California Real Estate Fraud Report

Andrew Abed Khoury, 42, San Mateo County real estate broker, pleaded not guilty Friday in San Mateo County Superior Court to 36 counts of real estate fraud. According to San Mateo County District Attorney Steve Wagstaffe , Khoury scammed three people out of over $800,000 between May 2006 and May 2012. 

A co-defendant, Cindy Teahan, worked at several escrow companies and said she knew Khoury on a business level. Teahan has been charged with six felonies, including three counts of falsifying documents.

Teahan said one of the victims was her 83 year-old mother-in-law, who Khoury allegedly convinced to turn over $202,000 she netted from selling her home and moving into senior housing.

Another man, 74 years old, gave Khoury $100,000 to invest after being told money was secured by a deed of trust, but according to DDA Wagstaffe, it wasn’t and Khoury allegedly used it to pay his credit card bills.

Andrew Khoury is being held at San Mateo County Jail in lieu of $1 million bail; Cindy Teahan is out on bail.

Read the original article in the San Jose Mercury News.

Hendrix Montecastro and his mother, Helen Pedrino, have caught a lucky break: their new attorney managed to get their sentencing reset for August 8.

Montecastro and Pedrino had represented themselves at the 86-day trial, in which prosecutors had accused him and the other defendants of fleecing victims out of a staggering $142 million. Similar to a Ponzi scheme, money was brought in by the defendants by holding seminars and setting up shell companies to take in money from the victims, who were located primarily in Riverside County and Palm Springs.

Mastermind James Duncan and Charles McLeod, pleaded guilty, and are already serving time in jail as they await their sentences, after agreeing to cooperate and testify against Montecastro and Pedrino, both of whom are sitting in jail.

Paul Lascola, a Thousand Oaks man who pleaded guilty to 11 of the 24 felonies with which he was charged as part of the “Ken and Katie Show” real estate investment fraud case, has been sentenced to serve 10 years in state prison.  

Lascola, who faced charges of elder financial abuse and grand theft, was linked with former radio show hosts Kathryn “Katie” Bess Rose, 63, of Woodland Hills and Kenneth Alan Powell, 59, of Bakersfield. Rose and Powell were on News Talk KVTA 1520 AM, on which they paid to broadcast weekly. Their program focused on real estate investments and according to the Ventura County District Attorney’s Office, targeted mostly retired and elderly investors from Ventura, Los Angeles and Santa Barbara counties.

At his May 30 restitution hearing, Paul Lascola was also ordered to repay his victims $3 million, according to Senior Deputy District Attorney Anthony Wold. Wold added “The point of restitution is to try to make our victims whole through the process of criminal prosecution. They are completely and utterly financially devastated. At least one was retired and had to go back to work. Most of them lost all the equity in their homes. They may have tremendous difficulty recovering from this financially, if they ever recover.”

Katie Rose pleaded guilty to 13 felonies, was sentenced in July 2012 to 12 years and eight months in state prison and was ordered to pay $3.4 million in restitution to her victims. Kenneth Powell pleaded guilty to 15 felonies, received a sentence of 18 years in state prison and must repay his victims $4.3 million.

Read the original article in The Acorn.

There are numerous articles about the Ken & Katie Show case on the California Real Estate Fraud Report. Use the search option at the left to locate them.

The Sacramento Bee reports that the second trial for former Realtor® Erica Burdg has postponed until September 10.

Burdg, 61, of Modestor, was charged with grand theft, forgery and attempted perjury. Prosecutors accuse her of taking money from Carlos Gonzales and his family, who thought she was helping them purchase a three-bedroom, two-bathroom house in the community of Newman.

Burdg’s first trial ended two years ago with a hung jury. Her real estate salesperson’s license expired in May 2012.

You can read an earlier article about Erica Burdg on the California Real Estate Fraud Report by clicking here.

REO (foreclosure) sales are winding down; investors will tell you the inventory is dwindling. This is due to the banks finally waking up years after Realtors® told them it was better for the bottom-line to allow homeowners to do a short sale.

HUD, FHFA, Fannie Mae and Freddie Mac (the latter two are GSEs) still have sizeable REO inventories across the country. Now the Office of the Inspector General for HUD (HUD-OIG) and the Office of the Inspector General for FHFA (FHFA-OIG) are taking aggressive steps to study how those inventories can best be managed, how to reduce REO fraud and to ultimately reduce inventories with minimal negative impact to neighborhoods.

FHFA-OIG has implemented an evaluation strategy, the objective of which is to learn whether both FHFA and the GSEs are maximizing financial recoveries and minimizing the negative effects of foreclosures on affected communities during their management of REOs. Part of FHFA-OIG’s task will be to audit the effectiveness of these REO management activities and determine if proper risk management controls have been established to avoid fraud and abuse.*

*Note: having sold REOs for banks and seen first-hand how some agents manipulate sales, including property management, for their own benefit (REO fraud), I’d say the FHFA-OIG has a difficult task ahead.

Read the entire well-written article in HousingWire.com.

In the long-running civil litigation against developer Kelly Gearhart and Hurst Financial Inc., a former Cuesta Title employee has refused to respond to deposition questions by the plaintiffs’ attorneys, invoking her Fifth Amendment right against self-incrimination.

When investors filed suit in 2009, they accused (now) Stewart Title and (formerly) Cuesta Title of aiding, abetting and/or conspiring with Hurst Financial Inc. and Gearhart to defraud  seniors by running illegal investment schemes. The list of plaintiffs includes over 500 investors includes conspiracy, fraud, financial elder abuse and negligence in the eight causes of action. If the allegations against the title companies are true - that the closed escrow, recorded ownership interests and transferred funds in a real estate investment fraud scheme – the losses would amount to more than $73 million.

