California Real Estate Fraud Report

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Archive for the 'Real Estate Investment Fraud' Category

Eleven Northern California Real Estate Investors Indicted for Bid Rigging and Fraud at Public Foreclosure Auctions

November 25th, 2014 at 6:55am

The following is a press release by the U.S. Department of Justice:

A federal grand jury in San Francisco returned three multi-count indictments against eleven real estate investors for their role in bid rigging and fraud schemes at foreclosure auctions in Northern California, the Department of Justice announced.

The indictments, filed late yesterday in U.S. District Court for the Northern District of California in Oakland, California, charge Northern California real estate investors Michael Marr; Javier Sanchez; Gregory Casorso; Victor Marr; John Shiells; Miguel De Sanz; Alvin Florida Jr.; Robert A. Rasheed; John L. Berry III; Refugio Diaz; and Stephan A. Florida with participating in conspiracies to rig bids and schemes to defraud mortgage holders and others.  The indictments allege that the defendants agreed not to compete at public auctions in return for payoffs and diverted money to themselves and others that should have gone to mortgage holders and other beneficiaries.  All defendants were charged with bid rigging and fraud in Alameda County, California.  Marr, Sanchez, Shiells, and De Sanz were also charged with bid rigging and fraud in Contra Costa County, California.  Additionally, Shiells and De Sanz were charged with bid rigging and fraud in San Francisco County, California.

To date, 47 individuals have pleaded guilty to criminal charges as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public foreclosure auctions in Northern California.  On Oct. 22, 2014, a federal grand jury in San Francisco returned an eight-count indictment against five additional real estate investors for their role in bid rigging and fraud schemes at foreclosure auctions in San Mateo and San Francisco Counties, California.

“Collusion at the foreclosure auctions created an unfair playing field where conspirators pocketed illegal payoffs at the expense of lenders and distressed homeowners,” said Brent Snyder, Deputy Assistant Attorney for the Antitrust Division’s criminal enforcement program.  “The division will continue to investigate and prosecute local cartels that harm the competitive process.”

The indictments allege, among other things, that at various times between June 2007 and January 2011, the defendants conspired to rig bids to obtain numerous properties sold at foreclosure auctions in Alameda, Contra Costa, and San Francisco counties, negotiated payoffs for agreeing not to compete, held second, private auctions known as “rounds,” concealed those rounds and payoffs, and, in the process, defrauded mortgage holders and other beneficiaries.

“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.  “The FBI is committed to work these important cases and remains unwavering in our dedication to bring the members of these illegal conspiracies to justice.”

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  Each count of mail fraud carries a maximum sentence of 20 years in prison and a $1 million fine.  The government can also seek to forfeit the proceeds earned from participating in the mail fraud schemes.  The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million.

These indictments are the latest charges filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa, and Alameda counties, California.  These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.

Campbell Man Pleads Guilty to Real Estate Investment Fraud

November 21st, 2014 at 10:46am

The office of United States Attorney Melinda Haag has announced in a press release that Sam Stafford, 57, one of three partners who operated S3 Partners, pleaded guilty in October to conspiring with Melvin Russell “Rusty” Shields and Michael Sims to commit wire fraud, mail fraud and bank fraud.

Rusty Shields has been already sentenced to 78 months in prison and ordered to pay restitution of $7,225,904.73. Michael Sims received 30 months in prison and was ordered to re-pay $411,460.92.

Prosecutors showed evidence during Shields’ and Sims’ trials that they defrauded their victims who invested with their real estate projects from 2006-2009. Many of their victims were elderly investors (elder financial fraud, elder financial abuse).

The press release also stated that “evidence further showed that Shields and Stafford fraudulently obtained millions of dollars from banks by submitting forged and fraudulent invoices and loan closing documents.”

S3 Partners  had offices in San Jose and Campbell, in Hickory, North Carolina, and Valrico, Florida.

Co-Owner of Irvine-Based Real Estate Investment Firm Pleads Guilty in Ponzi Scheme

November 21st, 2014 at 9:57am

One of two owners of Irvine-based Pacific Property Assets pleaded guilty in federal court to mail fraud in answer to charges by prosecutors that his once-legitimate business turned into a Ponzi scheme when the housing market collapsed.

John Packard, 64, of Long Beach could receive 20 years in prison when he is sentenced by U.S. District Judge Cormac Carney next May.

Packard co-owed Pacific Property Assets with Michael Stewart, of Phoenix, whose trial is set for April 2015.

Prosecutors allege that the business, which raised money to buy, renovate and re-sell apartment buildings in Southern California and Arizona, was initially legitimate and amassed a portfolio of over 100 buildings in a 10-year period. But when the real estate market reversed course in the mid-2000s, they turned to raising money from new investors in order to stay current on their loans to their first investors. At the time they filed for bankruptcy in 2009, they were in debt to banks for $100 million and another $91 million to almost 650 individual investors. The private investors lost all of their money but the banks only lost about 25% of their investment.

Read the original article in the Daily Pilot.

Commercial Developer Sentenced in $50 Million Securities Fraud

November 21st, 2014 at 9:40am

Commercial real estate developer and mortgage broker Bradley Holcom was sentenced to 10 years in federal prison.

Holcom, 57, pleaded guilty in July 2014 to committing wire fraud. He had sold approximately $50 million worth of promissory notes over 150 investors across the U.S., many of whom lost millions, through his Trust Deed Investment Program.

Holcom admitted that he had falsely promised the investors who purchased his notes that they would receive first liens on properties he was developing when he instead conveyed to them a lesser, weaker interest.

Read the original article in the Times of San Diego.

