California Real Estate Fraud Report

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Developer Kelly Gearhart gets 14 years in real estate fraud case

July 3rd, 2015 at 5:13am

Once honored as an Atascadero “Citizen of the Year,”  real estate developer Kelly Gearhart, 53, was sentenced to the maximum 14 years in prison for defrauding investors who lost over $15 million on his development projects.

Federal Los Angeles Judge Otis Wright imposed a harsher sentence than the government had requested for Gearhart, who pleaded guilty last year to wire fraud and money laundering. The judge noted that many were elderly investors who had lost everything due to Gearhart’s “sheer greed.”

In his plea agreement with prosecutors, Gearhart admitted selling the same lots to multiple investors doing the same to get bank financing.

Read the original story in the San Luis Obispo Tribune.

OCC restricts Wells Fargo, other banks, in mortgage servicing

June 29th, 2015 at 9:51am

The Consumer Financial Protection Bureau / CFPB is not the only agency after the banks for unethical mortgage practices. Now the Office of the Comptroller of the Currency / OCC has forbidden several of the biggest lenders from acquiring servicing contracts until they clean up their acts.

Read the article in RE-Insider.

Seven charged by U.S. Attorney for defrauding TARP banks

June 26th, 2015 at 2:52pm

Below is a press release from SIGTARP:

Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Benjamin B. Wagner, United States Attorney for the Eastern District of California; Wade Walters, Special Agent in Charge of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG); Birgit Fladager, Stanislaus County (Calif.) District Attorney; and Leslie DeMarco, Special Agent in Charge of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG), today announced that a federal grand jury returned a 15-count indictment on June 25, 2015, against seven residents of California, charging them with conspiracy to commit mail fraud and bank fraud, mail fraud and aiding and abetting, and making false statements to a bank in a mortgage fraud scheme.

Jyoteshna Karan, 43, and Praveen Singh, 36, were arrested this morning at their home in Modesto. Mahendra Prasad, 53, was arrested this morning at his home in Fremont. The remaining defendants each received a summons to appear for arraignment: Phul Singh, 79, and Sunita Singh, 60, both of Modesto; Nani Isaac, 69, of Ceres; and Martin Bahrami, 42, of Turlock.

According to court documents, the defendants conspired to defraud mortgage lending companies and financial institutions by making false statements on loan applications and short-sale applications in order to obtain properties under their names and the names of others. The false statements included statements relating to the defendants’ employment, their familial relationship, income, and their intent to occupy the home as their primary residence.

According to the indictment, the conspiracy encompassed at least 25 properties from Sacramento to Modesto. As a result of the scheme, lenders lost in excess of $3 million. “Early this morning, SIGTARP agents and our law enforcement partners arrested or served summons on seven individuals who stand charged with operating a fraud scheme that cost financial institutions, including multiple TARP banks, millions of dollars in losses,” said Christy Romero, Special Inspector General for TARP. “The seven allegedly conspired to falsify information on mortgage loan and short-sale applications submitted to multiple financial institutions in order to obtain properties across Eastern California. SIGTARP and our law enforcement partners will aggressively investigate allegations of fraud perpetrated at the expense of taxpayers’ TARP bank investments and bring accountability to those who engage in these schemes.” Jyoteshna Karan and Praveen Singh are scheduled to appear for arraignment in U.S. District Court in Fresno, on Friday, June 26, 2015, before U.S. Magistrate Judge Gary Austin. Phul Singh, Sunita Singh, Nani Isaac, and Martin Bahrami are scheduled to appear for arraignment in U.S. District Court in Fresno, on Wednesday, July 1, 2015, before U.S. Magistrate Judge Gary Austin. Mahendra Prasad is scheduled to appear in U.S. District Court in San Jose, on June 26, 2015, for arraignment.

If convicted, each defendant faces a maximum statutory penalty of 30 years in prison and a $1 million fine per count. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

This case is the product of an investigation by SIGTARP, the Stanislaus County District Attorney’s Office, the Federal Bureau of Investigation, FHFA-OIG, and FDIC-OIG. Assistant United States Attorneys Mark E. Cullers and Patrick Delahunty are prosecuting the case.