Kim Bucknell is the employee who has refused to give testimony. In April, Stewart Title and Cuesta Title filed a motion asking the court to give Bucknell immunity from criminal prosecution or to agree to delay the civil trial that is set to start on July 29.

Opposing the motion is Assistant U.S. Attorney Stephen Goorvitch, who filed his own declaration, stating that granting Kim Bucknell immunity could interfere with current and future criminal proceedings.

Last week, San Luis Obispo Superior Court Judge Charles Crandall denied the defendants’ request for immunity for Bucknell.

Read the original article in CalCoastNews. You can also use the search tool in the California Real Estate Fraud Report to read the numerous previous postings on Hurst Financial, Kelly Gearhart and Cuesta Title.

San Francisco real estate broker W.B. Coyle is the target of multiple civil lawsuits by investors after complaints to the NBC Bay Area Investigative Unit brought unwanted attention to him. Over a dozen investors have filed more than 20 lawsuits against Coyle, accusing him of diverting their investment funds, failing to provide financial records and real estate fraud. Coyle has denied the accusations and filed countersuits against the investors.

“I believe he embezzled more than $200,000 from us,” said investor Ralph VonderHaar.  Another of the investors, Elizabeth Klein said, “It is just horrible the level of damage that he has caused is incredible and nothing is being done.”

The California Department of Real Estate has jumped into the fray and filed a five-part accusation  against W.B. Coyle and Telegraph Hill Properties, for which he is the designated officer. Tom Poole, the Department of Real Estate’s Acting Chief of Enforcement, says of the DRE’s investigation,  “It’s about as serious as it gets.  The accusation speaks for itself.”  The DRE will be trying to prove that Coyle committed fraud or dishonest dealing, misrepresentation, failing to provide records, commingling funds and taking secret commissions. 

Coyle’s real estate license is expired, according to DRE records.

A lot is at stake besides the administrative actions of the DRE. The investors, who were forced to mandatory arbitrary because Coyle refused to settle with them, say$15 million of their money has been tied up for almost 10 years that was supposed to be invested in over two dozen properties.  Documents certified by the San Francisco Office of the Recorder-Assessor indicate that Coyle has received multiple notices of default or foreclosure. 

W.B. Coyle filed for bankruptcy protection on April 30, possibly in response to one arbitrator ruling in favor of five of the investors, awarding them $1.1 million.
Read the original article in NBC Bay Area.

Prosecutors in the case against William Hogarty are hoping to win restitution for Bay Area homeowners who paid a total of more than $350,000 in fees to him and his company for what is alleged to be a mortgage rescue scheme. He has been charged with 16 criminal counts of grand theft, real estate fraud and perjury; three other suspects face charges as well.

Hogarty, the president and founder of OF Lending, located in Pleasanton, has already surrendered his real estate license. This occurred after an investigation by the California Department of Real Estate  determined that he and his company violated the ban on taking advance fees. Hogarty’s attempt to discharge his debts through bankruptcy were denied by a federal bankruptcy court.

Hogarty was in a Pleasanton court on April 22 for charges of attacking his former roommate. During the hearing, the judge said that a warrant had been issued for his arrest on real estate fraud charges and he was taken into custody.

Twenty-two people have filed a civil lawsuit against him seeking restitution.

Read the original article in ABC7 News.

A Danville man who was indicted by a federal grand jury in December 2011 with rigging bids at real estate foreclosure auctions and mail fraud faces new charges having to do with evidence tampering.

Andrew Katakis of Danville is the recipient of a superceding indictment charging him with obstruction of justice in the federal investigation. He is now accused of convincing his co-defendants Donald Parker, Anthony Joachim and Theodore Longley to install and run software to overwrite deleted documents stored on their computers (spoliation).

Note: when computer users delete a file, it is not actually deleted, but the space in which it is located is flagged by the system as available for a new file to be written (unallocated space). The purpose of the software is to locate unallocated space and overwrite it one or more times with new data.

“Obstruction of a grand jury investigation is a crime the Antitrust Division takes seriously,” says William Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division. “We will prosecute those who subvert the competitive process, as well as those who attempt to conceal their illegal actions by destroying evidence.”

“The new charge arises out of a long-running investigation that has already resulted in guilty pleas by numerous other defendants who participated in the scheme charged in this case,” says U.S. Attorney Benjamin Wagner.

Ten defendants have already pleaded guilty in this conspiracy: Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat, Gregory L. Jackson, Walter Daniel Olmstead, Robert Rose, Kenneth Swanger and Wiley Chandler.

The current investigation is being conducted jointly by the Antitrust Division’s San Francisco office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division, and the San Joaquin County District Attorney’s Office.

Read the original article in the Central Valley Business Times. There are also earlier articles about this auction bid-rigging and prosecution in the California Real Estate Fraud Report.

Ricardo Fabian Salinas, 34, a Los Angeles man who was one of nine people named in an indictment in July 2012, has pleaded guilty to bank fraud in relation to a mortgage fraud scheme that was perpetrated in Bakersfield.

Salinas’ co-defendants are Eliseo Jara Jr., Sergio Jara, Antonio Perez Marcial, Lucia Yolanda Chavez, Arlene Jeanette Jara, Candace Shantel Gonzales, Joseph Shawn Chavez Jr. and Melissa Rochelle Jara.

Prosecutors allege that from 2007 to 2010 Salinas and his co-defendants deceived mortage lenders by preparing and submitting fraudulent loan applications and selling properties to hand-picked buyers. They charge that the false statements included inflating the borrowers’ income, employment and financial assets and that the intent of the purchasers was to use the homes as primary residences.

Ricardo Salinas could get up to 30 years in federal prison when he is sentenced by the judge for his crimes.

Read the original article in Bakersfield Now.