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.

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.

Why would a real estate professional risk their license and their freedom to make literally, a few dollars?

Apparently that’s what Christi Fry, aka Christi Martin, might have done. Fry, of West Covina, was arrested at Seller’s Choice Escrow earlier this week and charged by the San Bernardino County District Attorney’s Office, just one day short of the statute of limitations expiring, according to investigator Martin Landrum. She and her alleged co-conspirator, Omar Paz, of Rancho Cucamonga, are being held in lieu of $450,000 and $850,000 bonds respectively.

The events leading to the arrests began when Omar Paz and his wife divorced. Paz sold his home and Fry handled both the escrow and notary duties for the sale. Paz later transferred most of the money from the joint account he held with his wife that were the profits from the sale into an account he alone held. The fraud was discovered during the divorce proceedings, when Paz’ ex-wife noticed that her name had been forged on disclosure forms, escrow instructions and the grant deed to the new buyers.

Notarizing a document as containing an original signature requires the presence of the signer and positive identification. Probably because she overlooked that not-so-minor detail, Fry’s notary license was  revoked after a separate investigation by the California Secretary of State’s Office.

Read the Full Article in the San Bernardino Sun by Frank C. Girardot.

In what has to be deserving of the comment “What were you thinking?”, a number of investors in San Diego County traded their good credit for . . . . well, nothing.

The investors attended a presentation given by James McConville. McConville, who worked for Fremont-based Diamond House Development, confessed and was convicted in 1998 of grand theft. In his latest shady dealing, offered to pay the investors $5,000 to $10,000 for every mortgage they took out on the developer’s properties, using no money of their own, just their good credit. The gullible investors, happy to act as “straw buyers”, never received the promised fees and their credit scores went straight south, after all the properties were foreclosed upon.

Read the Full Article in the San Diego Union-Tribune.

Cuesta Title is once again in the news, as the woman who served as its North County branch manager and senior escrow officer is accused of conflict of interest and mishandling of funds given to escrow by an investor.

Melanie Schneider is accused in a lawsuit by investor Michael Hawkins of mishandling Hawkins’ money, failing to give him title to a property his money was supposed to purchase in the Vista del Hombre golf course development. Hawkins states that Schneider did not have an arms-length distance from developer Kelly Gearhart, but actually lived on Gearhart’s property in his guesthouse when Schneider separated from her husband.

Read the well-written Full Article in the San Luis Obispo Tribune.

Stanley Gentry is a real estate broker in the San Diego area who came up with his own private stimulus plan: according to charges filed by the U.S. Attorney’s office, Gentry “rented” out his real estate license to a Los Angeles street gang member and his crew for use in a real estate fraud and mortgage fraud conspiracy.

Darnell Bell, a known member of the Lincoln Park street gang in Los Angeles, is alleged to have earned $9 million for his efforts in hiring and managing other gang members in what may amount to a $100 million fraud that required inflated appraisals of San Diego properties, straw buyers to apply for loans for the over-appraised properties, and other license real estate professionals to make the fraud work.

Read the Full Article in Reuters.

Any Californian who does not want to see more mortgage fraud in the state of California needs to write, email or call their state legislators to vote against two bills our legislature is considering. Click here to find out who your representatives are.

Senate Bill 461 (introduced by Senator Lou Correa / Santa Ana ) and Assembly Bill 442 (introduced by Assembly Member Juan Arambula / Fresno County) both seek to amend the California Civil Code Section 1185 by requiring Notaries Public to accept the Matricula Concular card of Mexico as legal proof of a signer’s identity.

Never mind that the FBI has referred to the Matricula Consular card as “unreliable due to the non-existence of any means of verifying the true identity of the card holder” - our two legislators are more interested in establishing new “rights” for foreign nationals than they are in protecting the rights of California citizens and legal residents against mortgage fraud.

According to the California-based National Notary Association, which vigorously opposes the proposed legislation because it mandates that Notaries accept a document that both the U.S. Department of Justice and the FBI consider untrustworthy:

“Allowing acceptance of the Matricula Consular will compromise the safety and security of California consumers and undermine the credibility of the state’s Notaries Public.”

Timothy S. Reiniger, Executive Director of the National Notary Association further adds:

“In this era of rampant document fraud and identity theft, requirements for establishing proof of identification should be tightened rather than compromised. Senate Bill 461 and Assembly Bill 442 will not accomplish this, and more importantly, will undermine our state’s efforts and recent successes in fighting mortgage fraud.”

and

“The enactment of the legislation requires Notaries to recognize a card of proven unreliability, weakening the California notarial system that protects the public from forged real property deeds and other important documentary transactions and identity crimes. Notaries in this state must not be forced to accept a card that the U.S. Department of Justice and the Federal Bureau of Investigation declare is not a trustworthy identifier.”

Here is what the U.S. Department of Justice and the FBI say about the Matricular Consular card issued by the government of Mexico:

1. The government of Mexico does not have a centralized database to coordinate the issuance of consular ID cards. So multiple cards can be issued under the same name, the same address, or with the same photograph.

2. The government of Mexico issues the card to anyone who can produce a Mexican birth certificate and one other form of identity. Mexican birth certificates have been listed as a large part of the fraudulent foreign document trade and they are easy to forge.

3. If an individual applying for a Matricula Consular cannot produce the above documents, he or she can still be issued a Matricula Consular card by the Mexican consular official if a questionnaire is completed and the individual satisfies the official that the person of his/her identity. [Note: I feel safe already]

4. 90 percent of the estimated 2 million Mexican Matricular Consular cards in circulation are merely laminated cards with no security features.

This legislation could result in more: identity theft, escrow fraud, title fraud, mortgage fraud, loan fraud, real estate fraud - all because real estate transactions rely upon the authenticity of documents attesting to the identity of the individuals who are signing those documents.

Read the Original Article on Virtualization

Another story from the Lifestyles of the Rich and Shameless:

Bankrupt Brentwood businessman Ezri Namvar is facing five L.A. Superior Court lawsuits and one bankruptcy lawsuit accusing him of running a Ponzi scheme and stealing money from escrow accounts to keep his various businesses afloat. Several of the suits name several of Namvar’s relatives as defendants as well.

Namvar’s primary firm, Namco Financial, operated Namco Financial as a qualified intermediary, meaning that it facilitated the tax deferred exchange of properties in 1031 exchanges.

Namvar made his fortune in real estate investments by borrowing money from fellow Persian Jews in Beverly Hills, many of whom trusted Namvar and turned over their life savings, without receiving any collateral in return. Those monies are now most likely entirely gone.

Read the Full Article in the Los Angeles Business Journal.