obtaining more favorable mortgages on those homes and having the title returned to them at the end of the one year period.  Furthermore, Celestine and Simon allegedly told the homeowners that any equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses on those homes, as well as to repair the original owners’ credit. 

The second victim-group consisted of the straw-buyers.  Celestine and Simon allegedly recruited individuals with good credit scores to act as “buyers” of the homes facing foreclosure.  This was accomplished by misrepresenting to the straw-buyers that they were helping the true owners to “save” their homes.  The straw-buyers were also paid a fee up to $10,000 per property in exchange for their participation in the transactions.

The third group of victims were the mortgage lenders.   Based on the criminal complaint, Celestine and Simon submitted and caused to be submitted fraudulent loan applications to lenders in the straw-buyers’ names.  The applications contained false personal and financial information about the straw-buyers, most importantly their income, assets, and debt.  The combination of the high equity properties, the good credit ratings of the straw-buyers, the false information in the loan applications, and the promise that the straw-buyers intended to live in the homes in question all unfairly influenced the mortgage lenders into granting the mortgages.  Celestine and Simon also allegedly applied to different lenders for multiple mortgages on the same properties at the same time to extract the maximum available equity from each property.

According to the complaint, Celestine and Simon attended each loan closing and controlled the payout of the loan proceeds.  Once all the homeowner’s debts and other fees were paid off, the remainder of the loan proceeds was deposited in one or more of three different company accounts owned and controlled by Celestine and Simon. However, Celestine and Simon kept every penny for themselves.  Furthermore, the complaint charges that Celestine and Simon eventually failed to make the mortgage payments in nearly every case and caused the loans to default.  In the end, Celestine and Simon caused lenders to fund more than  $10 million worth of fraudulent loans and stole  $1.5 million worth of equity from the properties.

After reading the details of this scheme, one might assume Celestine and Simon were experts in the mortgage business.  In fact, Simon currently cuts hair at his salon, “House of Hair” located at 615 Washington Avenue in Brooklyn, New York.  This is an example as to why the public should research the credentials of anyone with whom they intend to do business in the mortgage and real estate industry.

Celestine and Simon are scheduled for an initial appearance today before the Honorable Esther Salas, United States Magistrate.  If convicted, the defendants could face a maximum sentence of up to thirty years in prison, a $1,000,000 fine, or both.  A criminal complaint is merely an accusation.  Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.