California Real Estate Fraud Report

This is one of the most egregious cases of corporate ineptitude and callousness I’ve heard of to date. And after wrongfully costing a man his property, it then may have cost him his life.

Larry Delassus was a disabled retiree, living on $1,600 a month in the Hermosa Beach condo he had owned for 16 years.

One of Delassus’ neighbors neighbors fell behind in his property tax payments. The neighbor, like Delassus, had his mortgage with Wells Fargo. Wells Fargo, in order to preserve its interest in the property, paid the property taxes. But instead of pursuing the neighbor for the shortfall, these idiots went after Delassus because they mistyped the parcel number on documents to show the person in default was Delassus.

Larry Delassus had actually paid his property taxes six months in advance.

In a scenario familiar to thousands of homeowners who have tried to communicate with this lender, Wells Fargo heaped on penalties, interest, fines and attorney fees in its relentless pursuit of Larry Delassus, forcing him into default by doubling his mortgage. He and his attorney tried and tried to call the bank, but got the runaround typical of Wells Fargo and other mega-lenders: put the borrower on hold forever, disconnect the call, transfer the call to the wrong department, transfer the call to employees unauthorized to make decisions, lose paperwork, etc.

According to an article in the LA Weekly, even after it admitted its error, Wells Fargo foreclosed on him anyway.

The next two paragraphs are quoted directly from the LA Weekly:

Robert Baily of Anglin Flewelling Rasmussen Campbell & Trytten LLP admitted the bank’s mistake: “Wells Fargo paid the amount it determined was owed to the County Assessor: approximately $10,500. This was a mistake. The $10,500 was the tax amount owed on a neighboring property, not Plaintiff’s.” (Bailey did not address the discrepancy between $13,361 and $10,500.)

Bailey added: “In September, 2010 Wells Fargo acknowledged its error in paying the taxes on Plaintiff’s neighbor’s property and corrected it.” By then, however, Delassus was so far behind on his mortgage payments wrongly doubled by Wells Fargo that the bank refused to let him resume his $1,237.69 installments, Trujillo says. He faced a sizable “reinstatement” cost — which is often the past due amount plus fees.

Delassus’ neighbor and friend, attorney Anthony Trujillo, sued Wells Fargo on his behalf for negligence and discrimination (based on his disability).

Wells Fargo litigation support manager Michael Dolan, in a videotaped deposition, was asked the following:  ”So Plaintiff was never provided with the reinstatement amount after the bank discovered its error, correct?” Dolan replies, “That is correct.”

Larry Delassus was in Torrance Superior Court last December listening to Trujillo argue his case when he slumped over and died.

Watch this YouTube video that discusses this story further. Read another article in Slate about Larry Delassus versus Wells Fargo.

New York Atorney General Eric Schneiderman has sued HSBC Bank USA and HSBC Mortgage Corp., accusing it of dragging out foreclosure cases in violation of state law in order to make it more difficult for homeowners to avoid foreclosure. 

Banks use stalling tactics as a strategy in order to stack up more penalties, fees and interest against homeowners. That said, Schneiderman is looking at suing other lenders for using the same tactics.

According to Schneiderman, “Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo where they can’t even get the legally required settlement conference that could help them keep their homes. For homeowners facing foreclosure, time is their greatest enemy. Every day spent waiting for a settlement conference is a day that the lender piles on additional interest, fees and penalties and the homeowner falls further behind.” Read his statement on the New York Attorney General’s website.

Unlike California, which is not a judicial foreclosure state, in New York, the lender is required to file a request for judicial intervention once it files suit against the borrower. That triggers a requirement to hold a settlement conference to explore alternatives to foreclosure, including mortgage modification, within 60 days, which Schneiderman is saying HSBC and other lenders are intentionally avoiding.

