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.

I love the justice system in Florida – this would NEVER happen in California.

John W. Lebron, 33, already on probation for possession with intent to sell GHB, an illegal steroid with strong sedative properties, has been sentenced to 26 years in prison for committing short sale fraud and foreclosure fraud.

Lebron, a formerly licensed real estate agent, opened a business called EZ Investments with his wife in 2005. Their first sale was consummated when John Lebron helped his sister Cynthia Lebron to buy a home that was in foreclosure. He not only collected both sides of the commission (dual agency), he got the mortgage broker’s commission after placing the name of another loan officer (loan fraud, mortgage fraud) on the paperwork to conceal his plan. Sounds like Lebron’s business model included fraud to help him achieve his goals.

Emboldened by a successful and very profitable transaction, John Lebron next set up a short sale to his brother-in-law and at the same time arranged a second sale to a straw buyer (“flopping”). Since the straw buyer happened to be unemployed, Lebron submitted phony pay stubs on behalf of the buyer. As with the previous sale to his sister, Lebron received both sides of the real estate sale from both sales as well as the commissions from the loans. The straw buyers earned $5,000 for their troubles.

John Lebron’s fortunes reversed when he defaulted on loans valued at $1.4 million. He was arrested in 2011, lost his real estate license and has been ordered by the trial judge to return $1.5 million.

Read the original article in the Tampa Bay Times.

San Diego Realtor® Kathryn Sylvester has been arrested by the FBI and now faces charges of operating a $5 million mortgage fraud conspiracy.

According to the U.S. Attorney’s Office, Sylvester, 43, was charged with 10 counts of wire fraud, two counts of bank fraud and conspiracy with regard to submitting fraudulent loan applications on behalf of straw buyers whom she allegedly recruited. Twenty-eight of the 80 properties that were purchased went into foreclosure, causing losses to lenders of over $5 million.

Straw buyers are rarely prosecuted and almost never see jail time, but three of them in this case have pleaded guilty and are awaiting their sentences: Claudia Montes, Tad Lent and Roderick Michener.

Read the original article in Courthouse News.

A San Diego woman who brazenly brokered loans without possessing the necessary license has pleaded guilty to operating a a loan origination fraud scheme that included kickbacks.

According to the U.S. Attorney’s Office, Mary Armstrong, 51, wrote over $100 million in fraudulent loans (mortgage fraud, loan fraud) and skimmed $14.5 million from it (equity skimming). Armstrong confessed to selling $100 million of real estate around the country at puffed-up prices (appraisal fraud) and took the overpayments for herself. Her admitted crimes included fabricating loan applications for her straw buyers and  getting supporting fraudulent documents from her co-conspirators.

Prior to Armstrong’s guilty pleas, the following co-conspirators also pled guilty:

- Teresa Rose, a Ramona real estate agent

- Audrey Yeboah, Mary Armstrong’s accountant

- Seattle businessman Justin Mensen

Still awaiting their turn to face the scales of justice are John Allen, 44, of Laguna Hills, and William Fountain, 57, of Los Angeles.

Prosecutors said that the straw buyers were recruited in Southern California and other states by the defendants advertising on the Internet and placing ads in the Los Angeles Times seeking “investors.” The straw buyers were paid $10,000 for each property they “purchased.” Taking advantage of greed by institutional lenders to capture more loan business, the straw buyers were able to obtain 100% financing, relieving them of the risk to make down-payments, as occurred back in the good old days of prudent underwriting. When the straw buyers defaulted, the originators and their secondary market victims, e.g., Fannie Mae and Freddie Mac, lost upwards of $20 million.

My pet peeve with prosecutors is their consistent lack of interest in prosecuting the straw buyers in mortgage fraud cases. Let’s see if this case is any different.

Read the original article in Courthouse News. You can also read earlier postings about these defendants by using the Search tool on the left side of the California Real Estate Fraud Report.

Two men, brothers Andrey Andreyev, 37, of Sacramento, and Vitaliy Andreyev, 30, of Antelope, entered guilty please to wire fraud with respect to a mortgage fraud scheme.

U.S. Attorney Benjamin Wagner said the two were recruited to act as straw buyers by Vera Kuzmenko, the owner of VK Tax Services, to buy properties. Andrey bought one for $850,000 and Vitaliy purchased another for $1.2 million. Kuzmenko allegedly prepared the loan documents and promised the men money for their “services.”

Vera Kuzmenko knew the statements on the loan applications were false because she was their tax preparer. Kuzmenko has been charged with wire fraud, mail fraud, money laundering, and witness tampering in connection but has not been to trial yet.

Read the original article in the Central Valley Business Times.

The following is a full reprint of the press release from the U.S. Attorney’s Office in New Jersey, continuing the aggressive actions taken by U.S. Attorneys in Eastern states to prosecute short sale fraud (compared to zip action out here in California by either the feds or the California Department of Justice).

Nine people involved in a long-running, large-scale mortgage fraud scheme that caused losses of approximately $10 million were charged in two Complaints with conspiracy to commit bank fraud, U.S. Attorney Paul J. Fishman announced.

