California Real Estate Fraud Report

After pleading guilty to 112 felony counts, 68 year old Joseph Anthony Veltre was sentenced to 18 years in prison for running a Ponzi scheme that fleeced investors, many of them elderly, out of $2.6 million. He was ordered to repay that same sum in restitution.

Veltre ran his Ponzi scheme out of Sea View Financial and Allied Corporate Investments. He made hard money loans to borrowers wanting to take out second and third mortgages and promised high rates of return to his investors.

Read the full article in the OC Register.

The San Joaquin County D.A.’s Office has completed a three year investigation into a Tracy, California brokerage, resulting in the arrests of the firm’s chief executive and a second person.

Ward Real Estate Brokerage & Foreclosure Services Inc., no longer in business, was the focus of multiple complaints. Authorities believe $4.5 million was stolen from investors through a house-flipping scheme that promised high returns but failed when the real estate market turned sour.

Leesa Marie Ward, 45, of Lodi, was arraigned on a 46-count felony indictment by a criminal grand jury, which charged her with tax evasion, grand theft and securities fraud. Alison Ann Jensen, 45, of Pleasanton turned herself in and was booked on identical charges. Bail for each licensed real estate broker is set at $3 million. Jensen’s broker’s license has expired, but Ward’s is still active with the California DRE.

Some of the victim’s of this alleged investment scam were elderly.

Read the full article in RecordNet.com

Mary Elaine Perkins, owner of Carlton Financial Enterprises, Inc., has pleaded guilty to mail fraud after brazenly defrauding 90 investors out of $7 million in a real estate investment fraud scheme that was bound to be detected by authorities.

Perkins’ fraud was that she promised investors returns of 12% - 15% by using their money to make hard money loans to homeowners, using their properties as collateral instead of the homeowners’ credit scores. Instead, Perkins foreclosed on the borrowers’ homes in some cases and either sold their property to a company she owned or to members of her family. Apparently some of the early investors were repaid with monies she obtained from later investors, classic Ponzi scheme tactics.

Read the full article in the Los Angeles Times (LA Times).

Livermore accountant Maynard Weldon Moreland has pleaded no contest to operating a $3 million Ponzi scheme. Moreland pleaded no contents to 21 counts of grand theft, 12 charges of elder financial abuse and one felony count of engaging in a pattern of theft conduct.

Alameda County Superior Court Judge Kevin Murphy heard the case and is waiting for a report on what happened to the money Moreland stole, which he promised his 20 clients/victims would be invested in real estate.

Read the full article in the Silicon Valley Mercury News.

James R. Halstead, an Orange County insurance broker who raised $50 million from investors, luring them by promises of returns from 25-35% over three to four months, was sentenced by U.S. District Judge David O. Carter to 10 years in federal prison for operating a Ponzi scheme. Halstead told his victims he was investing their money in securities known as private investment in public equity, or PIPEs, but instead spent the money on cars, jewelry and a house. PIPEs are used to make bridge loans to businesses that are applying for long-term financing, such as building construction.

Before he imposed the sentence, Judge Carter heard testimony from the victims about the financial and psychological devastation Halstead’s fraud had cost them and their families.  In his “apology”, Halstead shifted blame to Irvine securities lawyer Jeanne M. Rowzee, who accused of misleading him about how the money was invested.

Read the full article in the Los Angeles Times.

The owner of Cedar Funding in the Central Coast of California was ordered to stand trial this coming October on fraud and conspiracy charges related to a $160 million business involving 1,600 investors.

Bankruptcy trustee Todd Neilson said that David Nilsen used his business Cedar Funding to operate a Ponzi scheme, paying dividends to his early investors with funds he took from the later ones. Nilsen, who is representing himself at his trial,  has filed for Chapter 11 bankruptcy, but not before assigning the deeds to over a dozen properties to individuals, according to Nilsen. Nilsen also said that many of the loans in Cedar Funding’s portfolio were second, third or fourth deeds of trust, the value of which were mostly lost once the homes for which they had liens went into foreclosure. To date, the bankruptcy trustee has only recovered approximately $1.9 million, although he is still liquidating properties and attempting to set aside assignments of some of the trust deeds.

Warning: DO NOT purchase junior trust deed (2nd, 3rd, etc.) unless you are a very sophisticated investor. If the first trust deed, or one of the junior liens that is senior to yours forecloses, you are likely to lose 100% of your investment.

Read the full article in the Silcon Valley Mercury News.

San Diego U.S. Attorney Karen P. Hewitt announced that Michael Alexander, who owned several San Diego telemarketing companies involved in a real estate investment fraud scam, was sentenced to serve 30 months in prison after pleading guilty to mail fraud and filing a tax return. Alexander was also ordered by U.S. District Court Judge Roger T. Benitez  to pay restitution of $1,799,580.78 to his victims of the fraud scheme and to the Internal Revenue Service (IRS).

Alexander pleaded guilty two years ago to mail fraud and filing a false tax return using the Rose Fund, LLC to solicit money from investors. He then set up TRF Holdings, Inc., to capitalize the Rose Fund. The lead salesman Alexander hired was a convicted felon named William Wright.

This case was a joint investigation by the Internal Revenue Service Criminal Investigation Division, the U.S. Postal Inspection Service, and the Federal Bureau of Investigation.

Read the Full Article in Webnewswire.com

Thomas Hastert used to be a mortgage broker and owner of Loan Sense. In 2009, Hastert pleaded no contest to 63 counts of embezzlement and illegally selling real estate securities.

Forty-five victims of Hastert, who brokered more than 270 hard money loans totalling $20 million, showed up to attend the restitution hearing in Nevada County Superior Court Judge Robert Tamietti’s courtroom. They had submitted more than $2 million in claims for their losses. The restitution hearing could amount to little since Hastert claims to be broke.

Hastert faces six to 15 years in prison when he is sentenced, per his plea agreement.

You can search the California Real Estate Fraud Report for more articles about Thomas Hastert.

Read the full article in The Union.

Here’s another cautionary tale to investors who think they can earn astronomical returns on their investments.

Luis Madrid and Richard Habib, both formerly of Corporate Funding Financial of America Inc., have pleaded guilty to conspiracy to commit mail fraud and wire fraud and filing a false tax return. Madrid was sentenced by U.S. District Judge Marily Huff to eight years in federal prison, while Habib received a sentence of three years, 10 months. The admitted to defrauding investors out of $50 million and $20 million respectively.

The two con men told the investors they could earn returns of from 14 to 96 percent per year on promissory notes from mortgages but in fact they were running a Ponzi scheme and pocketing the investors’ money.

Read the full article in San Diego 6.

The Orange County District Attorney’s Office reports that real estate losses reported to its special real estate fraud unit amount to $100 million, with over 1,000 victims. The unit, formed only last year, has had 346 referrals to it for mortgage fraud (and presumably, loan modification scams) and real estate fraud both from victims and real estate professionals.

The numbers so far:

Referrals to the DA of suspected real estate fraud: 346 +

Referrals from county Clerk-Recorder: 16

Investigations received from law enforcement agencies: 17

Filed criminal cases: 29

Cases rejected for filing: 30

Cases referred to other state or federal agencies: 12

Convictions: 14

Real estate crimes by white-collar criminals show no sign of abating. Please get multiple, independent references before giving your money to someone you do not know.

Read the full article in the Orange County Register, aka OC Register.