Sentences in Maryland Mortgage Fraud Schemes

Rachel Dollar —  November 9, 2016 — Leave a comment

Alexander Sivels, II, real estate consultant, 32, Baltimore, Maryland and Christopher A. Kwegan, real estate agent, 59, Randallstown, Maryland, were each sentenced to 27 months in prison, followed by three years of supervised release, for related mortgage fraud schemes. U.S. District Judge James K. Bredar handed down the sentence and also  ordered Sivels to pay restitution of $1,317,314.35, and ordered Kwegan to pay restitution of $530,641.27.

Sivels previously pleaded guilty to wire fraud involving the fraudulent purchase of at least nine properties in Baltimore using fraudulent loan documentation and settlement documents, resulting in actual or attempted losses of more than $1.3 million. Kwegan participated in the fraudulent sale of two properties with losses of more than $530,000.

According to Sivels’ plea agreement and other court documents, Sivels owned Royal Real Estate Consultants LLC, and co-conspirator Cecil Chester worked as an accountant from an office located on New Hampshire Avenue in Hyattsville, Maryland.  Co-conspirator Andreas Tamaris, 46, Bel Air, Maryland, purchased, renovated, and then resold distressed row houses in Baltimore City, primarily in Highlandtown.  In 2007 or 2008, Sivels met Tamaris and agreed to assist Tamaris to find purchasers for houses he had bought and renovated, or that were owned by developers who owed money to Tamaris for renovation work.  Tamaris told Sivels the amount he needed to receive from the sale of each property to recover his investment and earn a profit.  Tamaris told Sivels that he could keep any excess funds generated if Sivels sold the house for more than the amount Tamaris needed to cover his costs.

Between 2008 and 2011, Sivels participated in the sale of at least nine properties, all of which were eventually foreclosed upon, resulting in losses of more than $1.3 million.  In 2008 and 2009, Sivels and Chester recruited buyers to purchase houses, knowing that they did not qualify for the home mortgages.  To enable the buyers to purchase the properties, Sivels and his co-conspirators prepared fraudulent mortgage applications which misrepresented the buyers’ income and assets.  Sivels sometimes created fake tax documents and false pay stubs, and falsified bank statements to reflect the substantial balances referenced by the loan application.  The conspirators often inflated the price of the house to insure a profit for themselves.  At the settlements for the properties, the proceeds of the sale were generally distributed to Tamaris, who would write checks to Sivels for his portion of the profits.  From the sale of just four of the properties Sivels received payments totaling more than $200,000.

In 2010 and 2011, Sivels assisted with the sales of several other Tamaris-owned properties by providing prospective lenders with fraudulent verifications of employment for the purchasers, falsely representing that they worked at a home renovation company Sivels owned, receiving cash payments in return for his assistance.

According to his guilty plea, in the summer of 2008, Kwegan learned that the owner of a row house on Washington Boulevard in Baltimore City was trying to sell his home.  The owner had purchased the property 10 years earlier for $11,500 and Kwegan told him that he could sell it for $75,000.  The owner agreed to sell it for that price. Rather than trying to sell the property at the actual market price, Kwegan requested assistance from Cecil Chester, who was already operating a mortgage fraud scheme and they set the sale price of the row house at $250,000.

Kwegan arranged to use the personal identifiers of an individual recruited by Chester to buy the property as a straw purchaser.  Kwegan and his co-conspirators knew that the straw purchaser lacked the necessary assets to pay for the down payments and closing costs on the property, or the income to keep up the mortgage payments on the house after the transaction closed.  Chester provided a mortgage loan broker with a false loan application and fraudulent supporting documents which inaccurately represented that the straw purchaser’s employment, annual income, and assets.  Based upon these false representations, a bank wired $242,500 to finance the purchase of the property, at the settlement on September 30, 2008.  Kwegan used his own funds to obtain a cashier’s check in the amount of $9,391.53 to cover the down payment and the straw purchaser’s share of the closing costs.  After the settlement, just $15,773.65 was disbursed to the seller of the property.  In contrast, $145,000 was wired to an entity identified as “CAK,” which were Kwegan’s initials.   These funds were transferred into Kwegan’s bank account.  Kwegan then wrote a check to Chester for $35,000.  No payments were made on the mortgage.  The property went into foreclosure and remains unsold at this time, resulting in a loss of between $150,000 and $235,000.  At today’s hearing, the Court found that Kwegan was also involved in the fraudulent sale of another property with Chester, resulting in a loss of $296,000.  Kwegan derived over $100,000 in proceeds from this transaction and paid another $40,000 to Chester for his assistance.

