California Real Estate Fraud Report

Kyle Grasso, a central figure in the Beverly Hills real estate fraud and mortgage fraud conspiracy that captured headlines and temporarily resulted in his enrichment at the expense of Westside property owners as well as contributing to the fall of Lehman Brothers Bank, received a sentence of only a year and a day in jail. Grasso was also ordered to repay a portion of the $13 million restitution that was determined to be the losses for the crimes he and his co-conspirators committed. Grasso was convicted of conspiracy, bank fraud, loan fraud and money laundering.

U.S. District Judge Dean D. Pregerson imposed the sentence. Inexplicable to me is how Judge Pregerson could refer to the sentencing as “difficult” because “Mr. Grasso is fundamentally a decent person. Sometimes people make stupid decisions.” Yes, Judge, but fundamentally decent persons don’t conspire to steal $13 million. It is only logical to assume that Grasso and his mortgage fraud gang would have stolen more if they hadn’t gotten caught.

No wonder there is so much real estate fraud and mortgage fraud: judges feel badly about sentencing criminals but not for the havoc their crimes wreaked on the local real estate market.

** Now for a truly macabre twist: Syd Leibovitch, owner of Los Angeles-based Rodeo Realty, sent out an announcement to Realtors two days ago that he has hired Joseph Babajian, the former partner and real estate agent who was also charged in the Beverly Hills mortgage fraud but was the only one who was acquitted of the approximately dozen charged. Why anyone would want to brag about hiring Babajian or even think it is a good idea has many of us who have remained scandal-free scratching our heads.

Read the full article on CBS News.

Sentencing is scheduled next week for former real estate agent Kyle Grasso, who was convicted for his role in a massive multi-million dollar fraud, much of which has been documented in earlier postings on the California Real Estate Fraud Report.

Grasso was convicted of criminal conspiracy, bank fraud, multiple counts of loan fraud and money laundering. Inexplicable, the U.S. District Attorney’s Office in Los Angeles is only recommending three years in prison, according, to its spokesman Thom Mrozek.

One of Lyle Grasso’s partners in crime was former appraiser Lila Rizk, who recently received a 3 year sentence.

Read the full article in the Beverly Hills Courier.

U.S. District Judge George H. King sentenced five people convicted in a foreclosure fraud scheme that victimized homeowners in foreclosure who were seeking assistance.

Judge King meted out the harshest sentence and criticism to Edward Seung Ok, who received 15 years in prison for his crimes. According to the judge, Ok fell “far short in the full acceptance of responsibility”. Among other things, Ok used the $4.6 million he stole to buy drugs and alcohol and a Lamborghini Gallardo. He violated his plea agreement by trying to hide from investigators the $1.6 million he transferred to the Bank of Nevis on the Caribbean island of St. Kitts.

Ringleader Martha Rodriguez was sentenced to 10 years and agreed to forfeit $900,000 in cash seized by the feds (see, crime does pay), interest in five homes and a truck. She spearheaded the scheme for which she was convicted while being free on bond after being charged with other real estate crimes.

Ok, Rodriguez and fellow convicted defendants Maria G. Juarez, Vladimir Stefanovic and Cynthia Valenzuela (she worked on the escrow fraud side) preyed upon homeowners in default and promised they could help save their homes by selling their homes to buyers provided by the defendants. In realty, the buyers were “straw buyers” who had no intention of purchasing the distressed properties.

Read the full article on Southern California Public Radio. More recent articles appeared in the Orange County Register and the National Mortgage Professional.

Lila Rizk, an appraiser who was part of a ring of real estate professionals that fleeced Lehman Brothers and other lending institutions, was sentenced to three years in federal prison.

Ms. Rizk was also ordered to repay an undefined portion of the $46 million in restitution that has been ordered by the federal judge hearing the trial. In all, the losses to Bank of America Corp., Royal Bank of Canada (RBC) and other lenders were thought to have totaled $142 million, according to Assistant U.S. Attorney Jeremy Matz.

The case, worthy of a Hollywood movie, included the participation and cooperation of real estate professionals at all levels and resulted in 11 convictions. Some of those yet to be sentenced are fellow appraiser L. Scott Robinson,  bird-dog Jamieson Matykowski, who found the houses used in the scheme and Timothy Holland, an escrow officer.

