California Real Estate Fraud Report

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.

Jay Hurst Miler, president of the Hurst Financial Corp., has filed for Chapter 7 bankruptcy protection in the midst of civil lawsuits, a criminal investigation and fraud accusations by California state regulator. His daughter Courtney Brard, who is the vice-president of Hurst Financial, has also filed for bankruptcy.

Hurst Financial has been the subject of a number of articles in the California Real Estate Fraud Report.

Read the Full Article in the San Luis Obispo Tribune.

Harry Markopolos is the accountant and Certified Fraud Examiner (CFE) who uncovered the largest Ponzi scheme in history, and as a result Bernie Madoff is sitting in prison for 150 years. But Markopolos, who spoke on July 14 at the 20^th annual conference of the Association of Certified Fraud Examiners (ACFE), isn’t rubbing his hands together with glee; instead, he said the case was “gut-wrenching” and he feels “tremendous sadness for the victims”, who count charities and other non-profits, institutional investors, foreign investors and individuals in their ranks, some of whom lost most or all of their financial holdings.

Monique Bryher covered Mr. Markopolos’ speech at the ACFE’s conference in Las Vegas July 12-17.

If you want to learn who the “Devil” is, read the article by Monique Bryher on Examiner.com

Photo: Assn. of Certified Fraud Examiners

In an article published today on its website, the Association of Certified Fraud Examiners’ chairman questions what the best way to prevent fraud is, and whether our society can do more to prevent fraud than it is doing currently.

Joseph T. Wells is a former FBI agent and CPA who specialized in fraud cases before he founded the Association of Fraud Examiners (ACFE) and developed the rigorous training program that can result in professionals earning the CFE - Certified Fraud Examiner certification.

Published on the ACFE’s website today, Wells’ article first reviews how Bernard Madoff created the largest Ponzi scheme ever recorded, then describes the mathematical impossibility of Madoff’s scheme and that it was bound to unravel. All Ponzi schemes depend on earlier groups of investors being paid off by later, larger groups. Eventually it becomes exhausting for the person operating the Ponzi scheme to keep the fraud going; we all know the rest.

All that being the case, what is most surprising is that ten years ago, a CFE named Harry Markopolos, hired by a Madoff rival to reverse-engineer Madoff’s successful strategy, determined that Madoff was most likely operating a Ponzi scheme, yet Markopolos’ verbal and written reports to authorities such as the SEC (Securities and Exchange Commission) were rebuffed. All those early investors were laughing all the way to the bank and future wannabe investors plus Madoff’s many friends in the federal government, had their collective ears and eyes wide shut.

Joseph Wells argues that in addition to the prison sentence handed out to Bernard Madoff, Madoff also should be required to educate consumers from the confines of his prison cell about how he conceived and carried out his Ponzi scheme for so long. This, argues Wells, is one of the best ways to prevent fraud: by educating and deterring.

But in the case of Bernard Madoff, it is not clear whether the public being educated would have had much, if any, impact or a deterrence effect upon Madoff. As noted, Madoff never advertised his services or successes, so there was essentially a wall of ignorance separating each investor group from the other. It was this inability to see the forest through the trees, as well as most investors trusting their investment managers to have knowledge of the true abilities of the world’s Madoffs, that allowed Madoff to operate freely and without concern of being detected for so long.

Click here to read the editorial by Joseph Wells on the ACFE website.

Fireman’s Fund is the target of a $30 million lawsuit as a result of damages being claimed by 46 current and former employees in an investment fraud case that could exceed $200 million. It has also caught the attention of California Attorney General Edmund G. Brown, who is investigating it as a possible Ponzi scheme.

The basis for the lawsuit is that Fireman’s Fund encourage its employees to attend seminars put on by Gary T. Armitage and James Stanley Koenig. Firemen’s Fund, which was acquired by Allianz SE of Munich, Germany, began downsizing in the mid-1990s, and retained investment advisors such as Armitage and Koenig, to promote their products as part of the Fund’s push to get employees to retire early.

Attorney General Brown arrested both Armitage and Koenig last week and both remain in jail on $5 million bail. Koenig has a prior conviction for mail fraud and served more than two years in a federal prison.

Read the Full Article in the Contra Costa Times.

The U.S. Attorney’s office, through its spokesman Thom Mrozek, has announced that a Glendale man has pleaded guilty to mail fraud charges that victimized investors out of more than $14 million.

Antoine D. Haroutunian solicited people to invest in his firms Luminous Wealth Management and Luminous Management, promising returns of 24% annually. Instead of investing the money in commercial bridge loans and real estate, Haroutunian spent the money himself.

Haroutunian had already pleaded guilty to stealing $450,000 from Bank of America when he was an employee.

Read the Full Article in the Los Angeles Times.

An FBI agent investigating a suspected $100 million real estate Ponzi scheme said the man at the center of their investigation admitted deceiving his investors.

During his interview with the FBI, Lawrence Leland “Lee” Loomis, 52, acknowledged that the accounting statements presented to investors from his NARAS fund were bogus. The literature provided to prospective investors promised a 12% annual return.

Read how Loomis scammed his investors in Examiner.com.

An Altadena woman charged by federal authorities with operating an $18 million real estate investment fraud scam that focused on African Americans received a sentence in federal court of 12 1/2 years in prison

Jeanetta M. Standefor, 40, operator of Accelerated Funding Group (AFG) in Pasadena, was also ordered by U.S. District Judge Percy Anderson to pay over $8.6 million in restitution to her victims as a result of her investment fraud.

Standefor promoted a “foreclosure reinstatement” program that attracted more than 600 investors and purported to use the funds to cure defaults on distressed properties, according to federal prosecutors. Although she promised returns of up to 50% in just a few months (Investors: that should have been a hint!), Standefor was in fact just operating a Ponzi scheme.

Read the Full Article in the Pasadena Star News.