Tamaris previously pleaded guilty to one count of conspiracy to commit mail and wire fraud and is scheduled to be sentenced on November 15, 2016.  Co-conspirator Cecil Sylvester Chester, age 69, of Mitchellville, Maryland pleaded guilty to the fraudulent purchase of seven properties in Baltimore, using fraudulent loan documentation and straw purchasers, resulting in losses of over $1.4 million. Chester is scheduled to be sentenced on November 28, 2016. Michael Gerard Camphor, 60, Baltimore, Maryland, previously pleaded guilty for his participation in the fraudulent purchase of four properties in Baltimore resulting in losses of over $736,000. Judge Bredar scheduled Camphor’s sentencing for December 19, 2016.

The sentences were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation; Special Agent in Charge Bertrand Nelson of the U.S. Department of Housing and Urban Development Office of Inspector General; and Special Agent in Charge Brian Murphy of the United States Secret Service – Baltimore Field Office.

“Mortgage fraud perpetrators steal by inducing lenders to make loans that will never be repaid, and they harm neighborhoods when the inevitable foreclosures drive down property values,” stated U.S. Attorney Rod J. Rosenstein.

United States Attorney Rod J. Rosenstein commended the FBI, HUD OIG – Office of Investigations and the U.S. Secret Service for their work in the investigation.  Mr. Rosenstein thanked Assistant U.S. Attorney Jefferson M. Gray, who prosecuted the cases.

In Mortgage Fraud
 permalink

CPA Pleads Guilty in Mortgage Fraud Scheme

Rachel Dollar —  November 9, 2016 — Leave a comment

Barry Horrow, 68, Glenn Mills, Pennsylvania, pled guilty to 4 counts of bank fraud.

As part of his guilty plea, Horrow, a Certified Public Accountant who owned and operated his own accounting company, Horrow and Associates, which operated in both Delaware and Chester Counties, admitted that he committed bank fraud by helping one of his clients, George Barnard of Newtown Square [(who owned Capital Financial Mortgage Corporation (“CFMC”)] and who was charged previously in an indictment with various offenses stemming from a $13 million fraud scheme who owned) to defraud lenders into issuing mortgages for 3 multi-million dollar New Jersey Shore beach mansions and a yacht based on false tax returns, false audit reports, and other false information. Horrow admitted that he repeatedly provided false tax returns for Barnard to submit to lenders on which Horrow inflated Barnard’s income by hundreds of thousands of dollars, when Horrow knew that the lenders were going to be relying upon the inflated income figures in approving Barnard’s loan requests.

Horrow faces a maximum sentence of 120 years’ imprisonment, a five-year period of supervised release, a $4,000,000 fine, a $400 special assessment, and a likely advisory sentencing guideline range of 41 – 51 months’ imprisonment. Horrow also agreed, as part of his plea, to make restitution of over $2,965,000.

The plea was announced by United States Attorney Zane David Memeger. The case was investigated by the Federal Bureau of Investigation, the Department of Housing and Urban Development, Office of Inspector General, and the Internal Revenue Service, Criminal Investigative Division, and is being prosecuted by Assistant United States Attorney Michael S. Lowe.

In Mortgage Fraud ,
 permalink

Another Sentence in Mortgage Loan Mod Scheme

Rachel Dollar —  November 9, 2016 — Leave a comment

Michelle Lefaoseu, also known as “Michelle Bennett,” “Michelle Lee” and “Michelle Page,” 42, Huntington Beach, California, was sentenced to 12 months and one day of imprisonment, followed by one year of supervised release, for participating in an extensive mortgage loan modification scheme.