According to prosecutors, properties in expensive Westside neighborhoods such as Beverly Hills, Santa Monica and Pacific Palisades, were bought and sold using straw buyers, inflated appraisals and mortgage underwriting that caused massive losses to the institutions that funded them.

To see earlier articles on this story, please search the California Real Estate Fraud Report using the term “Beverly Hills”.

Read the Full Article on ABC News, the Los Angeles Times, and the Orange County Register.

Terry and Cheri Tucker, who operated Tucker Mortgage in Thousand Oaks and San Diego, are appealing their 10 year sentences, handed out by U.S. District Court Judge Manuel Real on November 30 of last year.

Both defendants pleaded guilty to bank fraud after soliciting private investors, mostly elderly, for money for real estate investments. That investment money was used to purchase up to $80 million in conventional loans. Those loans were used to convince sellers that the borrowers had down-payments, which they did not. The borrowers in fact were told by the Tuckers that they could purchase a home with no money down.

The Tuckers’ appeal does not affect an upcoming restitution hearing for the victims that is scheduled on February 22, according to Assistant U.S. District Attorney Mark Avei.

Read the Full Article in the Thousand Oaks Acorn.

A mother-daughter team of real estate agents were arraigned September 23 on charges that they defrauded both lenders and home buyers to the tune of $5 million.

The two agents, Helen Sotiriadis, 49, and Irene Sotiriadis, 23, appeared in federal court after an informant told investigators that they planned to leave the country.

Both the Federal Bureau of Investigation (FBI) and the San Joaquin County District Attorney’s Office began investigating the pair for real estate fraud in January 2008. The alleged scam is one that has been reported over and over in the news: the agents submitted fraudulent documents in order to boost the income of Cambodian buyers and placed them into variable-rate loans which the buyers could not afford. A one-time $4,000 payment was required, after which the buyers were told they’d be refinanced into low monthly mortgages. Almost all of the properties became foreclosures.

If the charges are proven to be true, Sotiriadises could each get to enjoy the other’s company for the next 20 years in prison, in addition to a paltry (who came up with this number) fine of $250,000.

For the record, the California Department of Real Estate (DRE) website does not show that Irene Sotiriadis is a licensed real estate agent in California.

Read the Full Article in the Tracy Press. This article is also reprinted in Examiner.com by the L.A. Fraud Examiner.

In a case that is symbolic of the unbridled greed of the real estate and mortgage industries in the past 10 years, former Beverly Hills real estate agent Kyle Grasso and real estate appraiser Lila Rizk were convicted on multiple federal charges of bank fraud and conspiracy. They now face sentences of up to 515 years and 425 years respectively when they are formally sentenced next January.

In a clear surprise to prosecutors, the lead defendant, Joseph Babajian, was acquitted of 13 criminal charges, with the jury failing to reach a verdict on 8 additional charges. Prosecutors are evaluating to retry Babajian, despite skepticism from U.S. District Judge Dean D. Pregerson that Babajian could be convicted.

The fraud group’s ringleaders were developers Mark Alan Abrams and Charles Elliott Fitzgerald, who were convicted earlier in the year for their part in a scheme that cost Lehman Brothers Bank and other lenders up to $40 million in losses. According to earlier published reports in the California Real Estate Report and other media, the extent of the losses occurred because Lehman Brothers brushed off reports that they were being ripped-off when contacted by alert real estate agents such as Christian Stevens of Keller Williams Realty.

At its height, the conspiracy ring consisted of the developers, appraisers, mortgage brokers and real estate agents. Lower-end properties in high-priced Westside neighborhoods were purchased by “straw buyers” (non-legitimate borrowers working in the ring). The properties were then refinanced after being appraised at inflated prices and the proceeds distributed to members of the ring, who then defaulted on the loans. Eighty-one of these transactions were performed, with the conspirators borrowing a total of $142 million from Lehman Brothers.

Read the Full Article in the Los Angeles Times.

Also search this blog for “Beverly Hills” to read earlier articles.