Indictments in $100 Million Hard Money Loan Fraud
A pair of Monterey businessmen have been indicted by a federal grand jury on charges of conspiracy to commit mail and wire fraud, mail fraud, wire fraud and securities fraud.
David Arthur Nilsen, 58, surrendered to authorities in San Jose, but Manoel Antonio Errico, 55, is currently a fugitive. They are accused of defrauding up to 1,000 investors in loans secured by deeds of trust, as well as a fund that invested in those same loans.
The indictment further alleges that the men defrauded investors in fractional interests in loans secured by deeds of trusts, and in Cedar Funding Mortgage Fund, LLC, by making materially false statements, failing to disclose material facts, and creating a materially deceptive and misleading scheme, plan and artifice to defraud.
The scheme consisted of two parts: in part one, Nilsen and Errico created a false impression that Cedar Funding was safely placing investors’ funds secured real estate loans, which they claimed offered high returns and safety of principal.
In part two, as the borrowers began defaulting on their loans, Nilsen and Errico extended the maturity dates of the loans and continued to lend more of the investors’ funds. And like a Ponzi scheme, some of the interest used to pay existing investors came not from profits but from the funds of newer investors.