According to court documents and statements made in court, Lefaoseu worked at a California-based company that falsely purported to provide home mortgage loan modifications and other consumer debt relief services to numerous homeowners in Connecticut and across the United States in exchange for upfront fees. The company did business, at various times, as “First Choice Financial Group, Inc.,” “First Choice Financial,” “First Choice Debt,” “Legal Modification Firm,” “National Freedom Group,” “Home Care Alliance Group,” “Home Protection Firm,” “Hardship Center,” “Network Solutions Center, Inc.,” “Premiere Financial Center,” “Premiere Financial,” “Rescue Firm,” “International Research Group LLC,” “Hardship Solutions,” “American Loan Center,” “Loan Retention Firm,” “Clear Vision Financial,” “Green Tree Financial Group,” “Green Tree Financial,” “Enigma Fund, Inc.,” “National Aid Group,” “Southern Chapman Group LLC,” “Save Point Financial,” “Best Rate Financial Solutions,” “Best Rate Financial Solution,” “Best Rate Financial,” “Best Rate Finance Group,” and “Nation Star Financial.”

Aria Maleki presided over the entire structure of this scheme, and Lefaoseu was head of the processing department. Acting as representatives of the above-named entities, members of Maleki’s sales team cold-called homeowners and offered to provide mortgage loan modification services to those who were having difficulty repaying their home mortgage loans. Homeowners were charged fees that typically ranged from approximately $2,500 to $4,300 for the services. To induce homeowners to pay these fees, scheme participants falsely represented that the homeowners already had been approved for mortgage loan modifications on extremely favorable terms; the mortgage loan modifications already had been negotiated with the homeowners’ lenders; the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and if for some reason the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.

In fact, the homeowners had not been preapproved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners had not qualified for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request. Few homeowners ever received any type of mortgage loan modification through the defendants’ company, and few homeowners received refunds of their fees.

Participants in the scheme used pseudonyms and periodically changed their business and operating names to evade detection. They also directed homeowners to mail their checks to addresses and mail boxes that Maleki and others had set up in states other than California.

After members of the sales team fraudulently induced homeowners to pay for the company’s services, the homeowners’ files were transferred to Lefaoseu and the junior processors working under her supervision. Lefaoseu was fully aware of her co-workers’ lies and, during her contact with victims, repeatedly helped to cover up those lies.

As a result of this scheme, more than 1,000 homeowners suffered losses totaling more than $3 million.

On January 21, 2016, a grand jury in New Haven returned an indictment charging Maleki, Lefaoseu and five other California residents with conspiracy and fraud offenses related to this scheme. The defendants were arrested on January 26.

On July 11, 2016, Lefaoseu pleaded guilty to one count of misprision of a felony.

On March 22, 2016, Maleki pleaded guilty to one count of conspiracy to commit mail and wire fraud and, on July 18, 2016, he was sentenced to 112 months of imprisonment. He also forfeited approximately $350,000 that investigators seized from various bank accounts, approximately $362,000 sized from a Bitcoin account, a $100,000 cashier’s check, and a 2013 Ferrari 458 Italia.

The other five defendants, all of whom were members of Maleki’s sales team, pleaded guilty and were sentenced to prison terms ranging from 18 months to 58 months.

All seven defendants have been ordered to pay restitution in the amount of $2,390,496.59.

U.S. District Judge Stefan R. Underhill in Bridgeport, Connecticut, sentenced Lefaoseu and Deirdre M. Daly, United States Attorney for the District of Connecticut made the announcement. The matter was investigated by the U.S. Department of Homeland Security – Homeland Security Investigations, U.S. Postal Inspection Service, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), U.S. Department of Housing and Urban Development – Office of Inspector General, Federal Housing Finance Agency – Office of Inspector General, and Federal Bureau of Investigation, with assistance from the Oklahoma Attorney General’s Office.

The case was prosecuted by Assistant U.S. Attorney Avi M.

In Mortgage Fraud , ,
 permalink

Indictments in Foreclosure Delay Scheme

Rachel Dollar —  October 26, 2016 — Leave a comment

Yun Soon Matsuba, aka Dorothy Matsuba, 65, Chatsworth, California; Thomas Matsuba, 64, Chatsworth, California; Jane Matsuba Garcia, 40, Chatsworth, California; and Jamie Matsuba, 31, Chatsworth, California, and Young Park, 53, Koreatown, California, were indicted for their alleged participation in a conspiracy to defraud banks and homeowners and were each charged with one count of conspiracy to commit wire fraud, make false statements and commit identity theft.  In addition, the 18-count indictment charges Dorothy Matsuba with five counts of wire fraud, five counts of making false statements and six counts of aggravated identity theft; Jane Matsuba Garcia with one count of wire fraud, two counts of making false statements and one count of aggravated identify theft; and Jamie Matsuba with one count of making a false statement.

