November 14th, 2008 at 11:55am
The San Mateo County Investment Pool has filed a civil lawsuit against executives for Lehman Brothers Holdings Inc., accusing them of concealing information from investors about the firm’s losses in the real estate market while taking home lucrative bonuses.
The investment pool, which represents public agencies that invested in Lehman, lost more than $150 million when Lehman Brothers went bankrupt. They are suing the executives and the firm’s auditor, Ernst & Young, alleging fraud, negligent misrepresentation and violations of California law and the federal Securities Act.
According to Supervisor Mark Church:
“The theory here is the top management fraudulently represented that the company was financially strong at a time when they were about to declare bankruptcy. What makes this case so outrageous is all the while, they were siphoning off millions of dollars for their personal benefit, leaving good-faith investors holding the bag. It hurts our schoolchildren, our transit projects, and other essential services that we provide.”
Lehman Brothers was also in the news as the source of tens of millions of dollars lent to the Beverly Hills real estate fraud, appraisal fraud and mortgage fraud ring, whose accused members include Mark Alan Abrams, Charles Elliott Fitzgerald, Joseph Babajian and Kyle Grasso. Read earlier articles in the California Real Estate Fraud Report and another in Mortgage Law Central.
Read the Full Article in the San Jose Mercury News.
November 2nd, 2008 at 11:03am
The troubles that resulted in WaMu being acquired for $1.9 billion by JPMorgan Chase seem to be 100% of its own making. They are being investigated by Andrew Cuomo, Attorney General for the State of New York, for pressuring appraisers at e-AppraiseIT to increase the value of properties so that their profits on subprime loans could be higher. Other attorneys general are investigating WaMu in their respective states.
WaMu and some of its executive officers are also the subject of civil lawsuits, one of which was filled by Chad Johnson, a partner at Bernstein, Litowitz Berger & Grossmann, on behalf of the Ontario Teachers’ Pension Plan board, a large shareholder. Says Johnson: “(CEO) Kerry Killinger pocketed tens of millions of dollars from WaMu, while investors were left with worthless stock.” With WaMu gone, he added, “it is all the more important that Killinger and his co-defendants are held accountable.”
Keysha Cooper, one of WaMu’s senior mortgage underwriters, describes a work environment in which approving loans, no matter how risky or dubious, was her job. To paraphrase the old Chiller films of the 1950s: “Volume was the order of the day”. This included strong-arming underwriters to “re-structure” loan applications until the numbers worked. Loan officers with high sales volume were rewarded with Hawaiian vacations, whereas those that balked, such as Ms. Cooper, found themselves being written-up and, in her case, being put on probation before ultimately being fired. One of the loans she ad objected to defaulted immediately; the borrower never made a single payment.
Read the Full Article in the New York Times.
October 26th, 2008 at 9:51am
Although many jilted investors have cheered at the recent arrests of the mother-and-son leaders of the bankrupt Paso Robles-based Estate Financial, they are only one group of a growing number of investors in the Central Coast who have had troubles with mortgage and lending firms.
Besides Estate Financial, other hard money lenders who are biting the dust are:
- Atascadero-based Hurst Financial, which had at least $86 million in investments last year, has had its license revoked by the California Department of Corporations and has been accused of fraud in September in filings by the Department of Real Estate. Hurst Financial has been the subject of several posts in the California Real Estate Fraud Report.
- Real Property Lenders of Paso Robles had its license revoked by the Department of Corporations in May. It had about $55 million in loans as of 2007,
- 21st Century Mortgage, also of Paso Robles, closed down abruptly about a year ago with no notice to its investors. Other firms eventually bought most of the loans.
Estate Financial is still the king of fraud allegations at the time of this writing. Their $170-million in loans were frozen and put under court control after the state revoked its license to sell real estate investments. On October 16, Estate Financial’s President, Karen Guth, and her son Joshua Yaguda were arrested at their Paso Robles ranch by investigators from the SLO County District Attorney’s Office.
Read the Full Article in the San Luis Obispo New Times.
October 26th, 2008 at 9:34am
The Federal Bureau of Investigation (FBI) has published its latest statistics on mortgage fraud across the country.
Quick snapshots: California ranks 4th in the country (behind Florida, Nevada and Michigan) in “significant” reports of mortgage fraud in 2008; total estimated losses to mortgage fraud in 2008 - $4 - $5 billion; and in 2008: 523 indictments, 282 convictions.
Click here to read the full compilation of FBI statistics on mortgage fraud.
October 24th, 2008 at 12:47pm
Would you want a loan from a lender with the email address “scarycash@gmail.com”?