This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, which was established to wage an aggressive and coordinated effort to investigate and prosecute financial crimes. SIGTARP is a member of the task force and co-chairs the Rescue Fraud Working Group. To learn more about the President’s Financial Fraud Enforcement Task Force, visit www.StopFraud.gov.

About SIGTARP

The Office of the Special Inspector General for the Troubled Asset Relief Program investigates fraud, waste, and abuse in connection with TARP.

To report suspected illicit activity involving TARP, dial SIGTARP at 1-877-SIG-2009 (1-877-744-2009) or visit www.SIGTARP.gov/Pages/crimetips.aspx.

To receive alerts about quarterly reports, new audits, and media releases issued by SIGTARP, sign up at www.SIGTARP.gov/pages/press.aspx. Follow SIGTARP on Twitter @SIGTARP.

Interthinx publishes 5th annual Mortgage Fraud Risk Report

June 26th, 2015 at 11:13am

Agoura Hills-based Interthinx, Inc., a subsidiary of First American Financial Corporation has just published its annual Mortgage Fraud Risk Report.

Interthinkx, which provides risk mitigation solutions for the banking and financial services industry, released the Report based on data collected in 2014 from loan applications processed by the Interthinx FraudGUARD® system.

Read the original article, which includes a link to the Interthinx website, on MarketWatch.

 

Former Wells Fargo banker must re-pay elderly victim from whom he stole

June 26th, 2015 at 11:04am

A former Chico personal banker/broker who ripped-off an elderly client for $88,850 was sentenced to probation in the Butte County Superior Court.

Jeffrey McClure, 38, of Chico, had written approximately 36 checks from his 91-year-old victim’s bank account to himself. At the time, McClure worked for Wells Fargo Advisors, LLC and an affiliated bank; the latter of which had already compensated the elderly customer.

McClure was prepared to re-pay $45,000 as partial restitution and is reportedly working as a long-haul trucker in order to complete restitution plus 10% interest.

Read the original article in the Gridley Herald.

Former GMAC loan officer, step-mother charged in mortgage fraud case

June 26th, 2015 at 10:57am

Former GMAC loan officer Penny O’Malley has pleaded no contest to a felony for obtaining money by false pretenses.

O’Malley’s step-mother Ellen Flores pleaded no contest to a misdemeanor in the same case. According to prosecutor Gordon Isen of the Kern County District Attorney’s Office, O’Malley convinced Flores to assist loan applicant Consuelo Herrera by falsely stating that Herrera worked at a liquor store Flores’ husband owned. Because of the additional income, the loan was underwritten in 2006 but defaulted in 2008.

Read the original article in the Bakersfield Californian.

Modest attorney indicted for short sale fraud of his own property

June 23rd, 2015 at 9:47am

Robert Farrace, 51, a Modesto real estate attorney, has been indicted by a federal grand jury for allegedly completing a short sale fraud of one of his properties by setting up an LLC to purchase it.

Farrace has been charged with three counts of wire fraud, according the U.S. Attorney’s Office for the Eastern District of California. Federal prosecutors say he created Dignitas LLC but used a friend’s name as the LLC’s registered agent in order to hide his interest and control. The alleged purpose was to launder his higher mortgage through the company via a short sale in order to obtain a lower one. This could only be accomplished by misleading the lenders.

Prosecutors say that after defaulting on the mortgage payments to his two properties, Farrace created Dignitas LLC, which served as a straw buyer to purchase the home. The lenders did not know that Farrace controlled Dignitas LLC. The first short sale, of his Roseburg property, was approved; however the short sale for the Scenic Drive home was halted after law enforcement became aware of the alleged scheme and notified the lenders.

Read the original article in the Modesto Bee.

 

Fair Oaks man convicted in fraudulent sale of his investment properties

June 23rd, 2015 at 9:28am

Tony Salcedo, a Fair Oaks mortgage broker and licensed real estate salesperson, has been found guilty of one count of conspiracy to commit mail fraud and four counts of mail fraud, according to the U.S. Attorney for the Eastern District of California.