Dorothy Matsuba is the alleged architect of a $30 million mortgage relief fraud scheme and the other four defendants are former employees of a purported mortgage relief company.

Dorothy Matsuba, Thomas Matsuba, Jane Matsuba Garcia and Jamie Matsuba were all arrested; Park remains a fugitive.  Thomas Matsuba is Dorothy Matsuba’s husband and Jane Matsuba Garcia and Jamie Matsuba are Dorothy Matsuba’s daughters.  Young Park is Dorothy Matsuba’s brother.

The indictment alleges that from 2005 to 2014, the defendants operated an interlocking web of companies, primarily under the names of Ownership Management Service LLC and Trust Holding Service LLC, which purported to help homeowners obtain relief from high mortgage debt through short sales, in which lenders agree to sell a mortgaged property for less than the amount owed on the mortgage.  In a scheme to defraud both the banks and the homeowners the defendants allegedly convinced homeowners to deed their property to trusts set up and controlled by the Matsubas and also promised to pay their mortgages while negotiating with banks to short sell those properties.  In the interim, the homeowners either remained in their properties or were relocated to another Matsuba-controlled property.  Instead of performing short sales as promised, Dorothy Matsuba and the other defendants failed to make mortgage payments and submitted false and fraudulent short sale purchase offers to the banks in an effort to delay foreclosure and maximize the time period over which the Matsubas could collect rent from the homeowners and other third parties placed in the properties by the Matsubas, the indictment alleges.  The Matsubas also routinely forged signatures, used false and stolen identities and filed fraudulent bankruptcy petitions—all in a scheme to delay foreclosure and maximize their profits at the expense of the homeowners and banks, the indictment alleges.

The scheme allegedly netted the defendants more than $30 million in rent during the conspiracy period.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Assistant Director in Charge Deirdre Fike of the FBI’s Los Angeles Division, Acting Special Agent in Charge Charge Anthony J. Orlando of the Internal Revenue Service-Criminal Investigation (IRS-CI) Los Angeles Field Office, Special Agent in Charge Leslie P. DeMarco of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Western Region and Sheriff Jim McDonnell of the Los Angeles County Sheriff’s Department made the announcement.

The FBI’s Los Angeles Division, IRS-CI’s Los Angeles Field Office, FHFA-OIG’s Western Region and the Los Angeles County Sheriff’s Department’s Real Estate Fraud Unit investigated the case.  Trial Attorney Niall O’Donnell and Senior Litigation Counsel David A. Bybee of the Criminal Division’s Fraud Section are prosecuting the case.  Senior Trial Attorney Nicholas Acker previously worked on the investigation.

In Mortgage Fraud ,
 permalink

Two Year Sentence in Stolen Real Estate Scheme

Rachel Dollar —  October 26, 2016 — Leave a comment

Daniel Deaibes was sentenced today to 24 months for his role in a scheme to steal title to Southern California homes and then “sell” the properties to unsuspecting buyers – before the buyers realized who the true owners were.

From September 2012 through their arrest in November 2014, Deaibes and his co-conspirators, including co-defendants Mazen Alzoubi and Mohamed Daoud, fraudulently sold or attempted to sell at least 15 homes worth more than $3.6 million that actually never belonged to them. On at least 10 occasions, they were successful—earning illicit proceeds of nearly $2.2 million.

Deaibes pleaded guilty in March 2015 to participating in the fraud and was sentenced by U.S. District Judge Cynthia Bashant. As part of this plea, Deaibes admitted that he used aliases to deceive escrow and title officers into believing that he was “John Moran,” and that he was the true owner of property that was being marketed for sale. In fact, “John Moran” did not exist, and Deaibes and his co-conspirators planned to fraudulently sell the properties, divert the proceeds to their own bank accounts, and then quickly disburse the money overseas.  On at least three occasions, Deaibes, posing as “Moran” and presenting a fake driver’s license, appeared before notaries to sign title documents and property deeds.

To make it appear that they owned these properties, the co-conspirators generated forged deeds that made it appear the true property owner had sold his or her home to a sham real estate “investment” business the co-conspirators controlled. They forged the true owners’ signatures on the deeds, and used forged notary stamps to make them appear legitimate. In reality, though, the true owners were entirely unaware of the pretend sales. Once the fraudulent documents were recorded in the chain of title, Alzoubi (using aliases and stolen identities) listed the properties for sale, posing to buyers, escrow companies, and title officers as the new owner.  In this way, the co-conspirators collected all the proceeds of the sale, and the true owners were left with nothing.