Jose Luis Salguero Bedoya, also known as Jose Salguero, 36, of Elizabeth and Verona, N.J.; Paul Chemidlin, Jr., 41, of Morganville, N.J.; Delio Coutinho, 50, of Colonia, N.J.; Joseph DiValli, 44, of Jackson, N.J.; Christopher Ju, 26, of East Brunswick, N.J.; Carmine Fusco, 44, of East Hanover, N.J.; Jose Martins, 31, of Newark, N.J.; Yazmin Soto-Cruz, also known as Yazmin Soto, 32, of Elizabeth, N.J.; and Kenneth Sweetman, 32, of Lyndhurst and Nutley, N.J., were arrested this morning by FBI special agents.

Salguero, Chemidlin, Coutinho, DiValli, Ju, Fusco, Martins, Soto, and Sweetman, are scheduled for initial appearances and bail hearings this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark.

According to the Complaints:

From March 2008 to July 2012, the defendants engaged in multiple mortgage fraud conspiracies targeting at least 15 properties in and around Newark and Elizabeth, N.J. The defendants mortgage frauds took several forms, including obtaining control of properties through fraudulent “short sale”  transactions, short sale flips, and identity theft. They submitted materially false mortgage loan documents to lenders in order to obtain loan proceeds, which the defendants then used for their own financial gain. The defendants also obtained money through various sales to straw buyers.

From March 2008 to June 2010, Salguero, Coutinho, Ju, and Soto conspired with each other and others to release liens on encumbered properties via fraudulently arranged short sale transactions. This allowed the defendants to profit from new fraudulent mortgage loans obtained on the properties from other mortgage lenders. To complete the short sale transactions, the defendants submitted materially false closing and other documents to mortgage lenders. They submitted materially false mortgage loan applications to mortgage lenders to obtain new mortgage loans on properties in and around Elizabeth, New Jersey, including a property on Fulton Street.

From March 2011 to July 2012, Salguero, Chemidlin, DiValli, Fusco, Martins, and Sweetman submitted false mortgage loan applications to mortgage lenders for a property on Smith Street, Elizabeth. The defendants submitted gift letters to mortgage lenders that falsely stated that the borrower was obtaining the funds necessary to close the real estate transaction from a relative or friend in the form of a gift, when the funds used as the borrowers’ down payments were actually provided by Salguero. The defendants also submitted false appraisal reports in order to support inflated property values and therefore obtain mortgage loans in larger amounts. The defendants formed limited liability companies (“LLCs”) in the names of companies similar to those of licensed title companies in order to open bank accounts in the LLC names to conceal the defendants’ identities and to control the receipt and distribution of fraudulently obtained mortgage loan proceeds. They submitted fraudulent documents that misrepresented Salguero’s ownership in various properties and the disposition of mortgage loan proceeds related to various transactions. The defendants then distributed fraudulently obtained mortgage loan proceeds to themselves and others and concealed those distributions by failing to include them on the HUD-1 Settlement Statements.

As a result of the mortgage fraud schemes described in the two Complaints, which involved at least 15 properties, the defendants and others defrauded financial institutions out of approximately $10 million.

The defendants played different roles in the schemes. Salguero was a real estate investor who, along with his girlfriend, Soto, provided much of the funds used by the defendants to perpetuate their fraudulent schemes. Coutinho was a loan officer at a Northern New Jersey mortgage brokerage company; he submitted false documents in support of the schemes. Chemidlin provided fraudulent real estate appraisals for the defendants although he was not a licensed real estate appraiser. DiValli was a loan officer at a Northern New Jersey mortgage brokerage company who also submitted false documents in support of the schemes. Ju negotiated the fraudulent short sale real estate transactions. Fusco and Sweetman conducted fraudulent real estate closings for the defendants although they were not licensed attorneys or title agents. Martins was a bank employee who facilitated certain financial transactions for the defendants.

The criminal Complaints charge each of the defendants with one count of conspiracy to commit bank fraud, which is punishable by a maximum potential penalty of 30 years in prison and a fine of $1,000,000.

U.S. Attorney Fishman credited law enforcement agents of the FBI Newark Mortgage Fraud Task Force for the investigation leading to today’s charges. Specifically, U.S. Attorney Fishman thanked special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez, postal inspectors of the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Maria Kelokates, special agents of the U.S. Housing and Urban Development, Office of Inspector General (HUD-OIG), Northeast Region of Investigations, under the direction of Special Agent in Charge Cary Rubenstein, special agents of the Federal Housing Finance Agency, Office of Inspector General (FHA-OIG), under the direction of Inspector General Steve Linick, special agents of the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), under the direction of Special Inspector General Christy Romero, and special agents of IRS–Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, and the Hudson County Prosecutor’s Office, under the direction of Acting Prosecutor Gaetano Gregory.