An example of this tactic, Schneiderman outlined the case of Rebecca Karm of Erie County. Karm, who suffered both a medical illness and the loss of her job, fell behind on her payments. Although HSBC filed the proof of service on November 12, 2010, it didn’t file the request for the conference until June 8, 2012. According to an affirmation filed by the Western New York Law Center, during those 547 days, Karm’s principal balance ballooned by $23,000 because of fees and penalties HSBC piled on her.

Read the original article in MSN Real Estate.

Charles Head and Jeremy  Head (aka Mike Head), brother who owned Head Financial in Orange County, have been convicted for scamming $15 million from homeowners at-risk of foreclosure by promising the victims that they can keep them out of foreclosure and repair their credit (mortgage rescue scams, foreclosure fraud).

Charles Head was convicted on four counts of mail fraud; Mike was convicted on two counts. Their crimes were committed between January 2004 and March 2006, according to court documents.

The men used their own friends and relatives to act as straw buyers and gain title to the distressed properties without the homeowners’ consent (title fraud). They then applied for mortgages in order to suck any equity from the properties, as well as divided the rents paid by the homeowners among themselves. Of course, this resulted in the homeowners losing their homes to foreclosure, losing their equity and having their credit ruined.

Previous to the convictions, nine other defendants pleaded guilty.

 “The Head brothers preyed on the victims’ fear of losing their homes and then took advantage of those victims’ predicament to steal from them their last remaining equity in those homes, enriching themselves in the process,” according to U.S. attorney Benjamin Wagner. “As a result of their conduct, many of the victims who looked to the Head brothers for help were evicted and left destitute.”

Read the original article in National Mortgage News.

A Danville man who was indicted by a federal grand jury in December 2011 with rigging bids at real estate foreclosure auctions and mail fraud faces new charges having to do with evidence tampering.

Andrew Katakis of Danville is the recipient of a superceding indictment charging him with obstruction of justice in the federal investigation. He is now accused of convincing his co-defendants Donald Parker, Anthony Joachim and Theodore Longley to install and run software to overwrite deleted documents stored on their computers (spoliation).

Note: when computer users delete a file, it is not actually deleted, but the space in which it is located is flagged by the system as available for a new file to be written (unallocated space). The purpose of the software is to locate unallocated space and overwrite it one or more times with new data.

“Obstruction of a grand jury investigation is a crime the Antitrust Division takes seriously,” says William Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division. “We will prosecute those who subvert the competitive process, as well as those who attempt to conceal their illegal actions by destroying evidence.”

“The new charge arises out of a long-running investigation that has already resulted in guilty pleas by numerous other defendants who participated in the scheme charged in this case,” says U.S. Attorney Benjamin Wagner.

Ten defendants have already pleaded guilty in this conspiracy: Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat, Gregory L. Jackson, Walter Daniel Olmstead, Robert Rose, Kenneth Swanger and Wiley Chandler.

The current investigation is being conducted jointly by the Antitrust Division’s San Francisco office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division, and the San Joaquin County District Attorney’s Office.

Read the original article in the Central Valley Business Times. There are also earlier articles about this auction bid-rigging and prosecution in the California Real Estate Fraud Report.

I love the justice system in Florida – this would NEVER happen in California.

John W. Lebron, 33, already on probation for possession with intent to sell GHB, an illegal steroid with strong sedative properties, has been sentenced to 26 years in prison for committing short sale fraud and foreclosure fraud.

Lebron, a formerly licensed real estate agent, opened a business called EZ Investments with his wife in 2005. Their first sale was consummated when John Lebron helped his sister Cynthia Lebron to buy a home that was in foreclosure. He not only collected both sides of the commission (dual agency), he got the mortgage broker’s commission after placing the name of another loan officer (loan fraud, mortgage fraud) on the paperwork to conceal his plan. Sounds like Lebron’s business model included fraud to help him achieve his goals.

