December 23rd, 2011 at 10:04am
A Southern California man who prosecutors say fleeced investors out of $228 million in a real estate investment fraud, including many in Los Angeles, is fighting extradition from France, where he fled after his scheme unraveled.
Bruce Fred Friedman, 61, operated Diversified Lending Group out of swanky offices in Sherman Oaks until the Securities and Exchange Commission (SEC) shut his business down through a court order. Friedman then fled to Cannes, France.
A federal grand jury indicted Friedman on 23 charges related to what prosecutors for the U.S. attorney’s office in Los Angeles called a Ponzi scheme arising out of real estate loans (real estate fraud, real estate investment fraud). Prosecutors say that Friedman’s scheme worked because it was believable – he offered reasonable returns to his investors, many of whom moved their retirement funds into his fund.
Although the French courts have authorized his extradition, the final decision to do so is in the hands of the French government.
Read the original article in the Los Angeles Times.
October 21st, 2011 at 8:27am
This blog usually concerns itself with arrests, prosecutions and convictions for real estate fraud and mortgage fraud.
Today, I’m happy to write that eight investigators with the SEC have been honored with the 2011 Award for Excellence in Investigations by the Council of the Inspectors General on Integrity and Efficiency (CIGIE).
In 2009, Colonial BancGroup Inc. and Taylor, Bean & Whitaker Mortgage Corp. both collapsed due to the fraud committed by former Taylor, Bean & Whitaker chairman Lee B. Farkas and four others. Farkas and his co-conspirators scammed the taxpayers’ via the Troubled Asset Relief Program (TARP) by selling $1 billion of worthless mortgage assets to Colonial, which was later seized by the U.S. government and sold to BB&T Corporation. Farkas was sentenced to 30 years in prison.
Since the original arrests, the former CEO of Taylor, Bean & Whitaker has also been charged, as well as a C-suite executive and supervisor of Colonial.
In addition to the SEC investigators, staff at the following agencies were honored as was the Eastern District Court of Virginia:
Department of Housing and Urban Development (HUD) - Office of Inspector General
Federal Deposit Insurance Corp. (FDIC) - Office of Inspector General
Federal Housing Finance Agency (FHA) – Office of Inspector General
Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP)
Federal Bureau of Investigation (FBI)
Department of Justice (DOJ)
Read the original article in LoanSafe.
October 13th, 2011 at 1:36pm
A man identified by the Riverside County District Attorney’s Office as “second in command” in a staggering $142 million mortgage fraud and securities fraud prosecution may not be competent to stand trial.
Dave Wohl, the fourth attorney to represent Hendrix Montecastro, has petitioned Riverside County Superior Court Judge Richard T. Fields to have Montecastro mentally evaluated by two court-appointed medical professionals.
James B. Duncan, Montecastro’s co-defendant and the accused leader of the mortgage fraud, has already pleaded guilty, as have all the other defendants excepting Montecastro and his mother, Helen Moreno Pedrino.
Henrix Montecastro was charged with 249 felony counts relating to 201 properties that went into foreclosure in Riverside County, causing financial ruin to many of the investors.
Read the original article in the Press Enterprise.
October 6th, 2011 at 12:40pm
Bank of America, Wells Fargo and JP Morgan Chase may soon face a tidal wave of debt if claims they make to the FHA (Federal Housing Authority) are rejected.
The FHA insures loans made by bank and private lenders and did so increasingly after the subprime market disappeared. Claims made by the megabanks to cover some of their losses from bad loans are being closely scrutinized by the FHA, which has sued Deutsche Bank for $1 billion, accusing the bank of lying to it in order to get mortgage insurance.
Stock values for all Bank of America, Wells Fargo and JP Morgan Chase have fallen 59%, 25% and 32% respectively this year.
Read the original article on Bloomberg News.
October 6th, 2011 at 12:20pm
Lauren Baumann, 43, a Downey woman, has pleaded guilty to one count of felony wire fraud in U.S. District Court.
Baumann solicited investors for her business called Stewardship Estates LLC, which purportedly was a “Christian” investment company. Investors were told their money would be used to promote Christian rock bands and to purchase foreclosed homes. Instead, she appropriated the investors’ $1 million for herself, rent the historic Rives Mansion in Downey, pay for private school tuition for her children and repay earlier investors – a sure sign of a Ponzi scheme.
Lauren Baumann failed to mention to her investors that she has been the subject of court action in the past, first being convicted in federal court of securities fraud in 1999 and being sued and found liable for the civil action of that same case by the Securities and Exchange Commission.
Read the original article in the Long Beach Press Telegram.
