California Real Estate Fraud Report

The owner of the shuttered firm OF Lending is facing 12 charges of real estate fraud in the form of grand theft, three counts of criminal conspiracy and one count of perjury for running a business that illegally charged upfront/advance fees to homeowners in distress.

William Hogarty, 49, is also the defendant in a civil lawsuit filed by people who accuse him of defrauding them and costing their homes.

OF Lending claimed to be able to do short-pay refinancing (SPR) for underwater homeowners, which would permit them to negotiate new mortgage terms with their banks. Court documents indicate that Hogarty instructed his employees to sell homeowners on doing SPRs with Wells Fargo Bank, Chase Bank and Bank of America, even though all three lenders did not participate in the program.

The case is being prosecuted by the Alameda County District Attorney’s Office, real estate fraud division and includes co-defendants James Allen Rivera Jr., Gregory Wayne Lomba and James Torpey. The four men face additional prison time under a California enhancement that increases possible sentences for white collar crimes.

The perjury charge stems from Hogarty’s bankruptcy hearing, which he was allowed to withdraw. He is accused of lying under oath to U.S. Bankruptcy Attorney Margaret McGee regarding his financial assets and other holdings. According to the Alameda County court documents, “Defendant Hogarty committed perjury when he testified that he ‘gave out $421,000′ (in) refunds to clients. Based on the foregoing investigation and OFL financial records collected by the U.S. Department of Justice – Office of the United States Trustee from Defendant Hogarty, he did not distribute $421,000 in refunds.”

The court documents also allege that William Hogarty and his co-defendants conspired to defraud people of their property, that they conspired to commit false advertising, and conspired to collect advance fees.

The grand theft charges arise from the taking of over than $69,000 from people who believed that Hogarty could help them save their homes.

One of the investigators from the Alameda County District Attorney’s Office learned that Hogarty allegedly ordered his employees to pay his personal expenses, such as for his yacht or the mortgage on his 12,978-square-foot mansion, from the business, causing the business bank accounts to be “consistently overdrawn.” 

Read the original article in the Pleasanton Weekly News.

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.

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.

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.

David Kaup, 29, who pleaded guilty to two counts of wire fraud in April 2012 and was scheduled to be sentenced on December 17, appears to be on the lam after failing to appear in court. Now Bill Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office and André Birotte Jr., the United States Attorney in Los Angeles are looking for him.

Kaup admitted to the court in his plea that he had defrauded over 50 families out of at least $11 million by concocting several scams, including a mortgage rescue fraud and a real estate investment fraud scam. He ran Lunden Investments, American Loans and Funding (ALF) and First Mortgage West. The Lunden scam occurred when Kaup conned people into giving him $9 million for use as commercial loans but which he lost by trading on the Foreign Currency Exchange Market instead. Kaup convinced homeowners into paying him money upfront in order to refinance their homes at under-market rates (who would believe this?) using ALF.

Read the original article in CBS Local Media.

Sergio Gutierrez, a 49-year-old San Francisco businessman, has been setenced by U.S. District Judge Jeffrey White to 12 years in federal prison for a mortgage fraud scam that targeted Spanish-speaking borrowers (affinity fraud, ethnic fraud).

Gutierrez sought our Latinos in 2008 and 2009 and promised them that in exchange for a fee he could write-up documents that would prove their mortgages were invalid and that they did not have to pay off their loans. Predictably, most of the persons who signed up for Gutierrez’ service lost their homes. Apparently, none of these people was able to reason that if their mortgages were invalid, so was their right to stay in a home that they couldn’t possibly own. Dumb meets crooked.

 U.S. District Judge Jeffrey White sentenced Gutierrez to a longer term than that requested by prosecutors and ordered him to pay restitution to his “victims.”

 Read the original article in the San Francisco Chronicle / SFGate.

An attorney who served as attorney-of-record in what has been characterized as 130 predatory lending lawsuits has had her license pulled after a California State Bar Court judge accused her of having no remorse in a foreclosure rescue scheme.

Bar Court Judge Lucy Armendariz  heard the case against Sharon L. Lapin, 57, of Greenbrae. Lapin was a contract attorney for the firm known by various names as  US Loan Auditors LLC, US Loan Auditors Inc., My US Legal Services and US Legal Services and was paid $177,000 ($350 per hour) for her services for the period August 2009 through November 2010.

Sacramento-based US Loan Auditors charged homeowners in foreclosure fees to conduct “forensic loan audits” that were supposed to be used to convince lenders to give the homeowners loan modifications. Although the company has since filed bankruptcy and its main web page says it has “closed its doors,” its blog is still live, claiming to have “real clients that love US Loan Auditors.”

State Bar spokeswoman Laura Ernde said that Lapin was “culpable of multiple counts of professional misconduct, including moral turpitude, aiding the unauthorized practice of law, sharing fees with a non-lawyer, participating in a non-legal lawyer referral service, failure to perform legal services with competence, failure to maintain only legal or just actions and failure to avoid representing adverse interests,” according to an article in the Mercury News.