The government is represented by Assistant U.S. Attorneys Lakshmi Srinivasan Herman, Aaron Mendelsohn, and Charlton Rugg of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The charges and allegations contained in the Complaints against each defendant are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Hoda Samuel, a (still) licensed real estate broker and the owner of Liberty Real Estate & Investment Co., has been found of a conspiracy to commit mortgage fraud, as well as 30 counts of mail fraud.

Prosecutors apparently proved to the jury that Samuel, 60,  acted as the broker on 30 transactions between April 2006 and February 2007, which defrauded lending institutions due to the file of false information on the loan applications (loan fraud, mortgage fraud). Samuel kept tight control of the transactions by representing both the seller and buyer (dual agency) in about have the sales and obtaining funding in all but one. Unfortunately for the lenders, 28 of the 30 properties went into foreclosure, causing losses to the lending institutions of over $5.5 million. The straw buyers were the employees of her brokerage and other persons.

In a decidedly unique angle, Samuel overstated the values of the homes from $15,000 to $40,000 (appraisal fraud) in order to pay for “repairs” to the homes that included making homes wheelchair accessible for (non-existent) family members of the buyers.

When she is sentenced on April 30, Hoda Samuel could get up to 20 years in prison.

The case was prosecuted by Assistant U.S. Attorneys Philip Ferrari and Todd Pickles out of the Eastern District of California and by the Federal Bureau of Investigation and the IRS-Criminal Investigation Unit.

Read the original articles in News10 ABC and the Sacramento Business Journal.

Special agents with the FBI, the Federal Housing Finance Agency’s Office of Inspector General (HUD-OIG), and IRS-Criminal Investigation arrested five people who were alleged to have orchestrated a “builder bailout” scam involving over 100 condominium properties around the country after a federal indictment charged them with various counts of bank fraud and wire fraud.

According to an FBI press release, the scheme, which was operated out of Excel Investments and related companies that were based in Irvine and then Santa Ana, allegedly targeted new condominium developments which the defendants identified the builders as having trouble selling the units. The defendants entered into agreements with the builders, whose project were located in California, Arizona and Florida, and agreed to buy the units in exchange for large commissions. They recruited the straw buyers and fabricated the loan applications (loan fraud, mortgage fraud) by submitting altered or fraudulent W-2 forms, income and asset statements. The lenders were not aware of the excessive commissions because they were disguised as “marketing fees” which were concealed in the form of false HUD-1 Settlement statements by the defendants.

The five defendants who were arrested and taken into custody are as follows:

• Aref Abaji, 31, of Aliso Viejo, a real estate agent
• Maher Obagi, 26, of Huntington Beach, the brother of Aref Abaji
• Jacqueline Burchell, 52, of Orange, an escrow agent
• Mohamed Salah, 37, of Mission Viejo
• Mohamed El Tahir, 35, of Glen Burnie, Maryland

Many of the loans obviously went into default and there were subsequent foreclosures. The taxpayer is the ultimate loser because of the $6.2 million in losses suffered, $2.37 million were loans backed by Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).

Defendant Jackie Burchell was named in a previous post on the California Real Estate Fraud Report in June 2012 in which the FBI was investigating cases of short sale fraud in Los Angeles and Orange Counties.

If anybody is wondering why the California Real Estate Fraud Report is publishing arrests and indictments in other states that involve short sale fraud, it is because I believe that in California, where short sale fraud is rampant, prosecutors are for the most part too timid to jump into this fray. The result is that the crime of short sale fraud is even more pervasive, thanks to prosecutorial timidity reluctance. I cannot leave out the resistance by bankers to report this crime for prosecution, which is a large part of the problem. This only emboldens the commission of this crime that threatens neighbors’ equity, the property tax base, the IRS and our economy-at-large.

Randez Long, a Milwaukee, Wisconsin man, has been indicted for his role in an alleged mortgage fraud – short sale fraud scheme, which included his mother and sister.

From 2005 until April 2008, Long is alleged to have used his multiple businesses to con banks and other lenders into approving loans that contained false, fraudulent information from the prospective borrowers (loan fraud, mortgage fraud). Long’s businesses included LM Management, LLC; RL & DL Properties, LLC; RA & BB Properties, LLC; SC & Long Properties, LLC; R & B Mortgage, LLC; Long and Reed Property Management, LLC; and Long Management, LLC. See a copy of the indictment. Two of the named banks were Countrywide Bank and Southport Bank .

The purchasers are alleged to have made few payments, pushing the properties very quickly into foreclosure. Randez Long then arranged with the lenders to do short sales but instead sold the properties to new buyers than the approved short sale listing prices by the lenders. In the meantime, he managed to receive new loans from different lenders, again using false documents, and skimmed the profits, earning a tidy $1 million for himself.

The prosecuting agency is the U.S. Attorney’s Office for the Eastern District of Wisconsin, headed by James. L. Santelle.

Here are the properties alleged to be part of his scam;

3132 North 25th Street, Milwaukee, Wisconsin;

3442 North 12th Street, Milwaukee, Wisconsin;

2310 West Keefe Avenue, Milwaukee, Wisconsin.

Read the original article in the Mortgage Fraud Blog.