California Real Estate Fraud Report

Jon James pleaded guilty to federal wire fraud in a Ponzi scheme that prosecutors say defrauded over 50 people to the tune of $11 million.

James’ El Segundo business ran from 2003 to 2006 and consisted of James making presentations at local restaurants, where he lobbied his victims to invest their life savings and retirement funds in real estate transactions that mostly did not exist. Instead, James used the funds from the latest group of investors to pay back earlier ones, a classic Ponzi scheme, as well as helping himself to the money to pay for his wedding and buy a recording studio.

When he is sentenced, Jon James could face more than 20 years in federal prison. But given that the same U.S. Attorney’s Office is requesting only three 3 years for Kyle Grasso (see previous article on the Beverly Hills mortgage fraud gang), James is likely to spend very little time behind bars.

The original article appeared in the Silcon Valley Mercury News.

In a story reported last year in the California Real Estate Fraud Report, Milton Retana, a citizen of Salvador, was convicted in federal court on six counts of mail fraud one one additional count of making false statements to investigators. His attorney William S. Harris says he will appeal the verdict, which, if upheld, could send Mr. Retana to prison for a couple of lifetimes: 125 years.

Los Angeles U.S. Attorney spokesman Jim Bowman said that Retana operated a Ponzi scheme that targeted Spanish-speaking individuals. In Retana’s case, he was found guilty of fleecing his investor-victims out of more than $62 million. He was charged after U.S. postal inspectors found $3 million in cash while raiding the Libreria del Exito Mundo Spanish-language bookstore owned by Mrs. Retana, Lydia Campos. The bookstore is located next to Milton Retana’s real estate brokerage and mortgage firm, called Best Diamond Funding Corp. Ms. Campos has not been charged with any crimes related to her husband’s case.

Read the Full Article in the Los Angeles Times.

Sonya Tucker, aka Cheri Tucker, and Terrance Tucker, aka Terry Tucker, are each going to federal prison for approximately 10 years.

The husband and wife team of mortgage brokers and real estate agents pleaded guilty to bank fraud after being prosecuted for processing fraudulent loan applications. They were originally charged with scamming real estate investors, many elderly, after promising them 12 percent rates of returns.

The Tuckers were prosecuted by Assistant U.S. District Attorney Mark Aveis, who said “There are plenty of federal prison beds for criminals like the Tuckers”.

Read the Full Article in the Thousand Oaks Acorn.

A pair of Monterey businessmen have been indicted by a federal grand jury on charges of conspiracy to commit mail and wire fraud, mail fraud, wire fraud and securities fraud.

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.

The US Attorney’s office scored a win when a real estate agent from Santa Fe Springs was convicted of falsifying loan applications that reaped more than $1 million in revenue in a mortgage fraud scheme she carried out with her sister. Maria Sanchez, 36, was found guilty by a federal jury of 14 counts of conspiracy, money laundering, wire fraud and aggravated identity theft and faces up to 239 years in prison when she is sentenced. Her big sister, Beatriz Sanchez, 40, served as the straw buyer and will likely get no more than one year in jail for her part in the scheme, for which she pleaded guilty.

Sanchez worked for Lock Realty & Lending in Santa Fe Springs and Online Financial Services in Lawndale as both a real estate agent and loan officer.

Read the Full Article in the Whittier Daily News.

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.

A civil lawsuit filed in wealthy Marin County alleges that the principals of a real estate investment firm defrauded over 100 victims-plaintiffs of at least $27 million of investment monies in a Ponzi scheme that has attracted the attention of the California Department of Justice.

Investment adviser Gary Armitage, his firm AGA Financial, business associates James Koenig of Asset Real Estate Investment Co. and Jeffrey Guidi are the defendants in the lawsuit. Armitage has filed bankruptcy, claiming assets of between $1 million and $10 million while owing his creditors $50 million to $100 million.

Walnut Creek attorney Richard Miller is representing the 122 plaintiffs and is attempting to have the lawsuits against the defendants - filed in Marin, Sonoma, Alameda an Shasta counties - consolidated and tried before one judge in Marin County.

Read more in the San Jose Mercury News

Another story from the Lifestyles of the Rich and Shameless:

Bankrupt Brentwood businessman Ezri Namvar is facing five L.A. Superior Court lawsuits and one bankruptcy lawsuit accusing him of running a Ponzi scheme and stealing money from escrow accounts to keep his various businesses afloat. Several of the suits name several of Namvar’s relatives as defendants as well.

Namvar’s primary firm, Namco Financial, operated Namco Financial as a qualified intermediary, meaning that it facilitated the tax deferred exchange of properties in 1031 exchanges.

Namvar made his fortune in real estate investments by borrowing money from fellow Persian Jews in Beverly Hills, many of whom trusted Namvar and turned over their life savings, without receiving any collateral in return. Those monies are now most likely entirely gone.

Read the Full Article in the Los Angeles Business Journal.