Alzoubi, the ringleader of the fraudulent scheme, assumed multiple fake identities to keep the scheme going.  He also posed as real people, pretending on one occasion that he was an attorney for one of the true owners.  (Unbeknownst to Alzoubi at the time, he was talking to an undercover federal agent.)  As a result of his greater role in the scheme, Alzoubi was charged with, and in January 2016 pleaded guilty to, aggravated identity theft, which carries a mandatory sentence of two years in prison in addition to his sentence for the fraud and money laundering.  His sentencing is scheduled for November 7, 2016, at 9:00 am, before Judge Bashant.

Mohamed Daoud also pleaded guilty, in July 2015, admitting that he helped Alzoubi launder the proceeds of the scheme. They used Daoud’s company, “Norway LLC,” to pretend to acquire title to some of the properties. Daoud received approximately $270,000 in proceeds. In December 2015, before he was sentenced, Daoud fled the country and is now a fugitive.

Most of the properties the co-conspirators “sold” were post-foreclosure properties owned by banks or institutions such as Fannie Mae and Freddie Mac

“Schemes like this one undermine the public’s confidence in their most personal and important investment, their homes,” said U.S. Attorney Laura Duffy. “I am committed to prosecuting people who continue to prey on the victims of the devastating mortgage meltdown, and sending those criminals to prison.”

“This scheme was designed to literally rip home ownership right out of the hands of innocent victims, and for those victims the costs were far greater than a title to a house,” said Leslie P. DeMarco, Special Agent in Charge, Western Region. “This scheme is callous and the perpetrators deserve the punishment set out for them. FHFA-OIG remains committed to our relentless pursuit of individuals who try to profit from the aftermath of the housing crisis.”

“Fraud targeting a family’s home, the heart of a family’s financial investment, has a ripple effect through our nation’s economy,” said FBI Special Agent in Charge Eric S. Birnbaum.  “The FBI is committed to investigate and uncover schemes by those who defraud homeowners.”

In addition to his jail sentence, Deaibes was ordered to pay $1,819,591 in restitution to the victims of the fraud.

DEFENDANT:

Daniel Deaibes, 14CR3325-BAS                 Age: 38           Rancho Cucamonga, CA     

COUNT ONE: Mail fraud, in violation of 18 U.S.C. § 1341

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

CO-DEFENDANTS:

Mazen Alzoubi, 14CR3325-BAS                 Age: 33           Rancho Cucamonga, CA     

COUNT ONE: Conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. § 1349.

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution, and forfeiture.

COUNT TWO: Mail fraud, in violation of 18 U.S.C. § 1341.

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

COUNTS THREE AND FOUR: Aggravated identity theft, in violation of 18 U.S.C. § 1028A.

Maximum Penalties: mandatory 2 years’ imprisonment, consecutive to any other term of imprisonment, $250,000 fine, $100 special assessment, restitution.

COUNT FIVE: Conspiracy to launder money, in violation of 18 U.S.C. § 1956(h).

Maximum Penalties: 20 years’ imprisonment, $500,000 fine or twice the value of the property involved in the transaction, $100 special assessment, restitution, and forfeiture.

Mohamed Daoud, 14CR3326-BAS             Age: 53           Norway

COUNT ONE: Conspiracy to launder money, in violation of 18 U.S.C. § 1956(h)

Maximum Penalties: 20 years’ imprisonment, $500,000 fine or twice the value of the property involved in the transaction, $100 special assessment, restitution, and forfeiture.

AGENCIES

Federal Housing Finance Agency – Office of Inspector General

Federal Bureau of Investigation

In Mortgage Fraud , ,
 permalink

Real Estate Agents Gets 3 Year Prison Sentence

Rachel Dollar —  October 26, 2016 — Leave a comment

Lillian Marquez, 41, Stockton, California was sentenced by U.S. District Judge John A. Mendez to three years and one month in prison for conspiring to commit mortgage fraud.

Marquez pleaded guilty on June 14, 2016. On September 20, 2016, co-defendant Michael Keatts, 59, Stockton, California was also sentenced to three years and one month in prison for his role in the conspiracy. Both Marquez and Keatts were ordered to pay $193,134 in restitution to financial institutions harmed by their scheme.

