California Real Estate Fraud Report

Governor Arnold Scharzenegger signed Assembly Bill 2618 this week.

AB 2618 addresses the form of real estate fraud in which a person or legal entity is defrauded when title to their property is transferred without their knowledge (title fraud). It permits the boards of supervisors statewide to adopt a resolution authorizing their county recorder to notify all parties when a document has been executed that affects the interests in a property. Currently, only Los Angeles County has that provision.

The bill is in response to one of many real estate crimes occurring not only in California, but across the country. When a property owner has been defrauded because of title transferring without his or her knowledge, it often takes years and tens of thousands of dollars of litigation to correct.

Read the full text to AB 2618.

San Diego District Attorney Bonnie Dumanis told her audience during a recent public safety meeting that her office has almost doubled its caseload real estate fraud related cases. Her office filed 39 real estate fraud cases in 2009, compared to 20 cases in 2008.

The number of defendants, however, has practically tripled due to the focus on foreclosure fraud and loan modification fraud cases, which tend to have both more victims and more defendants.

Read estate fraud includes not only fraud in the purchase/sale of a home, such as intentionally failing to disclose material facts, but mortgage and loan fraud, appraisal fraud, foreclosure fraud, title fraud, escrow fraud, and now short sale fraud and REO fraud. The latter two crimes typically happen when the listing agent does not submit all offers to the bank or servicing company so that the offer of the agent’s own buyer becomes the highest or best offer. Expect to see many of these cases in the news in the near future.

Read the full article in the Voice of San Diego.

A closely-watched case in Westminster in which a real estate broker was accused of stealing $17.5 million ended when Kathy Chen, 49, was convicted of multiple counts of real estate fraud. Chen was charged with using stolen identities in order to purchase properties, which she then defaulted on so that she could steal the loan money (and she thought this was go undetected?). She now awaits a July 9 sentencing by Superior Court Judge Lance Jensen and a possible 111 years in prison.

Chen was the owner of Chen Financial, KC Realty and SBC Financial. She was prosecuted by William Overtoom of the Orange County District Attorney’s Office and convicted of 136 felony counts for obtaining 47 fraudulent loans totaling more than $17.5 million.

Among Kathy Chen’s victims was a 92-year-old woman, whose identity was stolen. Chen and her co-defendants (all fugitives, including her boyfriend) were accused of falsifying loan applications by inflating the incomes of the purported buyers, forging names and signatures on deeds and loan documents and forging the seal and notary stamp on a variety of notarized documents and deeds.

Read the full article in the Orange County Register, aka OC Register.

A Los Angeles firefighter who resigned from the department in December 2009 to avoid being fired has now pleaded no contest to numerous felony counts in a real estate fraud prosecution.

The Los Angeles County district attorney’s office said Bren Lamont Mathews, 43,  pleaded no context to six counts of forgery, three counts of recording a false or fraudulent instrument and four counts of grand theft, as well as admitting two special allegations of taking more than $500,000. Mathews still holds a real estate broker’s license according the California Department of Real Estate (DRE). His former girlfriend, Joi Rochelle Smith, 34, already has pleaded no contest to one count of recording a false or fraudulent instrument and has received a slap on the wrist of 52 days community service and 3 years probation.

Read the full article in the Los Angeles Times.

Four hundred homeowners who were ripped off by William Hutchings, 63, are happier now that Hutchings has been convicted of a jury of 160 felony counts of conspiracy, rent skimming, grand theft and violations of California’s mortgage laws. Five of his co-conspirators have also pleaded guilty in a criminal enterprise that appeared to target mostly church-going Latinos.

According to prosecutors, William Hutchings told the victims that there homes could be temporarily transferred to the federal government via a land grant or land patent, where it would be protected from creditors and foreclosure. For this “service”, Hutchings charged $10,000.

My question: if these victims had $10,000 - why didn’t they pay their mortgages?

Hutchings faces a possible sentence of 49 years for the estimated $2 million he was accused of stealing by taking control of the victims’ properties.

Read the full article by Onell R. Soto in the San Diego Union Tribune.

Attorney David Replogle of San Francisco, Kaushal Niroula and three others have been charged with murdering a 74 year old Palm Springs retiree, Cliff Lambert, in order to take both his money and profit from the sale of Lambert’s home. If convicted, Replogle could face the death penalty or life in prison.