 

Associates of Donald Totten Plead Guilty to Mortgage Fraud

October 16th, 2014 at 8:37am

Real estate investor Grant McCollough, 38, and his 36-year-old wife, Marisa, pleaded guilty to conspiracy to commit wire fraud and defrauding the United States.

The McColloughs recruited investors to act as straw buyers and, according to the U.S. Attorney’s Office, arranged for erroneous information to be submitted to lenders to approve their loan applications. They also inflated the value of the homes (appraisal fraud) and disguised the source of the down payments in order to skim funds from the fraudulent transfer of property among their co-conspirators. And they hid their skimmed profits from the IRS.

Their associate, Donald Totten,  was a mortgage loan officer and broker operating out of Rancho Santa Fe who specialized in negative amortization loans. Totten pleaded guilty in February to mortgage fraud, bankruptcy fraud and filing a false tax return that failed to report more than $3 million in taxable income.

Grant McCollough and Marisa McCollough will be sentenced in January 2015 by U.S. District Judge Michael Anello.

Read the original article in Fox 5 San Diego.

 

Sentences Handed Out for $36 Million Ponzi Scheme in Sacramento

September 19th, 2014 at 6:43am

Three men have received heavy prison sentences for their roles in the Ponzi scheme they ran under the company known as Diversified Management Consultants (DMC).

After hearing victims’ testimonies and an FBI forensic accountant, U.S. States District Judge Troy Nunley sentenced Christopher Jackson, 46, of Elk Grove,  to 30 years in prison; Michael Bolden, 60, of Sacramento, to 20 years in prison; and Victor Alvarado, 53, of Sacramento, to 10 years in prison.

According to prosecutors from U.S. Attorney Benjamin Wagner‘s office, DMC ran various investment clubs between 2003 and 2009, convincing at least 240 people, including their own families, to invest with them. Very little of the money was actuall invested, going instead to pay phony returns to previous investors (the Ponzi scheme) and to buy jewelry, expensive clothes and trips and the requisite Lamborghini, Rolls Royce, BMW, and Range Rover.

Three more DMC principals await sentencing: Garry Bradford, Nicholo Arceo and Erica Arceo. Erica was the in-house-attorney but lost her law license with the California State Bar as a result of her involvement and guilty plea.

Read the original article in the Central Valley Business Times.

 

** Update: meanwhile, some of the investors/victims sued Stewart Title of Placer and Stone Canyon Mortgage, to try to recover some of their losses. According to the Sacramento Bee, the case was settled on Sept. 24 for $900,000.

Nevada County Seeks Financial Help from State in Prosecution

August 8th, 2014 at 7:21am

In 2012, Attorney General Kamala Harris arrested and charged four people from a Grass Valley real estate company with securities fraud, conspiracy and elder abuse for their alleged involvement in a scam that cost investors over $2.3 million.

Philip Lester, 66, and his sister Susan Laferte, 60, claimed they were broke and were provided public defenders by Nevada County. Lester’s wife, Ellen Lester, and Jonathan Blinder, later had the charges against them dropped.

Nevada County officials, claiming that the legal fees for Lester and Laferte, who ran Gold Country Lenders, will cost upwards of $600,000, want the state to pick up the costs of the pair’s defense since it was Harris who brought charges and whose office is prosecuting the case. Nevada County is small – just 100,000 residents – and says the money could be spent on either law enforcement or restoring public employee jobs that were cut.

Read the original article in SFGate.

Modesto Man Charged in Real Estate Investment Fraud Case

August 8th, 2014 at 7:02am

A Modesto man was arrested Tuesday on allegations he mislead victims into putting funds into what they believed were legitimate real estate investments.

Xue Heu, 37, of Modesto has been arrested and charged with eight counts of wire fraud for allegedly taking over $360,000 from investors, who thought their money was being used to purchase real estate investments. Instead, Heu is being accused by the U.S. Attorney, Eastern District of California of using the money for his own purposes.

Read the original article in News10.net.

 

Petaluma Real Estate Agent Sentenced to Prison for Orchestrating Ponzi Scheme

July 11th, 2014 at 10:41am

Aldo Baccala, 73, a former real estate agent who pleaded no contents to a 141-count of criminal charges for a Ponzi scheme, was sentenced to 20 years in prison by Judge Gary Medvigy. Judge Medvigy also ordered Baccala to pay a $6.4 million fine for the havoc he wrecked on his investors, most of whom were financially ruined. Some of his victims were said to be close friends.

Prosecutors and Probation Department officials had recommended 137 years and four months in prison for the crimes, which included counts of securities fraud and grand theft with enhancements for elder financial abuse and white-collar crime. The crimes occurred from 2004 to 2008

Prior to sentencing, many victims testified how their life’s savings of over 40 years were wiped out by Baccala, who blamed the losses on the economic downturn. Baccala’s statements were countered by prosecutors, who said Baccala knowingly defrauded investors by issuing promissory notes backed by properties he didn’t own and that he used the monies he received to pay earlier investors, make risky stock market investments of course treat himself to a lavish lifestyle.

Read the original article in the Press Democrat.

Walnut Creek Man Indicted for Real Estate Investment Fraud

April 4th, 2014 at 8:50am

Benny Chetcuti Jr. was indicted last week by a federal grand jury on two counts of wire fraud, according to the office for U.S. Attorney for Northern California Melinda Haag.

Chetcuti’s business, which began in 1998, was buyer, renovating and reselling homes. He financed his business by obtaining private loans from investors.  According to prosecutors, however, he defrauded the investors by overstating how much debt was secured by the properties. He also in some cases did not record deeds of trust on the properties, which would have protected the interests of the investors in those properties.

Read the original article in the San Ramon Express.

© Copyright 2007-2014 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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