For her part, Sharon Lapin denies the charges, said she is innocent and promises to appeal, saying she “never engaged in a scheme to defraud clients.”

Bar spokesperson Ernde said that since February 2009, the State Bar’s Office of Chief Trial Counsel has been flooded with complaints against attorneys regarding loan modification fraud – 22 have been disbarred and 100 have received other disciplinary action.

Read the original article in the Mercury News, which contains the comments of Judge Armendariz regarding this hearing.

The California State Supreme Court still has to approve the disbarment action. You can read the documents filed with respect to this case by clicking on Sharon L. Lapin.

A former real estate agent from Hacienda Heights is facing serious time in prison after being convicted by a jury of 14 felonies related to a loan modification scam.

Laura Cecilia Carlson, 66, was accused of running a company called Global Team Consulting, which purported to help homeowners reduce the principal to their mortgages. According to prosecutor Dominic Kardum of the Ventura County District Attorney’s Office, she and her employees instead took advance fees from her clients and not only received no services, but in some cases, lost their homes to foreclosure.

It has been illegal to take advance fees for loan modification services since 2009,  when SB 94 was passed.

Kardum obtained convictions against Carlson for consulting fraud, grand theft, filing a forged instrument and money laundering. He had previously obtained convictions against Victoria Santos of Oxnard; Juan Alvarado Cervantes of Los Angeles; and Felipe Carlos Segovia Castro of Los Angeles. Defendant Margie Joanna Vargas, of Orange, avoided trial by pleading guilty to a misdemeanor.

The case was heard before Ventura County Superior Court Judge James Cloninger.

Maria Suarez, a Deputy Real Estate Commissioner with the California Department of Real Estate (DRE), filed an accusation against Carlson in October 2011 seeking to discipline her for her conduct with respect to homeowners Maria Arevalo, RenatoFernandez and Feliciano Betancourt. Laura Cecilia Carlson allowed her real estate salesperson’s license to expire in September 2012.

Read the original article in the Ventura County Star (VC Star).

Victims of fraud committed by a real estate license may be entitled to recover some of their losses from the California Real Estate Recovery Fund, also known as the Real Estate Consumer Recovery Account,  which is run by the DRE. You can read an excellent article about the fund that has been published in Property ID.

Two men who were managers at Westwood-based Direct Money Source (DMS) have been indicted as part of a nationwide investigation dubbed “Distressed Homeowner Initiative” by the U.S. Department of Justice.  The purpose of the nationwide opeation was to target businesses that lured distressed homeowners by promising “foreclosure avoidance” but which allgedly skimmed equity from many of the same homeowners. Over 500 people have been criminally charge in 285 cases filed by the Department of Justice across the country. The DOJ identified a staggering 73,000 homeowners as victims and losses to them and to lenders (loan fraud, mortgage fraud) as exceeding $1 billion.

David Singui, 49, the owner of Direct Money Source, and Aziz Meghji, 35, a DMS manager, were arrested last month and charged with conspiracy, wire fraud, loan fraud, aggravated identity theft and money laundering. Two other locals, Kiet Truong, 27, of Hawthorne, and Starr Smith, 31, face charges all of the same charges in the 42-count indictment except for money laundering.

Commenting on the arrests, United States Attorney André Birotte Jr. said “Shameless con artists seeking to prey on homeowners in financial distress need to know that law enforcement is hot on their trail. The results of this initiative demonstrate that the combined resources of federal, state and local authorities will be brought to the table in a concerted effort to bring fraudsters to justice and protect the nation’s homeowners.”

Read the original article in the Century City Patch and DSNews (Default Servicing News).

The Office of California Attorney General Kamala D. Harris sent out a press release today announcing it has arrested and charged two persons with 41 felonies, including grand theft, burglary, unlawful collection of advance fees, tax evasion and conspiracy in what it terms was “a wide-ranging mortgage fraud scheme.”

The suspects,  Joana Sosa, age 54 of Gardena, and Zoila Ortega, age 31 of Gardena, also face special enhancements for excessive taking and aggravated white-collar crime for losses to victims exceeding $350,000. Sosa and Ortega are alleged to have targeted member of their own community of Spanish-speaking homeowners (affinity fraud, ethnic fraud).

According to Attorney General Harris, “As the mortgage crisis continues, we are seeing a troubling rise in fraud that targets struggling homeowners, including those with limited English language skills.  The predators targeting these victims are ruthless, and I am proud of our prosecutors and special agents for helping to bring them to justice.” Deputy Attorney General David Peyman will be prosecuting this case.

The complaint against Sosa and Ortega accuses them, from 2008 – 2010, of charging their victims advance fees, promising them new mortgage payments they could afford and promising to protect their client-victims from eviction, which is exactly what happened to most of them.

In addition to the Attorney General’s Office / Mortgage Fraud Strike Force, the alleged crimes were initially investigated by the Los Angeles County Department of Consumer Affairs Real Estate Fraud Unit.