August 8th, 2011 at 9:14pm
Wells Fargo Bank and accounting firm KPMG have agreed to pay $590 million and $37 million respectively to settle a class action lawsuit over the “pick-a-pay” loans underwritten by World Savings that were later acquired by Wachovia and then Wells Fargo.
Plaintiffs’ attorney Darren Robbins of San Diego stated that this was the largest so far of any of the securities class action lawsuits resulting from the housing crisis.
Wells Fargo, which reported the settlement in its quarterly filing with the Securities and Exchange Commission, made the statement that it had already set aside the funds to pay and that it was settling in order to save court costs but admitting no wrongdoing.
Read the original article in the Los Angeles Times.
July 6th, 2011 at 11:19am
Three women have been charged in a Ponzi scheme that apparently targeted mostly working people.
Maricela Barajas (aka Maricela Torres), 41; Juliana Menefee, 50; and Eva Perez, 51, have been arrested and face multiple felony charges of grand theft and securities fraud. Barajas and Menefee were arrested after one of their alleged victims reported them Walnut/Diamond Bar Sheriff’s Station of the Los Angeles County Sheriff’s Department. Perez is already in prison on previous fraud charges.
The three women apparently gained the trust of their victims through their friendships and membership in the PTA (Parent Teacher Association) at the Armstrong Elementary School in the city of Diamond Bar. They told their investors that they had an exclusive franchise to sell Alta Dena dairy products at Disneyland and needed to raise capital in order to expand their business.
According to investigators at the L.A. County Sheriff’s Commercial Crimes Bureau, the suspects raised almost $14 million from 2008-2010 and returned about $10 million to the “investors.” About $2.5 million is unaccounted for and is presumed to have been used to fund private purchases, vacations, gambling, etc. of the suspects. The current estimated loss from the Ponzi scheme to the 40 victims is $1.5 million.
This post was published by a Nixle Alert from the L.A. County County Sheriff’s Department. The story is also published in the Diamond Bar Patch.
July 2nd, 2011 at 8:53am
Defunct subprime lender Washington Mutual, aka WaMu, and several of its business partners have agreed to settle a class-action lawsuit by pension plans and investors, who accused them of securities fraud.
The settlement agreement requires Washington Mutual to pay $105 million; Goldman, Sachs & Co. and a group of underwriters to pay $85 million; and Deloitte & Touche to an additional $18.5 million.
The largest loser was the (Canada) Ontario Teachers’ Pension Plan Board, claiming to have suffered $24 million in losses. The remaining plaintiffs were smaller pensions, investor groups and individuals. Their lawsuit accused WaMu and its executives of securities fraud by filing false financial reports and painting an unrealistic picture of its underwriting standards.
The U.S. seized WaMu in 2008 and sold its assets to JP Morgan Chase for $1.9 billion.
Earlier articles in the California Real Estate Fraud Report reported accusations that former Washington Mutual employees pressured appraisers to overvalue properties (appraisal fraud, real estate fraud) and push well-qualified loan borrowers into more profitable subprime loans (mortgage fraud) that were unnecessarily costly to those consumers.
Read the original article in the Los Angeles Times.
June 29th, 2011 at 12:56pm
In a possible sign of times to come, Bank of America Corp. announced today that it is settling a score of lawsuits from institutional investors for $8.5 billion.
The litigation, which included plaintiffs BlackRock Financial Management, Pacific Investment Management Co. and Western Asset Management, are related to the toxic mortgage-backed securities (MBS) that they purchased from defunct lender Countrywide.
Bank of America Chief Executive Officer Brian Moynihan released this statement:
“This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us. We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide.”
The settlement is the largest thus far from the fall-out of lenders packaging subprime mortgages into securities and selling them to mortgage bond investors without disclosing the quality, or lack of quality, of the loans. It could also pressure other mega-banks, such as JPMorgan Chase and Wells Fargo, to settle up lawsuits failed against them by other investors.
Read the original article by MSNBC.
June 21st, 2011 at 2:14pm
The securities division of financial giant JPMorgan Chase & Co. has agreed to pay out $153.6 million to compensate investor groups that lost large sums of money due to the hedge fund Magnetar Capital betting against the securities portfolio that it had convinced the investors to purchase.
The investor groups that lost big due to the omission. Unlike Chase, investment firm Goldman Sachs Capital Partners (GSCP) and its team leader Edward Steffelin, Magnetar was not charged by the Securities and Exchange Commission (SEC), which led the investigation. SEC enforcement chief Robert Khuzami said Magnetar “was not responsible for those disclosures to investors.” Maybe not legally, but certainly ethically.
