California Real Estate Fraud Report

U.S. District Judge George H. King sentenced five people convicted in a foreclosure fraud scheme that victimized homeowners in foreclosure who were seeking assistance.

Judge King meted out the harshest sentence and criticism to Edward Seung Ok, who received 15 years in prison for his crimes. According to the judge, Ok fell “far short in the full acceptance of responsibility”. Among other things, Ok used the $4.6 million he stole to buy drugs and alcohol and a Lamborghini Gallardo. He violated his plea agreement by trying to hide from investigators the $1.6 million he transferred to the Bank of Nevis on the Caribbean island of St. Kitts.

Ringleader Martha Rodriguez was sentenced to 10 years and agreed to forfeit $900,000 in cash seized by the feds (see, crime does pay), interest in five homes and a truck. She spearheaded the scheme for which she was convicted while being free on bond after being charged with other real estate crimes.

Ok, Rodriguez and fellow convicted defendants Maria G. Juarez, Vladimir Stefanovic and Cynthia Valenzuela (she worked on the escrow fraud side) preyed upon homeowners in default and promised they could help save their homes by selling their homes to buyers provided by the defendants. In realty, the buyers were “straw buyers” who had no intention of purchasing the distressed properties.

Read the full article on Southern California Public Radio. More recent articles appeared in the Orange County Register and the National Mortgage Professional.

Bad news for those who commit real estate fraud and mortgage fraud in Ventura County: the Ventura County District Attorney’s Office has just received almost $1.7 million in federal stimulus money to fight real estate crimes.

As a result of this good use of taxpayers’ dollars, the D.A.’s office will add one prosecutor, two investigators and an assistant to its team assigned to fighting real estate fraud according to Ventura County District Attorney Greg Totten.

If you live in Ventura County and believe you are the victim of a real estate fraud, click here for the Ventura County District Attorney’s Office to find complaint forms.

Read the Full Article in the Ventura County Star. This article is also reprinted in Examiner.com by the L.A. Fraud Examiner.

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.

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

Hard money lender Hurst Financial Inc. is not the only San Luis Obispo entity that investors are eyeing for restitution of the millions of dollars that have been lost. Investors and creditors who have lost millions of dollars to local hard money lenders may find financial reprieve through a plethora of entities with dirty hands. Developers, appraisers, title companies, accountants, and bankers may be tangled up in a conspiracy that created this Ponzi scheme that may have that may have already cost thousands of investors, primarily seniors, more than $500 million in non-returned investments.

Cuesta Title may have a bull’s-eye painted on it following its appraisal of developer Kelly Gearhart’s Vista del Hombre property, which the title company showed to be free and clear of all liens and encumbrances, when at the time it had liens exceeding $27 million. By the time the bank had received the appraiser’s report, it had already lent Gearhart another $1 million.

Hurst’s appraiser, Terry L. Pippin, claimed the Vista del Hombre development would be worth more than $100 million if it were completed - and that’s a big “if”. The bank’s appraisal came in at less than 1/4 of Pippin’s appraisal. Pippin is apparently only licensed to conduct residential appraisals.

This story of fraud and financial ruin in the Central Coast is much smaller than Bernard Madoff’s Ponzi scheme, yet is just as devasting for the investors in that region.

Read the Full Article in the CalCoast News.

Five loan officers from Creative Financial Solutions, Inc. (CF) have pled guilty to wire fire and admitted that CFS, a mortgage brokering company, obtained mortgage loans for unqualified borrowers by submitting false loan applications, false bank statements, and false income documentation. In total, the lenders who funded their loans, may have lost up to $16 million on properties that have been foreclosed or are in the foreclosure process.

Read the Full Article in the Imperial Valley News.

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.

James B. Duncan and Hendrix Montecastro were two of three principals of a number of companies, two of which, Pacific Wealth Managment and Stonewood Consulting, Inc., are accused by the Securities and Exchange Commission (SEC) of defraud almost 100 investors out of more than $11 million, forcing many of them into foreclosure. Now Dundan’s father and Montecastro’s mother-in-law have been arrested on charges of making false statements on loan applications - mortgage fraud and loan fraud.

Real estate lawsuits filed by the investors accused Pacific Wealth and its affiliates and companies of committing loan fraud by falsifying loan applications. Appraisal fraud was an integral part of the conspiracy by making the properties to be purchased look to be worth more than they were.

As with many other real estate fraud schemes reported in the California Real Estate Fraud Report, Washington Mutual, aka WaMu, was the willing lender. WaMu is itself under investigation by several attorneys general for pressuring appraisers at eAppraiseIT, to inflate appraisals of properties with subprime loans in order to increase profits.

Read the Full Article in the Press Enterprise.