According to SF Gate, Replogle, Niroula and the others “fraudulently took ownership of three luxury condos in the city last year, then took out a $2.2 million equity loan and divided it up”. They did so, according to authorities, by assuming fake identities and conning real estate agents in order to get the keys before taking title to the condominiums located at One Rincon Hill.

When the real owner, Shirley Hwang, became suspicious after receiving mail addressed to one of the suspects, she checked city records, found the fraudulent sales and called police. Ms. Hwang is now suing the lender to get the sale rescinded.

“The breathtaking scope, complexity and theatrics of this scam and these con men rivals any Hollywood movie,” District Attorney Kamala Harris said. “Thanks to the hard work of the D.A.’s office and the SFPD, the story had the proper ending.”

Seven police agencies, including the SFPD and the San Francisco District Attorney’s Office, raided  six Bay Area locations and arrested Jay Shah, 45, of San Jose on 19 criminal counts including conspiracy and theft, and his attorney, Melvin Emerich, 57, of Santa Cruz, on 13 counts. Winston Lum, 45, a former San Francisco tennis instructor, had already been arrested in February and charged with 21 counts. Lum is accused by prosecutors of forging the signature of the condo owner and granting himself the deed to the properties.

Read the full article in SF Gate. Read more of David Replogle’s alleged role in this bizarre story in SF Weekly , SF Weekly blog, True Crime Report and Fugitive.

Note: David Replogle graduated from the UCLA Law School in 1977. He and I were part of a group of close friends while I was studying economics there as an undergraduate. I am dismayed, to say the least, to read of his involvement in these crimes.

The U.S. Attorney’s office has announced sentencing for two Fontana women, who used the proceeds from a mortgage fraud scheme to buy luxury cars for themselves and to cover gambling debts.

US District Judge Florence-Marie Cooper sentenced Angela Cotton, 38, to five years in the federal penitentiary for operating the title company involved in the mortgage fraud conspiracy. Cotton found the properties used in the scheme and then used the credit of straw buyers such as Lisa Lievanos to secure loans and purchase the properties. For her part in the crimes, Lisa Lievanos, 45, received a sentence of a year and a day in prison.

Two others convicted in ripping off the banks were Terral Toole, 42, and Miles Davis, 47, a loan processor formerly from Reseda. Davis was sentenced to three years of probation, including six months of home detention, by Judge Cooper. Toole was sentenced to 85 months in prison by U.S. District Judge John F. Walter.

Both judges ordered restitution to the banks.

Read the original sentencing press release by the U.S. Attorney’s Office and a recent article in the San Bernardino Sun.

Rollo “Rick” Norton is a former financial planner. “Former” because he just pleaded guilty to mail fraud in connection with a real estate investment fraud in which 19 investors lost their money. But he is probably hoping his sentencing next month in San Diego Superior Court will be lighter because he pointed the finger at Chicago Title and Chicago Title Insurance, saying that their escrow office and a supervisor knew they were defrauding the investors in creating “phony real estate transactions” at the Crown Point Villas in San Diego’s Pacific Beach area.a

Michael Weaver, attorney for Chicago Title, countered that Norton, who is representing himself in court, is a liar. In addition, Weaver accused some of the plaintiffs of being participants in the fraud by providing false documents about their financial status and that the only victims were the banks they were defrauding.

Chicago Title Corp. is a subsidiary of Fidelity National Financial Inc.

Read the full article in Bloomberg Business Week.

County prosecutors issued an arrest warrant last week for a man accused of bilking an 89-year-old Pacifica woman out of nearly $600,000.

Fetuu Tupoufutuna has fled the country in the face of allegations he conned an 89 year-old woman in Pacifica out of almot $600,000. Tupoufutunas has been charged with nine counts that include elder fraud by a caretaker, forgery and a great taking allegation, according to San Mateo County Deputy District Attorney Melissa McKowan.

The victim, Pauline Reade, was tricked into signing loan documents for $312,000 by Tupoufutuna, who met her while doing minor repair work on her home. The home, in which Mrs. Reade lived since 1951, was going to be foreclosed upon as a result. Reade was a widow who had no close contacts, which made her an attractive target by criminals. visually impaired.

Read the full article in the San Mateo Daily Journal.

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.