According to court documents, from February of 2006, through at least August of 2012, Marquez and Keatts operated Colonial Home and Business Services in Stockton, California. Both defendants were licensed real estate agents who assisted clients in purchasing and selling homes. They both participated in supplying false information to mortgage lending institutions indicating that clients were employed by various businesses that the defendants set up and controlled. In fact, these clients were not employed by those businesses and their actual income from their true employment was far less than what was represented to lending institutions. To support these false claims, the defendants created and submitted fraudulent paystubs and tax documents falsely stating that their clients were so employed.

In addition, both defendants engaged in short sale fraud, in which they assisted clients facing default on their current loans to arrange for short sales of their properties. Unbeknownst to the lending institutions, the defendants arranged for the properties to be sold to straw buyers. The original owners would remain in the properties, and enjoy the benefits of the new loans that the lenders assumed were made to other individuals.

Acting U.S. Attorney Phillip A. Talbert announced the sentence.  The case was the product of an investigation by the Federal Bureau of Investigation and the Office of the Inspector General for the Department of Housing and Urban Development. Assistant United States Attorney Philip Ferrari prosecuted the case.

In Mortgage Fraud , , ,
 permalink

Sales Agents in Loan Modification Fraud Sentenced

Rachel Dollar —  October 26, 2016 — Leave a comment

Kowit Yuktanon, also known as “Eric Cannon” and “Aaron Brock,” 32, Huntington Beach, California, and Cuong Huy King, also known as “James Nolan” and “Jimmy“, 32, Westminster, California, have each been sentenced by U.S. District Judge Stefan R. Underhill in Bridgeport, Connecticut, to 18 months of imprisonment, followed by one year of supervised release, for participating in an extensive mortgage loan modification scheme.  Judge Underhill also ordered both defendants to pay restitution in the amount of $2,390,496.59.

According to court documents and statements made in court, Yuktanon and King worked at a California-based company that falsely purported to provide home mortgage loan modifications and other consumer debt relief services to numerous homeowners in Connecticut and across the United States in exchange for upfront fees.  The company did business, at various times, as “First Choice Financial Group, Inc.,”  “First Choice Financial,” “First Choice Debt,” “Legal Modification Firm,” “National Freedom Group,” “Home Care Alliance Group,” “Home Protection Firm,” “Hardship Center,” “Network Solutions Center, Inc.,” “Premiere Financial Center,” “Premiere Financial,” “Rescue Firm,” “International Research Group LLC,” “Hardship Solutions,” “American Loan Center,” “Loan Retention Firm,” “Clear Vision Financial,” “Green Tree Financial Group,” “Green Tree Financial,” “Enigma Fund, Inc.,” “National Aid Group,” “Southern Chapman Group LLC,” “Save Point Financial,” “Best Rate Financial Solutions,” “Best Rate Financial Solution,” “Best Rate Financial,” “Best Rate Finance Group,” and “Nation Star Financial.”

Aria Maleki presided over the entire structure of this scheme, and Yuktanon and King were junior members of the sales team.  Acting as representatives of the above-named entities, Yuktanon, King and others cold-called homeowners and offered to provide mortgage loan modification services to those who were having difficulty repaying their home mortgage loans.  The defendants charged homeowners fees that typically ranged from approximately $2,500 to $4,300 for their services.  To induce homeowners to pay these fees, the defendants falsely represented that the homeowners already had been approved for mortgage loan modifications on extremely favorable terms; the mortgage loan modifications already had been negotiated with the homeowners’ lenders; the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and if for some reason the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.

In fact, the homeowners had not been preapproved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners had not qualified for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request.  Few homeowners ever received any type of mortgage loan modification through the defendants’ company, and few homeowners received refunds of their fees.

Participants in the scheme used pseudonyms and periodically changed their business and operating names to evade detection.  The defendants also directed homeowners to mail their checks to addresses and mail boxes that Maleki and others had set up in states other than California.

As a result of this scheme, more than 1,000 homeowners suffered losses totaling more than $3 million.

On January 21, 2016, a grand jury in New Haven returned an indictment charging Maleki, Yuktanon, King and four other California residents with conspiracy and fraud offenses related to this scheme.  The defendants were arrested on January 26.

YUKATANON and KING each pleaded guilty to one count of misprision of a felony.