Emboldened by a successful and very profitable transaction, John Lebron next set up a short sale to his brother-in-law and at the same time arranged a second sale to a straw buyer (“flopping”). Since the straw buyer happened to be unemployed, Lebron submitted phony pay stubs on behalf of the buyer. As with the previous sale to his sister, Lebron received both sides of the real estate sale from both sales as well as the commissions from the loans. The straw buyers earned $5,000 for their troubles.

John Lebron’s fortunes reversed when he defaulted on loans valued at $1.4 million. He was arrested in 2011, lost his real estate license and has been ordered by the trial judge to return $1.5 million.

Read the original article in the Tampa Bay Times.

Consumers in Riverside County may get some assistance when they feel they are victims of real estate fraud.

Riverside County District Attorney Paul Zellerbach was successful in his bid to convince the Board of Supervisors to raise the filing fee for real estate documents to $10. The fee represents an increase from the original $3 fee prior to February of this years and in my opinion is a mere pittance if it will enable the Riverside D.A.’s Office to to expand its Real Estate Fraud Unit and hire more real estate fraud investigators.

Readers of the California Real Estate Fraud Report know well that Riverside, like most other counties in California, is home to not only real estate fraud but ample numbers of cases of foreclosure rescue scams, loan modification fraud and plain-old mortgage fraud.

Both a prosecutor representing Zellerbach’s office and Assessor/County Clerk/Recorder Larry Ward appeared before the Board of Supervisors, pleading for the fee increase due to the Riverside District Attorney’s Office being flooded with complaints. To illustrate, in fiscal 2011-12, the D.A.’s office received more than 2,400 referral having to do with real estate fraud, which was 500 referrals higher than the prior fiscal year.

The $10 fee is projected to raise almost $5 million annually and would increase the Riverside office’s staff from four investigators to seven and add a forensic accountant, a a real estate fraud document examiner and a forensic computer examiner. It would also fund regional teams in the southwest part of Riverside and also Indio.

Read the original article in the Press Enterprise.

Another two Northern California real estate investors have thrown in the towel and agreed to plead guilty for their roles in numerous conspiracies to rig bids at public foreclosure auctions in Alameda County.

The guilty pleas came after felony charges of bid rigging and mail fraud were filed in the U.S. District Court for the Northern District of California in Oakland against Peter McDonough of Pleasanton and Michael Renquist of Livermore.

The U.S. Attorney’s Office has taken an aggressive stance against this particular antitrust operation, which to date has resulted in 29 persons either pleading guilty or agreeing to do so.

Including today’s pleas, 29 individuals have pleaded guilty or agreed to plead guilty as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

As with the prior 27 criminals, McDonough and Renquist were accused in court documents for conspiring with others not to bid against one another during the period of November 2008 and January 2011 in public real estate foreclosure auctions. Rather, the conspirators designated a winning bidder and then determined the final winner in a second private auction.

Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division said “The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners. The Antitrust Division and its law enforcement partners at the FBI will continue to hold accountable individuals who subvert the competitive process at foreclosure auctions around the country.”

Added David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office, “The FBI and the Antitrust Division continue to bring to justice those individuals who engage in fraudulent anticompetitive practices at foreclosure actions. The foundation of our real estate market depends on fairness and transparency of all participants, and we are committed to working with our local and federal partners to ensure that conspirators are held accountable.”

According to the press release by the U.S. Department of Justice, a violation of the Sherman Antitrust Act “carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.”

In addition to the FBI and the U.S. Attorney’s Office, these crimes were investigated by the Financial Fraud Enforcement Task Force (FinCEN) established by President Obama.

Luz Lechuga was one of many who lost her home due to the actions of individuals who charged upfront fees in a foreclosure rescue scam. In court, she watched as the judged handed down a harsh sentence to one of the defendants.