In a unique form of mortgage fraud, in 2005 and 2006 Salcedo hired licensed mortgage broker Sean McClendon, 49, of Fair Oaks, and Anthony Williams, 47, previously of Memphis, Tennessee, to find buyers for Salcedo’s properties. He paid kickbacks to McClendon and the buyers outside of escrow (escrow fraud), meaning these payments were not disclosed to the lenders as part of the purchase and sale contracts.  Fraudulent documentation was submitted to the lenders in order to obtain loans for the buyers.

As a result of the scheme, the lenders granted loans over the actual value of the properties. Two or more of the buyers declared bankruptcy and lost not only the investment properties they purchased from Salcedo, but their own homes. Tony Salcedo and his family, though, released themselves from $1.6 million in mortgage loan debt.

Sean McClendon pleaded guilty in October 2013 and is still waiting to be sentenced. Anthony Williams, who also pleaded guilty, is serving a prison sentence of two years and nine months.

Read the original article in the Sacramento Bee.

 

Law firm sues J. Rockcliff brokerage for kickbacks on TransactionPoint program

June 12th, 2015 at 2:09pm

La Jolla-based law firm Bottini & Bottini has filed suit against J. Rockcliff, Inc. and Jeffrey W. Sposito for violation of California Civil code 1710 (3), California Business and Prof. Code 17200, fraud and others. The plaintiffs (“Class”) hired J. Rockcliff in the purchase or sale of residences in California between July 1, 2007 and July 11, 2011 and the defendants (the agents or owners) received payments related to Fidelity National Financial‘s TransactionPoint software.

Read the complaint by clicking here.

This lawsuit comes on the heels of similar class action lawsuits against Alain Pinel and Pacific Pinnacle, also filed by Bottini & Bottini.

Fidelity has already settled charges brought by HUD having to do with the TransactionPoint program, by agreeing to pay HUD $4.5 million for alleged violations of RESPA kickbacks.

In the current lawsuit, the plaintiffs are accusing the defendants of accepting undisclosed payments from steering business to one another as real estate agents and other services without disclosing this to the plaintiffs. If true, the various complaints: breaches of fiduciary duties, fraudulent concealment, violation of California’s unfair competition law, constructive fraud and unjust enrichment, could cost the defendants to have to return their full commissions to the plaintiffs.

 

Read the original article in RE-Insider.

Three more convicted in Rancho Cucamonga loan modification fraud case

June 11th, 2015 at 2:15pm

The owners of a telemarketing company that prosecutors accused of stealing more than $7 million from 4,000 homeowners in distress were convicted of various felony charges in U.S. District Court in Riverside.

Victims lost more than $7 million when they paid for services, including loan modifications, that were never provided after they were contacted through cold calls, advertisements and company-controlled websites.

Christopher Paul George, 45, co-owned 21st Century Legal Services Inc. George was found guilty by a federal jury of wire fraud, wire fraud affecting a financial institution and conspiracy to commit mail and wire fraud.

In the same trial, Crystal Taiwana Buck, 40 of Long Beach, whom prosecutors called a sales “closer,” was convicted of mail fraud.

Albert DiRoberto, 62, of Fullerton, a sales and marketing employee, was found guilty of mail and wire fraud affecting a financial institution.

Christopher George’s  co-owner, Andrea Ramirez, 47,  was convicted in the operation of 21st Century after an earlier trial

“Members of the conspiracy preyed upon homeowners who were in desperate financial straits by making promises they had no intention of keeping,” Acting U.S. Attorney Stephanie Yonekura said in the news release by the U.S. Attorney’s Office for the Central District of California.

To date, a total of 11 defendants linked to 21st Century have been convicted of federal fraud charges as a result of an investigation conducted by the Federal Bureau of Investigation; IRS – Criminal Investigation; the United States Postal Inspection Service; the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and the Federal Housing Finance Agency, Office of Inspector General.

 

 

© Copyright 2007-2015 Monique Bryher

Legal Disclaimer.

The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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