California Real Estate Fraud Report

One of the biggest real estate investment fraud trials in the history of Riverside County (or anywhere) will soon be in the hands of the jury.

Jurors in the trial in which prosecutors accuse Hendrix Montecastro and his mother, Helen Pedrino, of felony crimes and securities investment fraud have concluded their closing arguments.

The trial is being heard in front of Riverside County Superior Court Judge Jeffrey Prevost.

Hendrix Montecastro, 40, stands accused of being at the center of a Ponzi scheme that numbers 27 victims. Helen Pedrino, 61, has been accused as recruiting five of the victims.

Two other defendants, purported “mastermind” James Duncan, and Maurice McLeod, have already pleaded guilty, as have several other co-conspirators/defendants.

Read the original article in the Press Enterprise.

Sergio Gutierrez, a 49-year-old San Francisco businessman, has been setenced by U.S. District Judge Jeffrey White to 12 years in federal prison for a mortgage fraud scam that targeted Spanish-speaking borrowers (affinity fraud, ethnic fraud).

Gutierrez sought our Latinos in 2008 and 2009 and promised them that in exchange for a fee he could write-up documents that would prove their mortgages were invalid and that they did not have to pay off their loans. Predictably, most of the persons who signed up for Gutierrez’ service lost their homes. Apparently, none of these people was able to reason that if their mortgages were invalid, so was their right to stay in a home that they couldn’t possibly own. Dumb meets crooked.

 U.S. District Judge Jeffrey White sentenced Gutierrez to a longer term than that requested by prosecutors and ordered him to pay restitution to his “victims.”

 Read the original article in the San Francisco Chronicle / SFGate.

The long-awaited criminal trial of Hendrix Montecastro and his mother, Helen Pedrino, is finally underway, after a panel of jurors and four alternates was seated November 27.

Montecastro and Pedrino, who are representing themselves, are facing a staggering  317 counts relating to scamming 28 victims out of close to $30 million in a real estate investment fraud and Ponzi scheme.

Prosecutor, chief deputy district attorney Vicki Hightower from the San Bernardino District Attorney’s Office has the unenviable task of painting a picture of the massive amounts of evidence so that the jury can understand the charges. Thus far, she has shown the jury a poster with the alleged cast of persons, alleging that Montecastro and Pedrino were the chief architects and that Pedrino, a nurse, targeted church-goers and hospital employees (affinity fraud), using faith to get the former to reveal their financial details.

What should have raised eyebrows were the rules prospective investors were required to follow: commit to three years’ of investing, turn over control of their finances and ask no questions. In return, they would receive (literally) unbelievable returns of 300-700%.

Prosecutor Hightower is trying the case before Riverside County Superior Court Judge Jeffrey Prevost.

Read the original article in the Press Enterprise.

Update: Hendrix Montecastro has made his own opening statements, in which he responds to the prosecution’s opening by stating  “There’s no direct evidence” and that “I have God for my attorney” (the Jesus defense). Let’s see if the jury buys it, after they listen to the testimony of persons such as Deborah Weber, who, along with her husband, invested tens of thousands of dollars and lost all of it. You can read more about witness testimony and Montecastro’s defense by clicking here.

Note: James Benjamin Duncan, Maurice McLeod, Cindi Gayle Kelly, Thuan Nhan Du and Charlie Choi have already entered pleas.

The Office of California Attorney General Kamala D. Harris sent out a press release today announcing it has arrested and charged two persons with 41 felonies, including grand theft, burglary, unlawful collection of advance fees, tax evasion and conspiracy in what it terms was “a wide-ranging mortgage fraud scheme.”

The suspects,  Joana Sosa, age 54 of Gardena, and Zoila Ortega, age 31 of Gardena, also face special enhancements for excessive taking and aggravated white-collar crime for losses to victims exceeding $350,000. Sosa and Ortega are alleged to have targeted member of their own community of Spanish-speaking homeowners (affinity fraud, ethnic fraud).

According to Attorney General Harris, “As the mortgage crisis continues, we are seeing a troubling rise in fraud that targets struggling homeowners, including those with limited English language skills.  The predators targeting these victims are ruthless, and I am proud of our prosecutors and special agents for helping to bring them to justice.” Deputy Attorney General David Peyman will be prosecuting this case.

The complaint against Sosa and Ortega accuses them, from 2008 – 2010, of charging their victims advance fees, promising them new mortgage payments they could afford and promising to protect their client-victims from eviction, which is exactly what happened to most of them.

In addition to the Attorney General’s Office / Mortgage Fraud Strike Force, the alleged crimes were initially investigated by the Los Angeles County Department of Consumer Affairs Real Estate Fraud Unit.