Laura Cecilia Carlson, 66, of Hacienda Heights was sentenced by Ventura County Superior Court Judge James Cloninger to 11 years and eight months in prison. She must also pay $63,900 to her victims as restitution. Carlson was a licensed real estate agent who managed Global Team Consulting, training its employees to collect upfront/advance fees from homeowners in distress in exchange for getting their lenders to reduce the principal balances on their homes. Victims, who were not very sophisticated, were told to stop paying their lenders and direct their mortgage payments to Carlson’s company.

After hearing the verdict, Ms. Lechuga said “I feel better. Yes, this is justice.”

In meting out the sentence Judge Coninger addressed Carlson and said “You ruined people’s lives, you and your crime partners.” Referring to Luz Lechuga, the judge added “You took her to the brink of suicide with the harm that you inflicted. They were drowning, and so you all decided to throw them an anchor to make sure they would drown.”

The case was prosecuted by Dominic Kardum of the Ventura County District Attorney’s Office, who also obtained convictions against co-defendants Victoria Santos, Juan Alvarado Cervantes and Felipe Castro. The final defendant, Jose Miguel Aguilar, is a fugitive from justice.

Read the original article in the Ventura County Star.

Read this important press release from the U.S. Attorney’s Office in the Northern District of California about the felony charges filed against Gilbert Chung and Chung’s agreement to plead guilty in the US DOJ’s ongoing investigation into bid-rigging at foreclosure auctions.

A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Gilbert Chung of Burlingame, Calif. Chung is the 27th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Chung conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and San Mateo counties, Calif. Chung was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.

The department said Chung conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in San Francisco and San Mateo counties beginning as early as January 2010 and continuing until about December 2010.

“The conspirators went to great lengths to suppress competition and prices at these foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to vigorously enforce the antitrust laws and to prosecute those who violate them at the expense of distressed homeowners.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at San Francisco and San Mateo County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

“Today’s charges are another example of our resolve to bring to justice those who engaged in fraudulent bid rigging and anticompetitive practices at foreclosure auctions,” said FBI Special Agent in Charge David J. Johnson of the San Francisco Field Office. “We continue our partnership with the Antitrust Division in aggressively pursuing individuals who participate in these criminal acts.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.

Today’s charges are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov .

Blas and Nancy Arreola, a married Turlock couple, have been charged with multiple counts of identity theft, recording false or forged documents, and fraud conspiracy by the California Office of the Attorney General’s Mortgage Fraud Strike Force.

The apparent goal of the alleged fraud was for the Arreolas to forestall foreclosure of their home by the bank. The high amounts requested by the prosecutor for the bails for Blas, 37 and Nancy, 34, are $412,000 and $201,000, respectively – indicated that the Attorney General’s Office considers this to be very, very serious.

Investigator Glenn Gulley of the Stanislaus County District Attorney’s Office indicated in his arrest warrant that the Arreolas were trained in their failed strategy by Jacob and Aide Orona of Highland, which is located in San Bernardino County. The name of the Orona’s business is Document Recovery Forensic LLC. The website, which appears to be dormant, offered “A Life Changing Event” to occur after the reader enrolled in a “Mortgage Note Redemption Seminar” that was held in July 2012. Homeowners would “learn how you may be able to receive a settlement of anywhere up to 80 – 120% of the original amount of your mortgage note.”

The tone of these seminars are related to the settlements the Attorneys General for the 50 states negotiated with the major banks over their robo-signing policies.

According to the Federal Reserve, up to 50,000 homeowners in Stanislaus, San Joaquin and Merced counties may have been entitled to compensation due to banking errors with respect to foreclosures, but the deadline for review was December 31, 2012.

The Arreolas paid several thousand dollars to learn the tactic of selling a percent ”interest” in their two homes to people in bankruptcy. Such a strategy can block foreclosures but the people in bankruptcy never had any idea that the Arreolas and others piggy-backed on their bankruptcy filings and were thus unknowing parties.

Click on these links to get a copy of the Complaint and the Affidavit against the Blas and Nancy Arreloa.

Read the original article in the Modesto Bee.