California Real Estate Fraud Report

In a plot that has been repeated many times in the California Real Estate Fraud Report, a gang member pled guilty in federal court to operating a mortgage fraud ring that included at least 24 people. It entailed straw buyers, phony appraisals, fraudulent applications for mortgages and falsified escrow documents as well as the services of a real estate broker, Stanley Gentry, who allegedly sold access to the MLS for $10,000 / month. Estimates of the losses for the over 100 properties in San Diego County range between $20 million and $50 million.

Darnell Bell pled guilty to participating in a racketeering conspiracy involving bank fraud, money laundering and other crimes, for which he faces up to 20 years in prison. His co-conspirator, Michael Ivy, owned the Real Estate Center in La Mesa. Ivy pled guilty earlier to conspiracy and is awaiting his sentence.

Read the full story in the San Diego Union Tribune.

A real estate agent and her father are accused of money laundering, conspiracy and grand theft in Bakersfield and are wanted on outstanding arrest warrants of $1 million each.

Augustine Ramirez applied for loans for five homes in less than two months, indicating on each loan application that the homes were to be his principal residence, according to prosecutors in the District Attorney’s Office. The sellers paid Ramirez kickbacks for purchasing the homes at inflated rates, which he then allowed to go into foreclosure without ever making a payment. One of the homes Ramirez purchased was originally bought by ex-Realtor Carl Cole and his wife Rebecca for $361,500 in September 2004. The Coles sold the home to Crisp and Cole Real Estate within a few months, then to Crisp and Cole agent Justin Eddleman, who re-sold it to Ramirez for $949,000 in December 2006.

As should be obvious, the buy-and-flip schemes that Ramirez and others accused in real estate fraud and mortgage fraud were made possible by questionable property value appraisals.

Although only Augustine Ramirez’ name appears on loan documents, it is alleged his daughter was present at the time the loan documents were submitted and they both received the proceeds.

Read the full article in KGET TV 17, Bakersfield Now and the Bakersfield Californian.

Two men operating a real estate fraud scam together may have lost everything with one being charged with murdering the other.

Reginald Robinson is accused of murdering his business partner, mortgage lender Kasmir Billon, in order to avoid having to split the spoils of their combined real estate fraud and mortgage fraud. Prosecutors allege that Billon and Robinson schemed to over-appraise townhouses that would be sold to straw buyers using loans written by Kasmir Billon. Billon was found shot to death, a bullet in his heart, in his BMW 745 in April 2008.

Read the full article in the Silicon Valley Mercury News.

Merced County District Attorney Larry Morse has been running a real estate fraud unit since 2009. They are also working with a joint team comprised of real estate fraud investigators from federal, state and local investigators that was also created in 2009 by the FBI to combat fraud in the Central Valley. Fraud cases that span multiple counties are prosecuted by the U.S. Attorney’s Office; those that are restricted to Merced County are prosecuted by Morse’s office.

DA Morse notes that “While our local economy wrestles with the financial fallout from a real estate depression and thousands of homeowners are wracked with worry about losing everything, others have seized on an opportunity. Those of us in law enforcement know all too well that in every tragedy there are criminal profiteers that will seek to exploit the misery of others.”

Merced, like the rest of the country, is battling crimes from the real estate fall-out ranging from vandalism, squatting, tagging and metal stripping/theft as well as ongoing loan modification fraud and scams.

Read the full article in the Merced Sun Star.

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.

The Federal Financial Institutions Examination Council, aka FFIEC, is a federal interagency organization which is “empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS) and to make recommendations to promote uniformity in the supervision of financial institutions.”

The FFIEC has just updated its white paper on mortgage fraud and deterrence. Important topics for consumers and financial professions are its chapters on reverse mortgage fraud (a new addition), as well as property flipping fraud, short sale fraud, loan modification fraud and other schemes.

Read the FFIEC white paper on The Detection and Deterrence of Mortgage Fraud against Financial Institutions. There is also a link to the white paper on the blogroll to the right of this column.

To learn more about the FFIEC, click here.

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.

In an entrepreneurial twist, a mortgage broker and five other Fresno and San Francisco Bay area residents have been indicted for financing their residential marijuana farming operation by committing mortgage fraud.

Mortgage broker Monique Le Nguyen of Milpitas is the mortgage broker. She was ordered by U.S. Magistrate Judge Sandra Snyder in Fresno to remain in jail pending trial after the judge described the case as “extremely serious”.

Also charged are Andy Lieng and Jenny Chi-Ha for being involved in a marijuana conspiracy and cultivating the crop, which they did at two homes in Fresno and Tony Lieng, Lynn Truong and Shirley Wong.

The scheme was only discovered after firefighters responded to a blaze they determined was caused by a diversion of electricity to one of the homes. Once on the scene, they discovered the house had close to 900 plants growing. The second house had even more plants being cultivated; together, the crop value was worth than $2 million on the streets.

Read the full article in the Central Valley Business Times.

Sentencing is scheduled next week for former real estate agent Kyle Grasso, who was convicted for his role in a massive multi-million dollar fraud, much of which has been documented in earlier postings on the California Real Estate Fraud Report.

Grasso was convicted of criminal conspiracy, bank fraud, multiple counts of loan fraud and money laundering. Inexplicable, the U.S. District Attorney’s Office in Los Angeles is only recommending three years in prison, according, to its spokesman Thom Mrozek.

One of Lyle Grasso’s partners in crime was former appraiser Lila Rizk, who recently received a 3 year sentence.

Read the full article in the Beverly Hills Courier.

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.