Maleki pleaded guilty to one count of conspiracy to commit mail and wire fraud and, on July 18, 2016, he was sentenced to 112 months of imprisonment.  He also forfeited approximately $350,000 that investigators seized from various bank accounts, approximately $362,000 sized from a Bitcoin account, a $100,000 cashier’s check, and a 2013 Ferrari 458 Italia.

The sentence was announced by Deirdre M. Daly, United States Attorney for the District of Connecticut.  The matter was been investigated by the U.S. Department of Homeland Security – Homeland Security Investigations, U.S. Postal Inspection Service, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), U.S. Department of Housing and Urban Development – Office of Inspector General, Federal Housing Finance Agency – Office of Inspector General, and Federal Bureau of Investigation, with assistance from the Oklahoma Attorney General’s Office.

The case is being prosecuted by Assistant U.S. Attorney Avi M. Perry.

In Mortgage Fraud , ,
 permalink

Former Connecticut Representative Sentenced in FHA Fraud

Rachel Dollar —  October 26, 2016 — Leave a comment

Victor Cuevas, 52, Bristol, Connecticut, was sentenced by U.S. District Judge Jeffrey A. Meyer in New Haven to one year of probation and a $1,000 fine for conspiring with others to commit bank fraud in connection with his home mortgage loan applications.

According to court documents and statements made in court, in the summer of 2013, Cuevas, a City of Waterbury employee and, at that time, the state representative for the 75th District, wanted to purchase a residence in Bristol with a Federal Housing Administration (“FHA”) loan.

The U.S. Department of Housing and Urban Development provides mortgage insurance on loans made through its FHA program and mortgages offered through the program are subject to certain restrictions, including restrictions on the funds that may be used to purchase properties.

Cuevas, with the assistance of others, represented to the mortgage bank that he was using gifted funds to purchase the property when, in fact, the money was not gifted but was instead loaned to Cuevas for the purpose of purchasing the property.

Specifically, Cuevas first represented to the mortgage bank that an individual who he identified as his nephew but, in fact, was a subordinate employee from the City of Waterbury, was providing him with cash to purchase the property as a gift.  When the mortgage lender asked for the “nephew’s” bank account statements to prove that he had the money to gift to Cuevas, Cuevas withdrew the mortgage application.  A few weeks later, Cuevas had a different Waterbury employee, who Cuevas identified as his “cousin,” “gift” him the $7,000.  Both individuals signed a HUD statement under oath that the funds were, indeed, a “gift” and that no repayment of the monies was expected.  However, as soon as the mortgage closed, Cuevas re-paid the employee the $7,000.

On June 20, 2016, Cuevas pleaded guilty to one count of conspiracy to commit bank fraud.

Cuevas resigned from the Connecticut General Assembly in March 2016.

The sentence was announced by Deirdre M. Daly, United States Attorney for the District of Connecticut.  The matter was investigated by the Connecticut Public Corruption Task Force, notably the U.S. Department of Housing and Urban Development – Office of Inspector General, and the Federal Bureau of Investigation.  The Task Force also includes members from the U.S. Department of Health and Human Services – Office of Inspector General, U.S. Postal Inspection Service and Internal Revenue Service – Criminal Investigation Division.  The case was prosecuted by Assistant U.S. Attorney Sarah Karwan.

 

In Mortgage Fraud
 permalink

Settlement of Government Allegations on FHA Loans

Rachel Dollar —  October 26, 2016 — Leave a comment

The U.S. Attorney’s Office has reached a $1,025,000 civil settlement with First American Mortgage Trust, d/b/a NXTLoan.com, a small mortgage lender based in Brighton, Massachusetts, and its founder and CEO, Barry S. Polack, in connection with allegations that they submitted false insurance claims on mortgages insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA).

The settlement resolves allegations that NXTLoan.com, at Polack’s direction, ignored FHA’s due diligence requirements and falsely certified that NXTLoan.com loans qualified for FHA insurance when they did not.  The settlement also resolves allegations that Polack falsely certified to FHA that NXTLoan.com complied with quality control requirements and failed to report known loan defects.

“This settlement is another example of the government’s efforts to hold mortgage lenders and individuals accountable for fraudulent underwriting of government-insured mortgages,” said United States Attorney Carmen M. Ortiz.  “In order to obtain HUD insurance, NXTLoan.com certified that its loans complied with HUD’s quality standards while ignoring defects that made the loans ineligible for FHA insurance.”

