California Real Estate Fraud Report

Donna Demello, 44, of San Jose, has pleaded guilty to one count of conspiracy to commit wire and mail fraud in connection with a conspiracy allegedly run by James Delbert McConville, who is awaiting trial. Demello was an escrow officer at Stewart Title in Milpitas and will be sentenced by U.S. District Judge Phyllis Hamilton on December 8 for concealing exorbitant marketing fees on the escrow settlement statements.

James Delbert McConville was purportedly at the center of a conspiracy in which straw buyers were paid $5,000 - $10,000 for the use of their names and credit in order for McConville and his associates to obtain loans on condominium properties in the San Diego area. Prosecutors state in their filings against McConville that he took out $20 million in loans for 80 condos and that his “marketing fees” amounted to approximately $11 million.

You can read more about this story in previous article on this blog.

San Diego District Attorney Bonnie Dumanis told her audience during a recent public safety meeting that her office has almost doubled its caseload real estate fraud related cases. Her office filed 39 real estate fraud cases in 2009, compared to 20 cases in 2008.

The number of defendants, however, has practically tripled due to the focus on foreclosure fraud and loan modification fraud cases, which tend to have both more victims and more defendants.

Read estate fraud includes not only fraud in the purchase/sale of a home, such as intentionally failing to disclose material facts, but mortgage and loan fraud, appraisal fraud, foreclosure fraud, title fraud, escrow fraud, and now short sale fraud and REO fraud. The latter two crimes typically happen when the listing agent does not submit all offers to the bank or servicing company so that the offer of the agent’s own buyer becomes the highest or best offer. Expect to see many of these cases in the news in the near future.

Read the full article in the Voice of San Diego.

James Delbert McConville has been indicted by a federal grand jury on fraud and money-laundering charges. He is accused of using the identities and credit records of straw buyers to purchase 80 condominium units in Escondido and San Marcos. The straw buyers were paid $5,000 to $10,000 for renting their credit histories to McConville.

Also named as co-conspirators in the indictment were real estate agent Laura Margery Caton, Jason Piette, Rasul Rasuli, Donna Demello (an escrow officer) and Araks Davoudi (a personal banker). All have been ordered to appear before the court in June.

McConville has a prior conviction for grand theft in 1998, for which he was ordered to pay restitution for committing insurance fraud. His whereabouts are currently unknown, according to the San Jose Mercury News.

Read the full article in the San Diego Union Tribune.

A fugitive real estate agent who was wanted for embezzlement and check fraud was arrested in New York City by U.S. marshals.

As written in an earlier article on the California Real Estate Fraud Report, Jodi Lee Nazir was a former Rancho Cucamonga real estate agent with Re/Max Legends and Legacy Escrow who was the subjected of a felony warrant for embezzling funds from her Rancho Cucamonga company’s escrow trust account.

Read the full article in the Daily Bulletin.

Realtors Dan and Cheree Griffith are among dozens of people claiming to be defrauded out of millions of dollars by Jodi Lee Nazir. Nazir, who ran an escrow company partially owned by the Griffiths, is being sought by investigators who want to arrest her on embezzlement and grand theft charges.

Jodi Lee Nazir is being accused by the San Bernardino District Attorney’s Office of cashing escrow and other checks at local banks after first scanning the checks and showing them as deposited to the escrow company.

Cheree Griffith says “over 200 employees and agents” lost their jobs as part of the scam, as well as buyers and sellers of homes. Says Dan Griffith, “We’ve lost our home, lost our retirement, lost everything.”

Read the full article in KABC-TV Los Angeles, aka Eyewitness News.

Rollo “Rick” Norton is a former financial planner. “Former” because he just pleaded guilty to mail fraud in connection with a real estate investment fraud in which 19 investors lost their money. But he is probably hoping his sentencing next month in San Diego Superior Court will be lighter because he pointed the finger at Chicago Title and Chicago Title Insurance, saying that their escrow office and a supervisor knew they were defrauding the investors in creating “phony real estate transactions” at the Crown Point Villas in San Diego’s Pacific Beach area.a

Michael Weaver, attorney for Chicago Title, countered that Norton, who is representing himself in court, is a liar. In addition, Weaver accused some of the plaintiffs of being participants in the fraud by providing false documents about their financial status and that the only victims were the banks they were defrauding.

Chicago Title Corp. is a subsidiary of Fidelity National Financial Inc.

Read the full article in Bloomberg Business Week.

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.

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.

Mojgan Cox, a formerly licensed real estate broker in Rancho Cucamonga, pleaded guilty on January 27 to felony charges in relation to a conspiracy and which she and other co-defendants were charged with money laundering from an escrow account. Originally charged with conspiracy, grand theft, forgery and money laundering, Cox received a sentence of five years in state prison.

Read the full article in the San Bernardino Sun.