The fall in real estate markets has not only cost property owners their equity and many times the loss of their homes, it’s also been a magnet for scammers. Some are licensed real estate agents; others are not. Since the top of the market in fall 2006, there has been a flood of real estate crimes consumers had no concept of: real estate fraud, short sale fraud, REO fraud, Ponzi schemes, real estate investment fraud, foreclosure rescue scams and loan modification scams. In a number of cases, those crimes were carried out within certain ethnic or religious circles (affinity fraud).

The California Department of Real Estate, the primary means of investigating housing-related crimes, has responded by revoking a record number of real estate licenses for the fiscal year ending June 30, 2012. Here is a summary of the DRE’s August 6 press release:

781 real estate licenses revoked (up 14% from 681 the prior fiscal year)

190 real estate licenses suspended for cause (up 80% from 106 the prior fiscal year)

138 real estate licenses surrendered by the licensees (up 20% from 115 the prior fiscal year)

213 desist and refrain orders, typically ordered against an unlicensed individual or business

And now . . . my editorial

Why are there so many disciplinary actions in real estate? Very simply, because the barrier to entry is so low. This I blame on the California Association of Realtors, the trade and lobbying association for Realtors®, which gets its strength from the number (=volume) of dues-paying members under its wing. If you’re 18 years old and haven’t committed a major financial crime, you can get your real estate license.

Real estate training schools are big business. RealEstateExpress.com, a real estate “training” website, starts the first paragraph of its web page on licensing requirements by announcing “Getting Your Real Estate License In California is Not Difficult…” Although they state that “eight statutory college-level courses” are required for a prospective licensee to sit for the salesperson’s (aka “real estate agent”) exam, anybody who has attended even community college knows these courses are anything but college level. Prospective licensees are encouraged to sign-up for “boot camps” that are simply mass cramming sessions that show attendees what questions they must know in order to pass the exam. The purposes of these schools is in no way to inspire learning or to impart knowledge. That, along with taking online “practice exams” over and over until the answers are memorized, constitute the sum-and-total of what it takes to get a real estate license.

Two  men have been charged with running a$1.3 million real estate fraud Ponzi scheme that targeted Latino investors, in what appears to be a case of affiinity fraud (ethnic fraud), since the defendants are also Latinos. 

California Attorney General Kamala Harris announce that Edwin Salazar, 34, of Downey and 41-year-old Michael Zuniga of Fullerton have been charged with multiple counts of grand theft, elder financial abuse, burglary and conspiracy and that 18 victims have been identified. The two who apparently were insurance agents, convinced their victims to refinance their homes in order to participate in “risk-free” (that’s a hint) investments with guaranteed returns of 15% with their firm Omega Investment Group. The so-called investment was nothing more than a Ponzi scheme, with the defendants helping themselves to $700,000 for their own use.

Read the original article in the Diamond Bar Patch.

A Gonzalez-area woman who admitted operating a Ponzi scheme has been sentenced to three years in prison, but the sentence was stayed by the judge if she completes restitution.

Maria Ponce was sentenced by Judge Adrienne Grover but the judge’s priority is to seek repayment of the stolen funds for the victims, mostly Latinos.

Ponce admitted that her scheme caused $145,000 in losses from 57 people who were in foreclosure. Many of the victims testified to the court as to the devastation caused by Ponce’s loan modification scam, which required upfront fees.

Prosecutors contended that Maria Ponce was very sophisticated and knew exactly what she was doing when she solicited her victims.

Read the original article in the Contra Costa Times.

This is “Affinity Fraud Week” at the California Real Estate Fraud Report. By that, I mean that in the past week, almost all of the news that I have reported has been where the alleged perpetrator(s) and victim(s) have belonged to the same ethnic group (ethnic fraud). Now on to this latest story of affinity fraud.

The Orange County District Attorney’s Office has announced that two have have been charged in connection with a real estate fraud scheme that targeted the Vietnamese-American community.

Loan Thituong Nguyen, 43, of Westminster, is a licensed real estate broker who operated  Suncoast Mortgage and Suncoast Investment Realty. She and her alleged accomplice, Lynn Eichenberger, 42, of Chatsworth, have both been arrested and charged with 15 felony counts of grand theft, two felony counts of money laundering, and one felony count of conspiracy to commit grand theft with sentencing enhancements for property loss of more than $1.3 million, aggravated white collar crime over $500,000, and money laundering of more than $1 million.

Operating a book-end style scheme, Nguyen is alleged to have approached homeowners in foreclosure and promised to solve their problem in return for substantial amounts of cash (foreclosure fraud). She then made promises to investors to help them acquire foreclosed properties for a 50% upfront fee toward the purchase (real estate investment fraud). The monies she collected were then deposited into an account set up by Lynn Eichenberger.

Orange County District Attorney Tony Rackauckas believes there are more victims than the 17 Vietnamese investors who claim to have been defrauded.

Read the original article in the Orange County Register.