“This settlement agreement resolves allegations that First American Mortgage Trust, entrusted by American taxpayers to comply with FHA regulations, failed to conform with certain FHA requirements in connection with submission of insurance claims insured by FHA,” said Inspector General David A. Montoya for HUD.  “This settlement demonstrates a continued commitment to address business practices that potentially harm the FHA program and its participants.”

“We will not tolerate the reckless disregard for FHA’s underwriting standards,” said Tonya Robinson, Acting General Counsel for the U.S. Department of Housing and Urban Development.  “FHA’s insurance fund, and the millions of families who rely upon it, depend on the good faith and integrity of the mortgage lenders with whom we do business.  We will continue to work aggressively to weed out participants in the FHA program who purposefully fail to meet our most basic requirements.”

“This settlement is the latest example of our continued work of holding FHA Direct Endorsement Lenders accountable for adhering to strict underwriting standards,” said Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development Office of Inspector General, Northeast Regional Office.  “I am thankful for the cooperation between my office and the Department of Justice and am especially appreciative of the U.S. Attorney’s Office’s perseverance in bringing this matter to a fair and just resolution.”

NXTLoan.com and Polack participated as a direct endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite and approve mortgage loans for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance; to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices; and to self-report any deficient loans identified by their quality control program.

As part of the settlement, NXTLoan.com and Polack admitted that on certain occasions between 2005 and 2011, NXTLoan.com did not conduct the due diligence required by FHA, and as a result, some NXTLoan.com loans did not meet FHA’s quality standards and were ineligible for FHA insurance.  Nevertheless, NXTLoan.com underwriters, supervised by Polack, certified those loans for FHA insurance.  When those loans defaulted, FHA paid insurance claims on loans that never should have been FHA insured.  In addition, NXTLoan.com, at times, did not conduct post-closing loan audits, even though Polack certified annually to FHA that NXTLoan.com had complied with FHA underwriting requirements.  When NXTLoan.com began conducting audits on closed loans, NXTLoan.com and Polack did not report to FHA any serious issues identified by the audits.

The settlement took into consideration NXTLoan.com’s and Polack’s financial circumstances and recent improvements to NXTLoan.com’s business practices.

This matter was investigated by the U.S. Department of Housing and Urban Development’s Office of the Inspector General and Office of General Counsel.  It was handled by Assistant U.S. Attorney Brian LaMacchia of Ortiz’s Civil Division.

In Mortgage Fraud
 permalink

Pennsylvania CPA Charged in New Jersey Mortgage Fraud

Rachel Dollar —  October 6, 2016 — Leave a comment

Barry E. Horrow was charged by information in the Eastern District of Pennsylvania with four counts of bank fraud and one count of aiding and abetting.

The information alleges that Horrow was a CPA who owned and operated Horrow and Associates, first in Delaware County and then in Chester County, Pennsylvania.  From January 2005 through March 2013, George Barnard and David Fili, Jr. (both of whom were charged separately), began operating Capital Financial Mortgage Corp (“CFMC”) first as a mortgage brokerage and later as a direct mortgage lender.  Barnard also had a direct or indirect ownership interest in various title companies, including PA/NJ Abstract, Inc. dba East Coast Land Transfer, PANJ Land Transfer LLC, Tri-State Land Transfer LLC, Nationwide Land Transfer LLC, Atlantic Closing Services LLC and Gulf Coast Land Transfer Inc. CFMC and the title companies were clients of Horrow and Horrow prepared financial statements and the personal tax returns of Barnard and the corporate tax returns of CFMC and the title companies. The financial statements Horrow prepared for Barnard and CFMC were false. Horrow purported to conduct audits of CFMC and issued audit reports that he knew were being submitted to lenders to help secure loans for CFMC and Barnard when, in fact, he did not conduct any true audits and knew the audit reports were false.

The information further alleges that, in order to qualify for a loans to purchase homes at 221 65th Street, Avalon, New Jersey, 39 E. 25th Street, Avalon, New Jersey, and 670 First Avenue, Avalon, New Jersey, Barnard prepared and submitted various documents, including documents Barnard knew were false, in order to falsely inflate his income and cause the bank to believe his cash flow and net worth were greater than they were. The false documents included false tax returns prepared by Horrow.

In Mortgage Fraud , , , ,
 permalink