That was Garrett Gililland’s email address was, and the former (unlicensed) mortgage broker had plenty of customers before the long arm of the law came after him. According to federal authorities, Gililland is the subject of an international manhunt after being indicted on fraud charges and is part of one of the biggest current mortgage cons in the country.
Read the Full Article in The Chico Enterprise Record.
October 23rd, 2008 at 7:40pm
James Hurst Miller, President of Hurst Financial, along with his daughter Courtney Brard, have surrendered their real estate licenses rather than fight allegations of fraud against their investors.
The California Department of Real Estate has advised investors that their only recourse to getting their money back is to file a civil suit against Atascadero-based Hurst Financial or obtain a criminal restitution order from a judge.
Read the Full Article on KSBY Action News.
October 23rd, 2008 at 6:58pm
After a six-month investigation, local prosecutors have charged Karen guth and her son Joshua Yaguda of Estate Financial with 26 felony counts of fraud. The investigation included agents from the FBI, the Internal Revenue Service, the San Luis Obispo County District Attorney’s Office, the California State Department of Corporations and the California Department of Real Estate.
Estate Financial was a hard-money lender that solicited money from investors to make high-interest/high-risk loans to developers. At the time of the company’s collapse, it is reported that they had funded hundreds of millions in housing and condominium subdivisions, hotels and winery developments in San Luis Obispo County. Their war chest of $340 million real estate portfolio was built with money from more than 3,000 investors, almost 30% of whom lived locally.
Read the Full Article in The San Luis Obispo Tribune.
October 2nd, 2008 at 11:30pm
A group of predators who scammed more than 100 homeowners and lenders in Southern California are facing Judgment Day in U.S. District Court in Los Angeles for a $12 million foreclosure scheme.
Martha Rodriguez, 35, of Downey, is also awaiting sentencing after pleading guilty to defrauding the Department of Housing and Urban Development in another loan scheme. In 2006, the California Department of Real Estate issued an order to desist and refrain to the entrepreneurial Rodriguez from the California Department of Real Estate for conducting herself as a licensed real estate broker and providing residential, mortgage loan, and escrow services without ever having had a real estate license.
Here crew included Edward Seung OK, of Torrance; Cynthia Valenzuela, 23, of Downey; Vladimir Stefanovic, 35, of Lancaster; and Maria G. Juarez, 36, of Reseda. Rodriguez operated Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Victims in foreclosure were promised by Rodriguez and her co-defendants that they would save their houses and restore their credit, then used straw buyers to purchase the homes at inflated prices. They then skimmed the profits and allowed the homes to be foreclosed and the victims evicted.
This story is reminiscent of the upcoming trials of Beverly Hills Prudential California Realtors Joseph Babajian, Kyle Grasso, developers Mark Alan Abrams and his partner Charles Elliot Fitzgerald, appraisers Lila Rizk and Scott Robinson and others, who are accused of similar schemes that left Lehman Brothers Bank out tens of millions of dollars while failing to explain why they ignored the warns of potential fraud by Keller Williams broker Christian Stevens. A good summary is on the Los Angeles FBI website.
Read the Full Article in the Downey Patriot.
September 23rd, 2008 at 9:14pm
Galloping in after the gate was closed: the Associated Press reports that the FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers and insurance giant AIG (American International Group, Inc.). According to FBI Director Robert Mueller, they and up to two dozen other large financial companies are also under investigation to determine whether any of them have misrepresented their assets.
Also under the FBI’s microscope are failed bank IndyMac Bancorp Inc. and Countrywide Financial Corp.
Read the Full Article published on Yahoo News
September 20th, 2008 at 11:00am
Vijay and Supriti Soni were prosecuted in 2003 by Doug Brannan, a deputy Orange County District Attorney. Now he says “Unfortunately, we are back looking at these characters again.”
The Sonis and their family members took out 43 mortgages worth at least $24.5 million beginning in 2007. While home prices in Santa Ana, where the Sonis operated, peaked in 2006 and have fallen over 40% since, the Sonis flipped more than 22 properties and never sold for a loss.
WaMu of course denies any responsibility for not checking into the criminal background of its applicants like the Sonis or others who have a record of real estate fraud or mortgage fraud. Says spokeswoman Sara Gaugl, ”We have extensive controls in place to protect the integrity of our portfolio and loan processes. We are continually enhancing our efforts to identify and prevent any potential illegal activity.“
Paul Leonard of the Center for Responsible Lending’s California office has a different view. “This is a quality control problem,” he said. ”It certainly is curious WaMu’s fraud detection system didn’t pick this up. It looks very bad and it is bad. The question is how widespread it is.”
Read the Full Article (extensive and well-written) in the Orange County Register.
