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Forty Indicted in Major East Texas Mortgage Fraud Scheme March 16, 2010

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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

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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

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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

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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.

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

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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

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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

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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

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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.

Title agent indicted for mortgage fraud involving fake resort August 12, 2009

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Government press releases never read well for the defendant.  Sometimes people come up with dumb scams that have no chance of success and others are involved in complex business deals that fail.  Even if there is no criminal activity, the Government will allege otherwise and it won’t be until you see the discovery and talk to your client that you see the other side of the story.

This press release is too vague for me to figure out which type of case this is.  Based on what is here however, I can at least see some defenses here.  When you combine a failed business with cooperating witnesses who will say anything to stay out of prison (or avoid a long stretch) then you will get a nice story about some horrible scammers.  This is why it is so important for an attorney to follow the money.  Blowing the money on bad business deals is the sign of a civil case while blowing the money on luxury items can be the sign of a white collar crime case.

BALTIMORE, MD—A federal grand jury has indicted Jay Leonard, age 43, of Alexandria, Virginia, today for mail and wire fraud in connection with scheme involving the fraudulent purchase of 25 properties in Maryland, the District of Columbia and Virginia and a scheme to solicit investors for a resort property that did not exist, announced United States Attorney for the District of Maryland Rod J. Rosenstein. The indictment was returned on August 11, 2009 and Leonard is scheduled to have his initial appearance in U.S. District Court in Baltimore today at 3:00 p.m.

According to the nine count indictment, February 2006 through September 2008, Leonard, a title agent, working with co-conspirator Osman Al-Bari and others, solicited funds from victims in Maryland for a $10 million spa resort in Spotsylvania County, Virginia, that Leonard, Al-Bari and others claimed they were developing. According to the indictment, Leonard used his position as title agent and falsely claimed that he was doing a closing for the spa resort. Based on those allegedly false representations, the Maryland victims transferred $478,000 to Leonard’s bank accoung.

The indictment further alleges that, working with Osman Al-Bari, Timothy Reed, Terrence White and others, Leonard served as the title agent for several straw purchasers who bought at least 20 properties in Maryland, Virginia and Washington, D.C. For example, the indictment alleges that co-conspirator Sabrina Weinberg purchased four properties for Al-Bari and others and was paid approximately $40,000 for the purchases. Weinberg and other straw purchasers used fraudulent loan applications and closing documents to qualify for the mortgages and to disguise the true buyer of the property. According to the indictment Jay Leonard had Weinberg sign false affidavits claiming that each property was her primary residence. Further, the indictment alleges that Leonard kicked back a portion of the settlement funds from the straw buyer properties, disguising the wire transfers on the closing documents as reimbursement for alleged “renovations” performed on the properties prior to closing by Brotherly Investment Group, a company owned by Al-Bari, Reed and White. The indictment alleges that for the Weinberg properties alone, Leonard sent wire transfers totaling $515,820 to Al-Bari, Reed and White.

According to the indictment, almost all of the properties Leonard was involved with went into foreclosure, causing actual losses of over $7 million.

Leonard faces a maximum sentence of 30 years in prison for each of four counts of mail fraud and five counts of wire fraud.